PACIFIC BIOSCIENCES OF CALIFORNIA, INC. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Index to Consolidated Financial Statements Page(s) Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 78 Consolidated Financial Statements Consolidated Balance Sheets 80 Consolidated Statements of Operations and Comprehensive Loss 81 Consolidated Statements of Stockholders’ Equity 82 Consolidated Statements of Cash Flows 83 Notes to Consolidated Financial Statements 85 Fiscal 2025 Form 10-K 77 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Pacific Biosciences of California, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Pacific Biosciences of California, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. 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, 2025, 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 25, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. Fiscal 2025 Form 10-K 78 Table of Contents Revenue recognition - Identification and evaluation of performance obligations Description of the Matter For the year ended December 31, 2025, the Company recognized revenue of $160.0 million, including $135.8 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, 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. Auditing management’s identification and evaluation of performance obligations is complex due to the significant volume of sales transactions that require analysis. 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 and evaluation of performance obligations. 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2011. San Mateo, California February 25, 2026 Fiscal 2025 Form 10-K 79 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONSOLIDATED BALANCE SHEETS December 31, (In thousands, except par value) 2025 2024 Assets Current assets Cash and cash equivalents $ 63,707 $ 55,370 Investments 215,799 334,561 Accounts receivable, net 35,448 27,524 Inventory, net 49,285 58,755 Prepaid expenses and other current assets 10,793 18,781 Short-term restricted cash 20 690 Total current assets 375,052 495,681 Property and equipment, net 24,146 30,505 Operating lease right-of-use assets, net 41,695 16,091 Long-term restricted cash 1,532 1,532 Intangible assets, net 15,124 389,572 Goodwill 317,761 317,761 Other long-term assets 8,773 9,305 Total assets $ 784,083 $ 1,260,447 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 20,770 $ 16,590 Accrued expenses 33,646 22,595 Deferred revenue, current 15,936 13,864 Operating lease liabilities, current 448 10,026 Other liabilities, current 2,031 3,224 Total current liabilities 72,831 66,299 Deferred revenue, non-current 3,929 5,900 Contingent consideration liability, non-current — 18,700 Operating lease liabilities, non-current 56,592 14,914 Convertible senior notes, net, non-current 645,382 647,494 Other liabilities, non-current — 546 Total liabilities 778,734 753,853 Commitments and contingencies Stockholders’ equity Preferred stock, $ 0.001 par value: Authorized 50,000 shares; No shares issued or outstanding — — Common stock, $ 0.001 par value: Authorized 1,000,000 shares; issued and outstanding 301,956 and 294,418 shares at December 31, 2025 and December 31, 2024, respectively 302 294 Additional paid-in capital 2,699,892 2,654,804 Accumulated other comprehensive income 457 422 Accumulated deficit ( 2,695,302 ) ( 2,148,926 ) Total stockholders’ equity 5,349 506,594 Total liabilities and stockholders’ equity $ 784,083 $ 1,260,447 See accompanying notes to the consolidated financial statements. Fiscal 2025 Form 10-K 80 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Years Ended December 31, (In thousands, except per share amounts) 2025 2024 2023 Revenue: Product revenue $ 135,758 $ 136,149 $ 183,872 Service and other revenue 24,247 17,865 16,649 Total revenue 160,005 154,014 200,521 Cost of Revenue: Cost of product revenue 89,763 92,284 127,568 Cost of service and other revenue 15,390 14,057 14,754 Amortization of acquired intangible assets 4,894 9,393 1,983 Loss on purchase commitment 4,178 998 3,436 Total cost of revenue 114,225 116,732 147,741 Gross profit 45,780 37,282 52,780 Operating Expense: Research and development 97,307 134,922 187,170 Sales, general and administrative 141,493 175,017 169,818 Impairment charges 15,000 184,500 — Merger-related expenses — — 9,042 Amortization of acquired intangible assets 364,541 18,006 6,157 Change in fair value of contingent consideration ( 18,700 ) ( 850 ) 15,060 Total operating expense 599,641 511,595 387,247 Operating loss ( 553,861 ) ( 474,313 ) ( 334,467 ) Loss on extinguishment of debt — — ( 2,033 ) Gain on debt restructuring — 154,407 — Interest expense ( 6,954 ) ( 13,412 ) ( 14,343 ) Other income, net 14,757 23,783 32,684 Loss before income taxes ( 546,058 ) ( 309,535 ) ( 318,159 ) Income tax provision (benefit) 318 316 ( 11,424 ) Net loss ( 546,376 ) ( 309,851 ) ( 306,735 ) Other comprehensive income (loss): Unrealized gain on investments 35 203 4,984 Comprehensive loss $ ( 546,341 ) $ ( 309,648 ) $ ( 301,751 ) Net loss per share: Basic $ ( 1.82 ) $ ( 1.13 ) $ ( 1.21 ) Diluted $ ( 1.82 ) $ ( 1.59 ) $ ( 1.21 ) Weighted average shares outstanding used in calculating net loss per share: Basic 299,959 274,488 253,629 Diluted 299,959 288,366 253,629 See accompanying notes to the consolidated financial statements. Fiscal 2025 Form 10-K 81 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity (In thousands) Shares Amount Balance at December 31, 2022 226,505 $ 227 $ 2,099,782 $ ( 4,765 ) $ ( 1,532,340 ) $ 562,904 Net loss — — — — ( 306,735 ) ( 306,735 ) Other comprehensive income — — — 4,984 — 4,984 Issuance of common stock following milestone achievement 8,988 9 84,752 — — 84,761 Issuance of common stock in acquisition of Apton 6,121 6 76,636 — — 76,642 Issuance of common stock in connection with Apton liquidity event bonus plan 169 — 2,111 — — 2,111 Issuance of common stock from Underwritten Public Equity Offering, net of issuance costs 20,125 20 189,180 — — 189,200 Issuance of common stock in conjunction with equity plans 5,836 6 15,313 — — 15,319 Share-based compensation expense — — 72,118 — — 72,118 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 Net loss — — — — ( 546,376 ) ( 546,376 ) Other comprehensive income — — — 35 — 35 Issuance of common stock in conjunction with equity plans 7,538 8 3,420 — — 3,428 Share-based compensation expense — — 41,668 — — 41,668 Balance at December 31, 2025 301,956 $ 302 $ 2,699,892 $ 457 $ ( 2,695,302 ) $ 5,349 See accompanying notes to the consolidated financial statements. Fiscal 2025 Form 10-K 82 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, (In thousands) 2025 2024 2023 Cash flows from operating activities Net loss $ ( 546,376 ) $ ( 309,851 ) $ ( 306,735 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 12,987 13,774 11,463 Amortization of intangible assets 369,448 27,412 8,261 Amortization of right-of-use assets 3,977 12,165 6,810 Share-based compensation expense 41,668 71,036 72,118 Impairment charges 15,000 184,500 — Merger-related compensation expense — — 3,395 Loss on extinguishment of debt — — 2,033 Gain on debt restructuring — ( 154,407 ) — Accretion of discount and amortization of premium on marketable securities, net ( 4,365 ) ( 13,044 ) ( 12,840 ) Change in the estimated fair value of contingent consideration ( 18,700 ) ( 850 ) 15,060 Inventory provision 9,568 4,618 10,584 Deferred income taxes ( 546 ) ( 205 ) ( 11,424 ) Other 1,688 ( 628 ) 1,059 Changes in assets and liabilities Accounts receivable, net ( 7,924 ) 9,091 ( 17,829 ) Inventory, net ( 1,419 ) ( 8,320 ) ( 13,841 ) Prepaid expenses and other assets 8,514 2,228 ( 8,984 ) Accounts payable 2,482 1,405 206 Accrued expenses 3,158 ( 26,342 ) 13,103 Deferred revenue 101 ( 2,108 ) ( 10,420 ) Operating lease liabilities 723 ( 11,920 ) ( 8,759 ) Contingent consideration liability — — ( 14,882 ) Other liabilities ( 1,193 ) ( 4,612 ) 2,449 Net cash used in operating activities ( 111,209 ) ( 206,058 ) ( 259,173 ) Cash flows from investing activities Purchase of property and equipment ( 2,714 ) ( 6,188 ) ( 8,843 ) Purchase of intangible assets ( 5,000 ) — — Cash paid for purchases of acquired entities, net of cash acquired — — ( 102 ) Purchase of investments ( 216,911 ) ( 498,635 ) ( 756,567 ) Sales of investments — 34,856 595 Maturities of investments 340,073 593,971 769,521 Net cash provided by investing activities 115,448 124,004 4,604 Cash flows from financing activities Proceeds from issuance of common stock under equity offerings, net of issuance costs — — 189,200 Proceeds from issuance of common stock from equity plans 3,428 7,703 15,319 Payment of debt issuance costs — — ( 7,375 ) Payment of contingent consideration — — ( 86,411 ) Fiscal 2025 Form 10-K 83 Table of Contents 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 ) Net cash provided by (used in) financing activities 3,428 ( 42,987 ) 108,891 Net increase (decrease) in cash, cash equivalents, and restricted cash 7,667 ( 125,041 ) ( 145,678 ) Cash, cash equivalents, and restricted cash at beginning of period 57,592 182,633 328,311 Cash, cash equivalents, and restricted cash at end of period $ 65,259 $ 57,592 $ 182,633 Cash and cash equivalents at end of period 63,707 55,370 179,911 Restricted cash at end of period 1,552 2,222 2,722 Cash, cash equivalents, and restricted cash at end of period $ 65,259 $ 57,592 $ 182,633 Supplemental disclosure of cash flow information Interest paid $ 8,264 $ 14,805 $ 15,687 Supplemental disclosure of non-cash investing and financing activities Inventory transferred to property and equipment $ 2,941 $ 4,194 $ 3,984 Property and equipment transferred to inventory $ ( 1,620 ) $ ( 2,572 ) $ ( 7,022 ) Right-of-use asset and liability additions and modifications $ 29,575 $ 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 notes exchange $ — $ — $ 441,000 Issuance of common stock following milestone achievement $ — $ — $ 84,761 See accompanying notes to the consolidated financial statements. Fiscal 2025 Form 10-K 84 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Business Overview 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 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. Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations ("CROs"), pharmaceutical companies, and agricultural companies. References in this report to “PacBio,” “we,” “us,” the “Company,” and “our” refer to Pacific Biosciences of California, Inc. and its consolidated subsidiaries. Basis of Presentation and Consolidation Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or U.S. GAAP, as set forth in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC. The consolidated financial statements include the accounts of Pacific Biosciences and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes to the financial statements. On an ongoing basis, we evaluate our significant estimates, including those relating to the valuation of inventory, fair value of contingent consideration, valuation of acquired intangible assets, useful lives assigned to 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, 2025. Actual results could differ materially from these estimates. Functional Currency The U.S. dollar is the functional currency of our international operations. 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, on our consolidated statements of operations and comprehensive loss. Cash, Cash Equivalents, Restricted Cash, and Investments We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents may be comprised of money market funds, certificates of deposit, commercial paper, corporate bonds and notes, and government agencies’ securities. Fiscal 2025 Form 10-K 85 Table of Contents We classify our investments in debt securities as available-for-sale and report the investments at fair value in current assets. We evaluate our available-for-sale investments in unrealized loss positions and assess whether the unrealized loss is credit-related. Unrealized gains and losses that are not credit-related are recognized in accumulated other comprehensive 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, net. We have the ability to hold, and do not intend to sell investments in unrealized loss positions before the recovery of their amortized cost bases. Our investment portfolio at any point in time contains investments in cash deposits, money market funds, commercial paper, corporate debt securities, and U.S. government and agency securities with high credit ratings. We have established guidelines regarding diversification and maturities of investments with the objectives of maintaining safety and liquidity, while maximizing yield. Restricted cash includes cash that is not readily available for use in the Company’s operating activities. Restricted cash is primarily comprised of cash pledged under letters of credit. Concentration and Other Risks Financial instruments that potentially subject us to credit risk consist principally of interest-bearing investments and trade receivables. We maintain cash, cash equivalents, and investments with various major financial institutions. The counterparties to the agreements relating to our investment securities consist of various major corporations, financial institutions, municipalities, and government agencies of high credit standing. At December 31, 2025, most of our cash was deposited with U.S. financial institutions. Our investment policy generally restricts the amount of credit exposure to any one issuer. There is no limit to the percentage of the portfolio that may be maintained in securities issued by the U.S. Treasury and U.S. Government Agencies, or other securities fully backed by U.S. Treasury or Government agencies. We have not experienced significant credit losses from financial institutions. Our trade receivables are derived from revenue to customers and distributors located in the United States and other countries. We perform credit evaluations of our customers’ financial condition and, generally, require no collateral from our customers. The allowance for credit losses is based on our assessment of the collectability of customer accounts. We regularly review our trade receivables including consideration of factors such as historical experience, the age of the accounts receivable balances, customer creditworthiness, customer industry, and current and forecasted economic conditions that may affect a customer’s ability to pay. We have not experienced any significant credit losses to date. 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 years ended December 31, 2025, 2024, and 2023, no customer accounted for 10% or more of our total revenue. As of December 31, 2025 and 2024, 40 % and 36 % of our accounts receivable were from domestic customers, respectively. As of December 31, 2025 and 2024, no customer represented 10% or more 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. Generally, we have been able to obtain an adequate supply of such parts and components but in certain instances have incurred additional costs to secure a supply of constrained material. An extended interruption in the supply of parts and components currently obtained from our suppliers could adversely affect our business and consolidated financial statements. Inventory, Net Inventories are stated at the lower of cost or net realizable value on a first-in, first-out (“FIFO”) method. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess or obsolete balances. Cost includes depreciation, labor, material, and overhead costs, including product Fiscal 2025 Form 10-K 86 Table of Contents and process technology costs. Determining net realizable value of inventories involves judgment, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories. We make inventory purchases and commitments to meet future shipment schedules based on forecasted demand for our products. The business environment in which we operate is subject to rapid changes in technology and customer demand. We perform a detailed assessment of inventory each period, which includes a review of, among other factors, demand requirements, product life cycle and development plans, component cost trends, product pricing, product expiration, and quality issues. Based on our analysis, we record adjustments to inventory for potentially excess, obsolete, or impaired goods, when appropriate, to report inventory at net realizable value. Inventory adjustments may be required if actual demand, component costs, supplier arrangements, or product life cycles differ from our estimates. Any such adjustments would result in a charge to our results of operations. Property and Equipment, Net Property and equipment are stated at cost, reviewed regularly for impairment, and depreciated over the estimated useful lives of the assets, using the straight-line method. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related asset. Major improvements are capitalized, while maintenance and repairs are expensed as incurred. Transfers of assets between property and equipment, net, and inventory are transferred at standard cost and recognized at carrying value. Estimated useful lives of the major classes of property and equipment are as follows: Estimated Useful Lives Leasehold improvements 8 years Lab equipment 3 to 5 years Computer equipment 3 to 5 years Computer software 3 years Furniture and fixtures 3 to 5 years 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, 2025, these leases had remaining lease terms that expire between 2026 and 2034. 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. Operating lease expense 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 incurred. Business Combinations Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred. In connection with certain acquisitions, contingent consideration can be earned by the sellers upon completion of certain future performance milestones. In these cases, a liability is recorded on the acquisition date for an estimate of the acquisition date fair value of the contingent consideration. These estimates require significant management judgment, including probabilities of achieving certain future milestones. Changes in the fair value Fiscal 2025 Form 10-K 87 Table of Contents 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. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. 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. Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of the net assets acquired. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is assessed for impairment and then amortized over its estimated useful life. If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment. Goodwill and IPR&D are not amortized; however, they are reviewed for impairment at least annually. 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, adverse changes in business or economic conditions, lower-than-expected performance of a product line or business, changes in strategic direction, unanticipated technological or competitive developments, loss of key personnel, and actions 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 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. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of our reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the reporting unit with the carrying value, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, we record an impairment loss based on the difference. 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. The qualitative factors include, but are not limited to, macroeconomic conditions, industry-specific conditions, and company-specific conditions. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the IPR&D is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the IPR&D with the carrying value. If the carrying amount of the IPR&D exceeds the fair value, we record an impairment loss based on the difference. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative impairment test. Intangible Assets and Other Finite-Lived Assets Finite-lived intangible assets include our acquired developed technology and customer relationships. We capitalize finite-lived intangible assets and generally amortize them on a straight-line basis over the estimated useful lives. Intangible assets purchased as part of an acquisition are included in Intangible assets, net, on our consolidated balance sheets. Fiscal 2025 Form 10-K 88 Table of Contents 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, we estimate the fair value of the assets and record an impairment loss if the carrying value exceeds the fair value. 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 Our revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of our instruments and related consumables; service and other revenue consist primarily of revenue earned from product maintenance agreements. We account for a contract with a customer when there is a legally enforceable contract between us and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Revenues are recognized when control of the promised goods is 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. 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 separate 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 separate performance obligations. A product or service is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. 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 2025 Form 10-K 89 Table of Contents 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 primarily 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. We recognize revenues as performance obligations are satisfied by transferring control of the product or service to the customer or over the term of a product maintenance agreement with a customer. Our revenue arrangements generally do not provide a right of return. 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. Modification of existing contracts with customers 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 may require us to exercise 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 is considered a material right and, therefore, a performance obligation. 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. Additionally, we generally provide a one-year warranty on instruments. We accrue the cost of the assurance warranty when revenue of the instrument is recognized. Employee sales commissions are generally recorded as selling, general, and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. Cost of Revenue Cost of revenue reflects the direct cost of product components, third-party manufacturing services, and our internal manufacturing overhead and customer service infrastructure costs incurred to produce, deliver, maintain, and support our instruments, consumables, and services. Manufacturing overhead is predominantly comprised of labor and facility costs. We capitalize manufacturing overhead into inventory based on a standard cost model that approximates actual costs. 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. Research and Development Research and development expense consists primarily of expenses for personnel engaged in the development of our core technology, the design and development of our future products and current product enhancements. These expenses also include prototype-related expenditures, development equipment and supplies, partner development costs, facilities costs, and other related overhead. We expense research and development costs during the period in which the costs are incurred. We defer and capitalize non-refundable advance payments made for research and development activities until the related goods are received or the related services are rendered. Fiscal 2025 Form 10-K 90 Table of Contents Credit Losses Trade accounts receivable The allowance for credit losses is based on our assessment of the collectability of customer accounts. We regularly review the allowance by considering factors such as the age of the accounts receivable balances, customer creditworthiness, customer industry, and current and forecasted economic conditions that may affect a customer’s ability to pay. Credit loss expense was immaterial for the years ended December 31, 2025, 2024, and 2023. 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, disruptions associated with epidemics or pandemics, or other customer-specific factors. Available-for-sale debt securities Our investment portfolio contains investments in cash deposits, money market funds, commercial paper, corporate debt securities and U.S. government and agency securities. We regularly assess whether our securities in an unrealized loss position are credit related. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income. Unrealized losses that are not credit related are included in accumulated other comprehensive income (loss). The unrealized losses on our investments are mainly attributable to government securities, including U.S. government and U.S. agency bond securities, impacted by movements in market rates and not due to issuer credit risk. 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. Income Taxes 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. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards. The effect of a change in tax rates on the deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. A full valuation allowance is provided against our net deferred tax assets as it is more likely than not that the deferred tax assets will not be fully realized. We regularly review our positions taken relative to income taxes. To the extent our tax positions are more likely than not going to result in additional taxes, we accrue the estimated amount of tax related to such uncertain positions. Share-Based Compensation We recognize share-based compensation expense for share-based payments, including stock options, restricted stock units, performance stock units and stock issued under our employee stock purchase plan ("ESPP") based on the grant-date fair value. We estimate the fair value of stock options and ESPP using an option-pricing model. See Note 9. Stockholders’ Equity for further information regarding share-based compensation. Other Comprehensive Income (Loss) Other comprehensive income (loss) is comprised of unrealized gains (losses) on our investment securities. Shipping and Handling Costs related to shipping and handling are included in cost of revenues for all periods presented. Earnings 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 by dividing diluted net loss Fiscal 2025 Form 10-K 91 Table of Contents 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 December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . 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 was effective for annual periods beginning in 2025. We adopted this ASU for our fiscal year ending December 31, 2025 and applied the amendments retrospectively to all prior periods presented in the consolidated financial statements. The adoption of this new standard resulted in incremental income tax related disclosures to the notes to the consolidated financial statements but did not have a material impact on the consolidated financial statements. Additional required disclosures have been included in Note 8 . Income Taxes . Accounting Pronouncements Pending Adoption 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 2027, and interim periods within 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 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 2026, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. We do not expect the adoption of this new standard to have a material impact on the consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This new standard clarifies and modernizes the recognition and disclosure framework for capitalized internal-use software costs by removing all references to project stages and introduces a more judgment-based approach. The standard also clarifies the threshold to be applied to begin capitalizing. The standard will be effective for us beginning in the first quarter of 2028, with early adoption permitted, and can be applied using a prospective, retrospective, or modified transition approach. We are currently evaluating the impact of ASU 2025-06 on the consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities . This new standard provides guidance on the recognition, measurement, and presentation of government grants. The standard will be effective for us beginning in the first quarter of fiscal year 2029, with early adoption permitted, and can be applied using a modified prospective, modified retrospective or full retrospective transition approach. We are currently evaluating the impact of ASU 2025-10 on the consolidated financial statements. Fiscal 2025 Form 10-K 92 Table of Contents NOTE 2. BUSINESS ACQUISITIONS Apton Biosystems On August 2, 2023, we acquired Apton Biosystems, Inc. (“Apton”), a California-based genomics company focused on developing a high throughput short-read sequencer using highly differentiated optics and image processing, paired with novel clustering and chemistry (the “Apton acquisition”). In connection with the Apton acquisition, all outstanding equity securities of Apton were cancelled in exchange for shares of our common stock with a fair value of $ 76.6 million, cash of $ 0.2 million, and contingent consideration with an 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 five-year anniversary of the closing date of the acquisition. 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 recognized a change in fair value of contingent consideration of $ 18.7 million during the year ended December 31, 2025, resulting in a contingent consideration liability of $ 0 . This was primarily due to management's decision to cease development of the high-throughput short-read system, the associated changes in expected future revenues, and the requirement that the milestone event occur prior to the five-year anniversary of the acquisition closing date. 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 In-process research and development 55,000 Goodwill 52,287 Other assets, current 153 Deferred income tax liability ( 11,338 ) Liabilities assumed ( 2,191 ) Total consideration transferred $ 94,008 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. 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, which is primarily attributable to the synergies expected to occur from the integration of Apton and is not deductible for income tax purposes. Fiscal 2025 Form 10-K 93 Table of Contents 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 revenue projections and discount rate. We recognized a $ 40.0 million impairment charge during the year ended December 31, 2024 as a result of a quantitative interim impairment test. During the first quarter of 2025, based on our decision to cease development of the high-throughput short-read sequencing platform, which would utilize the IPR&D, and the resulting changes to the expected future cash flows, among other factors, we concluded that it was more likely than not that the fair value of the IPR&D was less than its carrying amount, requiring an interim impairment assessment. Using a discounted cash flow model under the income approach, we determined the fair value was $ 0 and recorded a $ 15.0 million impairment charge. See N ot e 4. Balance Sheet Components for further details. On January 30, 2026, we completed a disposition of assets to Illumina Cambridge Limited (the "Buyer") in accordance with the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”) (the “Asset Sale”). As consideration for the Asset Sale, Buyer paid us $ 50.0 million in cash and assumed certain liabilities (the “Purchase Price”). In connection with the Asset Sale, Buyer will pay at our direction 4 % of the net proceeds from the Purchase Price to the former equity holders of Apton Biosystems, Inc. (“Apton”) related to the waiver of all remaining milestone obligations associated with our purchase of Apton in August 2023, which payment is expected in the first quarter of 2026. See Note 12. Subsequent Events for additional information. NOTE 3. FINANCIAL INSTRUMENTS Fair Value of Financial Instruments Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy established under U.S. GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: • Level 1: quoted prices in active markets for identical assets or liabilities; • Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider an active market as one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, we view an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our non-performance risk, or that of our counterparty, is considered in determining the fair values of liabilities and assets, respectively. We classify our cash deposits and money market funds within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted market prices. We classify our investments as Level 2 instruments based on market pricing and other observable inputs. We did not classify any of our investments within Level 3 of the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the entire fair value measurement requires management to make judgments and consider factors specific to the asset or liability. The carrying amount of our accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses and other liabilities, current, approximate fair value due to their short maturities. Fiscal 2025 Form 10-K 94 Table of Contents 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: December 31, 2025 December 31, 2024 (In thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents: Cash and money market funds $ 60,496 $ — $ — $ 60,496 $ 55,370 $ — $ — $ 55,370 U.S. government & agency securities — 3,211 — 3,211 — — — — Total cash and cash equivalents 60,496 3,211 — 63,707 55,370 — — 55,370 Investments: Corporate debt securities — 23,250 — 23,250 — 46,905 — 46,905 U.S. government & agency securities — 192,549 — 192,549 — 287,656 — 287,656 Total investments — 215,799 — 215,799 — 334,561 — 334,561 Short-term restricted cash 20 — — 20 690 — — 690 Long-term restricted cash 1,532 — — 1,532 1,532 — — 1,532 Total assets measured at fair value $ 62,048 $ 219,010 $ — $ 281,058 $ 57,592 $ 334,561 $ — $ 392,153 Liabilities Contingent consideration - Apton acquisition $ — $ — $ — $ — $ — $ — $ 18,700 $ 18,700 Total liabilities measured at fair value $ — $ — $ — $ — $ — $ — $ 18,700 $ 18,700 For the year ended December 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. 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 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. 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 is $ 0 . An increase in the fair value of the liability may result from changes in projected revenues, including accelerated timing or higher expected amounts, and from decreases in discount rates, including the risk-free rate and the estimated subordinated credit spread for a CCC credit rating. Fiscal 2025 Form 10-K 95 Table of Contents Changes in the estimated fair value of the contingent consideration liability related to the Apton acquisition for the year ended December 31, 2025 were as follows: (In thousands) Level 3 Beginning balance as of December 31, 2024 $ 18,700 Change in estimated fair value ( 18,700 ) Ending balance as of December 31, 2025 $ — Changes to the fair value are recorded as the change in fair value of contingent consideration on our consolidated statements of operations and comprehensive loss. On January 30, 2026, we completed a disposition of assets to Buyer in accordance with the terms of the Asset Purchase Agreement. In connection with the Asset Sale, Buyer will pay at our direction 4 % of the net proceeds from the Purchase Price to the former equity holders of Apton related to the waiver of all remaining milestone obligations associated with our purchase of Apton in August 2023, which payment is expected in the first quarter of 2026. See Note 12. Subsequent Events for additional information. Contingent Consideration - Omniome On September 20, 2023, we achieved the commercial milestone in connection with the 2021 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. Fiscal 2025 Form 10-K 96 Table of Contents Cash, Cash Equivalents, Restricted Cash, and Investments The following table summarizes our cash, cash equivalents, restricted cash, and investments: December 31, 2025 (In thousands) Amortized Cost Gross unrealized gains Gross unrealized losses Fair Value Cash and cash equivalents: Cash and money market funds $ 60,496 $ — $ — $ 60,496 U.S. government & agency securities 3,211 — — 3,211 Total cash and cash equivalents 63,707 — — 63,707 Investments: Corporate debt securities 23,172 78 — 23,250 U.S. government & agency securities 192,170 380 ( 1 ) 192,549 Total investments 215,342 458 ( 1 ) 215,799 Total cash, cash equivalents, and investments $ 279,049 $ 458 $ ( 1 ) $ 279,506 Short-term restricted cash $ 20 $ — $ — $ 20 Long-term restricted cash $ 1,532 $ — $ — $ 1,532 December 31, 2024 (In thousands) Amortized Cost Gross unrealized gains Gross unrealized losses Fair Value Cash and cash equivalents: Cash and money market funds $ 55,370 $ — $ — $ 55,370 Total cash and cash equivalents 55,370 — — 55,370 Investments: Corporate debt securities 46,746 184 ( 25 ) 46,905 U.S. government & agency securities 287,393 418 ( 155 ) 287,656 Total investments 334,139 602 ( 180 ) 334,561 Total cash, cash equivalents, and investments $ 389,509 $ 602 $ ( 180 ) $ 389,931 Short-term restricted cash $ 690 $ — $ — $ 690 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 December 31, 2025: (In thousands) Fair Value Due in one year or less $ 153,645 Due after one year through 5 years 65,365 Total investments $ 219,010 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 our consolidated statements of operations and comprehensive loss was $ 13.1 million and $ 24.9 million for the years ended December 31, 2025 and 2024, respectively. Fiscal 2025 Form 10-K 97 Table of Contents NOTE 4. BALANCE SHEET COMPONENTS Inventory, Net Inventory, net, consisted of the following components: December 31, (In thousands) 2025 2024 Purchased materials $ 38,638 $ 45,270 Work in process 27,051 22,172 Finished goods 15,709 14,081 Inventory, gross 81,398 81,523 Inventory reserve ( 32,113 ) ( 22,768 ) Inventory, net $ 49,285 $ 58,755 Property and Equipment, Net Property and equipment, net, consisted of the following components: December 31, (In thousands) 2025 2024 Laboratory equipment and machinery $ 47,742 $ 47,273 Leasehold improvements 33,837 33,770 Computer equipment 19,477 18,882 Software 7,197 7,280 Furniture and fixtures 2,954 2,972 Construction in progress 5,409 2,276 Total 116,616 112,453 Less: Accumulated depreciation ( 92,470 ) ( 81,948 ) Property and equipment, net $ 24,146 $ 30,505 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, 2025, 2024, and 2023 was $ 13.0 million, $ 13.8 million, and $ 11.5 million, respectively. Goodwill and Intangible Assets Goodwill 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 recognized $ 144.5 million of impairment charges during the year ended December 31, 2024. 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. Fiscal 2025 Form 10-K 98 Table of Contents 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 assumptions used were inherently subject to uncertainty. The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and management judgment. The assessed fair value was deemed reasonable based on a market capitalization reconciliation and a supportable control premium. We performed our annual assessment for goodwill impairment in the second quarter of 2025, noting no impairment. 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. 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. 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 recognized a $ 40.0 million impairment charge during the year ended December 31, 2024. During the first quarter of 2025, based on our decision to cease development of the high-throughput short-read sequencing platform, which would utilize the IPR&D, and the resulting changes to the expected future cash flows, among other factors, we concluded that it was more likely than not that the fair value of the IPR&D was less than its carrying amount, requiring an interim impairment assessment. Using a discounted cash flow model under the income approach, we determined the fair value was $ 0 and recorded a $ 15.0 million impairment charge . The decline in the fair value of the IPR&D to $ 0 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 year ended December 31, 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. The discount rate was based primarily on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors. The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and management judgment. The assumptions used were inherently subject to uncertainty. Changes to IPR&D during the year ended December 31, 2025 were as follows: (In thousands) Balance as of December 31, 2024 $ 15,000 Impairment charge ( 15,000 ) Balance as of December 31, 2025 $ — See Note 6 . Restructuring for additional information on costs incurred in connection with our current year restructuring activities. Fiscal 2025 Form 10-K 99 Table of Contents In addition to IPR&D, we had the following acquired finite-lived intangible assets as of December 31, 2025: (In thousands, except years) Estimated Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology 3 to 15 $ 421,179 $ ( 406,055 ) $ 15,124 Customer relationships 2 360 ( 360 ) — Total $ 421,539 $ ( 406,415 ) $ 15,124 Amortization expense of intangibles was $ 369.4 million, $ 27.4 million and $ 8.3 million for the years ended December 31, 2025, 2024, and 2023, respectively. For the years ended December 31, 2025, 2024, and 2023 amortization expense of intangibles in cost of revenue was $ 4.9 million, $ 9.4 million, and $ 2.0 million, respectively. For the years ended December 31, 2025, 2024, and 2023, amortization expense of intangibles in operating expenses was $ 364.5 million, $ 18.0 million, and $ 6.3 million, respectively. 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 finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives. During the first quarter of 2025, we revised the estimated useful life of the developed technology acquired in the 2021 Omniome, Inc. ("Omniome") acquisition. This change reflects updated strategic plans and restructuring initiatives focused on accelerating HiFi sequencing adoption, leading to ceased development of our high-throughput short-read platform and revised expectations for the timing and amount of future cash flows from short-read sequencing products and services. As a result of the change in estimate, 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. This expense had a negative impact on basic and diluted net loss per share of $ 1.20 for the year ended December 31, 2025. 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 a total consideration of $ 9.7 million. In addition, the Company entered into a license agreement for complementary developed technology during the three months ended March 31, 2025. 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 December 31, 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. The estimated future amortization expense of acquisition-related intangible assets with finite lives is estimated as follows: (In thousands) 2026 $ 4,079 2027 4,079 2028 1,301 2029 745 2030 745 2031 and thereafter 4,175 Total $ 15,124 Fiscal 2025 Form 10-K 100 Table of Contents Assets Held for Sale During the fourth quarter of 2025, the Company committed to a plan to sell certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies. The assets met the held-for-sale criteria under ASC 360. The carrying value of the assets was previously written down to $ 0 through impairment charges and accelerated amortization resulting from the change in estimated useful life recorded in the first quarter of 2025. Accordingly, no additional loss was recognized upon classification of such assets as held-for-sale. The Company completed the disposition of assets on January 30, 2026. See Note 12. Subsequent Events for additional information. Accrued Expenses Accrued expenses consisted of the following components: December 31, (In thousands) 2025 2024 Salaries and benefits $ 18,254 $ 11,706 Accrued intangibles 5,000 — Accrued interest payable 3,270 2,470 Accrued product development costs 36 1,111 Accrued professional services and legal fees 874 824 Inventory accrual 790 1,237 Warranty accrual 3,046 3,100 Other 2,376 2,147 Accrued expenses $ 33,646 $ 22,595 Product Warranties We generally provide a one-year warranty on instruments. In addition, we provide a limited warranty on consumables. At the time revenue is recognized, an accrual is established for estimated warranty costs based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranties are recorded as part of accrued expenses on 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. Changes in the reserve for product warranties were as follows: Years Ended December 31, (In thousands) 2025 2024 Balance at beginning of period $ 3,100 $ 4,681 Additions charged to cost of product revenue 5,554 6,144 Repairs and replacements ( 5,608 ) ( 7,725 ) Balance at end of period $ 3,046 $ 3,100 Deferred Revenue As of December 31, 2025, we had a total of $ 19.9 million of deferred revenue, $ 16.0 million of which was recorded as deferred revenue, current and $ 3.9 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, 2025 includes $ 12.3 million that was included in deferred revenue, current as of December 31, 2024. Fiscal 2025 Form 10-K 101 Table of Contents 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, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 49.2 million, of which approximately 80 % is expected to be converted to revenue in 2026, approximately 16 % in the following twelve months , and the remainder thereafter. Other Liabilities, Current Other liabilities, current, consisted of the following components: December 31, (In thousands) 2025 2024 Accrued Employee Stock Purchase Plan $ 1,377 $ 2,014 Other 654 1,210 Other liabilities, current $ 2,031 $ 3,224 NOTE 5. CONVERTIBLE SENIOR NOTES 2029 Convertible Senior Notes 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 agreed to exchange the remaining approximately $ 459.0 million in aggregate principal amount of our previously held 1.50 % Convertible Senior Notes due 2028 (the “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 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. Additionally, on November 21, 2024, in connection with the issuance of the 2029 Notes, the Company and SBN entered into the Letter Agreement pursuant to which the Company and SBN agreed that, for so long as SBN and its affiliates hold at least $ 180 million aggregate principal amount of the 2029 Notes, the Company and its subsidiaries are subject to certain negative covenants that restrict the Company’s and its subsidiaries’ ability to incur additional indebtedness and create liens, in each case, subject to the exceptions set forth in the Letter Agreement, including exceptions which permit the Company to incur up to $ 75 million in aggregate principal amount of secured indebtedness pursuant to Credit Facilities (as defined in the Letter Agreement). In addition, the Letter Agreement restricts the ability of the Company and its subsidiaries from guaranteeing any indebtedness or incurring certain indebtedness outside of the ordinary course of business unless, in each case, the Company and its subsidiaries concurrently provide a guarantee of the Company’s obligations under the 2029 Notes. 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, commencing on February 15, 2025. The 2029 Notes will mature on August 15, 2029, subject to earlier conversion, redemption or repurchase. Fiscal 2025 Form 10-K 102 Table of Contents 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. 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. Fiscal 2025 Form 10-K 103 Table of Contents 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 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 in 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, 2025 is $ 212.0 million, of which $ 209.0 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 year ended December 31, 2025 were as follows: (In thousands) Carrying amount as of December 31, 2024 $ 214,200 Contractual interest expense ( 2,200 ) Carrying amount as of December 31, 2025 $ 212,000 As of December 31, 2025, the estimated fair value (Level 2) of the 2029 Notes was $ 183.5 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 (the “Securities Act”), and the rules and regulations thereunder. The 2030 Notes were issued on June 30, 2023. The 2030 Notes are governed by an indenture (the “2030 Indenture”) between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes bear interest at a rate of 1.375 % per annum. Interest on the 2030 Notes is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2023. The 2030 Notes will mature on December 15, 2030, subject to earlier conversion, redemption or repurchase. The 2030 Notes are convertible at the option of the holder at any time until the second scheduled trading day prior to the maturity date, including in connection with a redemption by the Company. The 2030 Notes are convertible into shares of our common stock based on an initial conversion rate of 46.5116 shares of common stock per $1,000 principal amount of the 2030 Notes (which is equal to an initial conversion price of 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 Fiscal 2025 Form 10-K 104 Table of Contents consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice at a redemption price of 100 % of the principal amount of such 2030 Notes, plus accrued and unpaid interest up to, but excluding, the redemption date. Upon the occurrence of a Fundamental Change (as defined in the 2030 Indenture), the holders of the 2030 Notes may require that we repurchase all or part of the principal amount of the 2030 Notes at a purchase price equal to 100 % of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date, and all unpaid interest from the fundamental change repurchase date thereon, but excluding, the maturity date. The 2030 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2030 Notes under the 2030 Indenture. The 2030 Indenture also includes customary covenants for convertible notes of this type. To the extent we elect, the sole remedy for an event of default relating to our failure to comply with certain of our reporting obligations shall, for the first 360 calendar days after the occurrence of such an event of default, consist exclusively of the right to receive additional interest on the 2030 Notes at a rate equal to (i) 0.25 % per annum of the principal amount of the 2030 Notes outstanding for each day during the first 180 calendar days of the 360 -day period after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived) and (ii) 0.50 % per annum of the principal amount of the 2030 Notes outstanding for each day from, and including, the 181 st calendar day to, and including, the 360 th calendar day after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived as provided for in the 2030 Indenture). On the 361 st day after such event of default (if the event of default relating to our failure to comply with its obligations is not cured or waived prior to such 361 st day), the 2030 Notes shall be subject to acceleration as provided for in the 2030 Indenture. The 2030 Notes are accounted for in accordance with the authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. Under ASU 2020-06, the guidance requires that debt with an embedded conversion feature is accounted for in its entirety as a liability and no portion of the proceeds from the issuance of the convertible debt instrument is accounted for as attributable to the conversion feature unless the conversion feature is required to be accounted for separately as an embedded derivative or the conversion feature results in a substantial premium. The conversion feature of the 2030 Notes is not accounted for as an embedded derivative because it is considered to be indexed to our common stock, and the 2030 Notes were not issued at a substantial premium; therefore, the 2030 Notes are accounted for in their entirety as a liability. Because we may elect to settle any conversions entirely in shares, and because settlement in shares is the default settlement method, the liability is classified as non-current. The requirement to repurchase the 2030 Notes, including unpaid interest to the maturity date in the event of a Fundamental Change, is considered a put option for certain periods requiring bifurcation under ASC 815 – Derivatives and Hedging. However, given the low probability of such a Fundamental Change occurring during the applicable periods, the value of the embedded derivative is immaterial. The additional interest feature in the event of our failure to comply with certain reporting obligations is also considered an embedded derivative requiring bifurcation under ASC 815. However, due to the nature and terms of the reporting obligations, the value of the embedded derivative is immaterial. The 2023 Exchange Transaction was accounted for as an extinguishment driven by the change in fair value of the embedded conversion option. We recorded a loss on extinguishment of debt of approximately $ 2.0 million in connection with the 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. 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. We did not receive any cash proceeds from the 2023 Exchange Transaction. In exchange for issuing the 2030 Notes pursuant to the 2023 Exchange Transaction, we received and cancelled the exchanged 2028 Notes. Fiscal 2025 Form 10-K 105 Table of Contents 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 on our consolidated balance sheets as follows: December 31, (In thousands) 2025 2024 Principal amount $ 441,000 $ 441,000 Unamortized debt premium 379 453 Unamortized debt issuance costs ( 4,997 ) ( 5,959 ) Net carrying amount $ 436,382 $ 435,494 Interest expense for the 2030 Notes for the years ended December 31, 2025, 2024, and 2023 was as follows: Years Ended December 31, (In thousands) 2025 2024 2023 Contractual interest expense $ 6,064 $ 6,081 $ 3,032 Amortization of debt issuance costs 961 950 463 Total interest expense $ 7,025 $ 7,031 $ 3,495 As of December 31, 2025, the estimated fair value (Level 2) of the 2030 Notes was $ 317.0 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. 2028 Convertible Senior Notes 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. 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. Interest expense for the 2028 Notes was as follows for the years ended December 31, 2025, 2024, and 2023: Years Ended December 31, (In thousands) 2025 2024 2023 Contractual interest expense $ — $ 6,139 $ 10,133 Amortization of debt issuance costs — 289 472 Total interest expense $ — $ 6,428 $ 10,605 Fiscal 2025 Form 10-K 106 Table of Contents NOTE 6. RESTRUCTURING 2025 Restructuring During the year ended December 31, 2025, we implemented an expense reduction initiative aimed at lowering our annualized run-rate operating expenses. These actions, which included workforce reductions and other cost-saving measures, were part of a broader strategic shift to prioritize the adoption of HiFi sequencing. A summary of the pre-tax restructuring charges are as follows: (In thousands) Year Ended December 31, 2025 Cumulative amount incurred to date Employee separation costs $ 4,787 $ 4,787 Other costs 1,076 1,076 Total restructuring charges (1) $ 5,863 $ 5,863 (1) Cumulative charges incurred to date include $ 3.8 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 $ 389.9 million in costs. These primarily include $ 359.3 million of accelerated amortization of certain intangible assets, $ 15.0 million of IPR&D impairment charges, charges of $ 8.1 million related to excess inventory due to decreased external demand, $ 3.9 million for estimated losses on purchase commitments tied to anticipated future excess inventory included in cost of revenue, and $ 3.1 million of accelerated depreciation of fixed assets. See Note 4. Balance Sheet Components for additional information on the IPR&D impairment assessment and the change in estimated useful life of the intangible asset and accelerated amortization. A summary of the liabilities related to the restructuring is as follows: (In thousands, excluding non-cash activities) Employee Separation Costs Other Costs Total Expense recorded in YTD 2025 $ 4,787 $ 1,076 $ 5,863 Cash paid during YTD 2025 ( 4,787 ) ( 687 ) ( 5,474 ) Amount recorded in current liabilities as of December 31, 2025 $ — $ 389 $ 389 Estimated total restructuring costs to still be incurred $ — $ — $ — Fiscal 2025 Form 10-K 107 Table of Contents 2024 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, 2025 Cumulative amount incurred to date Employee separation costs $ — $ 10,008 Other costs 888 16,102 Total restructuring charges (1) $ 888 $ 26,110 (1) Cumulative charges incurred to date include $ 15.8 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 WARN Act and approximately $ 4.5 million of severance costs. 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. 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) Other Costs Total Amount recorded in current liabilities as of December 31, 2024 $ 170 $ 170 Additional expense recorded 888 888 Cash payments ( 1,058 ) ( 1,058 ) Amount recorded in current liabilities as of December 31, 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 December 31, 2025 is $ 0 . NOTE 7. COMMITMENTS AND CONTINGENCIES Leases 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. Fiscal 2025 Form 10-K 108 Table of Contents 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. 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 December 31, 2025, the maturities of our operating lease liabilities were as follows: (In thousands) 2026 $ 3,960 2027 9,165 2028 12,389 2029 12,761 2030 13,144 Thereafter 46,752 Total undiscounted operating lease payments 98,171 Less: imputed interest ( 41,131 ) Present value of operating lease liabilities $ 57,040 Balance Sheet Classification: Operating lease liabilities, current $ 448 Operating lease liabilities, non-current 56,592 Total operating lease liabilities $ 57,040 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 10.2 %. The weighted-average remaining lease term for our operating leases as of December 31, 2025 was 8.2 years. Cash Flows Cash paid for amounts included in the present value of operating lease liabilities was $ 4.8 million and $ 14.2 million for the years ended December 31, 2025 and 2024, respectively, and were included in operating cash flows. Operating Lease Costs Operating lease costs were $ 9.3 million and $ 14.5 million for the years ended December 31, 2025 and 2024, respectively. Contingencies We may become involved in legal proceedings, claims and assessments from time to time in the ordinary course of business. We accrue liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. We do not believe that the ultimate outcome of any such pending matters is probable or reasonably estimable, or that these matters will have a material adverse effect on our business; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on us because of litigation and settlement costs, diversion of management resources, and other factors. Fiscal 2025 Form 10-K 109 Table of Contents Please see subsection titled Legal Proceedings , in Part I, Item 3 of this Annual Report on Form 10-K. Indemnification Pursuant to Delaware law and agreements entered into with each of our directors and officers, we may have obligations, under certain circumstances, to hold harmless and indemnify each of our directors and officers against losses suffered or incurred by the indemnified party in connection with their service to us, and judgements, fines, settlements and expenses related to claims arising against such directors and officers to the fullest extent permitted under Delaware law, our bylaws and our certificate of incorporation. We also enter and have entered into indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law. In addition, we may have obligations to hold harmless and indemnify third parties involved with our fundraising efforts and their respective affiliates, directors, officers, employees, agents or other representatives against any and all losses, claims, damages and liabilities related to claims arising against such parties pursuant to the terms of agreements entered into between such third parties and us in connection with such fundraising efforts. To the extent that any such indemnification obligations apply to the lawsuits described above, any associated expenses incurred are included within the related accrued litigation expense amounts. No additional liability associated with such indemnification obligations has been recorded as of December 31, 2025. Purchase Commitments In the normal course of business, we enter into agreements to purchase goods or services or license intellectual property, certain of which are not cancellable without penalty. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities or pricing as of the reporting date. Licensing agreements under which we commit to ongoing minimum royalty payments, some of which are subject to adjustment, may be terminated under certain circumstances. Our purchase orders and contractual obligations are approximately $ 71.3 million as of December 31, 2025, which consist of open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers for which we have not received the goods or services. A majority of these purchase obligations are due within a year. 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 $ 4.2 million for the year ended December 31, 2025, 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 our estimate of future excess inventory under 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 2025 (the “Supply Agreement”), for the purchase of certain products with a semiconductor manufacturer (“Supplier”). The Supply Agreement provides for minimum purchase commitments through 2031 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. We paid our Supplier deposits totaling $ 15.0 million (the “Deposit”), of which $ 4.0 million and $ 3.0 million was refunded to us during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, $ 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. NOTE 8. INCOME TAXES 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. Significant management judgement is required in determining our provision for income taxes, deferred tax assets and liabilities, and valuation allowances recorded against net deferred tax assets in accordance with U.S. GAAP. These estimates and judgements occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax Fiscal 2025 Form 10-K 110 Table of Contents assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in the current or subsequent period. We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50 % likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and the amount of the recognized tax benefit is still appropriate. We account for Global Intangible Low-taxed Income as a period cost. During the years ended December 31, 2025, 2024, and 2023 income/(loss) before taxes from U.S. operations were ($ 547.5 ) million, ($ 311.0 ) million, and ($ 318.9 ) million, respectively, and income/(loss) before taxes from foreign operations was $ 1.4 million, $ 1.5 million, and $ 0.7 million, respectively. Income Tax Provision (Benefit) Income tax provision (benefit) consists of the following: Years ended December 31, (In thousands) 2025 2024 2023 Current tax provision (benefit): US Federal $ — $ — $ — US State — — — Foreign 864 521 — Total current tax provision (benefit) 864 521 — Deferred tax expense (benefit): US Federal ( 275 ) ( 8 ) ( 9,956 ) US State ( 271 ) ( 197 ) ( 1,468 ) Foreign — — — Total deferred tax provision (benefit) ( 546 ) ( 205 ) ( 11,424 ) Total income tax provision (benefit) US Federal ( 275 ) ( 8 ) ( 9,956 ) US State ( 271 ) ( 197 ) ( 1,468 ) Foreign 864 521 — Total income tax provision (benefit) $ 318 $ 316 $ ( 11,424 ) Fiscal 2025 Form 10-K 111 Table of Contents 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: Years ended December 31, 2025 2024 2023 (Amounts in thousands) Amount Percent Amount Percent Amount Percent At statutory tax rate $ ( 114,672 ) 21.0 % $ ( 65,002 ) 21.0 % $ ( 66,807 ) 21.0 % State and local income taxes, net of federal income tax effect ( 741 ) 0.1 ( 1,100 ) 0.4 ( 2,250 ) 0.7 Tax credits: R&D credit ( 1,654 ) 0.3 ( 6,677 ) 2.2 ( 7,596 ) 2.4 Nontaxable or nondeductible items: Stock compensation 9,845 ( 1.8 ) 10,526 ( 3.4 ) 5,851 ( 1.8 ) Goodwill impairment — — 30,345 ( 9.8 ) — — Other ( 3,515 ) 0.6 793 ( 0.3 ) 1,513 ( 0.5 ) Effect of cross-border tax laws 367 ( 0.1 ) 405 ( 0.1 ) ( 6 ) — Changes in valuation allowance 107,803 ( 19.7 ) 27,394 ( 8.9 ) 55,413 ( 17.4 ) Other 781 ( 0.1 ) 291 ( 0.1 ) 1 — Foreign tax effects 557 ( 0.1 ) 219 ( 0.1 ) 362 ( 0.1 ) Changes in unrecognized tax benefits 1,547 ( 0.3 ) 3,122 ( 1.0 ) 2,095 ( 0.7 ) Total effective tax rate $ 318 ( 0.1 ) $ 316 ( 0.1 ) $ ( 11,424 ) 3.6 For the years ended December 31, 2025, 2024 and 2023, state and local income taxes in California and Massachusetts comprise the majority of the state and local income taxes, net of federal effect category. Fiscal 2025 Form 10-K 112 Table of Contents Deferred Tax Assets and Liabilities 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: December 31, (In thousands) 2025 2024 Deferred Tax Assets: Net operating loss carryforwards $ 466,004 $ 434,122 Research and development credits 93,752 91,416 Fixed assets 1,446 — Capitalized research and experimental expenses 68,647 73,281 Accruals and reserves 14,077 10,506 Cancellation of indebtedness income and interest expense 18,473 20,424 Share-based compensation 14,778 18,195 Operating lease liability 13,199 5,618 Total deferred tax assets 690,376 653,562 Less: Valuation allowance ( 678,952 ) ( 558,794 ) Total deferred tax assets 11,424 94,768 Deferred Tax Liabilities: Intangibles ( 1,810 ) ( 91,504 ) Fixed assets — ( 261 ) Operating lease right-of-use assets ( 9,614 ) ( 3,549 ) Total deferred tax liabilities ( 11,424 ) ( 95,314 ) Deferred tax liabilities, net $ — $ ( 546 ) At December 31, 2025, we maintained a valuation allowance against our net deferred tax assets which totaled $ 679.0 million, including net operating loss carryforwards and research and development credits of $ 466.0 million and $ 93.8 million, respectively. A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. We regularly assess the need for a valuation allowance against our deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that our deferred income tax assets will be realized. 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. 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. For the year ended December 31, 2025, the Company's valuation allowance increased to $ 679.0 million, primarily because of an increase in our net operating losses and credits 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 and experimental expenses that were fully offset by a valuation allowance. The change in valuation allowance of $ 120.2 million was charged to continuing operations. Fiscal 2025 Form 10-K 113 Table of Contents Net Operating Loss and Tax Credit Carryforwards As of December 31, 2025, we had a net operating loss carryforward for federal income tax purposes of approximately $ 1,844.8 million, of which $ 779.3 million is subject to annual expirations beginning in 2026. We had a total state net operating loss carryforward of approximately $ 1,222.9 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 $ 66.1 million, a portion of which will begin to expire in 2026 if not utilized and state research credits of approximately $ 57.3 million, which have no expiration date. These tax credits are subject to the same limitations discussed above. Unrecognized Tax Benefits As of December 31, 2025, our total unrecognized tax benefit was $ 19.2 million. A reconciliation of the beginning and ending unrecognized tax benefit balance is as follows: (In thousands) Balance as of December 31, 2022 $ 10,410 Increase in balance related to tax positions taken in prior year 2,044 Increase in balance related to tax positions taken during current year 2,100 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 Decrease in balance related to tax positions taken in prior year ( 14 ) Increase in balance related to tax positions taken during current year 1,562 Balance as of December 31, 2025 $ 19,224 Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, we had no accrued interest or penalties due to our net operating losses available to offset any tax adjustment. If total unrecognized tax benefits were realized in the future, it would not result in any tax benefit as we currently have a full valuation allowance. We file U.S. federal and various state income tax returns. For U.S. federal and state income tax purposes, the statute of limitations currently remains open for the years ending December 31, 2022 to present and December 31, 2021 to present, respectively. 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. Fiscal 2025 Form 10-K 114 Table of Contents Income Taxes Paid Income taxes paid net of refunds received exceeding 5% of the annual total by jurisdiction: Years ended December 31, (In thousands) 2025 2024 2023 U.S. Federal $ — $ — $ — U.S. State and Local — — — Foreign: Canada 29 38 69 China * 107 17 Germany 52 74 64 Japan * 16 18 Netherlands 88 * * Taiwan * * 22 United Kingdom 277 * ( 56 ) Other foreign jurisdictions 35 21 6 Total foreign 481 256 140 Total income taxes paid $ 481 $ 256 $ 140 * Income tax paid net of refunds received did not exceed 5% of the annual total by jurisdiction. NOTE 9. STOCKHOLDERS' EQUITY Common and Preferred Stock Our Certificate of Incorporation, as amended and restated in 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. As of December 31, 2025 and 2024, there were no shares of preferred stock issued or outstanding. Common stockholders are entitled to dividends when and if declared by our board of directors. There have been no dividends declared to date. The holder of each share of common stock is entitled to one vote. Underwritten Public Equity Offerings In January 2023, we entered into an underwriting agreement, relating to the public offering of 17.5 million shares of our common stock, $ 0.001 par value per share, at a price to the public of $ 10.00 per share. Under the terms of the underwriting agreement, we also granted the underwriters a 30 -day option to purchase up to an additional 2.6 million shares of our common stock, which was subsequently exercised in full, and the offering, including the sale of shares of common stock subject to the underwriters' option, closed in January 2023. In total, we sold 20.1 million shares of our common stock. We paid a commission equal to 5.75 % of the gross proceeds from the sale of shares of our common stock. The total net proceeds to us from the offering after deducting the underwriting discount were approximately $ 189.7 million, excluding approximately $ 0.5 million of offering expenses. Equity Plans 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, 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. Fiscal 2025 Form 10-K 115 Table of Contents On June 18, 2024, our 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. On June 4, 2025, our stockholders approved an amendment to the 2020 Plan, and we reserved an additional 23.0 million shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan. As of December 31, 2025, we had 38.6 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 The following table summarizes stock option activity for time-based awards: (Shares in thousands) Number of shares Weighted-average exercise price Outstanding at December 31, 2024 10,509 $ 11.09 Granted 8,290 $ 1.22 Exercised — $ — Canceled ( 2,823 ) $ 8.54 Expired ( 467 ) $ 7.15 Outstanding at December 31, 2025 15,509 $ 6.40 The aggregate intrinsic value of the outstanding options presented in the table above as of December 31, 2025, totaled $ 5.1 million, and had a weighted-average remaining contractual life of 6.9 years. The aggregate intrinsic value of outstanding options represents the total pre-tax intrinsic value (i.e. the difference between $ 1.87 , our closing stock price on the last trading day of our fourth quarter of 2025, and the option exercise price multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2025. 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, 2025, totaled 9,817,500 shares, had an aggregate intrinsic value that was $ 1.5 million, a weighted-average exercise price per share of $ 9.28 , and a weighted-average remaining contractual life of 5.6 years. The vested and expected to vest options as of December 31, 2025, totaled 15,136,547 shares, had an aggregate intrinsic value of $ 4.7 million, a weighted-average exercise price per share of $ 6.63 , and a weighted-average remaining contractual life of 6.8 years. There were no stock options exercised during the year ended December 31, 2025. The total intrinsic value of stock options exercised during the years ended December 31, 2024 and 2023 was $ 0.8 million, and $ 8.8 million, respectively. The total intrinsic value of options exercised represents the difference between our closing stock price on the exercise date and the option exercise price, multiplied by the number of in-the-money options exercised. The weighted-average grant-date fair value of all options granted was $ 0.90 in 2025, $ 1.40 in 2024, and $ 7.32 in 2023, each determined by the Black-Scholes option valuation method. Restricted Stock Units ("RSU") and Performance Stock Units ("PSU") 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 two to 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 PSUs 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. Fiscal 2025 Form 10-K 116 Table of Contents 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 Outstanding at December 31, 2024 14,211 392 $ 7.41 $ 9.43 Granted 11,997 — 1.26 — Vested ( 4,435 ) — 9.49 — Forfeited ( 4,222 ) — 4.00 — Outstanding at December 31, 2025 17,551 392 $ 3.50 $ 9.43 The total fair value of shares vested related to RSUs during the years ended December 31, 2025, 2024, and 2023 was $ 42.1 million, $ 47.2 million, and $ 39.3 million, respectively, based on the grant date fair value of each RSU award. The weighted-average grant-date fair value of all RSUs granted was $ 1.26 in 2025, $ 5.02 in 2024, and $ 9.65 in 2023. Employee Stock Purchase Plan As of December 31, 2025, a total of 37.5 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, 2025, 2024, and 2023, 3,102,930 shares, 1,906,529 shares, and 1,735,058 shares of common stock were purchased under the ESPP, respectivel y. As of December 31, 2025, 15.2 million sh ares of our common stock remain available for issuance under our ESPP. Share-based Compensation The following table summarizes share-based compensation expense: Years Ended December 31, (In thousands) 2025 2024 2023 Cost of revenue $ 3,847 $ 5,691 $ 5,399 Research and development 11,173 19,172 22,435 Sales, general and administrative 26,648 46,173 44,284 Total share-based compensation 41,668 71,036 72,118 As of December 31, 2025 and 2024, $ 0.4 million and $ 0.6 million of share-based compensation cost was capitalized in inventory, net, on our consolidated balance sheets, respectively. 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, 2025, 2024, and 2023 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. Fiscal 2025 Form 10-K 117 Table of Contents Determining Fair Value We estimate the fair value of share options granted using the Black-Scholes valuation method and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair market value of 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 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. • Expected Dividend – We have never paid dividends on our shares and, accordingly, the dividend yield percentage is zero for all periods. • Risk-Free Interest Rate – The risk-free interest rate used in the Black-Scholes valuation method is the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent to the expected terms. Stock Options 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. The fair value of employee stock options was estimated using the following weighted-average assumptions: Years Ended December 31, 2025 2024 2023 Expected term in years 4.9 4.9 4.9 Expected volatility 95 % - 96 % 81 % - 93 % 77 % - 78 % Risk-free interest rate 3.89 % – 4.29 % 3.48 % – 4.32 % 3.73 % – 4.60 % Dividend yield — — — Weighted-average grant date fair value per share $ 0.90 $ 1.40 $ 7.32 There were no stock options exercised during the year ended December 31, 2025. Cash received from option exercises for the years ended December 31, 2024 and 2023 was $ 1.6 million and $ 6.5 million, respectively. ESPP The fair value of shares to be issued under the ESPP was estimated using the following assumptions: Years Ended December 31, 2025 2024 2023 Expected term in years 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Expected volatility 101 % - 113 % 81 % - 118 % 79 % - 97 % Risk-free interest rate 3.7 % - 4.3 % 3.9 % - 5.3 % 4.9 % - 5.5 % Dividend yield — — — Weighted-average grant date fair value per share $ 0.89 $ 1.53 $ 5.34 Cash received through the ESPP for the years ended December 31, 2025, 2024, and 2023 was $ 3.4 million, $ 6.1 million, and $ 8.8 million, respectively. As of December 31, 2025, $ 46.8 million of total unrecognized compensation expense related to stock options, restricted stock, and ESPP shares was expected to be recognized over a weighted-average period of 1.6 years. Fiscal 2025 Form 10-K 118 Table of Contents NOTE 10. NET LOSS PER SHARE 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, (In thousands, except per share amounts) 2025 2024 2023 Numerator: Basic Basic net loss $ ( 546,376 ) $ ( 309,851 ) $ ( 306,735 ) Diluted Basic net loss $ ( 546,376 ) $ ( 309,851 ) $ ( 306,735 ) Add: Interest charges applicable to convertible notes (2028 Notes) — 6,428 — Less: Gain on debt restructuring (2029 Notes) — ( 154,407 ) — Diluted net loss $ ( 546,376 ) $ ( 457,830 ) $ ( 306,735 ) Denominator: Basic Weighted-average shares used in computing basic net loss per share 299,959 274,488 253,629 Basic net loss per share $ ( 1.82 ) $ ( 1.13 ) $ ( 1.21 ) Diluted Weighted-average shares used in computing basic net loss per share 299,959 274,488 253,629 Add: Weighted average shares issuable upon conversion of convertible notes (2028 Notes) — 9,395 — Add: Weighted average shares issuable upon conversion of convertible notes (2029 Notes) — 4,483 — Weighted-average shares used in computing diluted net loss per share 299,959 288,366 253,629 Diluted net loss per share $ ( 1.82 ) $ ( 1.59 ) $ ( 1.21 ) 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: Years Ended December 31, (In thousands) 2025 2024 2023 Shares issuable upon conversion of convertible senior notes 61,415 20,512 31,063 Equity awards 41,613 34,136 27,246 See Note 2. Business Acquisitions , for detailed information on contingently issuable shares that would be due upon achievement of a milestone. See Note 9. Stockholders’ Equity for detailed information on equity awards. NOTE 11. SEGMENT AND GEOGRAPHIC INFORMATION We are organized as, and operate in, one reportable segment: 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 Fiscal 2025 Form 10-K 119 Table of Contents • 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. A summary of the segment profit or loss, including significant segment expenses is as follows: Years Ended December 31, (In thousands) 2025 2024 2023 Total revenue 160,005 154,014 200,521 Less: Cost of revenue 114,225 116,732 147,741 Research and development 97,307 134,922 187,170 Sales and marketing 72,972 87,244 79,287 General and administrative 68,521 87,773 90,531 Impairment charges 15,000 184,500 — Merger-related expenses — — 9,042 Change in fair value of contingent consideration ( 18,700 ) ( 850 ) 15,060 Amortization of acquired intangible assets 364,541 18,006 6,157 Loss on extinguishment of debt — — 2,033 Gain on debt restructuring — ( 154,407 ) — Other income, net 7,803 10,371 18,341 Income tax provision (benefit) 318 316 ( 11,424 ) Consolidated net loss ( 546,376 ) ( 309,851 ) ( 306,735 ) A summary of our revenue by geographic location is as follows: Years Ended December 31, (In thousands) 2025 2024 2023 Americas (1) $ 72,798 $ 78,711 $ 105,410 Europe, Middle East, and Africa 44,051 34,594 40,658 Asia-Pacific 43,156 40,709 54,453 Total revenue $ 160,005 $ 154,014 $ 200,521 (1) Includes United States revenue of $ 69.7 million, $ 75.3 million, and $ 100.5 million for the years ended December 31, 2025, 2024, and 2023, respectively. A summary of our revenue by category is as follows: Years Ended December 31, (In thousands) 2025 2024 2023 Instrument revenue $ 53,819 $ 65,776 $ 120,451 Consumables revenue 81,939 70,373 63,421 Product revenue 135,758 136,149 183,872 Service and other revenue 24,247 17,865 16,649 Total revenue $ 160,005 $ 154,014 $ 200,521 Fiscal 2025 Form 10-K 120 Table of Contents NOTE 12. SUBSEQUENT EVENTS On January 30, 2026, we completed a disposition of certain assets to Buyer pursuant to an Asset Purchase Agreement dated January 30, 2026. Under the agreement, Buyer acquired certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies. In consideration, Buyer paid $ 50.0 million in cash, assumed certain liabilities, and granted us a non-exclusive license to certain intellectual property included in the purchased assets. In connection with the Asset Sale, Buyer will pay, at our direction, 4 % of the net cash proceeds to the former equity holders of Apton Biosystems, Inc. in connection with the waiver of remaining milestone obligations from our August 2023 acquisition of Apton, with such payment expected in the first quarter of 2026. As a result, we received approximately $ 48.1 million in net cash proceeds from the Asset Sale. Fiscal 2025 Form 10-K 121 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.