What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-06 · 147 added, 195 removed, 121 unchanged (74% of the section changed)

1 unchanged sentence

You should read the following discussion and analysis of our financial condition and results of operations together with (i) our unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and (ii) our 2025 Annual Report filed with the U.S.

Securities and Exchange Commission, or the SEC, on March 17, 2025.

Securities and Exchange Commission, or the SEC, on February 25, 2026.

This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties.

12 unchanged sentences

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

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

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

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

We focus 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 products and technology, which primarily consist of our HiFi long-read sequencing systems, 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.

1 unchanged sentence

Strategic Objectives

Our 2025 strategic objectives are to grow revenue and expand gross margins through the following four activities:

• Enabling the full-scale release of the Vega benchtop platform to broaden our market reach.

We believe this platform broadens the long-read market opportunity.

• Accelerating samples onto the Revio platform via SPRQ chemistry and application kits.

The SPRQ chemistry enables the sub-$500 HiFi genome, improves methylation detection capabilities, and achieves a 75% reduction in DNA input requirements for human whole genome sequencing.

These features can drive more samples onto HiFi sequencing than ever before.

• Investing in future product launches to diversify our offerings.

We continue to develop sequencing systems designed to increase throughput and lower the cost to sequence a genome, which we believe will allow us to address an even larger part of the market.

Additionally, we continue to develop kitted-solutions, like our Kinnex Full-length RNA kits and PureTarget, and enhance our on-market sequencers with products like SPRQ chemistry to drive more sequencing volume.

• Progressing our clinical strategy to improve outcomes and create durability.

Revio is increasingly being used in laboratory developed tests ("LDT") and clinical research settings to consolidate multiple tests and address complex genetic challenges.

We continue to believe that with the capabilities of our HiFi chemistry and SMRT ® technology, we can be a market leader in whole-genome clinical sequencing.

Our 2026 main objectives are to grow revenue and expand gross margins through the following five activities.

These initiatives are designed to improve the economics of HiFi sequencing, expand adoption across clinical and research markets, and drive durable growth across our platform portfolio.

• Accelerate samples onto the Revio platform through SPRQ-Nx chemistry and application kits.

SPRQ-Nx is designed to lower the cost of sequencing and improve sequencing efficiency, which we believe will support higher throughput, increased sample volumes, and broader adoption of HiFi sequencing in large-scale research studies and clinical applications.

• Expand the capabilities of the Vega benchtop platform to broaden our market reach.

We plan to enable faster run times and enhanced user experience through software improvements, which are intended to support broader adoption and improve the overall economics of HiFi sequencing.

• Progress our clinical strategy to improve outcomes and create durability.

Revio is increasingly being adopted in laboratory-developed test ("LDT") and clinical research settings, supporting consolidation of multiple tests, addressing complex genetic challenges, and driving sustained utilization of HiFi sequencing.

This includes in the Americas, where we continue to aggressively shift our strategy to clinical and commercial accounts where we believe the funding dynamics are more favorable.

• Advance data-driven interpretation through scalable HiFi datasets and analytics.

We are focused on leveraging the accuracy of HiFi sequencing and growing datasets to support advanced data analysis and AI-assisted interpretation approaches.

Collaborative initiatives such as the HiFi Solves Global Consortium are designed to aggregate large, well-characterized HiFi datasets, which we believe can support improved understanding of complex genetic variation and disease biology while maintaining expert oversight.

• Invest in future product launches to drive platform innovation.

We continue to develop sequencing solutions designed to increase throughput, simplify workflows, lower the cost to sequence a genome, and enhance downstream data analysis and interpretation capabilities, which we believe will allow us to address a larger portion of the market.

We continue to believe that with the capabilities of our technology, we can be a market leader in whole-genome clinical sequencing.

Leading institutions have adopted our products to study rare and inherited disease.

2 unchanged sentences

Collaborative arrangements add to the awareness of our products and service offerings and may drive new applications for use of our technology.

Q1 Fiscal 2026 Form 10-Q

Financial Overview

Key highlights of the nine months ended September 30, 2025 consolidated financial results include the following:

Key highlights of the three months ended March 31, 2026 consolidated financial results include the following:

Revenue of Gross profit of

1 unchanged sentence

Cash, cash equivalents, and investments of

$115.4 M $29.2 M $512.7 M

compared to $114.8 M during the same period of 2024

$37.2 M $12.8 M

compared to $37.2 M during the same period of 2025

compared to gross loss of $1.4 M during the same period of 2025

compared to $428.9 M during the same period of 2025

compared to $279.5 M at December 31, 2025

• Revenue was comprised of $36.5 million in instrument revenue, $60.3 million in consumables revenue and $18.6 million in service and other revenue during the nine months ended September 30, 2025.

Revenue was comprised of $50.5 million in instrument revenue, $51.6 million in consumables revenue and $12.7 million in service and other revenue during the nine months ended September 30, 2024.

The increase was primarily due to higher consumable sales, Vega unit sales, and service and other revenue, partially offset by lower Revio unit sales.

• Gross profit increased during the nine months ended September 30, 2025 compared to the same period of 2024.

The increase was primarily driven by growth in consumable revenue and lower cost of product revenue, partially offset by restructuring-related charges of $12.4 million during the nine months ended September 30, 2025 compared to $4.4 million for the same period of 2024.

• Revenue was comprised of $9.7 million in instrument revenue, $21.8 million in consumables revenue and $5.6 million in service and other revenue during the three months ended March 31, 2026.

Revenue was comprised of $11.0 million in instrument revenue, $20.1 million in consumables revenue and $6.0 million in service and other revenue during the three months ended March 31, 2025.

An increase in Consumable revenue and higher Revio unit sales were offset by lower Vega unit sales and a decrease in service and other revenue.

• We recorded a gross profit of $12.8 million during the three months ended March 31, 2026 compared to a gross loss of $1.4 million during the same period of 2025.

We recorded approximately $12.0 million of restructuring charges during the three months ended March 31, 2025.

Restructuring in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials, and tariffs.

Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, product promotions, future product launches, changes to inventory reserves, costs of raw materials, computing costs, specifically memory, and tariffs.

• Loss from operations decreased $420.6 million during the three months ended March 31, 2026, compared with the same period of 2025, primarily due to a $406.4 million decrease in operating expenses.

Operating expenses of $21.2 million for the three months ended March 31, 2026 included litigation settlement expenses of $15.4 million.

Operating expenses were mostly offset by a $45.8 million gain on disposal of assets to Illumina Cambridge Limited due to the Asset Sale.

Financial Instruments in Part I, Item I of this Quarterly Report on Form 10-Q for more information.

Operating expenses of $427.6 million during the three months ended March 31, 2025 included $381.8 million of costs incurred in connection with the restructuring and strategic shift, which included $359.3 million of accelerated amortization of acquired intangibles, $15.0 million of impairment charges, and $4.6 million of employee separation costs, partially offset by an $18.7 million decrease in the change in the fair value of the contingent consideration.

• Cash, cash equivalents, and short-term investments were $276.0 million at March 31, 2026, which represents a 1% decrease compared to the balance at December 31, 2025.

During the three months ended March 31, 2026 we received net cash proceeds of approximately $48.1 million in conjunction with the gain on disposal of assets discussed above.

We believe that demand for our instruments (particularly Vega) remains constrained due to, among other reasons, the funding environment in the United States, contributing to elongated sales cycles, or in certain cases, customers not placing instrument orders.

Additionally, sales cycles have been and continue to be impacted by, among other reasons, continued capital funding constraints in academic and research markets, procurement timing considerations, and longer adoption cycles among new customers, which have affected the timing of certain instrument orders.

We believe these challenges will impact second quarter 2026 revenue with approximately single-digit to low double-digit sequential revenue growth.

However, we believe that revenues will be greater in the back half of 2026, which we expect will be driven by continued clinical adoption, SPRQ-Nx consumable growth, and revenue associated with the Basecamp Research program, which we believe will start to materialize in the second and third quarters of 2026.

We are continuing development of a high-throughput, HiFi sequencer, which we believe could launch in 2027.

Macroeconomic dynamics that have impacted and could continue to impact the Company include rising inflation, higher computing component costs, specifically memory, which may result in material cost pressures and supply constraints in future periods, geopolitical tensions, including recent conflicts in the Middle East (including Iran), volatile capital markets, tariffs, uncertainty in the United States related to NIH and academic funding, and fluctuating exchange rates.

These factors could continue to impact our revenues and results of

Q1 Fiscal 2026 Form 10-Q

• Loss from operations increased $191.4 million during the nine months ended September 30, 2025, compared with the same period of 2024, primarily due to a $193.4 million increase in operating expenses.

This increase included $382.4 million of restructuring-related costs, comprised primarily of $359.3 million in accelerated amortization of acquired intangibles, $15.0 million of impairment charges, and $4.8 million of employee separation costs.

By contrast, restructuring-related charges totaled $20.3 million in the prior-year period.

These increases in restructuring-related costs were partially offset by a $78.2 million decrease in impairment charges, a $19.8 million change in fair value of contingent consideration, and reductions in research and development and sales, general and administrative expenses due to headcount and related cost savings from the restructuring.

• Cash, cash equivalents, and short-term investments were $298.7 million at September 30, 2025, which represents a 23% decrease compared to the balance at December 31, 2024.

The sales cycle for Revio instrument purchases continues to be elongated.

We believe this has been caused by, among other reasons, the uncertainty surrounding the funding for new capital equipment, in particular, uncertainty in the United States related to the National Institutes of Health ("NIH") and academic funding;

procurement delays;

small-to-mid-size existing customers yet to increase their sample volumes to drive an upgrade to Revio;

new customers, which have shown they have longer sales cycles compared to existing PacBio customers;

and sample volumes materializing slower than expected for some potential Revio customers.

Macroeconomic dynamics impacting the Company in the future may include rising inflation, geopolitical tensions, volatile capital markets, tariffs, uncertainty in the United States related to NIH and academic funding, and fluctuating exchange rates.

These factors could continue to impact our revenues and results of operations in future periods;

operations in future periods;

however, the magnitude and duration of these impacts is highly uncertain and inherently unpredictable.

On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill and finite-lived assets.

On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill, indefinite-lived and finite-lived assets.

However, these estimates could change in future periods based on events or changes in circumstances, which could result in material future impairment charges.

We recorded $15.0 million of impairment charges during the nine months ended September 30, 2025.

We recorded $15.0 million of impairment charges during the three months ended March 31, 2025.

See additional discussion below in Results of Operations, as well as Note 3.

2 unchanged sentences

See the Risk Factors section for further discussion.

Q3 Fiscal 2025 Form 10-Q

RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

(In thousands, except percentages)

2025 2024 $ Change % Change

Product revenue $ 32,597 $ 35,296 $ (2,699) (8 %)

Service and other revenue 5,844 4,671 1,173 25 %

Total revenue 38,441 39,967 (1,526) (4 %)

Cost of Revenue:

Cost of product revenue 19,204 23,278 (4,074) (18 %)

Cost of service and other revenue 3,078 3,484 (406) (12 %)

Amortization of acquired intangible assets

183 3,201 (3,018) (94 %)

Loss on purchase commitment

Total cost of revenue 22,540 29,963 (7,423) (25 %)

Gross profit 15,901 10,004 5,897 59 %

Operating Expense:

Research and development 22,846 25,516 (2,670) (10) %

Sales, general and administrative 31,099 43,746 (12,647) (29) %

Amortization of acquired intangible assets 833 3,649 (2,816) (77) %

Change in fair value of contingent consideration — 1,170 (1,170) (100) %

Total operating expense 54,778 74,081 (19,303) (26 %)

Operating loss (38,877) (64,077) 25,200 (39) %

Interest expense (1,739) (3,538) 1,799 (51) %

Other income, net 2,999 6,890 (3,891) (56 %)

Loss before income taxes

(37,617) (60,725) 23,108 (38 %)

Income tax provision

Net loss $ (38,000) $ (60,725) $ 22,725 (37 %)

Q3 Fiscal 2025 Form 10-Q

Total Revenue

Total revenue decreased $1.6 million, or 4%, for the third quarter of 2025 compared with the same quarter of 2024.

Product revenue decreased $2.7 million, or 8%, primarily due to a decrease of $5.5 million, or 33%, in instrument revenue, partially offset by an increase of $2.8 million, or 15%, in consumable revenue.

Service and other revenue increased $1.1 million, or 25%, primarily driven by an increase in Revio service contracts.

Instrument Revenue

Instrument revenue decreased for the third quarter of 2025, primarily due to a lower number of Revio systems sold—13 units compared to 22 units in the same quarter of 2024.

This decline primarily reflects variability in customer purchasing behavior resulting from uncertainty surrounding the funding for new capital equipment, particularly among academic and research institutions.

The decrease was partially offset by sales of the Vega system, with 32 units sold during the third quarter of 2025 following its commercial launch in the fourth quarter of 2024.

We expect that instrument revenue may fluctuate quarter-to-quarter based on timing of customer purchasing decisions, sales mix, and funding dynamics.

Consumables Revenue

The increase in consumables revenue for the third quarter of 2025 was primarily driven by higher Revio consumables sales, reflecting the continued expansion of the Revio instrument installed base.

Shipments of Vega consumables also contributed modestly during the period, and we anticipate increased contributions as customers begin ramping usage of the Vega platform and the installed base expands.

Looking ahead, we expect continued growth in consumables revenue as adoption of the Revio and Vega platforms expands.

This anticipated growth reflects increasing instrument placements, improving consumable utilization, and broadening addressable application for our platforms.

Q3 Fiscal 2025 Form 10-Q

Cost of Revenue and Gross Profit

Total cost of revenue decreased $7.4 million, or 25%, in the third quarter of 2025 compared to the same quarter of 2024 primarily due to a decrease in cost of product revenue and a decrease of $3.0 million in amortization attributable to acquired intangible assets that are related to sales generating activities.

Total cost of revenue included share-based compensation expense of $0.9 million and $1.2 million during the third quarter of 2025 and 2024, respectively.

Cost of product revenue decreased $4.1 million, or 18%, in the third quarter of 2025 compared to the same quarter of 2024 primarily due to a shift in product mix to lower cost instruments.

Gross profit increased $5.9 million, or 59%, in the third quarter of 2025 compared to the same quarter of 2024 driven primarily by lower cost of revenue and higher consumables sales.

Research and Development Expense

Research and development expense decreased by $2.7 million, or 10%, for the third quarter of 2025, compared to the same quarter of 2024.

The decrease was primarily driven by decreases in personnel and related expenses, including share-based compensation.

Research and development expense included share-based compensation expense of $3.1 million and $4.7 million during the third quarter of 2025 and 2024, respectively.

Sales, General, and Administrative Expense

Sales, general and administrative expense decreased by $12.6 million, or 29%, for the third quarter of 2025, compared to the same quarter of 2024.

The decrease was primarily due to $6.9 million of restructuring charges recorded in the third quarter of 2024 and a decrease in share-based compensation expense.

Sales, general, and administrative expense included share-based compensation expense of $7.0 million and $12.3 million during the third quarter of 2025 and 2024, respectively.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets included in operating expenses for the third quarter of 2025 and 2024 consists of amortization expense attributable to acquired intangible assets that are not directly related to sales generating activities.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration during the third quarter of 2024 represents the remeasurement impact of contingent consideration due upon the achievement of a milestone.

Interest Expense

Interest expense for the third quarter of 2025 and 2024 was primarily comprised of interest on the convertible senior notes.

The decrease was due to lower convertible notes balances as a result of the notes exchange transaction in November 2024.

Convertible Senior Notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Other Income, Net

Other income, net for the third quarter of 2025 decreased compared to the same quarter of 2024 primarily driven by lower investment income due to lower cash and investment balances.

Q3 Fiscal 2025 Form 10-Q

Comparison of the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended September 30,

Comparison of the Three Months Ended March 31, 2026 and 2025

Three Months Ended March 31,

(In thousands, except percentages)

11 unchanged sentences

Total cost of revenue 24,337 38,524 (14,187) (37 %)

Gross profit 29,214 27,224 1,990 7 %

Gross profit (loss)

12,841 (1,371) 14,212 (1037 %)

Operating Expense:

2 unchanged sentences

Impairment charges — 15,000 (15,000) (100) %

Settlement charges

15,400 — 15,400 —

Gain on disposal of assets (45,796) — (45,796) —

Amortization of acquired intangible assets 833 362,042 (361,209) (100) %

6 unchanged sentences

(8,091) (426,377) 418,286 (98 %)

Income tax provision

Income tax provision (benefit)

184 (302) 486 (161 %)

Net loss $ (8,275) $ (426,075) $ 417,800 (98 %)

1 unchanged sentence

Total Revenue

Total revenue increased $0.6 million during the nine months ended September 30, 2025 compared with the same period of 2024.

Product revenue decreased $5.3 million, or 5%, primarily due to a decrease of $14.0 million, or 28%, in instrument revenue, partially offset by an increase of $8.7 million, or 17%, in consumable revenue.

Service and other revenue increased $5.9 million, or 46%, primarily driven by an increase in Revio service contracts.

Total revenue was relatively flat for the first quarter of 2026 compared with the same quarter of 2025.

Product revenue increased $0.4 million, or 1%, primarily due to an increase of $1.7 million, or 9%, in consumable revenue, partially offset by a decrease of $1.3 million, or 12%, in instrument revenue.

Service and other revenue decreased $0.4 million, or 7%.

Instrument Revenue

Instrument revenue decreased during the nine months ended September 30, 2025, primarily due a lower number of Revio systems sold—40 units compared to 74 units in the same period of 2024.

The decrease was partially offset by sales of the Vega system, with 98 units sold during the nine months ended September 30, 2025 following its commercial launch in the fourth quarter of 2024.

We expect that instrument revenue may fluctuate quarter-to-quarter based on timing of customer purchasing decisions, sales mix, and funding dynamics.

Instrument revenue decreased for the first quarter of 2026, primarily due to lower selling prices, including with respect to our Vega promotional pricing through the end of the first quarter.

Sales of Revio systems increased—15 units compared to 12 units in the same quarter of 2025.

Sales of Vega systems decreased—27 units compared to 28 units in the same quarter of 2025.

We expect that instrument revenue may fluctuate quarter-to-quarter based on timing of customer purchasing decisions, sales mix, promotional activities, and funding dynamics.

Consumables Revenue

The increase in consumables revenue during the nine months ended September 30, 2025 was primarily driven by higher Revio consumables sales, reflecting the continued expansion of the Revio instrument installed base.

Looking ahead, we expect continued growth in consumables revenue as adoption of the Revio and Vega platforms expands.

This anticipated growth reflects increasing instrument placements, improving consumable utilization, and broadening addressable application for our platforms.

The increase in consumables revenue for the first quarter of 2026 was primarily driven by higher Revio consumables sales, reflecting the continued expansion of the Revio instrument installed base, partially offset by some customers delaying consumable shipments in anticipation of the SPRQ-Nx commercial launch.

Shipments of Vega consumables also contributed modestly during the period, and we anticipate increased contributions as customers continue ramping usage of the Vega platform and the installed base expands.

Looking ahead, we expect continued growth in consumables revenue as adoption of the Revio and Vega platforms expands, along with increased demand in connection with the expected commercial launch of SPRQ-Nx kits in May 2026.

This anticipated growth reflects increasing instrument placements, improving consumable utilization, broadening addressable applications for our platforms, and further expanding adoption across our research, clinical and commercial customers.

Q1 Fiscal 2026 Form 10-Q

Cost of Revenue and Gross Profit

Total cost of revenue decreased $1.4 million, or 2%, during the nine months ended September 30, 2025, compared to the same period of 2024 primarily due to decreases in cost of product revenue, amortization of acquired intangible assets, and share-based compensation expense.

These decreases were partially offset by an increase in restructuring-related charges.

We recorded $12.4 million during the nine months ended September 30, 2025, which included $3.9 million relating to loss on purchase commitments which is based on an estimate of future excess inventory related to supply agreements for which we do not expect to have related sales.

Restructuring-related charges were $4.4 million for the same period of 2024.

Total cost of revenue included share-based compensation expense of $3.0 million and $4.5 million during the nine months ended September 30, 2025 and 2024, respectively.

Cost of product revenue decreased $3.2 million, or 5%, during the nine months ended September 30, 2025, compared to the same period of 2024 primarily due to a shift in product mix to lower cost instruments.

Gross profit increased $2.0 million, or 7%, during the nine months ended September 30, 2025, compared to the same period of 2024 driven primarily by growth in consumable revenue which was partially offset by an increase in restructuring-related charges.

Restructuring in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information about restructuring activities.

Cost of Revenue and Gross Profit (Loss)

Total cost of revenue decreased $14.2 million, or 37%, in the first quarter of 2026 compared to the same quarter of 2025.

We recorded approximately $12.0 million of restructuring charges during the three months ended March 31, 2025.

Total cost of revenue included share-based compensation expense of $0.6 million and $1.2 million during the first quarter of 2026 and 2025, respectively.

Cost of product revenue decreased $6.4 million, or 24%, in the first quarter of 2026 compared to the same quarter of 2025 primarily due to cost reductions related to our instrument platforms.

We recorded a gross profit of $12.8 million during the three months ended March 31, 2026 compared to a gross loss of $1.4 million during the same period of 2025.

The change was driven primarily by relatively flat revenue and the lower cost of revenue described above.

During the first quarter of 2026, gross margin was affected by higher computing component costs, specifically memory, inventory adjustments, certain incremental warranty charges, as well as a limited time Vega promotion, which resulted in lower first quarter average selling prices for the product.

We expect Vega average selling prices to normalize in the second quarter of 2026.

While higher consumables mix and the introduction of SPRQ-Nx remain important drivers of margin expansion, rising compute costs will temper the pace of margin improvement in the near term.

Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, including promotional pricing, future product launches, changes to inventory reserves, costs of raw materials and computing costs, specifically memory, which may result in material cost pressures and supply constraints in future periods, and tariffs.

Research and Development Expense

Research and development expense decreased by $33.0 million, or 31%, during the nine months ended September 30, 2025, compared to the same period of 2024.

The decrease was primarily driven by a decrease in personnel and related expenses, including share-based compensation expense, lower product development costs due to the transition of launched products from development to commercialization, and lower restructuring-related charges.

We recorded $2.7 million of restructuring-related charges during the nine months ended September 30, 2025 compared to $5.9 million for the same period of 2024.

Research and development expense included share-based compensation expense of $9.0 million and $15.1 million during the nine months ended September 30, 2025 and 2024, respectively.

Research and development expense decreased by $9.4 million, or 33%, for the first quarter of 2026, compared to the same quarter of 2025.

The decrease was primarily driven by decreases in personnel and related expenses, including share-based compensation.

We also recognized approximately $2.7 million of restructuring charges during the first quarter of 2025.

Research and development expense included net negative share-based compensation expense of $0.8 million during the first quarter of 2026 due to the Company's estimated forfeitures and share-based compensation expense of $2.6 million during the first quarter of 2025.

Sales, General, and Administrative Expense

Sales, general and administrative expense decreased by $25.9 million, or 19%, during the nine months ended September 30, 2025, compared to the same period of 2024.

The decrease was primarily due to a decrease in personnel and related expenses, including share-based compensation expense, and lower restructuring-related charges.

We recorded $5.5 million of restructuring-related charges during the nine months ended September 30, 2025 compared to $14.4 million for the same period of 2024.

Sales, general, and administrative expense included share-based compensation expense of $20.1 million and $35.4 million during the nine months ended September 30, 2025 and 2024, respectively.

Sales, general and administrative expense decreased by $9.0 million, or 22%, for the first quarter of 2026, compared to the same quarter of 2025.

The decrease was primarily driven by decreases in personnel and related expenses, including share-based compensation.

We also recognized approximately $4.8 million of restructuring charges during the first quarter of 2025.

Sales, general, and administrative expense included share-based compensation expense of $4.6 million and $5.4 million during the first quarter of 2026 and 2025, respectively.

Impairment Charges

We recorded impairment charges of $15.0 million during the nine months ended September 30, 2025, related to in-process research and development (“IPR&D”).

We recorded impairment charges of $15.0 million during the first quarter of 2025, related to in-process research and development (“IPR&D”).

These charges resulted from an interim impairment assessment performed in response to identified indicators of impairment during the period.

The impairment test concluded that the carrying amount of our IPR&D assets exceeded their estimated fair value.

Balance Sheet Components in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

We recognized a goodwill impairment charge of $93.2 million during the nine months ended September 30, 2024.

This charge was primarily driven by a sustained decrease in our stock price and changes in the timing of expected future cash flows under our long-term plan, reflecting the ongoing impact of longer-than-anticipated median sales cycles and other contributing factors.

These conditions indicated that the fair value of the reporting unit may have been less than its carrying amount, prompting the performance of an interim goodwill impairment test.

The results of the test confirmed that the reporting unit’s carrying amount exceeded its estimated fair value.

The impairment test concluded that the fair value of our IPR&D assets was $0.

Balance Sheet Components in Part I, Item I of this Quarterly Report on Form 10-Q for further details.

Q1 Fiscal 2026 Form 10-Q

Settlement Charges

In the first quarter of 2026, the Company entered into a license and settlement agreement with PGI in connection with the PGI Settlement.

Under the fixed payment structure pursuant to the agreement, the Company paid PGI $8,000,000 in the second quarter of 2026, and will pay $5,000,000 in the first quarter of each of 2027, 2028 and 2029, with the payment in 2027 increasing by $1,000,000 if the Company’s 2026 revenue is at least $165,000,000 and another $1,000,000 if it is at least $180,000,000.

Balance Sheet Components in Part I, Item I of this Quarterly Report on Form 10-Q for further details.

Gain on Disposal of Assets

On January 30, 2026, we completed a disposition of certain assets to Illumina Cambridge Limited (the “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.

During the first quarter of 2026, in connection with the Asset Sale, Buyer paid, 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.

As a result, we received approximately $48.1 million in net cash proceeds from the Asset Sale.

In connection with the transaction, the Company incurred transaction costs of $2.3 million in the first quarter of 2026 that are offset against the gain on disposal of assets on our condensed consolidated statements of operations and comprehensive loss.

Financial Instruments in Part I, Item I of this Quarterly Report on Form 10-Q for further details.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets during the nine months ended September 30, 2025 included $359.3 million of accelerated amortization related to developed technology from the 2021 Omniome acquisition, reflecting our revised estimate that the asset will no longer generate economic benefit beyond March 31, 2025.

We expect significantly lower amortization expense in future periods.

Amortization of acquired intangible assets included in operating expenses for the first quarter of 2026 and 2025 consists of amortization expense attributable to acquired intangible assets that are not directly related to sales generating activities.

Amortization of acquired intangible assets for the first quarter of 2025 included $359.3 million of accelerated amortization recorded during the first quarter of 2025 which was related to developed technology from the 2021 Omniome acquisition, reflecting our revised estimate that the asset will no longer generate economic benefit.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration during the nine months ended September 30, 2024 represents the remeasurement impact of contingent consideration due upon the achievement of a milestone.

We recognized a change in fair value of contingent consideration of $18.7 million during the nine months ended September 30, 2025, resulting in a contingent consideration liability of $0.

During the first quarter of 2025 we recognized a change in fair value of contingent consideration of $18.7 million, 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.

During the first quarter of 2026, in connection with the Asset Sale, Buyer paid 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.

Financial Instruments in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.

Interest Expense

Interest expense during the nine months ended September 30, 2025 and 2024 was primarily comprised of interest on the convertible senior notes.

The decrease was due to lower convertible notes balances as a result of the notes exchange transaction in November 2024.

Convertible Senior Notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Interest expense for the first quarter of 2026 and 2025 was comprised of interest on the convertible senior notes.

Other Income, Net

Other income, net during the nine months ended September 30, 2025 decreased compared to the same period of 2024 primarily driven by lower investment income due to lower cash and investment balances.

Other income, net for the first quarter of 2026 decreased compared to the same quarter of 2025 primarily driven by lower investment income due to lower cash and investment balances.

Q1 Fiscal 2026 Form 10-Q

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2025, we had cash, cash equivalents and investments of $298.7 million compared to $389.9 million as of December 31, 2024.

We believe that our existing cash, cash equivalents and investments will be sufficient to fund our projected operating requirements beyond the next 12 months from the date of filing of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025.

As of March 31, 2026, we had cash, cash equivalents and investments of $276.0 million compared to $279.5 million as of December 31, 2025.

Our primary sources of liquidity, other than our holdings of cash, cash equivalents, and investments, have primarily been through the issuance of debt or equity securities, together with cash flow from operating activities.

We have historically incurred, and expect to continue to incur, operating losses and generate negative cash flows from operations on an annual basis, and as a result, we may require additional capital resources to execute our strategic initiatives to grow our business.

We began implementing expense reduction initiatives in the second quarter of 2024, including workforce reductions, facility downsizing, and a streamlined development pipeline, with the goal of lowering annualized run-rate operating expenses by year-end.

In the first quarter of 2025, we implemented additional actions, including further workforce reductions, to support continued cost savings.

Factors that may affect our capital needs include, but are not limited to, the pace of adoption of our products, which affects the sales of our products and services;

our ability to efficiently manage our operations;

We approved and implemented certain efficiency and expense reduction initiatives during 2025 and 2024.

These expense reduction initiatives included workforce reductions, facilities downsizing and a refined pipeline of development programs.

PGI License and Settlement

In the first quarter of 2026, the Company entered into a license and settlement agreement with PGI in connection with the PGI Settlement.

Balance Sheet Components in Part I, Item I of this Quarterly Report on Form 10-Q for further details.

Convertible Senior Notes

As of March 31, 2026, we had outstanding approximately $200.0 million aggregate principal amount of our 2029 Notes and $441.0 million aggregate principal amount of our 2030 Notes.

The 2029 Notes will mature on August 15, 2029, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.

The 2030 Notes will mature on December 15, 2030, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.

Convertible Senior Notes in Part I, Item I of this Quarterly Report on Form 10-Q for further details.

Our future capital requirements and the adequacy of our available funds will depend on many factors, including:

• our ability to successfully commercialize products and solutions that address customer needs;

• the pace of adoption of our products and our ability to obtain new customers in markets;

• the progress of our research and development programs and our ability to initiate or expand research programs;

• the effectiveness of our expense reduction initiatives;

our ability to attract and retain customers and collaborators;

the progress of our research and development programs;

initiation, expansion, or funding of research programs and collaborations;

• the purchase of patent licenses;

the impact of product quality;

litigation costs, including the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights;

costs of developing new and enhanced products;

acquisitions of complementary businesses, technologies or assets;

achievement of milestones in connection with acquisitions;

and other factors.

There can be no assurance that funds will be available on favorable terms, or at all.

• the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights;

• our ability to manage manufacturing and production costs, especially costs related to the compute requirements of our instrument platforms, including purchase obligations;

• the extent to which we engage in collaborations with partners and acquire other businesses or technologies.

Q1 Fiscal 2026 Form 10-Q

Contingent Consideration

Under the terms of our 2023 acquisition of Apton, we agreed to pay $25.0 million to former Apton equity holders if a high-throughput sequencer incorporating Apton’s technology generates $50.0 million in revenue within five years of the closing.

Payment may be made in cash, stock, or a combination of cash and stock.

As of September 30, 2025, due primarily to the decision to discontinue development of the system and revised revenue expectations, the fair value of the contingent consideration liability was estimated at $0.

If economic, financial, business, or other factors adversely affect our ability to fund our projected operating cash requirements, we may be required to obtain funding through traditional or alternative sources of financing.

Raising additional funds may result in dilution to existing shareholders.

We cannot be certain that funds will be available on favorable terms, or at all.

If we are required and unable to raise additional capital when desired, our business, operating results, and financial condition may be adversely affected.

See our risk factor captioned “ We are not cash flow positive and may not have sufficient cash to make required payments under the terms of our debt or fund our long-term planned operations ” in Part II, Item 1A of this Quarterly Report on Form 10-Q for more information.

Cash Flow Summary

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2026 2025

2 unchanged sentences

Net cash provided by financing activities 1,437 1,959

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

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

$ (7,395) $ 3,137

1 unchanged sentence

Our primary uses of cash in operating activities include the development of future products and product enhancements, manufacturing, and support functions related to our sales, general and administrative activities.

Cash used in operating activities during the nine months ended September 30, 2025 of $92.1 million was due primarily to a $506.0 million net loss that included non-cash items such as amortization of acquired intangible assets of $368.4 million, an impairment charge of $15.0 million, share-based compensation of $32.1 million, $9.8 million of inventory adjustments, and depreciation expense of $10.3 million, partially offset by an $18.7 million decrease in the change in the fair value of the contingent consideration and $3.1 million in net changes to operating assets and liabilities.

Cash flow impact from changes in net operating assets and liabilities was primarily driven by increases in accounts receivable and inventory, as well as decreases in accrued expenses and other liabilities.

These uses of cash were partially offset by a decrease in prepaid expenses and other assets.

Cash used in operating activities for the nine months ended September 30, 2024 of $175.4 million was due primarily to a $312.2 million net loss that included non-cash items such as a goodwill impairment charge of $93.2 million, share-based compensation of $55.0 million, amortization of acquired intangible assets of $20.6 million, depreciation expense of $10.9 million and amortization of right-of-use assets of $10.9 million.

This was offset by the accretion of discount and amortization of premium on marketable securities, net of $10.7 million and $48.9 million in net changes to operating assets and liabilities.

Cash flow impact from changes in net operating assets and liabilities was primarily driven by an increase in inventory, as well as decreases in accrued expenses and operating lease liabilities.

These uses of cash were partially offset by a decrease in accounts receivable.

Cash used in operating activities during the three months ended March 31, 2026 of $44.7 million was due primarily to an $8.3 million net loss that included non-cash items such as amortization of acquired intangible assets of $1.0 million, share-based compensation of $4.5 million, depreciation expense of $2.2 million, and $3.2 million in net changes to operating assets and liabilities, which were offset by a $48.1 million gain on disposal of assets.

Cash flow impact from changes in net operating assets and liabilities was primarily driven by a decrease in accounts receivable as well as an increase in other liabilities.

These sources of cash were partially offset by an increase in inventory and a decrease in accounts payable.

Cash used in operating activities during the three months ended March 31, 2025 of $44.1 million was due primarily to a $426.1 million net loss that included non-cash items such as amortization of acquired intangible assets of $366.4 million, an impairment charge of $15.0 million, share-based compensation of $9.2 million, $7.7 million of inventory adjustments, depreciation expense of $5.1 million, and $2.4 million in net changes to operating assets and liabilities, partially offset by an $18.7 million decrease in the change in the fair value of the contingent consideration.

Cash flow impact from changes in net operating assets and liabilities was primarily driven by an increase in accrued expenses partially offset by an increase in accounts receivable.

Investing Activities

Our investing activities consist primarily of capital expenditures and investment purchases, sales, and maturities.

Cash provided by investing activities during the nine months ended September 30, 2025, was primarily from $280.1 million of maturities of investments partially offset by $183.8 million of purchases of investments and $5.0 million in purchases of intangible assets.

Cash provided by investing activities for the nine months ended September 30, 2024, was primarily from $488.5 million of maturities and sales of investments partially offset by $418.2 million in purchases of investments and $4.6 million in purchases of property and equipment.

Cash provided by investing activities during the three months ended March 31, 2026 was primarily from $48.3 million of maturities of investments and $50.0 million of gross proceeds from a disposal of assets partially offset by $52.4 million of purchases of investments and $5.0 million in purchases of intangible assets.

Cash provided by investing activities during the three months ended March 31, 2025 was primarily from $113.4 million of maturities of investments partially offset by $61.8 million of purchases of investments and $5.0 million in purchases of intangible assets.

Financing Activities

Cash provided by financing activities during the nine months ended September 30, 2025 resulted from $3.4 million of proceeds from the issuance of common stock through our equity compensation plans.

Cash provided by financing activities during the three months ended March 31, 2026 resulted from $1.4 million of proceeds from the issuance of common stock through our equity compensation plans.

Cash provided by financing activities during the three months ended March 31, 2025 resulted from $2.0 million from the issuance of common stock through our equity compensation plans.

Q1 Fiscal 2026 Form 10-Q

Cash provided by financing activities during the nine months ended September 30, 2024 resulted primarily from $7.7 million of proceeds from the issuance of common stock through our equity compensation plans.

Contractual Obligations

We presented our contractual obligations at December 31, 2025 in our 2025 Annual Report.

There were no material changes outside the ordinary course of business to our contractual obligations during the nine months ended September 30, 2025.

There were no material changes outside the ordinary course of business to our contractual obligations during the three months ended March 31, 2026.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

9 unchanged sentences

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2025, we did not have any off-balance sheet arrangements.

As of March 31, 2026, we did not have any off-balance sheet arrangements.

In the ordinary course of business, we enter into standard indemnification arrangements.

7 unchanged sentences

Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q, any associated expenses incurred are included within the related accrued litigation expense amounts.

No additional liability associated with such indemnification agreements has been recorded as of September 30, 2025.

No additional liability associated with such indemnification agreements has been recorded as of March 31, 2026.

Q1 Fiscal 2026 Form 10-Q

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis