PACIFIC BIOSCIENCES OF CALIFORNIA, INC.
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
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FY2024 · Filed Mar 17, 2025
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Report of Independent Registered Public Accounting Firm (PCAOB ID:
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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 17, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
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 Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Revenue recognition - Identification and evaluation of performance obligations | |
| Description of the Matter | For the year ended December 31, 2024, the Company recognized revenue of $154.0 million, including $136.1 million of product revenue, which consists primarily of instrument sales and related consumables. As described in Note 1 to the consolidated financial statements, the Company may enter into, or periodically modify, contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations. The Company identifies performance obligations for promises to transfer distinct products or services to a customer. Contracts with customers may contain non-standard terms, requiring management to evaluate if there are additional performance obligations. For example, certain customer contracts provide options to customers which can be exercised at a future date, such as the option to purchase products at discounted prices. The Company assesses whether the specified discounts constitute material rights and, therefore, are performance obligations that are included in the allocation of the transaction price.Auditing management’s identification and evaluation of certain performance obligations was challenging and involved a higher degree of judgment due to their non-standard nature. |
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| 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 (including specified discounts on current and future purchase options). |
| Impairment assessment of goodwill and indefinite-lived intangible assets | |
| Description of the Matter | As of December 31, 2024, the Company’s goodwill and indefinite-lived intangible assets balances were $317.8 million and $15.0 million, respectively. As discussed in Note 1 to the consolidated financial statements, goodwill and indefinite-lived intangible assets are tested for impairment at least annually at the reporting unit level and asset level, respectively, or more frequently if indicators of impairment exist. The Company is comprised of one reporting unit.As described in Note 4 to the consolidated financial statements, the Company identified interim indicators of impairment in 2024, resulting in total impairment charges of $184.5 million for the year ended December 31, 2024.Auditing the Company's interim impairment assessments was more complex due to the higher estimation uncertainty in determining the fair value of the reporting unit and the indefinite-lived intangible asset under the income approach. Significant assumptions used in the income approach included revenue growth expectations and the selected discount rate. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining the fair value of the reporting unit and the indefinite-lived intangible asset. This included controls over management’s review of the revenue growth rates and the discount rate. Our audit procedures included, among others, evaluating the Company's valuation methodology and performing a sensitivity analysis of the assumptions to evaluate the change in the fair value resulting from changes in the assumptions to identify the assumptions that have the most significant impact on the fair value amount. We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry and market data and other guideline companies within the same industry. We also involved valuation specialists to assist in evaluating the Company’s selection of the discount rates. In addition, we inspected the Company’s reconciliation of the fair value of the reporting unit to the market capitalization of the Company and assessed the results. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2011.
San Mateo, California
March 17, 2025
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