PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

Previous wording

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

Current wording

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.

Previous wording

Key highlights of the three months ended March 31, 2025 consolidated financial results include the following:

Current wording

Key highlights of the six months ended June 30, 2025 consolidated financial results include the following:

Previous wording

•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 for the first quarter of 2025. Revenue was comprised of $19.0 million in instrument revenue, $16.0 million in consumables revenue and $3.8 million in service and other revenue for the first quarter of 2024. The decrease was primarily due to lower Revio unit sales, which was partially offset by higher Vega unit sales, consumable sales, and service and other revenue.

Current wording

•Revenue was comprised of $25.2 million in instrument revenue, $39.0 million in consumables revenue and $12.7 million in service and other revenue during the six months ended June 30, 2025. Revenue was comprised of $33.7 million in instrument revenue, $33.0 million in consumables revenue and $8.1 million in service and other revenue during the six months ended June 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.

Previous wording

•Cash, cash equivalents, and short-term investments were $343.1 million at March 31, 2025, which represents a 12% decrease compared to the balance at December 31, 2024.

Current wording

•Cash, cash equivalents, and short-term investments were $314.7 million at June 30, 2025, which represents a 19% decrease compared to the balance at December 31, 2024.

Previous wording

On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill 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 for the first quarter of 2025. See additional discussion below in Results of Operations, as well as Note 3. Balance Sheet Components in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information. Additionally, refer to the Critical Accounting Policies and Estimates section of our 2024 Annual Report for further discussion on the Company's asset impairment assessments.

Current wording

On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill 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 six months ended June 30, 2025. See additional discussion below in Results of Operations, as well as Note 3. Balance Sheet Components in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information. Additionally, refer to the Critical Accounting Policies and Estimates section of our 2024 Annual Report for further discussion on the Company's asset impairment assessments.

Previous wording

Service and other revenue increased $2.2 million, or 59%, primarily driven by an increase in Revio service contracts.

Current wording

Service and other revenue increased $2.4 million, or 57%, primarily driven by an increase in Revio service contracts.

Previous wording

Cost of Revenue and Gross (Loss) Profit

Current wording

Cost of Revenue and Gross Profit

Previous wording

Total cost of revenue increased $11.0 million, or 40% due to an increase in cost of product revenue, $3.8 million of restructuring costs 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, and an increase of $3.0 million in amortization attributable to acquired intangible assets that are related to sales generating activities. Cost of product revenue increased $3.9 million, or 17%, for the first quarter of 2025 compared with the same quarter of 2024 primarily due to $7.7 million of charges for excess inventory due to our updated strategy to prioritize long-read technology and decrease in demand for short-read related inventory partially offset by lower per unit costs to manufacture our products. Total cost of revenue included share-based compensation expense of $1.2 million and $2.1 million during the first quarter of 2025 and 2024, respectively.

Current wording

Total cost of revenue decreased $5.0 million, or 17%, in the second quarter of 2025 compared to the same quarter of 2024 due to a decrease in cost of product revenue and a decrease of $2.4 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 $1.1 million during the second quarter of 2025 and 2024, respectively.

Previous wording

We recorded a gross loss of $1.4 million for the first quarter of 2025, compared to a gross profit of $11.3 million in the same quarter of 2024, primarily driven by the increase in cost of revenue from restructuring activities and the decrease in revenue described above. See Note 5. Restructuring in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information about restructuring activities. Gross margins may be affected by product mix, manufacturing efficiencies, warranty cost improvements, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials and tariffs.

Current wording

Gross profit increased $8.7 million, or 147%, in the second quarter of 2025 compared to the same quarter of 2024 driven by lower cost of revenue and higher consumables sales. See Note 5. Restructuring in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information about restructuring activities. Gross margins may be affected by product mix, manufacturing efficiencies, warranty cost improvements, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials and tariffs.

Previous wording

Research and development expense decreased by $14.4 million, or 33%, for the first quarter of 2025, compared to the same quarter of 2024. The decrease was primarily driven by a decrease in personnel and related expenses due to prior year restructuring activities, as well as the transition of launched products from development to commercialization. Research and development expense included share-based compensation expense of $2.6 million and $5.8 million during the first quarter of 2025 and 2024, respectively.

Current wording

Research and development expense decreased by $16.0 million, or 41%, for the second quarter of 2025, compared to the same quarter of 2024. The decrease was primarily driven by a decrease in personnel and related expenses due to restructuring activities, as well as the transition of launched products from development to commercialization. Research and development expense included share-based compensation expense of $3.3 million and $4.6 million during the second quarter of 2025 and 2024, respectively.

Previous wording

Sales, general and administrative expense decreased by $3.6 million, or 8%, for the first quarter of 2025, compared to the same quarter of 2024. The decrease was primarily due to a net decrease in personnel and related expenses due to restructuring activities. Sales, general, and administrative expense included share-based compensation expense of $5.4 million and $11.6 million during the first quarter of 2025 and 2024, respectively.

Current wording

Sales, general and administrative expense decreased by $9.7 million, or 21%, for the second quarter of 2025, compared to the same quarter of 2024. The decrease was primarily due to a net decrease in personnel and related expenses due to restructuring activities. Sales, general, and administrative expense included share-based compensation expense of $7.7 million and $11.5 million during the second quarter of 2025 and 2024, respectively.

Previous wording

Other income, net for the first quarter of 2025, was $4.3 million compared to $6.8 million for the first quarter of 2024. The decrease was primarily driven by lower investment income due to lower cash and investment balances.

Current wording

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

Previous wording

We identified indicators of impairment during the first quarter of 2025 and performed an interim impairment assessment. Impairment testing demonstrated that the carrying value of our in-process research and development ("IPR&D") exceeded its estimated fair value. As a result, we recorded $15.0 million of impairment charges for the first quarter of 2025. See Note 3. Balance Sheet Components in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

We recorded impairment charges of $15.0 million during the six months ended June 30, 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. See Note 3. Balance Sheet Components in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Previous wording

Operating expenses for the first quarter of 2025 included $362.0 million of amortization expense, primarily driven by $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 for the remainder of 2025.

Current wording

Amortization of acquired intangible assets during the six months ended June 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.

Previous wording

Change in fair value of contingent consideration during the first quarter of 2025 and 2024 represents the remeasurement impact of the contingent consideration due upon the achievement of the milestone. As of March 31, 2025, primarily due to management's decision to cease development of the high-throughput short-read system, and the resulting changes in the expected future revenues, among other factors, and as the milestone event must occur prior to the five-year anniversary of the closing date of the acquisition, the

Current wording

We recognized a change in fair value of contingent consideration of $18.7 million during the six months ended June 30, 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.

Previous wording

As of March 31, 2025, we had cash, cash equivalents and investments of $343.1 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 March 31, 2025.

Current wording

As of June 30, 2025, we had cash, cash equivalents and investments of $314.7 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 June 30, 2025.

Previous wording

Cash used in operating activities for the first quarter of 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.

Current wording

Cash used in operating activities during the six months ended June 30, 2025 of $73.4 million was due primarily to a $468.0 million net loss that included non-cash items such as amortization of acquired intangible assets of $367.4 million, an impairment charge of $15.0 million, share-based compensation of $21.1 million, $8.5 million of inventory adjustments, depreciation expense of $7.8 million, and $6.3 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 increases in accounts receivable and inventory, as well as decreases in accrued expenses and operating lease liabilities. These uses of cash were partially offset by a decrease in prepaid expenses and other assets.

Previous wording

Cash used in operating activities for the first quarter of 2024 of $75.7 million was due primarily to a $78.2 million net loss that included non-cash items such as share-based compensation of $19.5 million, amortization of intangible assets of $6.9 million, depreciation expense of $3.2 million, and amortization of right-of-use assets of $1.9 million. This was offset by the accretion of discount and amortization of premium on marketable securities, net of $4.0 million, and $25.3 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, other liabilities, and operating lease liabilities. These uses of cash were partially offset by decreases in accounts receivable and prepaid expenses and other assets and increases in accounts payable and deferred revenue.

Current wording

Cash used in operating activities during the six months ended June 30, 2024 of $129.9 million was due primarily to a $251.5 million net loss that included non-cash items such as a goodwill impairment charge of $93.2 million, share-based compensation of $36.7 million, amortization of acquired intangible assets of $13.7 million, depreciation expense of $6.7 million and amortization of right-of-use assets of $5.9 million. This was offset by the accretion of discount and amortization of premium on marketable securities, net of $7.6 million and $31.7 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 decreases in accounts receivable and prepaid expenses and other assets and increases in accounts payable and deferred revenue.

Previous wording

Cash provided by investing activities for the first quarter of 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.

Current wording

Cash provided by investing activities during the six months ended June 30, 2025, was primarily from $195.4 million of maturities of investments partially offset by $118.0 million of purchases of investments and $5.0 million in purchases of intangible assets.

Previous wording

Cash used in investing activities for the first quarter of 2024, was primarily due to $191.9 million in purchases of investments and $3.9 million in purchases of property and equipment partially offset by $161.7 million of maturities of investments.

Current wording

Cash provided by investing activities during the six months ended June 30, 2024, was primarily from $351.6 million of maturities of investments partially offset by $303.6 million in purchases of investments and $5.4 million in purchases of property and equipment.

Previous wording

Cash provided by financing activities during the first quarter of 2025 resulted from $2.0 million from the issuance of common stock through our equity compensation plans.

Current wording

Cash provided by financing activities during the six months ended June 30, 2025 resulted from $2.0 million from the issuance of common stock through our equity compensation plans.

Previous wording

Cash provided by financing activities during the first quarter of 2024 resulted from $6.9 million from the issuance of common stock through our equity compensation plans.

Current wording

Cash provided by financing activities during the six months ended June 30, 2024 resulted primarily from $6.9 million of proceeds from the issuance of common stock through our equity compensation plans.

Previous wording

We presented our contractual obligations at December 31, 2024 in our 2024 Annual Report. There were no material changes outside the ordinary course of business to our contractual obligations during the first quarter of 2025.

Current wording

We presented our contractual obligations at December 31, 2024 in our 2024 Annual Report. There were no material changes outside the ordinary course of business to our contractual obligations during the six months ended June 30, 2025.