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 prioritized 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.

Intangible assets include developed technology, customer relationships, and acquired in-process research and development ("IPR&D"). In connection with the Apton acquisition in August 2023, we allocated $55.0 million of the purchase price to IPR&D. 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 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. 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 in our condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025.


		As of March 31, 2026						As of December 31, 2025
(In thousands, except years)	Estimated Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	3 — 15	$	421,179	$	(407,075)	$	14,104	$	421,179	$	(406,055)	$	15,124
Customer relationships	2	360		(360)		—		360		(360)		—
Total		$	421,539	$	(407,435)	$	14,104	$	421,539	$	(406,415)	$	15,124

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 three months ended March 31, 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, during the three months ended March 31, 2025, we recognized accelerated amortization of $359.3 million within amortization of acquired intangible assets in operating expenses, reflecting our revised estimate that the asset will no longer generate economic benefit beyond March 31, 2025. This expense had a negative impact on basic and diluted net loss per share of $1.21 for the three months ended March 31, 2025.

We review finite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. In the first quarter of 2025, as part of our interim goodwill impairment test, we also performed a recoverability test for the definite-lived asset group and noted no impairment.

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

In the first quarter of 2026, the Company entered into a license and settlement agreement with Personal Genomics of Taiwan, Inc. (“PGI”). PGI had previously filed a suit against the Company for alleged patent infringement and related matters. Under the terms of the agreement, the parties agreed to dismiss all claims and counterclaims and to release one another from all claims arising out of the litigation (the "PGI Settlement"). In connection with the settlement, PGI granted the Company a non-exclusive, royalty-free, worldwide license to certain patents and patent applications and provided a covenant not to sue the Company and its affiliates for patent infringement for a specified period.

Under the fixed payment structure, 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.

The Company accounted for the transaction as a settlement of litigation combined with a license to patents. The total consideration was allocated on a relative fair value basis between (i) the license to the patents and (ii) the settlement of past and potential claims relating to the patents and associated with the litigation.

The fair value of the license was estimated using an income approach, specifically the relief-from-royalty method, which is based on the present value of hypothetical royalty payments avoided as a result of obtaining the license. The fair value of the settlement component was estimated using an income-based approach that considered a hypothetical royalty rate applied to historical revenues generated during the alleged infringement period. This valuation represents a level 3 fair value measurement due to its reliance on certain unobservable inputs. The determination of fair value involves estimates and assumptions, including projected future revenues attributable to the licensed patents, historical revenues generated during the alleged infringement period, an estimated royalty rate derived from comparable market transactions, and a discount rate applied to the projected cash flows. The royalty rate utilized in the valuation was 5%, the discount rate of 14.5% applied to the projected future revenues was based on the Company’s estimated weighted average cost of capital, considering market participant assumptions and risk factors specific to the asset, and the discount rate of 6.3% applied to the historical revenues was based on the Company's estimated cost of debt, considering market participant assumptions. The assumptions used were inherently subject to uncertainty.

The portion of the consideration allocated to the license of $5.5 million was capitalized and included in other long-term assets on the condensed consolidated balance sheets. The asset is being amortized on a straight-line basis over a period of approximately three years, which approximates the remaining economic life of the underlying patent rights. The remaining portion of the consideration was recorded as a litigation settlement charge. The Company recorded $0.5 million of settlement charges within cost of product revenue in the condensed consolidated statements of operations and $15.4 million of settlement charges within operating expenses in the condensed consolidated statements of operations and comprehensive loss.

The Company recorded the liability at its present value of $21.4 million as of March 31, 2026. The liability will be accreted to its undiscounted amount using the effective interest method, resulting in an effective interest rate of 9.5%, with accretion recognized as interest expense in the condensed consolidated statements of operations. The liability for the settlement obligation is classified between current and non-current portions based on the timing of expected payments. As of March 31, 2026, $13.4 million is included in accrued expenses in the condensed consolidated balance sheets and $8.0 million is included in other liabilities, non-current in the condensed consolidated balance sheets.

As of March 31, 2026, we had a total of $19.9 million of deferred revenue, $16.3 million of which was recorded as deferred revenue, current, and $3.6 million of which was recorded as deferred revenue, non-current, which primarily relates to deferred service contract revenues and is scheduled to be recognized in the next five years. Revenue recorded in the three months ended March 31, 2026 includes $5.0 million that was included in deferred revenue as of December 31, 2025.

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 March 31, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was $46.6 million, of which approximately 78% is expected to be converted to revenue over the next twelve months, approximately 17% in the following twelve months, and the remainder thereafter.

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 the condensed consolidated balance sheets and warranty expense is recorded as a component of cost of product revenue in the condensed consolidated statements of operations and comprehensive loss. There were no material changes in estimates for the periods presented below.