
(In thousands)	March 31, 2025		December 31, 2024
Purchased materials	$	44,479	$	45,270
Work in process	24,914		22,172
Finished goods	13,429		14,081
Inventory, gross	82,822		81,523
Inventory reserve	(28,815)		(22,768)
Inventory, net	$	54,007	$	58,755

Goodwill is reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. We performed our annual assessment for goodwill impairment in the second quarter of 2024, as of the beginning of April 2024, noting no impairment. We recognized a $93.2 million and $51.3 million impairment charge in the second and fourth quarter of 2024, respectively, as a result of quantitative interim impairment tests.

Based primarily on the decline in our stock price and overall market capitalization during the first quarter of 2025, driven in part by macroeconomic uncertainties, as well as our updated strategic plans and restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and ceasing development of our high-throughput short-read platform, we concluded that changes to the timing and amount of expected future cash flows, among other factors, indicated that it was more likely than not that the fair value of the reporting unit was less than its carrying amount, requiring an interim goodwill impairment assessment. As a result of the quantitative interim impairment test performed as of March 31, 2025, we concluded that there was no impairment, as the estimated fair value of the entity-level reporting unit exceeded the carrying value.

To determine the fair value of the entity-level reporting unit as of March 31, 2025, we performed our impairment test using a combination of an income approach and a market approach to determine the fair value of the reporting unit. The income approach utilized estimated discounted cash flows, while the market approach utilized comparable company information. Significant assumptions used in the income approach included revenue growth expectations and a selected discount rate of 12.0%. The discount rate was based on the weighted average cost of capital, determined using market, industry data, and related risk factors. The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and significant management judgment. The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value. An increase of 100 basis points to the discount rate used in our assessment would have resulted in a change in the fair value of the reporting unit of approximately $75 million. The assessed fair value was deemed reasonable based on a market capitalization reconciliation and a supportable control premium.

Changes in our future operating results, cash flows, share price, market capitalization or discount rates used when conducting future goodwill impairment tests could affect the implied fair value of goodwill and may result in additional impairment charges in the future.

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. This asset is considered indefinite-lived until the associated research and development activities are either completed or abandoned, and is tested for impairment annually and more

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 below carrying value and recorded a $15.0 million impairment charge. The decline in the fair value of the IPR&D below its carrying amount as of March 31, 2025 resulted primarily from changes in the timing of expected future cash flows as compared to the fair value as of December 31, 2024, driven by the restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and resulted in ceasing development of our high-throughput short-read sequencing platform. The impairment charge is included on our consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025.

Significant estimates and assumptions used in the income approach include timing of future cash flows, revenue growth assumptions, a selected discount rate of 14.0%, and a selected obsolescence factor of 11 years. The discount rate was based primarily on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors. The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and significant management judgment. The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value. A decrease of 200 basis points to the discount rate used in our analysis would have resulted in an increase in the estimated fair value of the IPR&D of approximately $3 million, and an increase of one year to the obsolescence factor used in our analysis would have resulted in an increase in the estimated fair value of the IPR&D of approximately $3 million.


		As of March 31, 2025						As of December 31, 2024
(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	$	(402,997)	$	18,182	$	411,179	$	(36,607)	$	374,572
Customer relationships	2	360		(360)		—		360		(360)		—
Total		$	421,539	$	(403,357)	$	18,182	$	411,539	$	(36,967)	$	374,572

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 reduced basic and diluted net loss per share by $1.21.

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. As of March 31, 2025, $5.0 million of intangible assets acquired during the first quarter of 2025 remained unpaid, is included in accrued liabilities on the condensed consolidated balance sheets, and is expected to be paid in 2026.

As of March 31, 2025, we had a total of $21.1 million of deferred revenue, $15.2 million of which was recorded as deferred revenue, current, and $5.9 million of which was recorded as deferred revenue, non-current, which primarily relates to deferred service contract revenues and is scheduled to be recognized in the next five years. Revenue recorded in the three months ended March 31, 2025 includes $4.6 million that was included in deferred revenue as of December 31, 2024.

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, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $58.7 million, of which approximately 70% is expected to be converted to revenue over the next twelve months, approximately 23% 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.