Earnings call transcript Q1 2023

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Operator

Good day and welcome to the PacBio First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Todd Friedman, Senior Director of IR. ahead. go Please

Todd Friedman

call, welcome at call. and www.sec.gov. Exchange outlining first XXXX Form section the on quarter financial available on which Good the X-K or in today, to website as we Commission conference Investor today's discussing be Earlier we our release and copy issued earnings at of results, is website afternoon of will PacBio's a www.pacb.com a Securities the on press furnished

President and Chief Henry, Executive me Officer Kim, Christian With today Susan Chief Financial and are Officer.

coverage, we Onso you expectations Before including demand our be accuracy, we systems and or to PacBio using quality systems, statements and respect plans, advantages, like benefits our statements, begin, in of, expectations estimates, Revio plans, Onso regarding and or technologies products expected others, or business. and or and for regarding forward-looking their I'd uses, commercialization our that with intentions, availability, remind on products customer predictions, guidance, future progress, and financial benefits today's and call, guidance, of the making growth technologies, including our including Revio performance will to our

new uncertainties place actual those to forward-looking are on undue assumptions, discussed, products. not including cause or results projected developing could statements they commercializing risks in because should You to and reliance differ than and that our subject materially inherent those

statements our required most We risks to cause to XX-Q as could to documents release any and to with forms our SEC, that these recent or you results revise differ. that refer law. including XX-K, filed actual uncertainties We the forward-looking update recent obligation and except we and understand by better press disclaim our the

information on reported supplement operating set accounting The rules should basis present be also of US is not the only and the a under an call. non-GAAP results comprehensive prepared of will as a understanding used under company's We to certain GAAP. non-GAAP information during financial

strategic benchmark measures, results against to Reconciliations with measures, performance relative and plans, combined provide release. our are financial that believes and non-GAAP US within between useful GAAP in financial tables presented information externally performance our and our forecasts compare non-GAAP Management earnings US GAAP historical competitors. to

the we expenses non-GAAP and are without to unable unreasonable due For margin press to indicated the in reconcile future non-GAAP effort gross periods, operating release. our items

available In replay Investors that today's on the differ call. or call the addition, section is please website note change replay call our the recorded for that the use on be call. will are being may made of to statements and of audio after today's materially audio shortly after forward-looking cautioned Investor the electing live completion

Finally, today. queue. we We after be the one analysts could question please only session accommodate themselves we everybody remarks a prepared in hosting our limit to that that question-and-answer ask so will

the turn now will I over that, With to call Christian.

Christian Henry

everyone, Good generation we Revio, Todd. you XX thank long-read sequencer previous joining a today. our and times you, our unveiled is powerful Thank than for call more afternoon, Last sequencer. October, that

as we backlog a are researchers in And started we with of XX paradigm and the community saw system and scale in imagination these genomes we of The systems. changing XXXX QX, the researchers industry captured the scientists across believe most analyse with features enables to and what the economics. complete

targets on Revio, our of much shipments the the first that a favorably of quarter for our extremely to our our of continues system orders This for backlog. Revio ahead at rest In the us began world. outpaced launch well of our scale robust, so say pleased for March, I'm is up system targets. instrument shipping to Revio XXXX. we and demand net of The deliver customers the in resulting increase in sets Revio to growth so progressing to around be is new

demonstrating and we quarter. the first quarter, first record deliver in beginning and in manufacturing expectations manufacturing spending, capabilities up PacBio our Sequel on scaling that new Sequel ramp the II quarter surpassing Revio million our of customers Revio delivered launches. revenue scale still the capacity $XX.X instrument IIe consumable During With robust delivered and can and XX to systems, down first

initial The million us or be revenue Revio, XX% field confidence XX% We $XXX our full growth performance year, for our of to year-over-year. reception raise to customer manufacturing ability scale now has its expect to and guidance. given robust the million to the to full-year $XXX

ramp the growth shipments our our Sequel capacity HiFi Revio the matched extremely XX QX important This long-read may believe Interestingly, and that II have And sequencing demand with is in been technologies. cumulative sequencers their market the installed for short-read is and as I Sequel base. both clear. other total using existing the sequenced for in samples and will for increased fill projects our nearly customers new IIe

happy global on, teams. the move successful been to instruments have all I that like essential Before all and their runs. They the support regions and service installed I'd first I'm have launch of congratulate to report in our to completed XX platform. were sequencing

Additionally, our has early expectations. performance the field exceeded platform's

that gigabases SMRT and many with customers Cell, libraries output average higher, exceeding XXX of sample are Cell. customers XX per per with kilobases runs gigabases our For above SMRT XX

in to perspective, sequence the IIe given gigabases field according early That's XX per hours. manufacturing run XXX some To instruments of April, us we actively shipments strong XX-hour our in accelerate plan. generates put on Revio. to gigabases XX shipping are now The in has and Sequel confidence performance that just

academic commercial agriculture. customers take to They're of children's XX service labs, I'd to diverse spans who composition a already minute discuss have providers, pharma and group that Revio. received and the core another like hospitals, countries includes

The genome customer the applications to power and plant, and drive expected use human and installed ultimately scalability animal microbial from of large their Revio base human scale customers Revio product research. projects disease launch and are to can a flexibility expected and to research diversified as is progresses. These multiple-omic

implemented studies, based now preparing with start PacBio a Revio past XXX Cell, provider over we specifics scores cohort highlight gigabases Cell reported first behind better. large-scale average sequencing median quarter, or longtime biodiversity successfully our SMRT Q is efforts. of run sequencing an in GrandOmics, company the service In customers projects To and who yield of to China, run, per pangenome of a and its SMRT few the in QXX the with

for to to use Genome of cost Australian or they to extraordinary customers. the NIH's AGRF, Facility Us scale centers We've affordable sequencing implement offer Revio its program. Research up Additionally, and Revio to Revio plan plan All long-reads that also at shipped scale to long-reads the to multiple

look many more this of for their media. and quarter into the just the to these as These their examples excitement future. other to initial were forward and share many early posts customers platform on a social I willing few, were Revio experience

has enabled Revio large-scale genome some us genomics and win opens we partners. projects currently other to already the these of potential door and are multi-thousand-sample several are opportunities. to Revio in we with project several discussions tracking

PacBio most understanding Revio but health. disease, believe insights these human what top at cancer table of the highest complete we genome. scale not improving and for can makes a gets This it is deliver a us only genetic human a large ultimately better into seat means more we value the programs, competitor as potentially

values customers the We Delighting products critical complete after core part and high-quality services. our sequencing of is take our our in pride all a of our mission. customers is one delivering and

year So customer providers XX, over annual Promoter higher last Net incredibly survey, Score a showing from of improvement a with than reported. I'm pleased in-progress over other our significant have results and our initial sequencing

to Our days I closes feedback. forward and few survey a in look relaying more

first in in of We've the Revio the pipeline customers. as interest customers, for quarter from XXXX and were new of of sales customers, systems to our one-third also continued systems the the over see of new consist ordered remainder brand instrument from PacBio new one-third

from largest Revio In implementing that to genomes. customer, to genomes European of key they one indicated lab sequence genome can investigate long-read incorporate $X,XXX HiFi our disease short-read They ability to from The ordered in a to thousands the exomes a multiple testing looking under HiFi QX genomic of fact, directly instrument rare that was the factors cases. new so systems. order a customer was shift to genomes

capabilities to a decided of a a in customer, short-read expanding acquiring its sequencing. its portion towards highly long-read new budget reallocate sequencer Revio in and a for Another hospital high-throughput Canada accurate

PacBio has Medical long-reads, human PacBio to with to installed. system that instrument their once plan which move since be and for to ordered partnering their is also several RNA whole-genome, active Center shared PacBio Revio like first team RS II. with their forward score, us is leveraging epigenetics customers' will applications looking Cornell they projects legacy in in Revio interest Weill and reigniting their is short-read as genomic Revio Their

we installed in doubled XXXX, of base end been term, and years. XXX% IIe shipments over Sequel our near by most Sequel customers, base the investing grown more and which expect existing the and IIe heavily the couple past to II our of will our have be expanding IIe Revio is why Sequel than we've Sequel so Sequel customers. installed Since II In we

has strong foundation a Revio orders set still has nearly a cycle our Sequel only the product Revio. of we multi-year for about IIe one-fifth transition. runway, helped our to placed long After launch, This for the customer XXX conversion customers believe as have

pleased systems. been quite to partners focus continue and our Onso, sequencer, successful sequence on short-read As program turn to that we their our I'm groundbreaking to our has beta our report

our delivering increased previous our paradigm reliability recently site chemistry each have and We with enabled latest XxXXX over robustness versions. sequencing

beta sites QXX over output we're of are performance, reads reads its Regarding gets XXX to the XX% that our seeing specifications that paradigm and QXX. commercial regularly the and of share excited achieves million between

partners and is analysis. data looking editing are additional data DNA variant low circulating And forward beta gene such types. running challenging detection these allele from Our sharing as to sample samples tumor where critical, they're

first the the runs builds likely We've plans announce be manufacturing pleased our orders to we We Onso commercial well. commercial the for for quarter. around received Onso first as side, And second going on available the to is continue completed our our we've pipeline. believe Onso scale-up is sales team multiple manufacturing end already the On of Onso. shipment to that pilot finalizing front, in-house, with I'm operational build

As progress we Revio there on improving of platforms, the one make a attention would Onso but to lot expect, great continue sequencing on has been workflow. and

harmful During we cells Extraction less tissue of high-throughput PacBio and new than latest scalable samples. need Nanobind new chemicals minimizes fragment lowers is walkaway complete Kits or the to to eliminates scale input across extraction DNA blood, launched sequencing. and and two extraction a enabling protocol fast, our labs The high-throughput enable homogenization. quarter, large the sample automated to offering solution, time mechanical for their This hours, reliable

Also, end-to-end that sequencing first the during front-end annually. quarter we've streamline library enabling We workflows DNA Corteva to transition with be partnered to is first thousands of and Corteva workflow, extraction Revios to preparation, sequenced the samples the through its released Agriscience. on received platform. over beginning

continue to to we front, develop the informatics researchers On discoveries. tools impactful the for make

For homologous paraphrase, genotyping to TRGT help of large recent we example, tandem genome. developed that the variants SMRT and include have or to genes novo number call T-R-G-T visualization, highly tools assemblies some the de repeat Analysis HiFiCNV, copy across and for identifying face for

with ways collaborating pillar and platforms. Rolling further a our and interpret out of help third-party adoption data new improved providers will is our to strategy and long-read informatics key drive to

making year. research to applications. areas customers' power research, accessible, workflow last and been and ordered recently has kit launch addition the In more sequencing. we omics, customers omic across are growing since late XXX a which incredibly rapidly addresses to omics kits by In in important of launched single-cell our our transcript MAS-Seq transcript various already MAS-Seq its develop

can March, had associated in preprint a mapping of used This to before. UCLA with disorders of full-length Iso-Seq detected us brain, our other never and PacBio transcriptome XX% in brain atlas over developing variances allow understand which example, a risk at understanding and unique over human disease. to isoforms, the of help better institutions researchers build us neurodevelopmental development reshape and been For XXX,XXX

ago in first several preprint And PacBio colorectal cancer Iso-Seq hundred the described using dysregulated resolution atlas to weeks another structures in then tumor cancer just cells. research, a isoform identify few transcriptomic transcript

the but studies, ultimately legacy throughput bulk of groundbreaking into may like with which new can and Revio, improved on into II, the we along used enable outcomes. these Iso-Seq solutions with expansion further Iso-Seq, translate solution clinical MAS-Seq research our Sequel studies Both

in more I'll that, results turn financial Susan? the over With to to call Susan detail. discuss our

Susan Kim

Christian. you, Thank

represented quarter As discussed, million of revenue XXXX. reported the in quarter increase in first service other first $XX.X an XXXX, product, the $XX.X XX% million of which and from in of we

We ended from by previous Revio our IIe six is XX% Instrument Sequel the quarter and million, Sequel $XX.X Revio IIe revenue The $XX.X first base than quarter in with of ASP sold XX first and in a installed the the of increase systems. higher quarter, of Sequel was in first increase of which at platform. XXXX. II shipped in the systems was launch million an an the primarily revenue quarter driven

$XX.X first Turning of consumables. XX% from the of approximately remainder to with the consumables. quarter consumable other and million grew XX% in from other from last Revenue coming of first revenue $XX.X quarter million year Revio in the platforms and systems

We as total Revio percent expect new increase the of Revio as to and to customers XXXX consumables system. a shipping continue we throughout transition

the quarter million other Sequel the revenue America's Revio quarter compared XXXX, and higher a first regional million $X.X in to quarter flat for in roughly quarter XXXX. order revenue was ASP service million II/IIe was placement first compared the of the first the a in of From to of first as Finally, $XX.X $X.X perspective, record the offset XXXX. of region in

XX included to Sequel delivered last year Institute. a As Broad IIe the reminder,

its of Revio grew quarter the consumable country the strength, posted revenue of since to continue top grow XX% as the taking $XX.X consumables over also region of highest quarter approximately on year. are record XX% For to year's in XXXX, recovered QX and as Asia-Pacific, the second Japan as prior million in related COVID-XX showed lockdowns. XXXX. year-over-year grew its revenue customers and China last from of

received Wellcome University, Finally, like a changes revenue region a Radboud Revio representing with X% first XX% AMEA FX long-read MBRU million approximately period, and Institute, in the instrument had customers the year-over-year. its in their rates as $X.X to over projects. their scale genome region in highest revenue quarter The headwind of over year the prior-year Sanger grew

of A profit XXXX, a a of in the represented to the of the XXXX profit represented million GAAP down quarter first first gross GAAP which margin $XX.X P&L. $X.X margin gross Moving XX%, of million quarter of in gross a compared gross XX%. of

first of gross a First or in $X.X margin non-GAAP XX% profit million profit year. non-GAAP quarter quarter compared XX%, of gross last gross XXXX the represented million to non-GAAP of a $XX.X of

margin to sold discounts initial instrument and year-over-year lower had due in manufacturing loyalty costs. instruments during a customer Gross declined as margin provided part due primarily Revio quarter mix, the higher to

primarily resulting and million, consumables profit first Revio. to faster-than-expected of product approximately Additionally, reflect $X.X non-GAAP related the adjustments inventory transition demand excess Sequel a II/IIe due quarter GAAP gross decline from to the for in in consumables to

basis XXX accounted in on for This headwind quarter. gross approximate margin an point the

remainder depending gross scaled. and on margin expect we While the at which year, pace the gross to Sequel fluctuate margin expand usage could the during of II/IIe declines is Revio manufacturing

XXXX were expenses X% operating of quarter in expenses XXXX. $XXX of million compared operating $XX.X in the in quarter GAAP of first non-GAAP million million of million quarter operating representing were first decrease first $XX.X to the of the first XXXX, a expenses Non-GAAP the in quarter $XX.X XXXX. from

Non-GAAP Omniome Revio of expenses contingent operating expenses commercialization. payment operating in the XXXX development quarter the during increase GAAP of reflects value consideration fair in of from increase primarily driven shareholders. milestone transition to million the to by first to year-over-year, related The primarily an of the $XX.X liability declined

the XXX XXX the Regarding year. and quarter in compared quarter $XX.X quarter compensation to in last at with $XX.X quarter XXXX. end of the included of million of share-based to ended end XXX first XXXX headcount. at the non-cash of QX expenses compared first Operating employees, of the first million the We

XXXX, non-GAAP million, net the $XX.X share first $X.XX million, $X.XX in loss was $X.XX per net Non-GAAP compared in $XX.X of XXXX million, quarter in loss quarter share. first loss the compared $XX.X a per first of representing a share, GAAP the or share to net to of GAAP loss in XXXX, million the per XXXX. first representing net of was quarter per or quarter of $X.XX $XX.X

balance Turning which approximately to included fourth XXXX. unrestricted and ended first net sheet prepayment proceeds the quarter bonus offering approximately reflects in at first $XX $XXX for with quarter a of cash $XXX employee We with from public and future million, inventory our the million burn million compared of cash less January XXXX. million the in our in payout the our items. quarter annual $XXX of change in The cash investments of end

reminder, in a the cash achievement connection of shipments platform. commercial equity to As approximately of Omniome expect the million Onso the with the $XXX shareholders and milestone dependent upon pay we in a

Revio with and at the X.X to inventory Inventory of quarter million inventory consumables in million, increase balances purchases the increased end first inventory. inventory representing and instrument the $XX.X X.X $XX.X fourth reflects quarter turns, representing compared of The of turns. primarily XXXX, Onso in

increased quarter the first first to XX days in receivable declined the a million the XX days of quarter quarter the the million XXXX. quarter fourth of XXXX, $XX.X DSO of end of Accounts in DSO compared our $XX.X in while of of fourth compared with at

Turning to guidance.

and XX% We approximately consumables lower earlier, XXXX. customer successful representing continues to As of for XX% higher a reception our range in revenue compared are the the Revio. of XXXX. given discussed high range XXXX. toward million transition as we a guidance -- expect to to The revenue increasing year-over-year end assumes million, now positive rate compared in growth customers assumes slightly launch Revio, $XXX assume of decline the to was The consumable to to $XXX end

compared still to other and be revenue is XXXX. to Service expected lower

We our planned XXXX capacity QX. rate for to ramp manufacturing expect continue and to production during reach up

year. be more second to expect such, As revenue we weighted increase Revio a expect this to And half. result, the every toward we continue shipments as quarter to

P&L. the down Moving

due to of due resulting XXXX of reserves intangible decline customers' to our the We the to in of margin, transition QX expect guided inventory which amortization than previously consumables and demand in non-GAAP lower Sequel Revio. the from XX% XX% Sequel range to primarily gross assets will be exclude IIe product II to

drive optimization and volume higher drive as unit costs. margin Revio mix a margin beyond lower placements higher shift XXXX expect and toward manufacturing will help expansion We consumables

continue non-GAAP expect XXXX in We to grow XXXX. compared X% to less operating to than expenses

full-year Additionally, we on have income offset debt. our our interest and investments minimal other EPS, to as and cash a interest on our from convertible interest expect the expenses to expense impact expected is

for approximately and as later million, We Omniome $XXX for expect of reflecting average issued full milestone be count the expected share of year. part the be recent EPS weighted shares year to to shares the this the sale common

some hand it to Christian? for back remarks. final I'll Christian

Christian Henry

Susan. you, Thank

of of can one-third Revio to you to driving strong plan a the from new the prepared existing and throughput customers capacity remarks, how sales we're rapid instrument As XX-fold sharing long-read off customers We're platform's see they funnel the start over for year. being with of PacBio to adoption our the amount our sequencing with increase. increase

market. For Onso, towards eye getting our of We and company becoming only we're accuracy the forward and leading beta end customers operations the is program to commercial hands our an short-read QXX in scaling more on the launch well with quarter. this technologies and with long-read Plus at progressing look both their

become Financially, to targets well-positioned strong and with our sheet. goal we investments position allows believe balance million $XXX remain to company, drive cash and becoming year. multi-product our of We both on toward positive cash first our we growth and financial the in our us a on this you Revio multi-platform, is in to XXXX. journey and the XXXX Onso flow throughout during step look updating forward

we over so can to And that, the turn the I'll that begin Q&A. with it operator

Operator

you. Thank

Please the will And from question go now will Brennan [Operator come first from Instructions] question-and-answer begin TD Dan Cowen. We ahead. the session.

Dan Brennan

quarter. off, it questions. for you taking think, Congrats couple. on a just I your the kicked Revio expectations. Maybe Great. is saying exceeding kind of Thanks the Thank you. Christian,

flavor color of it's pipeline, been And how us given some of optimistic. the customers, where wondering, obviously on like give guys, of where get have kind is the is, performance? so order for Just us just it funnel, more that then in know placed. than that just trying giving the Is Maybe profile initial were give some You've of of you that that I'm the then is. numbers extent optimistic obviously of is kind And it things the kind it you. to a backlog, nature. greater box. that not number terms for talk did Thank flavor pretty you around obviously, of a but you're other the out, of color and/or the any what I'm quick a might follow-up. about record was just I I orders

Christian Henry

Great. Hey, you. Thank Dan.

different exceeding a is my Revio So expectations number on fronts. of

customers product actual First, at working our of and then almost in of with to execute XX run out on but the -- product samples gate the very XXX. SMRT real-world the over the the oftentimes Gb our time, customers seeing straight ability getting get per shipped and on get Cell, performance, hands least how are our

actually of encouraging ability system launch early me for for in the deliver that. this overall on performance the So quite and is us the the to

breadth the of The of frankly. applications and second breadth demand, the piece quite is

-- broad. plant think research research, to tried and do adoption that from Revio highlight it we've and doing the animal to human that demonstrates I platform brings of is remarks people broad our to people in And that throughput orders genomes, really seen really that bear. a need I this whole microbial written really very the

it actually although the I would to it's happening see community, was kind so sets at us out demand. the looking level that of and into it's the that well gratifying entire And for also up future and happen, happening across hopeful

going is of was well is But year. in rest what book for that well about give the which been to say numbers. clear we and very fantastic, When shipped, up sets above tried quarter-to-quarter It to course was of you that order we've we what talk QX. actual we're order the orders, very us not strong the

continues The that lots customers lots of about are coming funnel into the with thinking be product, scale. to healthy customers new of

of excitement and the you the Revio outlook me opportunity. how a of a for future its And and lot growth into it's to going so when it look continue trajectory, lot gives at

of very, position. very Of a but we're to I lot do, a have always think course, good do work we in

that answers Dan. your hopefully So question,

Dan Brennan

follow-up. It's helpful. super it's quick And just maybe early. Yeah. know obviously a Super May Xnd. I

do Revio of think First rate boxes run customers filling discussed is with -- when four see a got maybe this out could kind when pull-through. and what you of at could But actually terms the March. quarters about we you've end the in of

Just the kind box generate sequence on are X,XXX from of terms you genomes. in can what front of think I customers that hearing --

as we that -- the modeling about pull-through the of what kind demand think and early So early suggest of traction Revio? like would users trends the the utilization about out and

Christian Henry

to but the Yeah. of kind predict a things future, of me comment Dan, it couple that is can really really impossible kind I of for on.

of were shipments the we straight for the modeled, gate. all, out Revio First higher consumable had than even of

going. there's And so says that what enthusiasm to is get

a Second, that in about long-read. short-read to we prepared have projects my we remarks, lot talked there are where lots conversations of customer are moving people

first what happen so means utility that samples Revio. And that all, long-reads make to it quickly. exist that see transition is means utility in to me of and secondly, they reasonably But that on

And so are signs. encouraging both two those

far, Hundreds hundreds be time. run. are mid a the the delivered their And instrument going of you have hundreds is product run, were been performance and is to people -- really other and as to hey, are this would is quite to said, thing it from it's of helps which overall, still new run one which have also say, have funnel, us systems anywhere robust systems. way March, too since, high, upon you I using can that most early read. these But SMRT been to -- over of course. But say customers gives helps hard the results late so So the Cells a

into pull-through say we we of yet, give But will try Dan. as a they're where bit now, we to could this, quarter-to-quarter on kind going. metrics watch it's can. And I all color start and about get to from a of perspective those but some report where our and on early it few that's So quarters

Operator

Piper will Thank the Westenberg come go from Sandler. you. Please ahead. question next from David And

David Westenberg

think Hi. with on should gross like Thank great some people a then we start Sequel I here, and that instrument bought you just placements here. we think roll really wanted is manufacturing? And of margins? II I that year, When get question, to on see orders And leverage higher I you going wondering to that see was I here. discount know the think do margin better And echo million the I margin congrats are year you maybe last how $X.X discount. in Susan, gross that about side. actually. and they or in had for taking off and one I the this there gross start the -- XXXX, off for then last to these really more all headwind than as and off. of the ASPs inventory into that? coming That those And questions guidance you're probably margins. Is the the for we got year gross all

Christian Henry

making Revio painless to Well, I'll pass of all, transition stab for of possible. launch a the to customers was and sure first from really was then take Sequel the at strategy the But and it as developed strategy Revio and around Susan. that starting absolutely as maybe -- will strategy pricing the notion delighting our

we've years, tough. that product the experience of these we lots over are know Through had transitions

even so and for a amount a discount XXXX. you of get X says sequencer set we up loyalty discount for believe X something I that in 'XX, bought minus And 'XX, program you if

we with installed of in that our a bit all heaviest XXXX. base the of a discount, gave being So discounts

a the orders reasonably result, So first pretty discounted as virtually program February. XX were and all ended that in

their of then when of QX, watermark ASPs would at improve financials our rate kind then And the to look And QX QX. to projections we the probably this QX, in expect be part normalize and XXXX. expect our we and the so year, of low over first and normalized ASP quarter, we at

out of our we think we that's the unpack systems So as how of ship backlog. ASPs are going all to themselves

we that charge, If expectations charge the margin to based Sequel the really you consumable was demand move the the and II. gross in took QX for on

And predicted I if we was had customers so transition or was difficult to that needed we is transition Revio we because and it are extremely the we mean predict, inventory faster if by and these make to than seeing are slow fast. maybe capability things enough what sure to had

than we and -- is happening result, to charge modeled. amount take QX, did we as as of about million seems consumables. that Back than took a faster have though was we remember, in related And most instrument. charge, that would II It you as Sequel well a the it's $X.X if a we for

excess is so going through issues, the that so characterize amounts most don't it. anticipate best of way this material see we And issue significant to we forward, guess those I of and point, at inventory -- the we're

Susan Kim

one to asking, the when that David, start of think were get you terms that in I you thing add, the gross do margin. on I'll just leverage

lot helping mix a consumable to a big part get margins. about being that talked gross leverage the we on So of

And the base and of very tell guidance, revenue so the can installed from growth heavy instrument a year. -- you our is this as with

see our installed next Revio grown. year, so the to more revenue consumable base And has for you start of as

that's help this gross going of year. to that to margin expansion terms see you'll so start of to the in more in And relative XXXX

Christian Henry

to thing, this other the the probably the watermark year. out gross we be Susan, low we being should is low for QX point -- this But expect for that this of watermark margins

quarter about by get to then 'XX. really in quarter talk like and the We leverage it expect improve to

Susan Kim

Exactly.

Christian Henry

Yeah.

hopefully So that answers your question.

Operator

ahead. come Mikson will go question next from The Canaccord. Kyle you. from Please Thank

Kyle Mikson

two the the taking gate ask so I for up out a question. the wanted Thanks the far. here, to start questions. strong guess just of hype guys. living to Congrats Hey, on I multi-part

guidance the on First update.

was conservatism And You XX in would think, you that. event. end huge the literally of you first a of the baking rate orders to and the the after interesting of the for in the pretty over let What in. put provide guess this the how you Just million capacity expectations. like Revio I thinking run mean, of year kind XX ASHG I'm a bit Thanks. yet just beat a Revio XX is be ahead year compares macro, of $XXX half like that just guess that. early. remainder with point. number? quarter matched just would kind data of end? I at you the currently, still more then beat And by curious high are said, this raised instruments? much some this of going quarter, assumptions forward? field the out you -- to at Revio Maybe total the like you too curious about HiFi I Christian, about frame could orders point, the guide Maybe detail in it's you're both secondly, company-specific the on that up received kind how importantly, first backlog And XX coming and I

Christian Henry

Okay, Kyle, a lot that's unpack. to

how and all range still was broad guidance. have could first we And us, did understand So how the trying joining fast the we way, decline broad Kyle. by us The still consumable Revio have see a affects to of you II really thanks range -- reason by Sequel fast why driven guidance, what we the is and that pretty up. of ramps for

revenue year. question up. And a course we still that's a us our see of a The Revio XXXX so mark of for news ramp and lot we performance excitement in the right and for is that of we tactically the lot good now -- see

well future like talking about and our before. the over into you look Susan company, it margins, grow kind significantly of for if extremely the several to was next us of gross our grow consumables years bodes So the

So we the funnel that by and see modestly. very build do do nice strong a because incredible right, a we there see you're continuing to we amount, did raised And range We left increase really, guide beat. we well the quarter that. do And pretty an really this that had thinking and opportunity of to roughly. We continued wide is year. the

to of a lingering figure we quarter, the there factors of a in we confidence and the are part But performance have the some also it the cognizant first we and is great But year demand of raise don't out we're is And ball. unfolds. we very see gave here. had we what how macroeconomic us first lot which strong the crystal to there for quarter, want do year second see

was guidance there continues The continues of -- team. in, is demand year a look But over really result. it quarter first to really deeper opportunity end high curve strong. we The if And look get robust. was the of we the the to great proud to further the on I'm the the will. course order clarify as book

and right quarters stock fact see we're opportunity the how QX, we'll we're taking see rest just lot unfold. next few year, of taking great had definitely And so we this a a we of the -- that now of the but

orders The get is are -- of lot than that? variable to did any a or objective different XX The basis. all quarter-by-quarter shipping did revenue more reality orders particular be than I likely more the we see, before, our but I -- quarter getting much as on so QX. dependent in said factors. have be in of orders the that Let's to going on is a than -- more a on that for But much

of in on the year into you than think it look from better the did to, year. what of growing I QX, for when course, see course do over may our that quarter to orders balance, year, of So but next lumpy But towards be out objective is the this we and quarter. I remainder

Operator

Tejas you. Stanley. Thank from question The Morgan Please next Savant will from come go ahead.

Tejas Savant

evening. guys. Hey, Good

side Christian, the on the couple of consumables. So, a then hardware one and

you sort can the my then mind the of consumables the the longer-term just consumable this could of And of or were a the your so, share the box on XX% the workflow sort year? areas about slope you feel had highlighted through insights Thank early of pull-through earlier about that Revio on And so of for received throughput placements in you instrument need sequencing? work around but learnings of pause So higher new I long-read us shipment the enables? mean, what that key do customer can you side to for other the Nanobind about then rather. color and these the around there being thing? a the talked feedback pull-through you dynamic any you. or max of question more side to duration be final Any of terms April walk in Kits, of just key you've it during two-year out Is of XX%, that the are on called some your max you here that support sort XXXk Extraction sort process in things, of Revio, you is, from ramp? the sort in

Christian Henry

the Thank questions. you for Tejas. Yeah,

there was the well. were, because any continue But quite pause the frankly. that We shipping modest, so the were were to launch key quite performing issues learnings So software will some system excited is typically have.

squashing, mostly So now. some are patches we did behind bug which us for

see already going have I've on probably field. generally seeing across the runs of this too the We many wanted also really as gone to first above-spec our we're and runs would well all And in the times call, said just how be output customers.

is Cell than point seeing, one little performance of the is are a optimal guess the characteristics Cell DNA the SMRT XXM to your the I of if loading I out We XM. one, the the SMRT loading out challenges, there that onto was get bit of would different

have customers DNA for sample the happen. been up loading to our to amount of So basically their optimizing has getting or their type application, that speed,

Cells take to as probably So that's learning even and better. development And particularly, processes program. that some learned in new make implement higher that SMRT our into put can scale that perhaps down scenario density little where we bit to road, have we'll we a it and the place

some those of are things. the So

think target pretty been are going we're failures. are which is failures right launch the far darn it's have balance, well, at is to satisfied. now, going any good. -- excellent. And Run spec I extremely On still so particular run customers actually With our

can failures. to small quarter, at further do all runs of better portion make hard platform of they're and decrease that We actually run have very course enhancements really we a the point. But to failures we'll this this over think the the

a in system very the robust launched way. we very, So

to The max And of so early the been to faster which data, is out insights, consumables enthusiasm and probably their customer speak, with have that is pull-through data their base -- enough not insights. there even to I only respect is truth run the they and the than there's expected, glean buying those good.

running And in they've getting labs, really then really most is kind scale the of what workflow up. they the down do and the run systems they'll their the locked into, higher-throughput are they'll mode they'll of development until for systems time,

date dates going starting so our customers, on date. on, with which And hey, encouraging. that to we're set to or happen people start target full that And seeing my I'm higher-throughput is scale-up this

So those pretty good. have not fundamental any really all going insights. But are to we're

kind for mentioned, particular one get say, kind horizon I customer. you the would throughput to a The pull-through the of two-year as optimal to thing potentially time of or

base. But years. think First, than I two to I faster going much importantly, that ramp variable highly will more think number is that be customer the amongst be

don't months start -- start the XX between to see it's know, thinking I that. think should months we I I you to to you'd of kind -- and -- XX think where somewhere be in see

So there. little a hopefully bit that you of gives color

on irving the And fully size for then protocols. do are process for upfront have workflow we We -- selection. today automation. is lastly, We and in was system but shearing improving in bottlenecks the improving biggest The do automated. -- throughput, the latest the in Nanobind high

sequencing automated workflow work major to continue isn't on away, we can not it's major you're a which really you consideration. ways that on sure high-quality -- And The just able not and It's them is really sequencer. new short-read and in the overall that. do so much a we innovate longer technologies making get than so -- have libraries, time put really walk the it's that to

the way time you with any designed your load is And the running. is while Revio sequencer we next can run at

And the maximize basically so capability days to the can the sequencer every hours week. the really and sequencer, you of a seven day load a XX day, sequencer run

we're So on that's what focused continuing that.

guess further. I step go as then said, And I one I'll

On sample of tools drive the to the launch help sequencer. through throughput lots new back end, to we continue

Operator

from And Thank question come go Sung the Nam Please ahead. from you. next Scotiabank. Ji will

Sung Ji Nam

congratulations and well. well. very really and nice question the -- in the already Revio taking to as for I base Thanks running terms of quarter up see on Christian, curious, it's installed was Hi. the

customers orders bundling are there any point. this including then new users also you're differences your at seeing between expectations, users. on Thank quickly the you. to existing if there just up versus versus related PacBio to characteristics if with if Revio the between are above And kind Onso, existing curious terms of how in ramping new users Just customers HiFi of the the are then achieving And differences customers. performance customers, Sequel

Christian Henry

great. Yeah,

same So and with -- benefit that's Sequel Revio. with is Revio, new versus for to the a to the workflow to the customers, existing respect respect II of essentially real

typically Sequel we And the up get II customers. ramped than bit can customers faster a so are seeing the new existing

But and it easier that to high-quality in make help past. And innovations customers, DNA using the our the make technology will get use any ever then onto very we've sequencers. the lot Nanobind relative to samples system new has that the our to of get out had of think they a gate product high-quality sure I those

I going don't full longer kind of know, don't don't for ramp think XX%, be longer, they're Probably, I XX% I customers so the capacity. XX%, But will -- at do maybe. before I think -- And I given new the ease frankly. of early, really think think use bit the early of It's don't onerous, a to Revio, still experience. going but that's don't it's it's to -- that quite be I be

channel orders power of we've to it and curve With up. our had straight gate. interesting. ramp Onso starting orders, respect is the demand Lots we really to really it's the out to of exciting bundling, but going on Onso, also of systems conversations about the see had And of sales single

we're now so development, ready scale full for late the stages manufacturing at getting commercialization. and global finishing of And

think done, you respect with think significant which platforms when get it, little -- year going to a date talking it's and lot talk to a significant to have be think major our is pretty with right And about going hopefully about, same PacBio by end we task a Onso, like of like about or is we're when the the a right it achievement. two launching there. the And target company I quarter I around pretty we've to there in been and is

orders on it have So you it's we to shipping hopefully, about after, more wild. next product getting telling our out forward then the the look and in call

Operator

from The go next Please Thank will Julia JPMorgan. Qin ahead. you. from question be

Julia Qin

positive the the on POP-seq Us of are Christian, for that congrats could other being us that the we in you this users, down? mix going that programs color but we short-reads at And included from the forward where both the give quarter. mentioned, thinking on probably programs the about strong mix, pipeline. and afternoon POP-seq Broad a discussion And you cost good you've short-reads on of -- you about strength the All cycle? remarks terms then the and and regarding go surprise the continue are a mentioned to Hi, is appreciate both are third Obviously, how long-reads a being on you? prepared more in and Revio to as

Christian Henry

Yeah.

respect not enabling. all I be think quick because to to try going the the to that's platform, we've that the achieved thanks, Julia. surprising throughput and here. But samples with that -- at so Revio coming that's and I'm mix short-read onto economics

kind be Revio. capabilities the able actually that the market piece thesis of with And of unique it's the expand is market going to here fundamental to to the and of we're able take share be

Revio taking the projects us by to of further I existing grow samples speed it -- helps and sooner. up because capabilities. the that faster get I'm not it surprised So just helps think But from

or probably or early later winning those late be as year. some stage are would projects. stage basically The there's ones later the we focus could expect participating in to as ones there and because mid to I POP-seq, are project don't competitive of any are are and now. frankly, early there stage of respect to With want there one get that percolating projects stage reasons, into achieving and we -- this on, programs lots are quite but for right specifics

made people So of has a -- to talk -- give we in the it be a of prepared was are projects competitor, Revio. taken such to and notice Revio remarks it strong that have the can important the sense about

not out, that's deals, to that course reaching it's we And win for some I of we these people And only think be can really if our combo out so will reaching growth. of that us. are great And powerful.

say I'll about what that's today. So that for

Operator

John from is question ahead. Sourbeer next go The you. Please Thank UBS. from

John Sourbeer

taking and Hi, the thanks congrats on quarter. for question the

China here. ones quarter. in pretty the clarifying strong quick of couple a was Just

thoughts to on a year question. then how any in ramps follow-up the just reopening? last throughout And that that Just

Thanks. are you PacBio, to existing new of customers many new customers? on sense those over? that are how Oxford be long-read of third customers have the converting all a Do maybe On to Nanopore those might

Christian Henry

Yeah.

in and companies both -- as -- of that strong over China, it always, result, strong. So first certainly there. headwinds are be be continues us can the last all, and think quarter, new China, learned months, I maybe as other to are a But we've variable. so growth the XX% that was really Revio respect can really portfolio XX Onso with actually any have China to do helps allay helping product

be in that see the we business continuing year. So to strong

new -- to yeah, With certainly they're of some may about most program long-read generally but new respect service done to with They're providers, new they're they talk we customers, those have to -- long-read. customers, generally projects long-read. when new

them of Oxford And breakdown. and but exact some I the haven't, don't of tried them some have know

long-read have both the attack What's interesting parts is we although of different both technologies, that we market.

one don't still scale, But we other so think. cost industrialization, do, excite as but maybe might it's maybe see as And not much Oxford the much We Revio advantages of might see each as customers. one think. even the the as to Nanopore exciting

Operator

be question Osborn Cantor next the Please from Ross from go Fitzgerald. will And ahead.

Ross Osborn

our Hi, congrats on and for taking questions. quarter, the thanks

without walk balancing cannibalizing comment was the it So Onso than re-ask in matched you're addressed, was not placements demand believe on as all, demand? can while demand but I Revio And do that market, stronger an regarding meeting Revio your did guess, anticipated question, us to interesting color Revio first question launch through just comment. then think you Kyle's I trying HiFi I'll my that the for how strong of

Christian Henry

Those questions, good Sure. are Ross.

increasing just color. generate with HiFi more for HiFi was data were capability that we with Revio created, to data. drive data. What launching, are will little that customers that comment is out to even point of think that for more So the And a that we demand the we trying bit now HiFi

that from is that really market. And paradigm our a that's about toe I And capacity essential -- mind driving the of Revio was for hey, the into perspective, shift can researchers was our technology of fundamental flywheel think how to flywheel with beginning to think long-read the how the technology go so growth. drives their and and kind starting short-read to projects in And now the really we're of build that long-term get point world. that significant up really really toe

So that the was for really the comment. reason

think thinking of every sure demand single about we making launch, a that day. that's balancing last Onso I and have great The something question about

right as the I now on way there's Onso think it's lot focusing that is principally lot we of Onso. have important managing do specialist that and good think of a promise is really And we're opportunities. are we showing that folks a

And unified funnel. Revio six in one is particular, now we last in focus Revio definitely commercial but out that have you hard still think really We if intensity the funnel, it, can ramping organization, a months, over that we position story look impacting are Onso. the up drive the on on We our of that to execute and executing we're don't big create so and pushed on a could we we've and continue now focus.

us and data, drive you'll see so Onso lot the And need to data continue commercialization. to power funnel. we're to demonstrate publish building of still the and and Onso We that continue help the the will more a

to our it But act stay team and require sell stay it that it's how just The will well. to solutions and and on. serve with selling good that of I has a than multiple lot is experience But we platform really is think And focused balancing -- focused. you're right, thinking a about you us going have us to products. good news for execution something it's rather

Ross. highlighting you it, appreciate I So

Operator

our would for this to any Todd concludes I session. Friedman conference to turn over and gentlemen, And ladies the like back question-and-answer closing remarks.

Todd Friedman

joining investor forward you concludes soon. conferences summer. at catching and quarter for up it on you Thank call. That updating and you thank progress of many to this and We you and today. Chad, our QX look all talk our with Thanks, events our this for

Operator

The now concluded. today's presentation. conference attending has Thank you for

You disconnect. may now

Pacific Biosciences of California (PACB) 2 May 232023 Q1 Earnings call transcript