Earnings call transcript Q2 2023

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Operator

Hello and welcome to the PacBio Second 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 conference is being recorded.

I would now like to turn the call over to Todd Friedman, Head of Investor Relations.. ahead. go Please

Todd Friedman

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

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

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

to our products. to our our press results they commercializing to assumptions, including results law. uncertainties and could forms understand refer to that by statements subject the actual XX-Q are release risks obligation We with update We discussed, SEC, actual most the filed including inherent or materially revise risks not should because and forward-looking XX-K, required except projected in differ. cause these any recent as and recent disclaim that have and on undue to developing you place could uncertainties that better statements our You to we those from new or cause forward-looking reliance and documents those differ

not with within Reconciliations a certain that non-GAAP we financial benchmark measures, GAAP set to performance under between compare operating only believes financial U.S. combined accounting U.S. prepared understanding company's Management to of information the results call measures, of the strategic used and performance information our U.S. forecasts information on provide release. historical present should GAAP externally will a non-GAAP as are also our earnings useful and competitors. under against comprehensive our and GAAP. reported in be relative During an plans, tables presented supplement and non-GAAP financial to is basis. Non-GAAP results rules

unable For uncertainty gross efforts expenses among including of to that future to may unreasonable the margin operating regarding and periods, technology. we developed are the certain acquisition due related non-GAAP amortization events matters reconcile arise during other without year, the non-GAAP

discuss acquisitions also our We will Biosystems. of recently Apton announced

as forward-looking materially Investors or call. after we have will today's of made replay which the at use defer more that cautioned the found statements of presentation note call. to audio the and section of available electing section on For change posted recorded a today's the our website can www.capb.com. shortly is being are on completion information, be call website replay Investors on live for be the may call Investors Please our after

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

over Christian. turn to I will the now call

Christian Henry

prepared you, of our call. Thank today's several everyone update In our I'll on business. you joining aspects remarks,

quarter our second and the in performance highlight activities. record PacBio's commercial discuss I'll First,

Revio quarter Second, performance I'll comment its on and customer since launch. update full field in first

was I'll share of beginning are us of us, announced at will the finally priorities Biosystems, executing set And at and through financials our XXXX against detail. more guidance of how which launch and with year. acquisition I the year Apton highlight we Onso and take the behind the then in I'll Next, commercial today our earlier recent our close a forth half Susan

to quarter of with performance, to as for second PacBio XX% Starting drove record revenue in rapid our for by history quarterly in manufacturing year the quarter first compared Systems we we installations XX for XX excellent another posting team $XX of QX revenue June XX. as record installed did grew of revenue region and ship with the the adoption enabled and an of Revio each last million brought scaling time exceeded to Revios job which ramping The us our revenue. and base Revio

healthy demand have a revenue our quarter momentum $XXX million year confidence XX% over to We with increased to our Revio's and instruments. exited XX% XXXX. growth revenue our to we for ability Additionally, full expectations $XXX further and between XXXX. backlog of be now Revio representing to customer million, the expect meet raise

to have their interest customers now XXX of bundles customers set we commitment to received Onso new date, demonstrated Revio, orders, multi several and diverse including approximately A system different Revio customers. orders from steady from and have

sequencing several link accuracy, HiFi on to structural emphasis fact, States projects, and In a throughput aim now on previously to IIb decided XX% customers. from on ordered and alternative long in human an platform. to research decided used Requiring to They university that to and included an technology quarter had second PacBio with customer invest constraints new the the disease. due the scale, in landscape the read came instruments Revio. variation of Sequel about the These leverage the to in Southeast reproducibility re-examine United its

in customer to read targeted long short used New also the consolidate workflows genes first streamlined and to The which into utilizing it customers approach sequencing. panels Innsbruck, multi and difficult which PCR quarter HiFi Sanger sequencing of included analyze the in Medical sequencing, included read plans Revio University the marks Austria.

ordered to as and the metagenomics suited match appropriate They New long-reads Revio, The approach academic human They Onso in the hospitals to best health. customer The leverage Indonesia binding Foundation. sequencing with included orders with plan also the targeted order promote the repository diverse plans the and difficult the Group to liquid to research on collaborates biopsy. panels genomic sequencing in and instrument sequencing improve country targeted applications first from bundle sequencing Onso institutions to YSDF develop across accuracy in in build quarter genes. as whole genomic genome a by well customer use Indonesian to for to the sequence across the application. of population, the

samples quarter sequencing population service in to by leading program Revio's the increased continue New throughput, provider genetics a the start its into population Jersey, genomic Revio of detection Veteran a expects large scale a sequencing and Sample, expand funded of biorepository accuracy and first programs. received to direct Department methylation and genomics second In long-read for the Affairs. based cohort

is second HiFi an long-read milestone in released exactly entering program the the the as genomes. interest public effect can PacBio research talking genomes, adoption. type And about quarter the XXXX we've and long-read research over data more can of been in from important flywheel [indiscernible] realm unlock prompting data more accelerate discoveries, This that

total Revio's in and to Revio from product a our some in with quarter up and strong of higher in larger launch. usage during $X consumables is projects the customers utilization indicate strength come. This performance early utilization anticipation consumables from Customers anticipated second revenue the start the of working approximately quarter. to of million inventory customers million attributable Customer field building a to ramping $XX.X their are Revio

see during to quarter. a flow consumables encouraging Revio also was customers also demonstrates This busy the of to place that continual customers larger come. keep orders for quarters standing samples to anticipate their It

next Revio early of represented customers. I As positive, we a the first year. that though reminder, wave pull-through understand are our sometime utilization and and will better ordering Revio trends, expect normalized

field further add continues system performance, customers to approximately failure launch Regarding per our are improve Later below that performance. average, hit and sequencing more functionality cell. Gigabases The SMRT year, to that specification and of is rate updates and targets. anticipate this up libraries XX we improve on KB launching continue heart our will well XX

Overall Revio proving be is reliable in the field. to

customers that, Maryland University up instrument began noted one detection Revio scientific that de see to Revio, powered. across this Washington sequencing and SMRT publications assemblies. researchers variation, on exciting SMRT of As coverage, the also has novo genome first found They in system WGS can cell". generate PacBio from consistent XXx and on their "highly and new cells of and the Revio ramp sequencing consistency and preprint, on In University long-read of methylation, wave accurate, coverage the is it's one

with In researchers XX of provide that of greatly International a preprint, control group plant species of Consortium, effective analysis reduce they weed methods sustainable goals described yields. another the to developing and the the that from can reported environmental threats enabling crop about Weed and genomic insights XX pan sequencing Revio, how this and with institutions,

only from calling SMRT instead of All that II a II but to and HiFi study Revio cells. demonstrated Sequel example, variant identical Revio three assemblies benchmark the third sequencing SMRT a one were cell As datasets, required Us Sequel data, Consortium essentially by of

Additionally, the lower nanopore resulted nanopore the and with data, nanopore a observed certain PacBio that in reports, error data and they compared study than precision rate nanopore HiFi Consistent classes higher methods. indel with data much data. that HiFi latest standard calling in variant had previous compared duplex to

but to delighting its also score our survey and of offer completed am and to service continuing resulting to best-in-class pleased around and that, throughput pleased to customer quality of quarter With demonstrates forward that Net with the final economics, PacBio that provides. our all Promoter in our a only was look are not with changing globe. customers our the game XX. customers the in annual Customers we Revio This I of support commitment

today early core accuracy. to SBB of we of by is than The long-read years at the two ago from gears which first the from with stage system promise we Onso the of binding commercial Switching level delivering an I'm our sequencing extraordinary excited system. earlier the announce technology customers to was chemistry acquired shipped that short-read, Onso less or Omniome sequencing

offer six to of both highly our I bases, sequencer every for in deliver specification offer to monumental team company long PacBio plus short-read solutions We moment omni less advertises. than this for error believe and that technology to the second becoming in designed only Bio XX% differentiated in next or into ecosystem. journey other platform our sequencing it a multi multiplatform, sequencing customer months. strategic across for a developing congratulate is specifically accuracy we aims designed the company that bases the and sequencer levels one systems at truly This launched Packed QXX sequencing marks it's a genomics as XX,XXX to as at step believe a currently the entire positions of PacBio no

of range first or ultralow disease detect accurately complexity collaborator variance including the Translational Institute that One the high biopsy. Onso systems applications TGen, found the ability going without error Genomics a Research who an for to the early SBB correction in of liquid is broad infectious and to demonstrated need

commercially, the we manufacturing plan that XXXX. scale are Now we shipping to throughout second-half of

related PacBio's Additionally, the milestone the and instrument particularly The and month. to address sequencing and this short-read associated rare Onso consumables PacBio of the of once Omniome installation is complete portion this will acquisition of instrument be both consumables very expects later to are expected related triggered researchers Onso understand payment looking a find been ship with to variants. shipped. have significant market, where Onso

believe Therefore, a high As discoveries sequencing mid short-read to both our our we throughput, made, to develop a platform. highly with then will that chemistry. platforms these throughput want based these SBB which experiments portfolio is researchers on and accurate scale will high require their strategy multiproduct are short-read

share past of Bay that Apton image a few announced chemistry, to working found result to system. developing sequencing today our processing. throughput acquire Area sequencer and pleased is a of state-of-the-art for that SBB platform using a we a company that months, optics capable Biosystems, the with data Apton in an In high generating based Apton's short-read clustering, strategy, throughput we quality As sequencing agreement high earlier on into I'm entered we

flow company, throughput of launched differentiated As while expect differentiated When deliver high a further we per billions on economics. and we sequencing extraordinary advanced with and a sequencer. and reads to to offerings, Apton's high combined SBB with other technologies platform of this optimize par to output throughput cell optics develop accuracy accuracy chemistry expect integrate the compelling imaging providing

high throughput and density a throughput Apton development. launching and is of Increasing the a will give in development that us one key head sequencer start significant challenges in

and the engineers this Apton's planning started over from lean and bringing are several have next organization We sequencer. already development generation of talented scientists

of is will our high acquisition many course, likely a Of and how PacBio operating our throughput our keeping going forward. be R&D may not a growth annual map this range sequencer expenses the develop targets we you reduce compound and of on this development wondering sequencer impact OpEx under deviate throughput XXXX, product to always will target. through has to our road high and short-read acquisition been Developing accelerate our that remain overall to long from expenses system. the X% while Therefore, committed is to required expected acquisition on delivering

we fact, discuss operating previously than anticipated that shortly expect will In expenses Susan be in to XXXX. lower

with that, call to pass discuss to I'll over our And the Susan? financials. Susan

Susan Kim

Christian. you, Thank

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

systems drove quarter XX an were in customer more for Revio their momentum of loyalty systems. Revio continued the revenue extended XX of customers base We due Higher to primarily to in ended the new the ordered we relative the as ASPs in to Revio installed quarter. lower QX the with in revenue increase The quarter addition customers QX. first to who Revio in shipped discount in part

million second year, systems consumables. from last declined the the remainder consumable the $XX.X with approximately quarter XX% other quarter in X.X% consumables, million other of from revenue of of to coming and in Turning from revenue systems Revio and second $XX.X

II shipping consumables Sequel the transition and total IIe we We platform. a and new expect as throughout percent XXXX customers to as of to decline Revio continue

America's of ASPs revenue related quarter the the transitioning decline customers of From XXXX. million regional higher $XX.X platform. second second a the record XXXX. was to quarter. $X.X posted Finally, to more mentioned earlier, second $X.X as perspective, offset the in a million grew consumables XX% with in compared Christian and second service revenue and quarter year-over-year to of other new instrument regions Increased all than compared to in placements services in quarter revenue the million

a became Instruments Canada include first long-reads the from project. receive utilize cystic Revio to variant and continued adoption plans customer fibrosis children's as HiFi hospitals to its SickKids for calling in

million over $XX.X consumable of both growth. revenue and the instrument Pacific, grew Asia year For XX% with prior revenue

to such achieving quarter. to pleased the addition from record are regions revenue performance see strong China in in all We

DKSH, progress have they Additionally, an and distributor in Asia who we're improved in excited to on-boarded Revio, the have support well the supply quarter. new marketing chain distributor for warehousing. provide a We're bundle Southeast best-in-class will sales after as new order seeing with and booked sales, Onso as as already

from And over in customers initial are showing in other our APAC of signs orders of XX% interest the region. Onso coming with Onso the platform

grew country. to Finally, and $XX.X user [ph] who's customers services with researchers a EMEA for the intend over included the instrument like a they growth, by of decade prior of sell which PacBio driven been across their Oslo, revenue million XX% to scientists year University and the Revio period, over

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

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

largely quarter their prices costs. primarily due margin average during year-over-year the Revio from margin the to the new and who due loyalty higher higher Non-GAAP discounts in declined instrument Revio initial quarter improved first lower in more sequentially customers to part manufacturing customer discounts first margin lower selling Gross a as second loyalty from addition system. quarter had average to provided purchased in sold instruments due mix to gross

the decrease representing of XXXX. in and material depending to XXXX the in remainder gross $XX.X year, expand expenses quarter declined. demand margin margin IIe of Sequel operating gross in of the fluctuate and of million ASP at Non-GAAP expenses which $XX.X quarter were manufacturing on the during second Revio a the expenses second $XX.X could declined, million operating unit expect XXXX, we improved the XXXX. quarter second X% pace million the While in GAAP operating cost of to second were $XX.X compared non-GAAP million of from quarter

The XXXX fair increase million decrease million shareholders of the of of a the to to compared in related contingent expenses in in second an GAAP value during fair payment of of reflects $X.X milestone the increase the of Omniome consideration liability in primarily operating value quarter to XXXX. consideration $X.X second contingent quarter the

by Revio in Non-GAAP operating sales R&D transition to the commercial declined of offset lower resulting commercialization, related from from organizations. to partially increased year-over-year, expenses investment primarily driven marketing by and expenses the primarily expenses increased development

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

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

XXXX. convertible the offsetting reflects investments at compared Turning second with to cash quarter our The first with in loss change operating primarily our balance the unrestricted items, with end our of sheet of income exchange. million million with expenses associated $XXX.X note in the cash ended we $XXX.X and quarter interest

of the second the at with decreased second in first end compared million inventory turns. million to of our purchases increased instrument compared quarter the receivable representing quarter consumables the million, of to of in days $XX.X end in X.X XX declining at of Accounts XXXX, inventories. XX reflects $XX.X the representing quarter Onso of Revio, days second primarily balances to of and XXXX. the inventory increase in quarter of first in X.X million quarter the resulting with the XXXX, Inventory compared first The turns $XX.X in DSO quarter $XX.X DSO a inventory

XXXX. for as an be increase to representing earlier, at now our rate revenue increasing Revio, approximately million guidance, we to are the This million momentum We given a growth the to guidance to $XXX of XX% compared million expect continued to $XXX represents Turning midpoint. discussed in $XX of XX% XXXX.

Revio assumes placements quarters. the in fourth modest sequential in third growth Our system and guidance

Moving expect the amortization will margin down to of in be the XX% intangible P&L, we gross exclude range to non-GAAP XXXX assets which to XX%. of

shift We We mix less and expect and to costs. consumables manufacturing margin operating will non-GAAP XXXX expenses placements at margin growth now as Revio higher to compared previously expected grow than drive driving a toward expansion lower expect XXXX. beyond higher unit help volume X% to efficiencies X%

with acquired Apton the consisting million. to PacBio or an As $XX transaction PacBio transaction cumulative for in mentioned million in upfront in commercialization valued cash common of overall approximately million million to on $XX of plus of approximately stock revenue consideration payable related stock, million additional option Apton throughput PacBio’s the an $XX earlier today, in at all-stock based $XXX for X.X an achievement of of approximately connection a shares sequencer technology, up high

X% expense We absorbed XXXX. non-GAAP to expenses growth X% expect within of forward related acquisition go compared the to operating the the to to development guidance be

consumables year. the remainder this expect of triggered associated and with instrument to the offset shipped. milestone Omniome both later instruments of expense to related acquisition been Onso complete interest be PacBio’s ship we the for consumables Onso PacBio first expects The of have more and the payment interest month. Additionally, once expense will the related installation income than

cash equity. paid represents $XXX with As million half in being milestone a commercial reminder, approximately and this half in

weighted We at the unchanged expect for to million. for approximately average share $XXX full EPS the year count largely be

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

Christian Henry

priorities With us, on wanted provide our Susan. you, Thank now a update XXXX. year five for behind strategic half to I status the

the Sequel our Customers to year, the second-half, and customers. our was half to the shown XX% goal system new to converting Revio drive by existing IIe in consumables. begin customers. in expectations. continue pipeline first and our Revio as new expect at sequencing we II this are eager about XX% Our ramp instrument Sequel attracting new adoption of Further, and II pack which platform. decline on of new of to exceeds to And first by consumables customers bio were orders rapid be looking and the customers, In

field in and second goal level research demonstrate can of show was the Our how it applications. Onso's extraordinary to accuracy needle-in-a-haystack transform in

As runs they telling one we've beta get heard not data how from is from above of feedback that several and beta us alternative excellent quality collaborators a discussed level technologies. With raw the improved about early can quality had sites Onso that and customer he's our into seen translate using research. sequencing earlier, scores QXX, with

into With to the customer commercial we program QXX look underway, complete shipments hear getting and labs beta forward customers more accuracy success and stories. plus continuing to

a next While development priority important and this the and sequencers. towards was was short-read efforts it Revio year, just long top drive that of we commercializing generation Onso as our

to make ultrahigh onto our resources long-read long-reads, future on Revio systems. long-read top throughput our continue R&D development We and shifting the from bench of progress

of sequencing allow new communicating, now faster gives developing than PacBio previously us throughput of high the been version which cadence will Further, parts at Onso, to significant the to as address I've market. one a start organization delivered. differentiated largest head I much us and the had of expect in Apton instruments deliver And the

ecosystem program and launched automation, the drive and adoption. the partnerships XX and library and sample to prep year, was we nearly and workflow analysis. signed secondary on across Next across Earlier prep, and customer extraction expanding compatible HiFi this partners tertiary SBB PacBio

and examples we've to PacBio have these sequencing. collaborations led seen increased year where We partners expect already several sign more to this several

the cash job achieved goal flow improving updated our the of in year an midpoint financial executing XX% our growth on quarter this second product excellent as guidance. our on We launch done certainly least an is expectation positive the of On position. but Last at top of XXXX. record during team not our with drive our PacBio revenues of toward being has

expense year discussed, levels, our As to through for also XXXX. we be X% compound target X% expect annual X% operating is the to below which growth XXXX growth over

Additionally, strengthened in payment. financial debt our the extending XXXX notes our by quarter of and a lowering significant while we our the coupon second further our of portion exchanging in due position duration

As been you the PacBio see, first and us it's sharing as at year to exciting we of an can rewarding the progresses. half look year forward and for more

to open And with like I'd that, up questions. Operator? the to call

Operator

Thank you very much.

begin now with question-and-answer session. comes from ahead. will Sykes the We [Operator Instructions] Today's first Please Matt Sachs. go question Goldman

Matt Sykes

for Hi, for into want on about eventually start talked on the in But investment Thanks questions. with quarter. scale you're you leverage high warrant that to wondering, sort additional this I the the Apton open my growth would Onso of of the size afternoon. up customers address I'm good the that acquisition. level also to Maybe you development? of within and taking that cannot throughput. market and think making being high Christian, terms question does up you short-read an and just the Congrats Onso that R&D has able out a

Christian Henry

you and our solving. you optimize problems how been that has question is and for go get the different on the certainly thank and our that solutions at opens this why kind could thank the back and of the from demand of customer the multi to us if strategy at go quarter. develop that's multiproduct, we you of is we reach market Matt, up each Omic so the portfolio, levels do look -- that's that for congrats This customers more Yes, core why for

of out market. on get delivers we of because the for per how platform done that that reads fact per you is. end Onso accuracy going competitive very is believe We're the high with in accuracy SBB we reaching chemistry, does let product that delivering throughput a deploy flow on once we'll a kind the the economics, be this job the of of to strong very the reads the chemistry anything mid capable to same particularly us with And system, fewer get part will develop cell, else given billions work the and actually of run of It high. can great that there. more so apps market,

And to our the exactly that's the strategy space. so that part and reach market offerings Onso Apton that part right, of get to is in us couldn't enable the out will you're really of perhaps short-read round

Operator

Kyle Mikson with from comes question Canaccord. go ahead. Please next The

Kyle Mikson

for quarter and the questions. Apton, you I guys. guys. Congrats taking over the Hi Congrats Yes. acquisition John on Thanks the to and saw at Hannah there

So questions. just I guess two-part

of year? the Christian, of a just on First seem in more environment mind of guidance, you terms talking optimistic. guys would fluid, sort what the in is the baking you're quite macro bit about be of Susan, it's but you second-half the little It kind evolving, to

of stuff situation of on Apton mean Apton, like secondly, kind then in And mode enable what to table to go to leading emerging Illuminant like kind guess, Ultima? from of I I just this an competing does company PacBio kind with bring to Thanks. the

Christian Henry

the you Sure, Kyle, for very much questions. thank

Revio our You what is has our and lot know, we we're really forecasts that momentum. performance at evaluating of were in market looking really seeing guidance it's Revio starting with the a we [indiscernible]. is year-to-date. were the And

a position have of that just I strong strength position us backlog very starting so from We in think and backdrop. the helps economic

thing One as driving the and revenue how Revio and of was so year. encourages that that half the back into me their starting consumable to surprising utilize are fast kind is customers we of look our the systems to us

truth macro it's is pretty say very product what the cycle strong the is part tough we continue in environment strong in early in very a have nice the could particularly of But certainly, powerful China new and around to demand. Revio as maybe Now example. in us, to its a product for we've world demand seen see be conceived

think I China are a so of impacted don't I we any headwinds If know think by small yet we're you you and some as larger seeing. look at of those of course companies don't customer base the specifically perhaps have macro we're, that

fact Revio the going looked we've we're So, acquisition and many the help at new our propel beyond. what with that the order customers XXXX today, the is looked customer in done backlog, only at that new at to we looked really XXXX not and what's but at so looked gaining growth forecast,

kind thought about of it. how so that's And we

If you things look at bring channel, on experience deep we on. and how execute brings commercial -- we Apton, to to on bring act if many we bring products. move build PacBio so scale, We create to

about product. we've right. less and We're Omniome it's fact product we've the from here's talked over Revio quarters years of market dynamite last excited within the a deliver mean in we're market. I a than other In demonstrated able months six a got each it. acquisition, company lot two that, the to products to Revio to of about we've the really course both and

I saw And team the of think so kind that. Apton

is we really the that what exists And works fact that capability platform and out exciting is gate. in already. on right instrument Chemistry our the in have that Apton diligence, the fact But of the demonstrated SBB

development. we great with that to the about for. is And because capability expertise, chemistry our manufacturing can And we with we it it the so now so can we instrument speed optimize instrument on that our make that our consistent can product significantly day start what's our one very we working so can accelerates a development up can the optimize dramatically industrial and design,

acquisition. part coming -- and that well built a we a the think as he's I've great as with I I table. So, bring relationship the I of -- think do across John to lot

Onso able just the the think have is P&L, out fact given more is resources really on do absorbing we today. that lot door, without And product to I getting excited we're be the Omniome, So product a exciting. take this to which the

Operator

ahead. comes go from with Nephron next Please The Research. Meehan question Jack

Jack Meehan

Good you. afternoon. Thank

consumables, the field? share for I expectations it that, can utilization of on that. out gaining broadly that more Revio few sort the possible think And your might proxy then does areas it compare for seeing be you're possible SMRT to you you is ago? like second, months where with maybe to or legacy a just call good how could to is be a Revio Christian, short-read, First versus range of is be thought lumpy, share data in but cell a understand generation consumables early the

Christian Henry

Thanks those to we're the now. Sure. out things for not With questions. going break to Jack right respect consumables,

we we expected. our imagine, can metrics been even or what utilization can you above really what bit tell early What is I you the we're As a in still at little have launch. expected that

to And They've our they off their understand to customers use system. how get so start, means the and a which seeing good projects for it. we're goal got

we I is as said, know more allows seeing as because manufacturing scale and to need been be we've we when and know us us in. it consumables we my we're in so standing remarks, going huge shipping a there. prepared orders As come projects This for optimize are to to that our company, more or out those

is the a through, make And better fast I to to not But are than through we're than like probably of certainly is pull remarks little curve to And I on is curve number what know what wants we're so upward to that, a look we would know, to start, our world off say we and that other of on going going to the how really consumable whole right end bit say the to prepared up, to kind -- going we're that steady now. where good the get on we're that slope state? expected.

we're general, long-read majority that vast the share scale I where in and the population they to project prepared scientific technology was did other design, what experimental to account gaining programs once long-reads taking quarter their us remarks, I'll are seeing approaches. those. completely With share one of and short-read particular, think re-point because business I that our basically short-reads, significant in the into do is start in been we With the have to on see highlighted or was we now space in just portion the a to entrenched going how short-read respect one through, design integrate in of has seeing of they product that to thinking the thing, project, a you're converting there market and win take of in Revio that to versus respect in the sense the another we'll, a utility be Revio is

Revio -- the see year. goes, samples little actually of make in the over helps. to HiFi we seeing that's several putting that what kinds the And really think of strategy with in in And on a And of the already, tens how are of we've we're gains to that informatics our of coupled execute comprehensiveness that thousands that's and of use major really simplicity But in just and us it. all is been the here And here. burden the position course seeing bit story. we'll the the examples of really performance seen Hopefully opportunities the of significant funnels and here along those the I these Revio take to first programs. ease you're and is starting of

Operator

from TD Please comes question go Cowen. next ahead. with Brennan Daniel The

Daniel Brennan

for about Congrats backlog. you a thanks. Maybe the Great, quarter. the very on just strong talked times just Thanks throughout the questions. Christian, multi-parter, several

above Sounds have one. could like notably book-to-bill been

first placements quarter-to-quarter. any know So modestly Revio Secondly, there? up talked color I would be question Susan about

any customer capacity? it the pacing? accelerate outlook. it it you readiness? could be wondering size then funnel? implied Just of it the color one And just final on Is revenue the And, manufacturing Is the further? in what drives your on, would Is

the not us to could think number, mix through you're pull going help just you between While and a through consumables? instruments give

Christian Henry

Sure. Thanks questions. the Dan for

We talking Morgan in point orders about a about talk So, and quarter. making going one JP thing, we on come I've we're since this that orders, not the are orders. expectations did for have to of been our actually

situation, backlog are We healthy about. a as talked we in

long-term blessing and of every in us revenue instrument it's generate it of but our because gives does growth. not backlog revenue, Now, backlog forward consumable sits a does that course, of also us is some in not both, propel terms predictability on

And see is that us to to need deliver do. capacity, deliver capacity, the go And you'll if increase to of time, at now can we to of backlog what or we and down so steady for we forth increase basically our we've end strategy we the when a start cetera. on as to whittle try year, over we'll where the year to state expect the see which remainder to et got basically we need manufacturing

moving Susan forward. Revio of say sequentially increase, did pacing itself, kind modest

think field approach continuing some to support business, build serve make to a the been our in to issues we're straightforward sure doing taking very We've the that continuing teams of just field. address the I hiring customers can we kind with to well.

And leads to are creates flywheel so, great when so more you pull -- look for at a that we totality data, how create customer how repeat trying we which instruments for get of forward, in for we think push down do of more road. this experiences customers amazing the through really business

And those think we through the deliver we for the so, when of think about things. rest try how we year, to

of goes over manufacturing to. As to course we do far capability think need specifically, do if now right well capacity can road year increase do always we and have as the to we pretty I down the the

Finally, growing we're still, with their product product in we up, ramping mix We II going is fast ramp is we're the Sequel along II Revio been year, area though, be how down. respect bit about a to to XXXX. the have we've Revio that's mix, be XXXX, questions some and QX as and Revio’s. start so to an and to watching heavy really to saw starting instrument very Sequel to the we'll all saying customers important going see a where and understand. is quite trying ramps down ramps

suspect through of than probably the our little bit we quarter. continue in year. with the of a line in rest maybe Revio’s see some the higher basically expectations, So those And we'll expected I trends,

very So to are to be, really shine. going it's instrument but Revio year starting continue heavy a to consumables

Operator

Scotiabank. comes Please from The next question Ji Nam ahead. go Sung with

Sung Ji Nam

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

I too I for for you more might the of depends economics. application, the provide it's that on realize it especially don't population be could taking early but more was also seeing Just on scale, projects if the know your sequencing coverage lower if wondering given Revio, customers, attractive I to of maybe advantage or tell, coverage

you you. of kind trends curious, seeing might Just be Thank there. what

Christian Henry

truth $XXX Thank and making is $XXX price, result, application. the if customers list for week short-read With a Revio, are you, as performance own and coverage list and the get single great question even Sung XXx which than very a Ji. right, is XXx customers a you better decisions of the sequencing coverage list, can a But sequencing, their on I on The XXx that that genome compare and seeing you're XXx significant is use sequencing, more we every you coverage I is just what XXx always basically use PacBio it's coverage. to genome. kind That's that with benchmark. do short are more And read traditional price based if appreciate relative get less economics actually think it. our you

gap your look So, between metrics on quickly short-reads coverage it long the you economic is about and really shrinking and at experiment. when thinking

and high scale And through ability get thinking XXx. there's with customers coverage the no question comparable that that accuracy great leveraging low are population very that and to

us XXx some Now and different thrilled still or some you than start or was XXx think, about coverage trying a suspect that you're different in some actually to in for that. to understand our coverage. coverage do customers situation rare need short-reads. perhaps other more, the that. world's patient are XXx don't even understand seeing important than want customers in really models trying the I in and helping research it make to coverage And long-reads I'm to very world are they But I in actually to looking, those really decision other a of that, best so oncology, be going is applications, promoting that do XXx doing disease. where might perhaps Where a translational you're cases,

into long-reads. reason to getting great a be for you that's So

Operator

with The is Please Luke Barclays. next Sergott question go from ahead.

Luke Sergott

thanks Great, guys.

perspective, just understand et of portfolio, from the of I a but just you want could midst drive thinking to guess of timing why company's one, history get So I off risk launch the strategy bore from, orders there the early successful you're I going pacing cetera, less seed burned there fits kind two sense a you kind of stage biting the there then know in? from get of first have how any, Because shipments you build the but I I you the I there be But deal? biggest guess. a in there round, that the not just, going, a orders organization. hard coming is to Is there kind the not like the backlog. it an between were do from are could not the still of there one orders instruments, chew more you I then April the, down Apton. the it an guys as and full in something know that or Christian, the on any placements, think, cash, that out And timing timeframe was color launch and them of kind the up second where enough. guys it just some give and the my than is, some sounds you'll been of you that were

Christian Henry

the Yes. Luke, questions. thanks for

had a chemistry. the the entirety to backlog. With all, in respect First market to to with of respect address the the and this out really maximize fundamental value SBB think we we of multi-product it's build have of then I'll portfolio to and to get to strategy Apton, short-reads, Apton,

time a have they've working of bit team and on, chemistry the still of have you we'll be enough technology many in platform, for there, It's been optimizing and years. Diego executing already away. close we is a enough highly Menlo anytime so built you're along still going Apton where right along, after. San new But systems systems far platform start we'll that working shortly know, we a it can that on have you working capable is the And deal's launch far Park to We here. in the that on working for

SBB start as throughput. usage and for is We applications, example. important to And routine in Onso really, chemistry with liquid because momentum we require routine biopsy usage, gain particular, convert really to that to that's want into in think we momentum going high some two perhaps it. can that the that It's highly where product world. in a throughput else out new high not with it market in get market window will make ways about there's a believe competitive just, a We no there's to window anything we

essence. so is of so certainly time the that's, And

in think pushing pushing, never You not everyone are just has right, company position the to be are hard me I'm hard, just actually a before. think is we team I that as because great been place which such the is but pushing I

is -- the gives start So next to it of incredible the years us this to ago best now plant Apton, a time XX is today. an best really time and with acquisition is tree And to head accelerate a product go a complete customers to develop gross stronger and have market, high to not the a portfolio, development, really to us allows with get complete offering. throughput but only drive margins revenues,

with our long-term quite we today need we're done and get keep done getting frankly, to thrilled pushing goals. to today, it on this So

and that on were orders, With respect year for where to the I objective for to We're backlog. down of our respect our some the -- backlog, them. as quarter to a ended ago, up is with our expecting we orders burn said we few minutes track

trying over do of get revenue the we course year, can the consumable are so sooner. more We to that that actively

consideration means to the critical better, in without sooner increases maybe I think but planning create positive, a I flows on revenue talking go cash right the important get gross margins ability and face think our it's the don't even faster, agenda. for CFO, to I'd flow here which I gross better. do I'm do get really And cash we because it's of item is about first a to as an now. faster, can the Consumable growth company increasing strategic old think meeting sustainability drive better margins into single

Operator

from question comes Morgan. Please JP Rachel ahead. with next Vatnsdal go The

Rachel Vatnsdal

taking you the strength and congrats on this Thank questions Great. quarter. the for

So I assumes gross to the on wanted for line. to now of margins comments XX% margin dig the your Guidance into gross XX% of year. non-GAAP some

fluctuate could that mentioned II based on ASP and and Sequel We that IIe. consumables also gross margin line on Revio Sequel

margin levers actually what's through And progression you. into about gross XXXX? guidance for gross the how in margin think us that walk just the year? then that you we can should Thank contemplated impacting So

Christian Henry

on XXXX of into want So XXXX? -- in cover Susan, going you what's do work the to and kind I'll

Susan Kim

Yes.

I'm So to. happy

ASP we efficiencies also manufacturing this addition, in margins trends have and then manufacturing for Revio in gross the year the with for baked So Revio instrument.

we do better us you the of start with in than and the and has have side, ASP we So slightly that given expect terms in ASP ahead terms or the in be consistent to funnel shift, were if orders see that calculation, on of expect instrument QX backlog of and QX. Revio will just we I instruments the QX, QX we ASP the the for in to where relative improved

into baked how that estimated we gross our margins. was So

gross we consumables, there, incremental which come the baking Revio done is in cost and manufacturing And we're QX. measurement is are job great reduce down incrementally build we helping that that QX yields time coming our which efficiencies team relative to year that manufacturing improving the then instrument, how in and in building on it's our down, our are with gross time In touch respect improving improvements One the the of to the instrument margins consumables. instrument. been those to for in building terms of doing to we margins. also with instrument, has a And are efficiencies has two Revio and touch have manufacture

guide So in has year. when been our we of factored all that

Christian Henry

product complexity fundamental you transition effects margins, with also also gross Yes, of the certainly and and launch a lingering of we a you pretty COVID. Revio but to And so it, about that's anytime Susan. helpful, II year, have when think you have lower the had, Sequel kind of

had year. particular have, gross for quarter have we did unfortunately expectations write-offs So the impacted higher in margin in our which the first we

out as help that's of going to XXXX. right, Susan's, achieve ASPs to continue into we of on And so will steady Revio. particularly likely year system, and this margins, the XXXX in of the and end kind by And costs also gross state drive our

that really margins are I so positive that positive signs gross think up. and to drive signals going help those And are

drive importantly pull traditional XXXX that finally, gross later change. which through, years will to fact of the much this product mix next And consumable Revio would higher that the mix to of all and is imagine, year and few will the most of perhaps over instrument can margin into start therefore a more our see probably also instrumentation, and start significantly here. you the very XXXX consumables into help to too, I

team's I good think job, a lot we to of aggressively managing a do. the but have we're work So doing

Operator

with Savant Tejas from is ahead. Please go Stanley. Morgan question next The

Tejas Savant

and you the Thanks take Hey on of so terms a that what how you for and help of like, don't are at on, you'll Revio as then be see at point question question guide feedback frame, about at? is in that of I that historically on any thoughts XXXX heading you've sort come would I early Onso my the the because from sort Onso And you based I in the guys. side kind what it comment tack backlog In into second on excluded think us of time. of XXXX. sort Can ramp backlog Good evening. one. and normal upon but a any you prudently think know know where want end color to I'll cycle a different start looking things. backlog, product really to XXXX year important of Christian customers? here, of be we Thank inflecting maybe an from to you. down on it's sort see it orders launch your

Christian Henry

Tejas. Thanks

have So work and a then way, that kind customers. customers you in you backlog cycle, new to product heavy new kind and drive, traditionally when first go starting you oftentimes and happens the with, your to what drive orders existing of of

and the, look customers data phase. end that a now, customers. like best yes, the The is what want the the want the intended. at plateau, from to increasing the a curve make plateau so curve. to sure would then tail system of we're starting, increase notice. in see bit increasing that are They are, They is system, be And working of means to and another taking the starting as And the that a order new and really how is of would right I an in book kind say we're kind of still then

sales funnels If at be and to you look sales strong globally. continue grow funnels, our our

is now. down for And And what to think so, company. really we And I on see opportunities guidance new we're and our the a that a incredible raised objective some. I I significantly the, backlog trajectory as year. demand we're result, this that's our do think on we've think as right off do whole whittle seeing to a

which super can excited So we about, very we our whittling do book, forward. down will have I that we make get the us propel gross backlog before. said got about pull continues to margins so as that excited that and consumable consumable start the We've through order a drive healthy backlog revenue, to the sure

Now, ramp, opportunity what's about it's the a seen reach since Asia, think with amazing that a the can team, Onso a organization, lot orders we we for global of and point. out the an coming same sale, instrument Onso the have can, actually And early the are I of sales majority we've and call we is same of example. lot, that

and in So that companies, Asia, emerging have strong where don't have demand scale. we're the Europe, just the is seeing demand in capability the strong this we and

product's sets And market and so so our there. class and providing go in XXXX of get we we'll data I out would ramp the in expect and sure that great manufacturing world making service the us in, robust the through support

goal We've that's so seen important get sales building a us and across for why the of was to, momentum line. in the it funnel, lot

were in back some verification June, said, that had challenges we I we validation working through. As and

and here happened that were manufacturing. We're very runs the happy know, over through the now You the those for we've largely we're first fantastic. worked weekend scaling shipments

going. our excited we're our going product just, a lot with is we're really so a about leverage is where And excited to we're advantage wise we I product XXXX, when that And scale of and customers. think has at press really that look

do. we how see we'll so And

Operator

is The Fitzgerald. Ross ahead Cantor Please Osborn from with question next go

Ross Osborn

Congrats thanks on our questions. for and the taking quarter

new still were that in read long of the us the customers you much terms just Oxford And more this not and broadly. from PacBio, Was see quarter? the as quarter? think. as in one maybe believe to Historically, did the you did company's they I for So market people conversion long this views to perhaps new users on or case read, overlap Oxford

Christian Henry

I are those technologies. is It to, use questions. Ross, good say would customers multiple difficult

just is Revio the to user example so economics in not, you easier from of moving to look the have, start never it's when you pointed Revio. I little more higher past, reality we at remarks truly the when the couldn't we just, had was competitive, to the capabilities than wanted because In think nuanced the even it that, scaled scientists And a to of we but throughput to use scaled experiments or Nanopore conversions, you a though say, be do. cetera. had the But users, out is, workflows, we do our they really do et opening accuracy,

that Revio, with really actually the penetrating our customer's all over market with meets Now needs. we're product really a that

single part But And that's the are focus say use the would $XXXX high market, that that's seriously a the of long we we with – that, broadly throughput competitive. that so is. I there's market don't really part not that say we're And because we of of our I where read for serve technologies users, engaged serve. making Nanopore would kind then And speaking, throughput that which inroads. scale it's low not

And we so traction think lead gaining that of as I would highly but competitive. already we in both, market, say where areas focused, well. the we're are we I are part And the

Operator

Please John with go comes ahead. Today's from UBS. final question Sourbeer

John Sourbeer

here Hi, thanks the question my end. for at taking

you're, here, II, just guess Sequel mix on I on up Onso And follow two the to orders there? combo upgrade Onso, any versus on thinking Thanks. Revio you from to So backlog into launch, packages? two, cycle are color I any that Revio are quarters then ask two, the just to is the one-to-one, the about two now three how one, color it what Onso standalone from the

Christian Henry

Yes.

So to a John, one-to-one to in I that's the be Revio likely closer than more good believe long else. that it’s question. anything run, Sequel II still say install base the to

probably because, the in think the times to two one more system's than Sequel of we more days, even XX But the range. the I capable have that's to seen, in three early two II. or think I kind

predecessors. And powerful than a so with into ultimately platforms old almost are lot experience, people And scaling significantly dramatic, lot case, my are a platform. you've more leveraging and turn a a couple that I'm then, years in their a gray the single the new experience like, of launching post-launch seems base say every to that it hair one-to-one largely of does far, install seen to basis. close over products so on

early I you're we can, front what you have I call technology it's decisions long doesn't in of don't have powerful, maybe bundled then the capable I for last and but too other unique your have don't looking It's don't are. has a less you me. still since to the last where accurate the and short far. any half applications what lastly, has think platform, has, of to right answers no is, arrangement respect offering right? view numbers ability about I reads, company to highly reads bit highly what our really of right your it's our and so Onso little, changed are with kinds experiments, My of the kinds PacBio think drive drives about, that last quarter, expectation don't, in the your deals front but a last our quarter. A And than is little numbers But orders in a me, of probably half, have bundled it see,

others And given customers they confidence closely of PacBio, and our really their on our our focus customers, them work serve meeting come different can think lot technology. that needs perhaps give ability great a to very way to than know, a to with with you we're when maybe I going do in

the for you question. thank So,

Susan Kim

about who XXX base you John, the of thing there that's to so the, third install going with are II, Sequel to if Sequel that I system, and a is statistic ordered The that add, the customers respect only we customers was a to one the compare II. gave a of a that have Revio even have

and is market for that fact Sequel from And going even more and of we are to base so the new And that the number orders expect to XX%. will next quarters, be the we the, of the more be the accessing access than the that and by expect much install of coming Revio, so the the forward case vision couple new II. the we of market, larger customers, it more customers Revio more

Christian Henry

Sure. a place today. Well, to us for perhaps that's up wrap great for

Todd Friedman

on good. progress. all This rest Yes, replay the available to forward of you for of quarter conclude on us will we call section year you today's the call today. look throughout our joining and sounds and updating the Yes, and is our thank our investor

Operator

presentation. you now today’s concluded. you. attending call Thank for The has Thank

may disconnect. You now

Pacific Biosciences of California (PACB) 2 Aug 232023 Q2 Earnings call transcript