PACB - Earnings call 3 2023 | Pacific Biosciences of California, Inc.

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Operator

Good afternoon, everyone, and welcome to the PacBio Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Todd Friedman, Senior Director of Investor Relations. Sir, please go ahead.

Todd Friedman

Thank you, Jamie. to quarter welcome call. earnings and afternoon, PacBio's XXXX third conference Good copy available today, release our Form discussing available at will a press issued website website on Exchange Commission on which the call, Earlier is a X-K we at outlining www.pacb.com we furnished section the on Investors financial or results today's the of of and is on www.sec.gov. be Securities Officer.On plans, Susan today's Christian Henry, President Chief Kim, With growth making Chief sales and and statements, expectations predictions, Financial and potential, we me statements are today guidance. consumable our including and forward-looking call, Executive and respect be intentions, will regarding Officer; and to GAAP others, growth instrument with including progress, guidance estimates, non-GAAP

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

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

recorded electing completion call. being statements cautioned for differ call the Investors materially note audio our the are the addition, made on the use please of today's and the section today's Investors replay available to will after change live forward-looking not or after of call. In may call is that that replay be shortly website

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

Christian Henry

year-over-year again third joining the another $XX quarterly million as Thank brings record exceeding time third to PacBio base revenue. call posted quarter, three to XX XX $XX.X installed revenue, in Revio the the the in for we milestone for a you, Revio by quarter. XXX in revenue revenue is This we everyone, quarter history. our instruments achieved million, record XX% quarterly today. grew In All PacBio's September in for shipments one regions number shipped systems. of as instrument of first which

countries in a order across units at customer continue also in we Onso this the new platform scale third matures later for date I look and the sharing ramping XX and orders received interest the types installed shipments our I'm our platform.We've in and various base to expect manufacturing. to and forward up system fourth as the quarter. further Onso first with pleased broad We shipped quarter. from momentum customer application the

SMRT consumables. was Cells This quarter. than recorded just its the also ramp of the on full X,XXX QX. and X.X had well originally IIe Sequel in million in quarter of Revio consumables $XX.X In expected. million faster surpassed II revenue second We over we consumable We market, approximately shipped Revio

second Revio quarters XX quarter. utilization the new customers' cells, elasticity to of further adoption and rapid took Sequel surpass QX, the the which it X,XXX II/IIe context, platform.In For to increased underscores compared

per use began ramp system production. customers into they more Our installed cells their as

In from already $XXX,XXX. Sequel output an surpassed total fleet in Revio II/IIe annualized the XXX-plus for of third quarter fact, resulted instrument the consumable the peak. the The pull-through the data in increased fleet utilization total output at its

above Although more represent data again now say and would level between are we continued Day and guidance growth consumable out of launch see million revenue generating us uptake than XX% expect November. our is if targets Revio increase early pull-through year know long-term cycle, set adoption we XX% XXXX XXXX also at our allowing Revio long-term of pull-through We to ever exciting customers in $XXX platform.The I full and our not to to it over do is in still to we before, $XXX the of this Investor last be the revenue that year. will representing million, this the our

of that to to-date. orders third report One from expect adoption pleased PacBio. more platform IIe less of quarter PacBio Sequel have we're as the our enables XX% the of II metrics than multiyear for to continue it Again, XXX we on opportunity sequencing a important Revio Revio to for users customers.Additionally, customers II to Sequel new tracking Revio, uptake approximate in to existing most new migrate over a the to customer customers system and were ordered the instrument migrate other Revio over from we're how shows technologies is as XX% more and

we their Children's offering them who to recently has into an several provides Revio Helix, for customers strengthen to to across purchasing incorporating sequencing which end-to-end include in genomics able and and solve of legacy to also improve Revio States.In addition hospital sequencing by the which ordered accurate accelerating understand turnaround weeks Hospital while our using of rates University the whole-genome and population existing they Similarly, City, are that long-read sequencing Kansas ability study shared our believe a its customers how results its to currently one a programs menu with HiFi has large-scale months integrated be may the our new just Revio platform to some the enabled like achieve HiFi consolidate shared tests. genome. already and consolidate two GeneDx of of conditions HiFi system with improve can that to to efficiency tests tests, Washington in time. long-read pediatric Further, collaborating genetic native customers business, in patients.We increase X-base United complete new capabilities onto compared platform, multiple Mercy long-reads are customers the Revio, different capacity, with expanding Our

over and genetic continue the hospitals further its Sequel and from see research Midwest was genomics this HiFi this Iso-Seq quarter. We key ramp in is from begin or its year. Pangenome uncovered in for to to researchers rare Bin of were at pairs decided institution the in cohorts compared which disease PacBio to Reference, sequencing that data, contributor adolescent HiFi pleased another to an sequencing implement cancer Revio patients.In million team IIe multi-thousand includes upgraded to children's as momentum to pediatric scale Mohammed data why the during strong of Rashid MBRU which implemented developing leading unlocking new and see on genome sequence project segment the Pangenome other novel whole genome large-scale sequencing to for we in Health recent initial Arab disease This projects, references. a base other to a larger University Sciences, XXX Medicine to Revio

sequencing. sequencing I'd our been ability year. in platform by features a performance the customers adding update are instrument this continuing is few to Revio, our load minutes by This The preload has later these systems tradition production of PacBio QX, the run to feature improving that enables preload the valuable scale to our underway. software of for gives the hallmarks we onto like Revio optimizes their additional a features value run sequencing feature the the out of some field to enables our truly and create to while adding potential running always new spend we a platforms.With discussing and this enhancements. of be on the rolled next new Revio. to In customers One long-read

customers result, few some feature.And improve we most some having we recent function, that preload software this to some made in the highest challenges release. changes of learned was months, throughput, our this included Over a as which past using industrialized the were

customers Now enhancements quarter, the further allowing add new to we potentially to plan customers several high-volume the In Revio utilization. platform. can preload fourth Revio as to increase expected,

users incorporate the DNA confidently the tailors adaptive Adaptive loading it to prevent are also shorter fit applications yields.We First, like will achieve SMRT will support loading can XX-hour XXS favorably and ultimately consistent microbial for load more and run highly than time, XX-hour can we Revio DNA anticipated popular DNA will feature more customer's so sequencing. loading more platform. IIe sample, optimize Iso-Seq on and inserts. AAV, kilobases This less runs enable and libraries higher Further, Cell the enable longer in more Sequel which backstop to their better will that position to enable our for customers long, and X overload. a providing

acquired Finally, consistently process for sequencing to improve just sequencing preparation will each the length. we release customers sequencing power sample are end-to-end through their the we the that will This not feature, and improving will of Cell year, enhancing achieve better enabling HiFi truly believe also platform, the the output our with during to sequencing leverage the to ability workflow.We read SMRT preparation process, improve we Cell. technology sequencing. customers statistics the a also and improving the future on selection from customers' We're Circulomics but update analysis, workflow longer see Preview size the to run allowing sample users to the four enable data Run first plan In leverage include improvements our focused by hours achieve next SMRT higher to plan after that runs. from on

to the automate providers, over levels with customers launched and WGS preparation PacBio and bioinformatics all HiFi Revio, experience Revio II/IIe have protocols in Tecan genome front, analysis month, pipeline. tools order the to Variant Sequel Hamilton, the Variant XX take enable sample leading consolidates Sequencing method collaborated a and systems.On user-friendly including of enabling to computational tertiary Whole analysis access fully standardized advantage we of with secondary we sequencing. workflow, whole both automation of to this for separate pipeline, Additionally, This single into throughput Genome or earlier full Integra, our the Revvity users

approaches the increased ultimately how multi-omic important greater and genome the and biology with Swiss proteome, the insights capabilities, detection allow multi-omic and see Over our few to goal This we're to connections company. of Knife combined glean us the more disease.With transcriptome can multi-omic to better Revio into and be I've a flexibility throughput of is Army starting Revio as the sorts. to the single-molecule underlying the from HiFi years, make epigenome understand and past discussed PacBio often

could and protein than market, Revio in in address from and a data look impact University of one produce Undiagnosed how Disease in on researchers at of we're scalable, excited development uncover and synchronized and example, and Sequel Network, more of the and determining than from four long-read previously enabling isoforms diversity single For researchers and epigenome alternative changes reported has more Iso-Seq Cell, a showed omes one of PacBio kits, the how concluded preprint data another unexplained separate genotypes.This PacBio institutions the functions another this that from SMRT thought IIe. other transcriptome tests. just the the structures test in In analyzing chromatin participant's rare have splicing the the understand or to cost-effective, month, isoform each the Revio the of last Kinnex role Revio structure impact full-length potential diversity multiple alternative launch study, Max and into Dresden on four yet participant omes on Planck protein independently genome, study Washington expression.To growing multi-omic deeper a to RNA methylome, is showed greater on how sequencing used gene transcriptome. University that in new the splicing scientists transcriptomics In conditions brain of protein our function example the a and Institute effectively to one-off explained biological can critical high-quality to

method one insert dramatically long late experiments. RNA smaller customers With output into increase introduced concatenate cell inserts the last MAS sequencing can year, in to single

about RNA gene truly includes bulk year studies, kits species in customers single on address thereby oncology offerings of with quantify cost, has whole more with to also and leave we pairs the Revio markets. ASHG and in well capacity and disease and unused Kinnex, of to our application access sequencing. sequencing sequencing on samples researchers addition community health a gene, The to better to microbial and with allowing on providing genomics would XXS genomes sequencer.With been allowing into look identify, the and strains X,XXX better difficulty HiFi cancer regarding per the found kits for in and par short-read of Sequel reveal dollar expand market. line the at role short-read rare to classify neurology, projects These kits. genetics, Now II human to week. in large reading rebranded a system, This The information.This long discussing Kinnex XXS biology multi-hundred kids, later on the scientists expression positioning while gene and the this perform is long-read microbiology, gene has sample. and XXS forward further of obtaining million research them disease address base as to competitive Revio bacterial expanded Kinnex customers this microbial as enables other long, the Revio, Revio At we for concatenate can can isoforms in puts the thousands libraries sequencing used the long applications,

over Susan finance companies, leader pass Board with Directors. of I David to like pass I'll brings various Board to Moderna life healthcare the to the a to Before I'd financials. to call Susan? welcome discuss Incorporated.And experience in to Susan, our science Meline as that, David the our extensive and most recently, call

Susan Kim

Thank you, Christian.

base the in an million we reported quarter have increase from $XX.X the Revio discussed, ended which in instruments of from with are the third shipped product revenue to revenue in the as increase of an quarter revenue third in XX the We of As million XXX% $XX.X systems. quarter XXXX. Revio quarter. increase million XXXX. in of we installed continued XXX in other quarter and revenue third for Instrument of service XXXX, drove The was quarter million, XX% pleased represented $XX.X third $XX.X momentum an of the primarily of in the

Turning to a of was record $XX.X systems and of in from from consumables; consumable revenue XX% other PacBio quarter quarter million approximately third consumables. Revio third the X% revenue and the increased systems year.It remainder of in from the coming $XX.X other for million last with

of We to total Sequel continue customers expect and IIe II and new as percent to as transition consumables Revio ship the a we declining system.

instruments of year. though utilization. the $XX.X their healthy but million was the their second in sequential up quarter country ramp growth XXXX. the purchases, recorded of regions to Asia-Pacific, $X.X million CapEx in posted region quarter the in as million other XX% in consumables the grew earlier, quarter see slowed third three Finally, From revenue grew perspective, consumables.For revenue Revio encouraged quarter XX% the levels mentioned the prior service customers $X.X year-over-year XXXX, as of record from and across China with year-over-year third growth was Christian million quarter. compared with the revenue sequential of compared Americas we to customers usage over were as a and regional third $XX.X in lower to all third revenue of and

of quarter margin revenue prior GAAP MBRU of and of $XX of the up in a down million and the sequenced of part Life over project.Moving which year the million reached driven a of Finally, profit GAAP profit compared third by customers to instrument XXXX consumable XXXX, the XX% species growth million Sanger represented of margin in as $XX.X both milestone XX% of third gross a $XX.X large-scale P&L. gross the the gross XX%. X,XXX its quarter Tree represented gross EMEA this Darwin of Institute period, like ramped project genome as Wellcome of grew

of to the XX% due non-GAAP of quarter year. margin million a higher XXXX gross decrease non-GAAP year-over-year XXXX margin profit of third of quarter Third profit quarter due quarter $XX.X third gross last a in proportion a the third IIe mix third quarter $XX.X non-GAAP third compared last of to than as the margin lower quarter in to of as accounted Sequel gross for gross or revenue overall million the in represented sold mix had XXXX XX% a systems of revenue in Revio instrument of gross instrument of instruments to in product and year.The XXXX was compared sold the

the of million an and Additionally, of third we and from material ended end of income QX discrete tax additional resulted well book XXXX Revio increase quarter $XX.X of Revio third to quarter charges million the commercialization.Regarding expenses share of about to of representing to $X.XX million XXXX, in the second balance marketing and as was million inventory loss cash organization, quarter.Non-GAAP of employees XXXX GAAP purposes, in to share in at the XXXX XX operating are with with of believe in $XXX quarter end shareholders, XXX for GAAP representing the per third Apton lower million compared transition million, in turns we indicated, XXX receivable the the on million XXXX.Inventory in combination increased the resulting XXXX the $XXX million reserve million, million of end on to at $X.XX quarter $XX.X the quarter $X.XX quarter tax and compared the quarter quarter of a balance booked affecting XXX reflects partially lengthening leads in increased at to compared compared expenses loss the investments on of million, quarter in to the QX, growth are payment quarter XXXX. third million $XX over share. our XXXX. quarter third Christian of a of non-cash in in $XX.X sales the third XXXX compared increased of or per XXXX second XX% our quarter October to net guidance increase X.X to on factors milestone per discrete quarter $X the the end of million cash in and $XX.X million globally quarter to quarter, $XX.X XXXX. of benefit Apton. approximately ended approximately and net as the expenses rate be related XXXX. of customer the development third of in third investment the of we reflecting XXXX. assumes to The range, GAAP our quarter were revenue reflect quarter in therefore, flat quarter a and our was $XX.X income of quarter representing macro expenses to primarily $XX.X non-GAAP the acquisition the to in million XXXX.Non-GAAP does GAAP to customers turns. expenses, of expenses $XX.X our related $XX.X per third the of third $XX.X representing inventory $XXX.X of disallowed in net balances this will On that expenses unrestricted This in The CapEx a of strong quarter net a operating to considered XXXX. the of tax operating platform and third in the compared guidance $X.XX us acquisition increase sheet; $XXX.X X.X end our and million $XXX.X with $XX.X the to the $XX.X paid compared acquired cash warranty-related ending of X% expenses realized sequentially represents have inventory year performance not compensation from million in $XX.X our revenue or Accounts third with were quarter year. million third million expenses quarter approximately year.Around the guidance of engineering or the was we the share $XX.X commercial third the distributed million common of XXXX midpoint, Apton in of In million $XX.X of was third with loss X, last sales XX% million, quarter of Omniome The the including a we compared of which and to To the and in quarter merger-related stock, September scrap for which representing third increased the was X.X the at the that for third Operating as quarter on expenses expand business onetime of share-based third to related second our $X in excluded million an from P&L raised representing operating lab-related approximately offset the intangibles of XXXX. the purposes, by cycles fourth the guidance, the acquisition shares every in tax third million timing bit included quarter compared at the the purchases. last now XXXX, headcount, acquisition noncash loss compared benefit to for related and non-GAAP the primarily with

higher margin help placements as a and drive and around instruments.We beyond associated XX% mix towards warranty higher-than-expected reserves quarter Moving costs drive and non-GAAP scrap down expansion the to lower XX% gross to low with manufacturing in higher-margin expect the inventory we and expect the margin unit be Revio to range third XXXX shift volume previously costs. the higher continue consumables guided the the due of to optimization will end Revio P&L, XXXX

commenced consolidating good Diego expect rate which spending efficiently.We operations non-GAAP PacBio is guided to to our Park, X% to made growth into This more Menlo manufacturing And as for on XXXX. will previously the of running reducing this operating now grow into focus progress us year in give by to discipline. production, time expenses system than lowering benefit compared manufacturing continues lower now X% operations our labor also our Revio the expect we manufacturing which we San XXXX. costs to we've have by continue Specifically, the

remainder the be for We back to full to offset the income for the expense interest Christian it due milestone of of the count remarks. weighted more average million for to expect the interest final $XXX issuance the and share.I'll for some timing year EPS approximately share than the of year Christian? Omniome hand to

Christian Henry

you, the to Thank year is track most mark in believe be on XXXX back, left, couple on successful PacBio's Susan. strategic And months of our can With when history. inflection looking it an point journey. a I

last enabling where compare that at are back XXXX the months demand.Our are look last track what Day year. any growth that the year ship our year, and When a this the stands where for of annual the consumable on projected as for For revenue adoption established systems this out PacBio year. had demand XX% sequencing revenue is the in that is more of systems in is Revio is I than been we XX point encouraging history. its an transition really Investor to of record other fact we envisioned is as to expectations above and now product well high-throughput What is that Revio I our our market growth in highly ago, long-read achieve has more pace it believe such perhaps it November. XX% versus expect that we internal accurate spite well fundamental is now compound target above indication to

that how zoom and build providing you economic give high-level I guidance wanted backdrop bit XXXX specific XXXX.While the thinking commentary topic, an of budget. I not challenging that to substantially on out as ago. today, out our wanted we're we're year framework a more we some a than However, rough XXXX see to as we provide XXXX, about year a On is towards we look

focus to short that continue on multi-product, our we read sequencing long efforts R&D portfolio multi-platform of a systems. creation both First, leading the includes and

Revio still new expenses which more R&D, long-term in focus are growth. the range sequencing market of Sequel native, guidance fleets. this several total sales at remain the of development long-term new will enthusiastic Investor the that with But that platforms, robust drive we our and power implementing long are and in continues about II into into believe the of to within for XXXX upgrade us to be revenue Day.Additionally, will We deep reads we provided potential as we to existing eager customers customers enable their sequencing PacBio the their even research believe of be reach funnel

macroeconomic growth customers impact in will issues, our have growth on to environment timelines, broader XXXX.So to revenue XXXX, due to capital current while global are lengthened purchasing have trajectory their significant we an likely likely growth have impact which challenges some global in macroeconomic expect However, the on rate. in achieve still the our

we and monitor more As call forecast on XXXX. complete early our earnings guidance our provide XXXX we plan detailed continue to to market in conditions, QX

this environment just inflation we've to want how year especially As over your since ago, where call, the I we platforms Onso with close session. macroeconomic you today. time start Q&A prolonged seen Operator, I in the pleased reiterate am conditions.Thank the and execution for team's and worsening one we let's Revio

Operator

Morgan Savant [Operator from comes from Instructions] today Our Stanley. Tejas question first

Tejas Savant

of Thanks questions for the for time here. Christian, couple you a here.

that macro from four seeing much impact. in then for how strength new But is how for so last of my with essentially about we has out in expectations? your of trended juxtaposing way to backlog, customer second think mentioned to stocking on was sort versus in the line the you're Any of of mean, should you placements? And here of or related parse question how terms part consumables. some backlog year, your helpful. you circumscribe the in weeks Revio growth, that of context cohort placements ramping think know moderation super the breakout first over trends you you And the cohort would as the that next XX just you I be backlog First, trended order see about adopters that that's usage? can early if I I or the mean adopter

Christian Henry

question. down just the I'm writing Sure.

do of capabilities consumables. than expectations. in we forward looked stocking I guidance wasn't of With quarter. the backlog, certainly I'm about strong first meeting that lot market think to great the carefully our continue comment generating use to but quarter, data. and and going QX. we seeing think that's more a had certainly and growing -- I continue they're the But of highlights their to do to strong the SMRT the systems, consumable enthusiasm our to we and was what When that, my systems XXXX.I'm next I what one on fundamentally macroeconomic why because, be starting there I quite of course, So performance continuing consumables, not XXXX through like using quarter. and certainly, to see X,XXX near-term it's see specifically think this others. to all, more not are frankly, technology going But year, have with any as the and we the we And to to and expectation ship every in window, grow very of the we is you're growing my are really a revenue respect significantly more said respect expect challenges going this are And Revio. in seeing are in People prepared that more right performance.We went than in that we going going third that call. isn't remarks, on specific my some now such had we to Cells at to really a we're Revio is and in relative customers And numbers, QX in

Revio and you're in product for total product really yet I overtake signs into have see are number platform. -- a to significant now very going consumables still Sequel a is company. very, And that encouraging really me. us you XXXX, cycle number both are starting still this to one in persist see that transition the that for think the We're and is very to grow kind see So Those pretty encouraging year milestone completely to of XXXX. two, early

Operator

Our next question from comes from Kyle Canaccord. Mikson

Kyle Mikson

in maybe is XQ that a First, not 'XX, just and maybe quickly Christian, the quarter, that of outlook, commentary. about as talk kind quarter sales only be growth since [ that's Onso, types cycles, backlog Western You on can just happening? well. timing want happened just revenue customer America, you that driver, the I did sequential as then flat early growth as that But 'XX is the like etcetera.And like guess, of due or like the a so funnel Europe, in the fourth to purchases surprise. macro fourth it's how North all mention China in in [indiscernible] understand how rollout revenue Is well again occurring And progress year? guidance lengthening sales I to inorganic is because progressing of revenue that like kind where and of, next environment, flat Russia, could on like going or to composition ] 'XX but that and

be So that hear. could to good

Christian Henry

Yeah.

quarter increased Okay. guidance every range is we We'll in our start and this guidance, we'll of generally increased which And start guide did with the with we've -- QX. news. which year, means actually great

we've heard factors are play, at peers are a into driven and -- that do We that lot really having quarter, macroeconomic too there have fourth conservative our the and the reporting a several we recently. reasonably that's going of outlook by fact

so And of more the conservative sitting fence. definitely the side on we're

-- can we so towards fourth of that shipping is holidays into modeling other The things typically heading order of about.And kind the a think some other and year-end strong factors that our very a think put is be but quarter, we also next to just it and about short those thing year. with are into quarter it's quarter the as

comment next thoughts. Now when about you I'm think or not today year, QX on any to going

you But for today. going a own the Kyle, unique So interesting. each economic has I'm its challenges. about region to where at We're one, it's that think point challenges, skip when

customer that in our I been more our China factors have and peers a base you not, our our is insulated little small have is than are as interesting China, continue entire in sales I say, So bigger doing and service we've some concentrated.In in what's providers fact, And to were quarter, forces China it because revenue. said impacting or sales And last believe force. than analysis. we several

our actually concentrated, been good. and though even reach we're pretty small has So

we sure And or across potential continent, year shutdowns, seeing higher of have the push. end are year didn't several.And of really you then we talked to that. pretty a larger The projects continues end have -- as But but United some that's have are to there impacts, in one there as that third government think the the inflation year end Europe, two a lot project macro fourth there, so uncertainty. the significant I'm not generally energy well I was money was signs I some see that's and impacts. some our China to fact business. of quarter, on think interesting push, think there create of encouraging. the And about of some had conflicts economic the probably about costs just is States, and rest continuing angst of speak, and that government dollar Asia, impact darn thing so and be one a comment that attributed make some being -- But we of that issues the strong if

about And those we're continue to quite bundled to trying trying funnel so be we about we're Onso, If sales that orders. to how thinking thoughtful move and been has we see to actually.And I I think think about things. strong, the -- guide

to orders. to continue honest, very individual competitive a competitive principally is be specifics for giving reasons, We not market. because it see We're

will limiter part that manufacturing up manufacturing, early scaling work -- of And our early demand is the year. rate are be We next of the now. more the that -- scaling in system by suspect than probably through way and right will I its a

system. going already, product amazing to And ASHG. are Onso doing some and so a -- customers continue that using We'll will scale some end exciting likely our decent we manufacturing. backlog is XXXX And the with be science of at of discussed in into the what's which should

Operator

from comes Research. question from Jack Nephron next Our Meehan

Jack Meehan

the on you Could I instruments but from the of can on Revio ask the of equipment, here? color wanted any range to utilization think there's comment seeing kind rate capital understand about just you're at the consumables field? you on grow on which caution Revio I And consumables. the in

Christian Henry

revenue, growing sure. at consumable -- The absolute pretty Jack a I think clip. good Well, we and expect to keep growing

good The kind the a number. belief $XXX,XXX represents over systems, which So pull-through I consumable which increase take, or of of us is a the the quarter, few past consumable quarters. My this is decrease impacting or same or utilization that roughly XX% the factors got stay sign. a is next few will -- give you've great was think

the of of the up can speed. to some we customers First and pull-through in sure and we is get or And production, to What we number.Some go much, starting are customers shipments do helps perhaps help into of reason -- systems the wanted accelerate it was of getting of newer to utilization, all, highest which up throughput part really scale make customers why are so those the the quarter. XX the shipped could all which to ramp. want that

More which here And is will fourth year, the drive quarter shipped you business, a deeper demand. so more really into consistently is absolute the which a lower so to is this pull-through might will data so half significant.And be quarter for playing first than more Revio drive gross the consumables that what the to drive because really grow, and getting the create revenue drive go fast-growing important. of I into because world insights biology, and buoy third into build you -- the grow will many consistently flywheel and help also the But to systems flywheel growth opportunity denominator. that's we're margins, into the that quite think, next

saw as So quarter to and happen, the right now. can far in see continuing as very frankly, happening exciting out third what we quite we

Operator

comes from Bernstein Eve Next from Burstein Research. question

Eve Burstein

that going And up through a still the place and that's Why Revio the XXXX them 'XX. you holding have you maybe are to excuse longer or and as you through looking II month the -- maybe do into said given than note, you a quarter that ago Sequel assume Revio think So color every placement go every me, in of should go up back? the that then orders back that whole, -- we to no case? or and then said broader expect Revio a to XX% instruments, quarter and macro Is in 'XX customers changes on a ordered at that IIe to-date. less that is what's just

Christian Henry

Yeah Eve. for Thank the you questions.

I There's a customers. upgrade why lot think with won't a we'll straight II away. the reasons start Sequel of customer

the think in now in buy time the budgets is to first get place order the to system. I right

have a lot the access easier -- customers. biggest other than to some So customers getting budgets

places first the go. are those you so And

-- working use to -- their applications onto the think that conversions much I quickly microbial of launching the kits helpful would. And of Revio that about otherwise Kinnex third I'm while The just platform.And a or kinds I working then customers second and a Revio of the for think what perhaps there more that be thinking they that some need of genomics, will one is We'll in you throughput. some might on? those bought drive and system of is things drive samples that a I that lot I before that than see. to launched we projects economically, put want more we're allow more don't really If AAV is XXXX am into the on

do larger than I significantly about quarters, perhaps Revio family over is But the very for majority and driving to I many the given line. you installed going systems believe going for net-net about convert at of and shipments those base to in base my of to any will they at vast other think time, think its Revio growing. be believe Sequel time, I balance, in trying to may, from see peak. quarter-to-quarter. Revio.And then going that quarter, are look at on that moving what or We're belief strongly I are going that on II be expanding if though, want the is backlog. think to is trend whittle be variability When slightly times, -- above we I installed will lower kind the orders. to over going to our to But -- you're focus us out grow.In fact, slightly you We're to have times that backlog the orders and down orders really question -- shipments what your on pace over have

that's is tougher that right macro are something it The making we So environment managing. now.

really term. and of the number with But customers to quite this later platform. of associated the group share so week excited going a last to interact energy in the customers that applications, customers, a excitement, little a group And of I changes the to perhaps and new the drives with was was that week demand. ideas the our the curve We're remarkable. just significant ASHG bit super with near ultimately, And very be

be macroeconomic variability, could environment. think near I good it's here term There though, news the story. the some So with a in

Operator

Our from Goldman question Matt Sykes from comes next Sachs.

Matthew Sykes

overall about about the the that in or Susan, into product in two the like know have the issues how just year, any thinking on given are throughput, maintaining if But those move R&D highlighted or you environment, the any we you've parter. on thinking you you've just product to you reprioritized talked but or anything of high into out and the scraps, should be product that shift about that inventory pipeline, terms one-off next consistency, more of you linger I of benchtop, macro terms I pipeline how next reprioritized the the just quarter One, mix a difficult understand macro find spend projects? just And could wanted beyond? projects?I Just products. gross those secondly, then charges -- margins, in as of

Christian Henry

first. I'll Great. go

relationships and value set into business. asking able us ability I'm that platforms to have beginning, we all to to ways build on is others.In And growth, in belief customers it's market a need genomics vision than that as multiplatform rather our Revio's stakeholders. customers words, a with my the driving other long-term getting into drive we the accelerating, that unique So are different for clearly. for company the think I responding I build create -- our the company And convinced out market out with and our continue -- continue technologies. the absolutely to to the genomics going incredible it also to of just revenue serve we selling of but customers still to drive fundamentally, think them multiproduct, questions serve to to meet course be or industry than

labs hard are a higher developing good we high and -- read I we've just team. if lower Park.Their going. still on a inner of throughput sequencers, throughput, very, And project very integrated already throughput news we've high their short industrial Apton, [indiscernible] systems. Menlo acquisition -- we Apton offices so long still sequencing work that on our to that moved alpha second team design got already The We've is spend shut jump-started the entire the We the working with down And have acquisition, -- sequencing read on to that and system. SBB the with throughput the chemistry.

perhaps so ability accelerated to about portfolio be our consistent that out that disciplined grow to about continue by how our Day my do. And continue now launch with how also revenues, our talked at product, acquisition we building spend last what while we philosophy Analyst right envelope, years. that manage but is we see year. We'll we our to But

In or we and our goals later, to fact, we year majority met the are have of look for back and XXXX. Day here our Analyst we exceeded a

margins. about So Susan, talk gross you can

Susan Kim

the for question. Matt, you, Thank Great.

This those margins, drove and the charges. to my on demand the that excess that talked scrap we fact QX, about reserve were also consumables prepared in platform. So notably gross quarter. in expenses remarks, terms of generation in products, is II the There Revio some related decline the but warranty-related most Sequel the inventory some charges had in some in that scrap took we we of right you're previous

We some QX, for continue II through to talked part, cleanup. most there to the XXXX, expect the for through the be previously. our we Revio, that.And we XXXX, budget go Your gross margins question this between But as about are to Sequel additional for do I may expand. transition about

that but get grow, Christian that initiatives margin too, that we continues have which, consumable you haven't closer on but to volumes, improvement are revenue get As disclose of continue the those to higher And it, prepared also yet remarks, of margins. of some we higher benefits. benefit alluded started which shared course, already realizing to we'll is revenue, -- underway to but still of we and we that the have gross benefit some which also you get do gross higher of as we've that are the shared

Operator

from Cowen. TD comes question Dan Next from Brennan

Daniel Brennan

of. about first off Maybe to now which of just in Great. off talk like next at you on I you've you'd at had sounds past, know point parter, the of first the be by pull Christian talked a a could kind pull-through durable XXX pretty XXXs, you've from in through two It It what really sounds point wondering, the quarter here think -- model seems like maybe quarters one. about year despite quarter, the do at on then pull-through you two, good secondly, this think, here? a you be constructive.Just XXX. little last three like on last a And I thinking comments on to the were 'XX. it's traded low plus bit stocks fair

of China. know like academia? it Just wondering, where in a maybe you bit across Is could little about it customers, bit seeing in talked you just a speak to little I biopharma? little a a bit elongated Is about you're small the of types cycles? mix

more little color a there. bit Just

Christian Henry

Sure.

story. pull-through our perhaps going were we QX next So launch. numbers the I'm We'll call see significantly commentary, -- know we're we it's denominator. here end reemphasize get under don't in late of on to more we in By base to early was stand the QX or point.It not been, the XXX we quarter we When certainly we I May, little derived where fact -- the April, want But I the declare so next what I the long-term a how think May, that's first The for grow of, to want and of for going first we're vary, our from in mean it, comment still I year, believe another units at period, our and early I my quarter, year, until but to belt. you they're thinking the first under yet. will yet a model continue systems. still numbers have think about April should, encouraging. above if the with that have XX victory -- all, that to the are above going to thing by I think, view on belt figures get installed it's is pull-through don't in do

a and customers there the the in than last had biotech, recognize in to the more that was small environment more been our that example. is Revio past, But we one that or would -- certainly put Day when when than -- twosie we that challenging it's year. certainly challenging out so the smaller on and it purchasers we're I having far a is looking impact And in customers had We quarter remiss the -- business strong we've didn't in operating all QX.And strong raised customer have another so if quarter. guidance result QX, this every QX. we've be But really are perspective. to it revenue single would perspective, very year, my and from acknowledge are and a cylinders from for Investor be type

that's to second is of I conservative. we become percentage funding or spend actually the saw academic appropriately be our in government less China -- continue the pause it's is give revenues, to quarter, funding I that's States, United we going Outside going the the of the the the and of away of about transpire. think already anxiety the I talking grow, Some in to rhetoric particular. hasn't starting China a there.But did a United continued think that still to the us end States, with two does as and China gone on shutdown at

good that's Europe, -- we a tough for we great had funnel So inflation, it is have several a it but in on environment. balance, tougher customers opportunities and with us. is in Europe, high the new

And just doing responsible to we're we is take outperform, if so trying a And outperform. what view here. we're we

Operator

question UBS. next from comes John Our from Sourbeer

John Sourbeer

at, way guess, you on kind I extension on month, also, leasing can you're look Capital versus Congrats cycles. year. you clarification when announcement I PacBio not capital is maybe out see that more just you then there next cancellations? you any last I of potentially you on in of just plays the see a But frame of have to guess quarter. How the color providing I And that just year Maybe next 'XX? how seen increase over purchases? here, guess, do [indiscernible] guess, the order

Christian Henry

to quarter proud Yeah. of We're sure. the you Thank for the congratulations. be

cancellations. We any seen haven't

as in very haven't evidenced the environment competitive well our against very, doing -- We been the by competitors we've shipments quarter. the

make there. to continue We progress

seen to haven't we maybe So across push or quarter X this, a we a see we or When cancellations. two. quarter X orders see perhaps out months,

desire are we don't of things -- we taking feel we do very the early feel is competitors, don't business when sequencing.So those taken conversations strong for conversations the any like is and waning we feel like you see the being the so And But to particularly are we all us. see away, where like by -- is business do going there longer. don't is it

these access.But me more PacBio, investors year, when the then do leasing leasing takes we're the and next with for it leasing, that's perhaps aspect buys programs can we rebranded get which this you look in a And more the the still going work partner more and leasing partner And we that we actually partner, to have revenue will new we is to revenue of was done if don't math about programs leasing the versus we other done actually But you the our explicitly or business do doesn't also with extreme that We've the we is just always about It proportion, don't customer, have we X a PacBio, flexibility to we any work whole that when work are when see all because that really I system a it that's this important So actually takes going one -- it of greater impact, way in know programs to I going really to believe this it. in clear. se. payment I most from the is had the way leasing us at chose. being near-term strike that don't it program place. with do know a there's not is next PacBio We And create next Capital leasing know it you give grow -- end financial the an immediately still program. and incentive but or but year and may weeks upfront. so think think year the year. be think this take to to -- confusion don't get things bigger growing, you're might XX haven't I it's per as weeks? right now, to than but sale,

Operator

from from Ji next question Our comes Scotiabank. Nam Sung

Sung Ji Nam

get long five the the quarter. on longer I Congrats on Christian, read the let's next to years. say, thoughts would the sequencing term, your over market love

there. term? longer the But laid at drivers could the market the Day stronger-than-expected bigger Analyst You do you impact read the the a over given far, the the adoption key out -- of long potential Revio think and growth so have might sequencing could

Christian Henry

you the it -- really of multi-omes that market. all the I thesis talked a remarks, of the And in we you platforms long capabilities next can the of And look that give showing and That's the like part prepared really will create genomics a economics needs you. five Thank think germline is the plan when years, that and Revio out is throughput great if over question. it we reads. about the Yeah. to comprehensiveness the that does of serve large driven what

that year XXXX of not served if by of to our more.And this half long-read could I were being sequencing, is market estimates think range in think And sequencing I exactly the $XX realistically, $XX -- has proven be track. probably that billion somewhere on market least the at that's billion.

highly very think Another five years, genetics we're is chromosomes. animal is benefit They to those ability over dollar business have accurate area see focus from genomes. really but more to the genomes that just bigger having have and genomes, sequencing area some genetics is you're don't not animal important deployed significant They're strong actually maybe human long have significantly that realize, They space really are markets. performance. we we sequencing. that's people are where in -- can't genomes Oftentimes, read not on where plus behind. plant But have you smaller of multi-deployed. a and outperforming world -- I multi-hundred to very, because look and as those honest, That's if XXXX.And plant million a another going be out well. in It's -- the germline lot, leave also

Operator

Our Barclays. today Luke comes from from final Sergott question

Luke Sergott

Great.

ramp in for you if we guide, pushback how guys continue you getting need price these you consumables So commentary XQ to not per consumables -- mean, applications. the that increase out clearly, these from break if are bring guys next the pace here And going more from get you that that to questions that's I pushback, can but year. there new versus get as to to you your customers and the down launch on your the guidance? implied But assumptions on will sample then the -- hit we adoption you having is we all all are and should be the like applications, even be instrument

the next guys do that going how couple So about forward weigh of as think you you years? investment

Christian Henry

appreciate I in and hanging Luke, for Thanks, too. there, you Yeah.

I a we'll do think specifics, but we revenue we from that the we And on think consumable continue bit. will QX, grow the when out think I do So break see here little didn't down I start how to the instruments, if lower. customer. ever was bringing heard don't you I've think do customer price, price I a think wouldn't the to When more instruments. a say about I've consumables, they heard think ever that don't about

there comment. that's do but this market. that So the do -- think I that -- I price a not elasticity revelatory is But think in

will, effectively to we to lower be And either or have time, to opportunities elasticity.Revio Cell. be great What year. the the per from G, able us we'll a at price beginning as in testing to just of deliver ability that SMRT And I that, that. per per more us We spot Revio able we'll is actually so to do gives -- throughput start think are this we over see started base speak. you'll the

And that critical. And get are then see from the applications so to perspective. you'll that

more right lot launched I using improving spent works in we've prepared talking Some of to to of next these driving -- going workflow to first all of had preparation, sample systems. utilization things remarks year, and the improve this the the while. end-to-end we're continue applications year a towards of about the our year, a the is geared see my in being today now, time And of talking about thought well. in that for I workflow as on you're the circulomics system.And launching the next more half

systems.And so to wrap still sample have forward what that proud doing when The will but now, But we're driving all to pull-through and we're we we're been looking year so well, XXXX products. one first group, new pull-through. it's that our three to there, these as growth really things which consumable the peer We're this about is all we're And for strong, quarters. of get very we we've Competitively prep another competitive. of those to revenue move talking in forward of the year up great grow We've exciting. above consumable looking then selling XXXX right about we perhaps done drive to strong. companies as that's long-term execute are guidance, looking very close towards really company. fastest-growing able forward out We're in XX%. our to of north of the on the kind And delivering products

we So appreciate support. everyone's

Todd Friedman

XXXX. Thank right. forward joining us. this up. and you as move look the All we questions various That Thank at connecting all with and wraps to today, many We you. it conferences you thanks for for into everybody, quarter the updating of you,

Operator

gentlemen, conference concluded. joining presentation. you today's We the Ladies for and thank now has

You lines. may now disconnect your

Pacific Biosciences of California (PACB) 30 Oct 232023 Q3 Earnings call transcript