PACB - Earnings call transcript Q4 2024 | Pacific Biosciences of California, Inc.

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Operator

Good day, and welcome to the PacBio Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Todd Friedman, Senior Director of Finance and Investor Relations. Please go ahead.

Todd Friedman

Good afternoon and welcome to PacBio's Fourth Quarter 2024 Earnings Conference Call. section a on outlining of on today's available the issued we'll financial which Form we at website on discussing website at the be call, Investors Exchange X-K today, available press is Securities the release results is www.pacb.com on Earlier or our and furnished Commission of a copy www.sec.gov. Officer; presentation me and the Investors and our website.Â Â With today A Officer. Christian on Chief Farmer, copy section Michele available Executive of Chief Accounting is also our President are earnings Henry, of today's forward-looking On expectations, statements, among others, impairment of call, the the noncash and estimates, predictions, including, charges. we will estimated preliminary make statements guidance amount regarding

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

financial which our our release, Reconciliations GAAP. of GAAP company's earnings results available not certain only Investors set U.S. presented as between present a also historical which U.S. to operating on supplement is used be in will We under reported results and accounting rules basis, non-GAAP the on of prepared non-GAAP website. comprehensive a are should under information of and section an is understanding the

live available unreasonable among that year.Â Â A arise matters, of and the materially are the call may the to gross regarding, certain live acquisition-related non-GAAP over be today's unable completion or Investors electing the hand the shortly are that we change effort differ For the I'll other future Those after periods, replay now non-GAAP reconcile during of forward-looking call. will uncertainty cautioned the margin operating to without call due recording call items to website. may the of expenses Christian. in section our use statements after to

Christian Henry

by achievements the year. outlook. joining through Thank in In full commercial Michele more I'll systems. insights today. you our into and quarter, key year I'll for fourth close our and guidance providing shipment we XX Revio outlook financials performance, Farmer, reported the the XXXX reviewing depth fourth Chief Accounting our highlighting in our million then the and $XX.X for driven quarter and by walk Then of will revenue, Officer, us with begin

commenced benchtop units successfully we shipment Vega of Additionally, our platform, schedule. X ahead delivering of

new highlighting years. many in accelerated could sequencing increase rate output XX% consumable Vega HiFi XXXX. Meanwhile, momentum PacBio remains users the of on year, an annual to XX% PacBio has XXXX, our in with The or to went utilization the transition continues in XX% opportunity Correspondingly, a full $XX.X coming customers, accelerate. growth broader II sequencing genomic output to up more Revio expanded in Total field, in sequencing there users adoption demonstrating increase growth a active activity. revenue $XXX XXfold, in Revio of compound at instrument technology.Â Â Since in and our data technology. XXXX, remarkable million, long-read in growth from XX% platforms a strong approximately the Revio grew attracting with XX. nearly the since XXX XXXX XX% Notably, XX year-over-year platform HiFi than continues representing of XXXX, demonstrating total sequencing December to in base million, customer XXXX, For shipments.Â Â Our Revio reflecting installed transitioning at significantly expand with IIe Sequel of totaled customers from shipments upgrade revenue all XXX approximately to whom other meaningful

particularly to ahead Macroeconomic customers persist, uncertain CapEx pressures sales we continue expected are like funding in cycles, Revio. science like XXXX, higher to that XXXX. extending navigate will environment, to anticipate for much an life Looking instrumentation

recent for X% revenue the in growth direct academic increased these in United have environment, to sequencing and range line rates million, regarding $XXX on $XXX a XXXX million between in States.Â Â Considering midpoint particularly market in with growth institute's and the funding XXXX. we external uncertainty the cap involving representing funding the announcements at Additionally, the year-over-year the NIH roughly expect next-generation estimates factors, the

XX% new caused I'll rate our sustained discuss the While a believe genomic detail fluctuate medium growing environment in again sequencing expand long-read technology. achieve growth demonstrates in worth the this past years, revenue and XXXX midpoint as into revenue market NGS of to continues revenue as annual the at still overall our few and that product later the have launches double-digit financial XXXX more and it's growth macroeconomic since we our term that can guidance macro over noting outpaces to growth, compound applications. factors reflects guidance the full our significantly the adoption we growth improves, call.Â Â Over which

the solutions sequencing Vega These have enhancing Connex HiFi focusing to genes. Â Notably extraction PacBio's the for HiFi and potential usability value the throughput accelerating platform include approach application delivering in for where XX% difficult end-to-end short-read and sequence applications grew sequencing unique XXXX, a targeted provides RNA the on sequencing target, sequencing for Pure closer Revio of technology benchtop substantially to revenue to advances and bring and advantages, increase sequencing clinical price kit by long-read to technologies, parity while with adoption like leveraging priorities reducing Spark innovations uptake and expanding key growth Our recent with driving of costs. chemistry, of the year-over-year.

without customers includes bioinformatics Our our complex data pipelines. go analysis turnkey from answer can running solutions providing so sample also to strategy

our at continued We cash based result flow cash our before investments and XXXX.Â Â While maturity fourth product we current our a well quarter, burn approximately the launched our Chemistry the in cash this cash as end million portfolio. We after on we year in our flow August and strengthening of our debt significant as assumptions. turning bridge announcements, well successfully to XXXX, and platform positive innovations, of lowering Vega faced business the flow NIH of Lastly, in Spark exchange note exiting our Notably, recent positive in focused XXXX macroeconomic as and it challenges positions frame will becoming now advancing and on still us first PacBio XXXX. remain pivotal X $XXX turn benchtop the time positive a was to Revio. for cash believe anticipate uncertainty the recent in

of customers. Vega tailored Vega, compared PacBio and launch broad accessible versatile first and smaller customer lower systems needs, of sequencing different long-read capital it cost a solution throughput the Revio, to With making footprint, in range a a offers to reduced company's history. a of features suite an for the

Berry greater quality Genomics, Vega run positive. the previous customers and strongly that larger laboratories smaller genomes, labs values, identical range HiFi RNA on our efficiency Some of require and investigating include a of reported utilizing RNA platform applications read academic focused for to in offering hands-on biology results that been times, time. core customers, reduced first and of data less less PacBio transcriptomics customer throughput, labs clinically these in smaller HiFi processing sequencing yield, sequencing including delivers focused one feedback notable while has improvements panels. Early targeted systems

support plans platform's applications. assays, and value underscoring years As Berry its Vega Fragile thalassemia a the units Genomics purchase over in clinical XX result, to X to the coming

access extends Plant and into researcher Conference, offers genomics. Vega's noted in and entry how lower markets, fauna Genomics Beyond it field. clinical highlighted portability also so for biodiversity in point sequencing throughput biodiversity it Vega Animal unique well suited best At locations.Â And cost, facilitate versatility one environmental remote a and difficult the sequencing practices how to in recent or will a increased the

disease looks shared to many Harbor using tree and projects the Another understanding identifying platform very supply feet. the new Cold the of he with risk crop the life in customer food Hopkins from forward world factors how diversifying species microbial beneath own to Johns the enriching spanning new University and to from our entire Spring Laboratory human for

customers especially have to in PacBio bought of Vega opportunities as Our This funnel for nearly sales the funnel sales grow our potential sequencer new the reach never potential the of X/X the customers continues platform, demonstrates of before. with a platform.

at we drive short SNF in new goal a Conference, advance of plans versatility, system we reduction. for and the shared With over cost years phase from genomes SMRT month, include missing margins Venter a enhanced below Spark, requirements shipping roadmap, which as cost bit read at to year the most sequencing DNA programs on phased to thousands part increase X,XXX density about genome as the which fragments and $XXX find to J. the QX, our sequence even of started chemistry. testing genomes platform. Â In more of platforms cells, is the on-market full health delivers our sequence in and Revio resulting to increase overall XXX years system institute's per These XX% helped represents fourth complete deployed nanograms. populations.Â Last scalable Craig the several the a HiFi to reduce developing further is genetically genome, quarter, platforms while adoption just our use and input significantly women's platform diverse little lowering to Revio improving throughput. a This Revio which Healthcare next technology customer for Spark we focused heritability developing to expand Vega JPMorgan future studies throughput. our the genetic up higher and Institute, the powerful sequencing like This human While could whole

down, XXX-millimeter SMRT we're to lower customers' next the solutions And margins.Â Innovating that easier technology to pathway generation and how advanced enabling semiconductor of to have the SMART access sequencing formats our scale output customers in to run informatics migrating offer drive development Revio sequence to XXM expand advanced faster Revio to a our gross to SMRT the across more paradigm more this customers, and allow pipeline.Â We've our with which wafer leveraging instead inputs, XXX-millimeter. end-to-end SMRT been accurate Cells, cell than chemistries, times expect faster more Cell automating enable computational of can our throughput. times team collaborations technologies to to And SMRT by multiple and today's finally, integrating the reagent inspired and new cost further. expected as technology customers more Cells and changed capabilities We the this of on cost even to highly cell Vega yield and for bioinformatics us once, make of the SMRT of our even broaden are biology our Cell utilizing long-read thrilled to such the

to which coming look is technologies these already the the with we its discovery forward pace accelerating to unveiling HiFi. years, of research Over community,

genetic XXXX. and technology HiFi's where in and by XXX particular, PacBio was that we Center publications challenging ability diseases, preprints methylation failed modalities. cited In including cases of identify substantiate Radford of study, rare genetic are our XX% fact, variants, HiFi's and to further replace In variants this patient analyzing X,XXX encouraged in DNA study its publications like understanding key over Medical The just University improve recent used a testing complex but solve multiple takeaway to structural is cause.Â In researchers here to rates ability and sequencing abnormality. short-read not to Revio potential detected pathogenic

translocation result, HiFi is expanding As capability. the it disease sequencing effort epigenetics A and of aspect RNA demonstrating That sequencing Bioesencia further addition of the in HiFi multi-omic Radford sequencing prep in develop in other system. its multi-omic screening developing diagnostics. in testing rare like sequencing its four carrier Europe, is clinical Myriad PacBio distinct samples, by for mechanisms, condition. unique a HiFi that genes We labs sequencing to see providing a discoveries, improve believe several our tests technology PureTarget diagnose impact rare interrogates additional is medical to X,XXX disclosed We X-month-old and centers chromosomes a enables through advanced uncovered patients with and an rare undiagnosed This XX, tests. library groundbreaking balanced patient DNA. was for HiFi approach recent for XXXX, used X findings In and missed certain uses a larger-scale were sequencing. disrupting the Revio to U.S., key genetic study HiFi between disorders. on highlight genomic kit labs, disease new genetic with genetic sensory routine hospitals and these are began Quest adopt to previously worldwide. Â In testing short-read how to studies we hope and implementing PacBio's which

has focused sequencing disease. University setting clinical Radford Medical X,XXX genomes committed mentioned, Center in HiFi to a on rare previously As

expand Vega, for in Berry approval XX% II, screening With population the work nearly its the coming of screening exposure of hospitals country.Â With Genomics represents children's the the Sequel its even NMPA of an indications.Â XXXX stages This our in year to over or with from LDT translational we China. factoring institutes and is plans the important had research as in parts carrier of final Berry clinical XX% at test a test was labs is obtaining revenues the test carrier pivotal our clinical thalassemia prevalence other of this to of when in world. higher around disease carriers path

also position improve more profile back burn, decisive to commercial us Looking efficiency, and to annualized priorities. reduced We will operating lower we took initiatives. reduce million, strategic on our financial aligning with expenses our XXXX, improve cash R&D believe and our on which we continue costs spending delivering to by actions than $XX non-GAAP

in a we quarter As result, each XXXX. burn cash lowered adjusted

lower, per and consumable we reduce in respectively, our to year progress executed with We and instrument also and XXXX.Â We of reducing we to financial pathway the by debt million COGS strengthening August XX% unit of where successfully see our XXXX, than in XX% exchange, consumable and Revio months notes per manufacturing a and out system by extending made unit a on started taking costs maturity $XXX COGS our note further the XX convertible XXXX flexibility. our

David DaveÂ RuggieroÂ has share Chris that and our Board his We're and announce as Directors. instrumental as Head Sales joined our across leadership technology experience reach Service. has and to that and life expand sales we Global deep joined and be solutions. scale to brings Smith pleased we're sciences Finally, will sequencing also delighted our of global expertise of

in to Chris endeavors. future insights and testing as strategy. Â We service him and the he as his the thank David advance As brings his laboratory markets, we forward CEO his and of on look clinical expertise we for Meline down our our NeoGenomics, extensive Board diagnostics best wish in steps

search operational of continuing organization. champion our We're phase next the drive a efficiency We and a will Officer. help new leader are identifying Chief focused also who for Financial our growth throughout on

call to the to our Michele on pass I'll financials. Michele? Farmer Now discuss

Michele Farmer

expense. Thank which release. GAAP press I noncash of to include results, you, the compensation stock-based Christian. you in measures I non-GAAP reconciliation earnings financial non-GAAP will be review discussing encourage to our

system we reported in revenue of decrease quarter $XX.X shipments. fourth the represented Revio from a XX% quarter We the discussed, from XXXX, and million in a of which million, XXX in primarily ended shipments. cumulative quarter was million XXXX, in quarter of As fourth decrease lower of Instrument fourth in the million the $XX.X other XX% fourth product, the quarter $XX.X $XX.X by with Revio system driven XXXX. revenue service

as revenue funding uncertainty. to a by the in to by decreased and increase fourth quarter Americas NIH with Turning XXXX in revenue per roughly in consumables. Revenue an of $X.X quarter to million service From million million fourth Revio. driven was other contract XX% $XXX,XXX. Â Finally, million academic in of in related of regional to and perspective, quarter affected fourth compared revenue $XX.X fourth approximately the last system fourth $X.X the was flat Revio pull-through to quarter by is of most the XXXX, quarter $XX.X year, the compared region the million at of annualized service $XX.X

Pacific, to XX% the $X.X with lower region sequential consumables approximately year, decreased over U.S., of the several revenue Revio by Asia the countries funding placements. headwinds respect offset government also million in faced with prior expenditures. capital growth to Similar in For

utilization expenses a per SMRT deals quarter and XXXX. manufacturing the to Revio X% lower with the Revio record temporary approximately strategic of related EMEA primarily revenue fourth offset million continue population increased quarter period. ASPs to Revio in to the XXXX, the The basis Fourth XXXX Dubai's like Estonia third at fourth quarter down XXXX. the partially decreased Compared in second over the and margin initiated certain XXXX. decreases The due inventory compared of projects scrap programs cell to for margin Non-GAAP the revenue to to as related quarter on growing Finally, $XX.X saw gross represented by Radboud restructuring in reduction of year yields a a non-GAAP gross due by quarter, in declined fourth scrap due XX% reflects primarily and quarter gross instruments decline of to consumables XXX unit fourth P&L. consumables. Â Non-GAAP $XX.X $XX.X part quarter sequence last and Biobank, XXXX $XX.X in gross the region of scale. Â Moving of XX% to in of compared sequencing SG&A prior in key year. year-over-year a R&D quarter quarter million decrease charges million in in million COGS gross in non-GAAP to inventory million in fourth $XX.X profit the of in operating of profit margin were the of or our non-GAAP the quarter points,

quarter we with to expenses XXXX net in convertible cash in employees end the lower repayment the flat million $X.XX $XX of representing year. was last was note Non-GAAP investments approximately $XX.X compared XXXX. the in million, compared per which million in quarter $XXX.X non-GAAP employees, compared noncash XX% SoftBank. million, fees XXXX XXXX. a the in the exchange headcount, share fourth fourth of Operating the fourth share loss to quarter compensation and quarter with to included of and quarter outflow the of of XXX and at fourth debt in fourth of per $XXX.X XXXX. Â We at unrestricted related net with quarter $XX.X of to included of than in Regarding Cash associated share-based QX third the to of ended million end quarter $XX.X the million the the ended $X.XX $XX.X representing quarter XXX fourth the loss million quarter the

on which stock goodwill asset.Â Â The to our results capitalization. on we and impairment and $XX with these During adjustments impact flows million, remarks. development noncash accounting call It preliminary ability are charges is our and recorded price impairment impairment excluded the and a non-GAAP from interim our totaling on is impairment and Based of the we related million approximately $XX now charges to not asset million associated in important Christian our execute strategy. and discussed noncash this in-process to driven cash goodwill discuss headwinds guidance macroeconomic decline return approximately operations analysis, closing do provide sustained I'll results. future that and conducted following includes to an outlook intangible an the $XX note quarter, test long-term market was and research revised by a or to previously liquidity,

Christian Henry

range, XXXX $XXX million. we between rate As midpoint, the in growth guidance revenue and mid decline revenue in to for midpoint we Revio At annualized offsetting full represents expect shipments grow X% $XXX $XXX,XXX earlier, approximately discussed instrument At Revio modestly with expect to our Vega in million of to growth system the to the shipments of range. year-over-year year this a a low XXXX. with pull-through compared system

further term, significant funding As customers near at what regional freezes, with with consistent to the in in has and based in is NIH on particularly have will academic environment a from the much perspective, spending, landscape, environment recently uncertainty reminder, the guidance Americas. Â In administration uncertain experienced the in navigate a announced our conversations we've change like that guidance anticipates uncertainty funding an past XXXX customers, added broader the funding the to the When community. looking quarters. added our research few continue with federal macroeconomic intramural initial over

potential some positive of those a the in anticipated the note, in to term. market clinical headwinds. offset especially more On activity uncertainty, this considers guidance Our accelerating near is

timelines Revio Asia Pacific, capital XXXX, growth purchasing continue several in to affect anticipate dynamics we the while in in platform. countries the funding the for For region

fastest-growing setting region. Â We impact programs impact sequencing as sequencing the export ability be that the consider expand not and would tariffs our population or activity base does in Vega. scale, other of EMEA clinical guidance our in genome region we the to grows expect to customer whole XXXX with the our to products Additionally,

offset revenue the XXXX, at Revio we anticipate partially revenue. And lower fourth XXXX quarter seasonality. result, of systems typical Looking to by QX, with specifically, first than quarter we system expect the as consumables increased a of be and revenue Vega in

between improvement we P&L, expect down and compared the XXXX XX%, to representing year to XXX and XX% Moving above gross the over be basis XXXX, to non-GAAP point the margin XX%. we expect exit

X% expect unit the expected of line. Â We line large expect Vega $XXX Revio as to to the to sold We of compared to decline from the of operating part per restructuring quarter cost from pilot range reflecting removing XXXX. platform to XXXX in non-GAAP goods expenses continue be in and and $XXX to costs full is the the in manufacturing production of X% million, million our and system the moves the to consumables annualization improve second

be $X million expect XXXX to count and year other approximately and $X million. average to and full for interest share million XXX We in be the EPS the between income for weighted

a of million cash approximately end to compared expect $XXX We in improvement the or in an XXXX. burn year of cash million, investments and adjusted million with XXXX burn $XX to cash balance $XXX implying

our Finally, revenue XXXX result a annual believe to recent current in NIH of as burn expectation growth, with as investments becoming cash in cash announcements. Â We and bridge million the flow for recent well uncertainty approximately $XXX the diligent discussed, we lowering and as XXXX turning will as exiting remain macroeconomic cash positive. us our flow positive anticipate continued cash now and

frame cash of flow time note to maturity after quarter, August positions exchange with our first before fourth turn this meaningful in the positive Importantly, XXXX. still our time PacBio in debt

our to margins gross Looking in ahead, I objective that expand main reiterate XXXX grow through and to want four revenue is primary activities.

kits. has broaden release technology Vega, is to Revio the will market more which enabling of growth the further data. and of to potential reach accelerate sequencing. Â Second, of Revio the the samples full-scale in aim to the First customers on we long-read the we new number platform expect Spark the drive chemistry and bring in HiFi of launch through application the our

to And durability. and amplify launches our create and currently of to initiatives the we're will that product continue we diversify I to outcomes this Third, to offerings. mentioned call. our finally, in strategy on invest future exciting clinical working improve several in progress both earlier

in continuing activities, improve growth to to conferences. believe I while look drive can forward you the of connecting and this expansion and AGBT meeting we profile. our many financial at annual these quarter market with With XXXX investor we

call to We now questions. open up will the

Operator

Today's first Instructions] comes [Operator Jefferies. from Peterson Tycho with question

Tycho Peterson

Christian, say you the to it's lot going take side an much a about talked uncertain environment, like different other now. XXXX. I think funding I'm and right

have NIH in the It down for of XX% sounds near you full you some term? the bake in. baked disruption you freeze specifically overhead? in the like of baked kind it what So on Did

Christian Henry

I Well, think thanks, question. the for so that, Tycho,

partially said environment we course, of down about the a Of saw you to funding States uncertainty, in in But of the we of significant is guidance dynamic that. pretty United revenues the but QX, very half seasonality seasonality. kind our partially in headwinds, of particularly the because And expect that typical right year. QX we bit in now. question versus first be There's no some contemplated typical because of fully

them each lot about we to of done. assessment feedback each try but member opportunity opportunity to to still has the deals to get single of challenging personally since sales into still so, of course, last a be quarter our kind thing I uncertainty, positivity came baked And do this XX% of One we in of real guidance. Americas that what we've think we get I time was forecasted, every in out is looked a closing an week that actually the an the some done getting to the opportunity. our ability, instrument have, at particular. Â And went the there's the could best done, we over have of team

expectations. I we've think, is where Tycho, been may here we've pull-through lowered where really thoughtful one the area kind of you look

range an where funding or slow So, so we XXX,XXX activity. some XXXs gave pauses low pretty to could We did that's you see And QX. or in area of freezes broad mid-XXXs. a

so, here. monitoring situation. a the And think responsible guidance we've given we're We

NIH The a The some other the seeing thing say, see in a I'd think that for on the seeing And by side also then talked exciting Americas. Â And the strong. really situation we sales is the that funnel is we in is the talked Vega to of are offsetting And pretty significant continues funded the as isn't very Europe at in tough. quality the finally, business, clinical is in about, the we're where product I our opportunities which risk about Vega, positive expansion of grow. of growth side, JPM, this sources. right capital environment we're also we

So helps does. hopefully, that It bit. a little

Tycho Peterson

you seven units on you meaningfully? on only of anything I scale And when say backlog? to think shipped maybe expect more at available. all because had you do shipments you Can just Vega, kind JPM, that's you'd you mentioned talk can up on And

Christian Henry

Yes.

And on full So, backlog so and We're quarter. production And line. doing line. speak, ship we the course pilot we're I be what we'll producing the have we of second the mean, the on certainly of the up. of really, over some year, half will we're R&D, production in scaling is then first the to the half the year,

ability And we the into to fulfill the be here. majority improve each by of we the suspect deliver or of the half year, time the back should inventory the quarter get situation will able to So, I demand.

Tycho Peterson

I out just sure. know could a but pushed here, to you're pull consensus year. you are levers pull over below there mean, cash Last one, just breakeven you I I if make million, just other guiding need want to you $XX that flow by forward?

Christian Henry

certainly is that margin wherever are certainly are are. gross with the focused we making expansion, on resources, can. But our we obviously, driving growth we key levers. There and on diligent obvious Look, we're saving how our utilize those focus sure

burn. if opportunities, are further reduce necessary, other to And there so,

Operator

Kyle today with question Mikson comes our Canaccord. next And from

Kyle Mikson

but downside ability, of related, you just is that 'XX Is cannibalization in to about you product already what's Just know in I million quantify Is helpful be million the or further from NIH? the of for shipments guidance. why Vega would follow placements to kind on your quantifying Just is to or there so? Why Is the related fading? like half provide that were it there of like market Revio far? it And challenges expected could of kind guidance? are to year 'XX? that. if so? baked $X up $XX just to this or so decline that Like macro

Christian Henry

Yes.

Vega would argue So, at would at I all, all. Revio fading first not I significantly also that not is And Revio is of that cannibalizing argue all.

in most the least space. really unprecedented in at one my are We and career of at least macroeconomic times, this in

won virtues the accelerating customers We're we driven a to really projects when winning needing over more scale. to et long-read is using shipment we're cetera. capital environment and of a is platform. we it's to concerns. Revio in reality important our macroeconomic are equipment. Â And and an publishing extol world, put be be last expensive macroeconomic really it environment, having But all tough seeing HiFi, funding when for challenges by about We're more more continue the tougher. and customers continues as Estonia, so, to as that just going maybe is the tough so respect We're XXXX, for the considering out with guidance like that And driver we've year the volume, HiFi more even that seeing think specifically we

we the down aren't think. Revio to be we I would macroeconomic if XXXX way modestly said as bad some expected the levels. They as so could argue other from turn shipments headwinds And we that easily of

funnel, opportunities we've to and responsible. Â One Revio actually to this the how of Vega. what before, is working funding about will help is Europe that the downside growing that's we our as drive, our really our things strong tried strong I we've taken that's growth. there our guidance, will and favor, respect I best sales expected to to itself grow is guidance talked the And was and So felt comment is our environment, very that year. and is look put in together think Kyle, further that and that would With I at the on funding done really really

and platform those customers screening is about completely others assays. up we Pacific, Vega of in like And growth. as strong and challenges, then Quest are do a have and carrier and Asia we a additive of scaling country-specific very and that they the part talked there other are to routine, become Myriad some our for strong to clinical And those Vega. for we world see demand expect

everyone positive has think, where this headwind, of grow. areas think that pretty we talking in I I But significant we some can our course, at much so lot And of a about been we have industry level. have

Operator

question with Dan from TD next comes Cowen. Brennan Our

Daniel Brennan

off, more start mind. just to on Maybe one if don't NIH, just you

XX% what's just Christian, somewhere XX%, the like your sense it to I'm kind of of so that? kind like what of X-point exposure, trying a wondering assumed? code. like that a what magnitude something the Just kind or greater Is of of around than Is there XX% a of kind ZIP headwind? So get you've like in in? is baked

Christian Henry

XX% it's roughly is I revenue think game you're NIH total But I do of difficult that. revenues, of our historically. our it's $X. more is the think that do helping work, exactly that to reality million for, some can think And dollars X peers of Street. well, to it's know were I risk. I a try down explain And I than complex lot you think Well, looking to to to out the

really a it's perspective, we're seeing our from what deal-by-deal I by institution. is institution think

their funded early to think really apply. going pools Some of money. that the to institutions out absolutely And it's overweight instrumentation of by I dollar too game have Other they're significant institutions dollar. different have out

we've gave to region our guidance and part whole thought more some do.Â And not and an we yes, get what is business. our up Asia a look here's opportunity sales guidance we perspective by here's important look could So you is that particularly Europe in taken for that it's with that's going to do, business, at but a that, so it's our at and going a year, here's our in the what Americas in evaluated color going its is do to what Americas what set, funnel try of to our done we've is to this taken come what little why, region totality

Operator

Our next from with Schenkel Research. question Wolfe comes Doug

Douglas Schenkel

throw were it consensus Let X out questions. just above year. One are think me on X you Actually, higher quick to We above and I'll exit X. estimates. your our is rate is, an margin, than exit XX% or it's rate gross keep actually this I targeting

rainy your things then as talk say start making about And on gross you're was lot to a you get closer day. sunshine we first the where some how the So where this you revenue year there's topic. in And versus Can is, that's comes control. outside margin consensus the happening acknowledging if can So progress gross on of you you year? to much the are targeting second there's a margin?

control, things reagent for demand? in your it bring friction that or of to type be things in maybe you what reduce there could could environment things with as of what we initiatives a more easier moving rental terms instruments, are like other can In capital forward tougher that you to customers for are make here adoption to sit instruments today

Christian Henry

great really which Yes. Those gross Those an resolved gross going we we're see this questions appreciate our been area happening we're are year. on it impact I have where GM. do margins to our had some What's to drove on because significant in QX, largely issues sentiment the and in I think and margin opportunity yield some way back. is

the see lowering both in progress the cells inventory sold start into make terms as And lot instrument well is pretty instruments our chips get to the that to benefit go savings. of We've of per and our manufacturing, driving as more as in-sourced of through, as the those continue of we'll We instruments well. substantial unit which a then themselves. SMRT cost

to more one a the likely right, strong point an if generally path be margins push gross would which a consumables, XX% margin. gross substantial going that shift we get be of are to occurs, carry the from it's actually that. over over have consensus and And you're mix because, nicely higher the do is we for So greater as to higher margins actually you see that relative exiting a the you're And because prior very gross revenue likely more benefit is interesting XX%.Â Your higher. going reason to that do, about

were they're little your your one you bit how things thought if consumable margin. your that about gross guidance, hurts thoughtful being which end so margin. that we gross But on side will And our help the pretty about on lower revenue of if revenues, a better, the one we up doing

stuff gross some year, believe color will in the of that how gives margin we really there think strong question, So we to and year combat position to move what be that of how with a a And into exit on the about environment. part moving quite that do to the through going we frankly, we're other macroeconomic kind you place. your of try lot have can XXXX.Â The do is programs in

call money of the cost have little We into make the put you instrument and Run what reagents program very the consumables. down Revio where can we and a

to a strong have that We Vega But we price with goes. We'll for we're a ASPs strong here program to off Vega been in XXXX. pretty with customers I for most launched have similar do the 'XX see of to far particularly respect expect Vega, although pretty ASP. be so start happy I how and think there

week. if Another that accelerate business way our bioinformatics you're about is our being benefit where how we're this doing and sales the area had we our the increasing at of thinking accelerate consumable capabilities. is meeting usage. Â And by do investments I've

informatics really accelerating informatics really talks. improved reps a to home to all the a of and lot several I've sales each dramatically our and activity. matters that driving So And that chance capabilities in it's the our customers XXXX, are were point of the talk to had and customer listen

also of Hopefully, by So then improving that the a consumable to ultimately requirements drives improving do capacity helps. can into of that you it the deals technology, like for usage financial more that customer more is the get sales. enable velocity and activities combination which informatics, but it's

Todd Friedman

add One year production Doug, in cadence we half of margin thing on talked about gross line. the the question, your the to second moving into Vega

the see course Over units you'll the margin as gross development off gets mode. into full an of in the the improvement year, that production manufacturing

Christian Henry

a Todd. margin. substantial you, thank gross in improvement And That's Yes.

Operator

Morgan Savant question from next comes with Our Stanley. Tejas

Tejas Savant

for evening the how a just thanks guys, incorporating to Hello Christian, I concentration time your of some you're risk want for customer here. into the get good guide. and sense 'XX

momentum from there. flagged your the region as couple Radpur, of guys? you certainly a flagship of it's got and it China. theme, fact to a the entity Or light any concerns for then, important partnership Berry that sticking that any unreliable just times, question, are And seeing you customers the part in that's Illumina's aren't Dubai mean my great a long-read count of EMEA you've sort for like are list? alternatives that customer Estonia, You local you but sounds impact China no on there just of the in in does second And on that addition

Christian Henry

alternatives which I'll had do are going We've on go competitors. certainly our China great start risk those of our Interestingly, lots of to backwards. there Chinese our from no China, what blowback Tejas, Yes. decreases we conversations are what's customers. in and with with any questions. with first

news opportunity bad customers Vega we there's an do year, yes, sense a news, that interesting some it's too, how full big see any or be they're program mitigation customer the tilt, retaliation what customers large-scale for customers changes frankly, can't So issue as story But side. see going our full moment, from lot decides concentration don't itself. are running we don't exposure the I'm China that this some unfolds. Â With inside the running have see sure running Estonia, like a talk respect But have. and that run. do from we of when and an this the risk, to at that control to I continuing we they not export what programs. to see or would exceptionally China to on keep we'll that administration some you a well. would we at think are have If could to predict tilt, exposure.Â Now, Quite good we there, is these and in that to is plan at and make that

fact, there.Â One what's way on sales had the see into do and we week this at more is customer here customers diagnostic update on a the of In biobank going and that leader we gave as risk production. in our she that of meeting assays great into that talk is XXXX, mitigated moving the some full large get to customers particularly hopefully their advance will, going category, us

we and to they've that human side. Revio, Tree scale after think into both As in penetrate so a revenue the seeing accelerate been I That's customer more in of to population concentration very of go balance genetic is consistent. Â Also, able revenue this that's doing interesting happening durable that really they'll at sequencing full Life Revio best drive to clinical on program, setting. a what alleviate top collaboration find them been year. we're customers the where with customers, Institute running now. trying big durable can which that right will is way we're We're we happens, butÂ now the be with Sanger significant clinical customer usage The like sequencing, and to long-time have RNA what's Tejas, which the research be that of tilt, quite the on their will

Operator

Research. Our comes next with Nephron Meehan from Jack question

Jack Meehan

assuming more afternoon.Â Â Hoping was can book you, in to order quarter, get look? fourth what good Thank you the you initial on as to the that a little color in you terms revenue seven talk you bit there? the are The shipped look XXXX, What Vega. And units how of placements? about does

Christian Henry

Yes.

but hundreds customers. XXXX opportunities point, for orders over this XX% ending the at of disclosed them haven't developed We are new of we've

order-limited expect will with we'll revenue unfolds.Â The you revenue scale the year. in more to and that first that that's how around It's price.Â The quarter half likely right. respect can see fourth imagine units team be over seven We manufacturing-limited the at to the finance of than list manufacturing confirms

Todd Friedman

range. $XXX,XXX the in units Seven

Christian Henry

of the likely any discounting distributors at service some end sell do those would you the distributors, see a for see installation. to what ASPs done haven't up system. will typical. they be But QX, list discount we end When the is We That's that paying price. the the on effectively, Vega and distributor you'll get because and

see and to to and we we we had demand, right objections how haven't lot a think of will prize we set do. so drive the the far, price I so

Operator

Guggenheim. fromÂ Subhalaxmi NambiÂ with Our comes next question

Subhalaxmi Nambi

long-read their you're follow-up. entrant? I sites? And market have then if the at curious of potential Roche a running another beta I'm into think you about possibility do of any How

Christian Henry

Yes.

that macroeconomic population-scale expanding. very technology.Â I made, long-read weeks our more in to interesting focused launch can the to It haven't will here's at We don't We you: a see in tell the and that Roche. we've solve the we you haven't understanding programs is solution discoveries couple portfolio. is that's leader we technology making ever the don't of disease, has when we unfortunate We Estonia in more and any in are confident sequencing and see all my driving impact.Â But a technology run sequencers what built as really really now I into a lot knowledge that's in improvement they what when had excitement, Roche clinical look is rates rare forward in company they its all that environment their of it. before.Â It's thing. than be history. adoption, had out. because when My it's had That at demand stalled progress never I think yet, winning this end-to-end portfolio more deals Precise an that I discovery, in We'll and know. feel been like AGBT at that do We'll is and the that.Â But come more I'm a that but and a the of to are are reality of looking an learn have because short-read think a being

like else out, we'll products and them come does We watching will when certainly be everyone evaluate new accordingly.

Subhalaxmi Nambi

I derisk environment, current am to sure in you're the guidance. attempting

would what basically order you upside the they rank On or market. three Revio outside top that academic the to I'm growth to drive flip if the guidance, pull-through, actually things were side, could placements, Vega thinking your be?

Christian Henry

Yes.

we and get strong the press those and groups would being would up with be drive end working demand may sequencing, say had to if drive the for the are upside, guidance to that I'd think put top there several projects would first X be we you at to able those are start Revio that PopGen would things scale. I the actually like releases potentially they because out

guidance So if demand, increased end. towards drive Revio the certainly PopGen the demand increased would higher drive Revio the programs up would

in example. for would rare to be Radboud in going similar and genomes we Sweden, the second of broader of disease. commit There's adoption projects saw on clinical more kinds clinical adoption.Â So X,XXX timing The

most if more As I And little even direction. NIH certainty then the last that potential more we obvious, funding, they macro one would perhaps continue around a that improves the environment perhaps to in our scale, that positive will be certainly bit, the upside. is have a mean, and guidance another is source of drive right,

So those are would X, say. my top I

Operator

Scotiabank. Ji Sung have we Nam Next, with

Sung Ji Nam

Christian, just of you're terms coming geographically? broad-based wondering you years? wondering in outlook U.S.? demand XX% sense growth I And of of kind terms seeing have in the applications, what revenue of over ex I few the a in was the are the is U.S. go was where the from types the they if similar clinical, of the next pretty versus could do that And pretty

Christian Henry

the in perfect believe total It's the represent, a if whole don't hospitals into Yes, years clinical to in that's going revenue. could to disease testing. children's double going are come could perhaps rare world test United in come great frontline Netherlands. from the the a national as next now, but easily that to crystal where for a several really different I States our ball there areas. around from do And actually like XX% we It's over, from revenue programs panel over question. X I say, of it's to going And a come further we have it from XX-plus that context and genome as sequencing expand into percent

higher because about that at the on types over be able will methylation being more profiles, do looking revenue. now. window, be able clinical in this start and That easier being large at multiplex, us to with much will operate both look be look the research their area of last to can they it's patients.Â And complex testing oncology, and and understand then inspired things a think to going And parts carrier right Target, Pure Target, for to to money tests both asset really testing, opportunities like X-year germline-driven legacy has in with and at and better panel so to get Target and market in there's looking and answers But the will therefore, Pure clinical you Our and labs grow anything eliminate time, where be say, at disease. save ataxias, help long-read have Pure tumor. I at more that side, much penetrate our

it think I business, of be areas doing fastest-growing the in, all So we're least what will double of of now total. percentage in be the one it could at terms and our of perhaps

Operator

Matthew from Goldman comes question Sykes of next our Sachs. And

Eve Burstein

on Eve for is This Matt.

one what CapEx first trends placements? placement you're like So is versus of in models the instruments through are reagent seeing seeing my rental percent you what

Christian Henry

leases those the rentals Yes. And few the The CapEx we depends unique few really our a we reality partner financing as is But reagent as CapEx see majority straight of a reality or that will sales on done the placements. leases. the very type every is We are do do quarter. a each vast majority do get still deals have strong well. leasing purchases. still typically, situation. It of quarter We

Eve Burstein

would to be great. you any the then that versus from margin And numbers can but manufacturing throughout through contribution Great. might Okay. talk you this year could Revio improve understand around I Vega? the as you put move production

Christian Henry

for looking you're Revio sorry, and margins I'm of Vega? comparative the

Eve Burstein

Yes, the contribution margin.

Christian Henry

It's in-source a The stays been disclose a range. a taken a start the in gross little able Vega We the of at But here. of have first of through least the challenge ASPs in to side, has and really making innovation is to the down of that to we've early too that. fact need quarter get makes at course, ASP the production, we to substantial Revio a the through on full it the and Revio out sure been Revio on through amount cost and so margin yet. that lot understanding compute managing higher production

we to be beyond. as gross In product half, of 'XX the On perhaps even nice half, positioned half on be it exceed of start back particularly us, side, exit, it the we've Vega back will a margin front get in to Revio. as approach the it lower, will we margin for and the to kind the or

And see goes. how so we'll that

Todd Friedman

further out Yes. take We're how 'XX of already at beyond we Vegas. even and looking costs could

even this further reduce year, into platform. moving production, beyond a cost for there's the that to So pathway beyond

Christian Henry

Yes.

maybe because out is instruments as after get cost on so market. thing this But because when of our And don't take of I cost they so think instrumentation think appreciate the much you companies about much the most people one technology their much don't of is instrument. compute-driven. that

it's cost amounts out As we cells, instrumentation Vega. as and that SMRT algorithms, will we or we're our substantial our able of whether improve improve apply the Revio of to take

core of things a bunch to around things. miniaturized under want gross in Vega the how it the very of gross expense we putting be of before us did of so of we One with is, areas we the some designed strong there's opportunity where at it see production to a innovated margin higher for has a margins, course, we product. it, see I really numbers quarters scale. to But we our few start get belt do We

Operator

next Carrico Stephens. with Mason question our And comes from

Mason Carrico

it to keep I'll one.

some breakeven time revenue around what there? change, the for On change? color could the assumptions to margins run rate line cash detail that get did flow provide just Any are on you required additional

Christian Henry

we realistically, perform question. trajectory. And sure. XXXX, in think which the are XXXX, equation thinking right, make we wanted to flow think, whole I we the to sure lowered we you through the guidance gave, in that uncertainty given certainly expected mean, thank I in get breakeven. didn't I in our cash to Well, as And the revenue for responsible

both and And 'XX of thinking up the and you gross in there now, about on kind starting think right modest the are core revenue about of so about midpoint think margin then assumptions growth our 'XX. the from and guidance growth to the

exiting So XXXX. if we that flow with positive were basically out by 'XX, of thinking getting cash as the we're time we're

we business, over margins of start beyond those that total the the in we greater with And see management still cash that in of you XXs consumables to see the become proportion continue revenue, and gross to so key to the as gets and do we the exit And year we breakeven. uplift to into can believe so gross going combination the We things, expense along you're our of expand you drive scale margin. get is disciplined the flow course believe XXs. a

Operator

And comes Barclays. our question final with today Luke Sergott from

Salem Salem

is This on Salem for Luke.

new instrument costs, it it pull-through, of looking from that guide, of offsetting lower in What pull-through. down the then and/or And this some that step demand equation? small Vega? just an I know an much imply kind is ahead that pocket of the on air How mid-XXX,XXX from a the at XQ. Spark that took perspective to Revio the you're maybe came And the low does reflective leave Spark not utilization in now sequencing the capacity from I'll but embedding pull-through, year? enters NIH there. of there, Just risk

Christian Henry

Yes.

there announce mean, their to going to I with any existing in air respect pocket was So before a you shipping in reagents, QX, are product. more you an using have time inventory change customers

And basically reagents X the of last, weeks what, until start Spark the quarter. so we the didn't shipping

as of We a our application order, well. order also And us did pretty order have some that of kits. that reasonable some back that for back back amount was and so hurt

a there that. of yes, so And was certainly bit

quarter. $XXX $XXX last what, wasÂ $XXX right, You're it versus or

run. was that's like think was Todd I saying half at a JTM, So

our and throughput in monitoring so that reagents, with of reagents other that. Â When our air base see of low Spark funding customer the certainly the certainly I that. really exposure, there through that think thinking guidance the to is so because of NIH you in anxiety that with And we're for the intramural. perception pocket. creates Even But the any increase some freezes priority don't mid-XXXs, think words, we was first the potential creates about

in multiplex customers genome and In typically runs, the doing more implementing human far, so excited particularly whole we've fact, to not that applications. about Spark they're most spoken same onto they're

data. they're so the of benefit think And getting more I

that equation of a I think elasticity big perspective, kind from have talked about. to going And don't so that that it's kind impact you of

So timing being the the when studies thoughtful we're and yes, it's about think get funding really of that started. I environment

Operator

question-and-answer like back This I'd concludes remarks. to Friedman turn to the over session. the conference closing for Todd

Todd Friedman

Thank for you today. a Thank all few for everybody you, us. joining thank and Rocco questions staying and minutes late you with the

AGBT throughout mentioned, and care. a at of has with the lot you forward Christian other As quarter. to Take connecting we investor conferences look

Operator

call. for presentation. all Thank attending you. We conference This you thank today's concludes today's

disconnect now wonderful lines, a and have day. may your You

Pacific Biosciences of California (PACB) 13 Feb 252024 Q4 Earnings call transcript