Pacific Biosciences of California (PACB) 7 Aug 242024 Q2 Earnings call transcript

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

Good afternoon, and welcome to PacBio's second quarter 2024 earnings conference call. Earlier today, we issued a press release outlining the financial results we will be discussing on today's call, a copy of which is available on the Investors section of our website at www.pacb.com or as furnished on Form 8-K available on the Securities and Exchange Commission website at www.sec.gov. and earnings our also Christian will website. With and Executive our Investors on Henry, be of Financial expectations, Chief of Chief and including section me Officer; predictions, making copy forward-looking presentation call, statements available is the President Officer. On statements, A today's Kim, regarding we estimates, Susan today are guidance.

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

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

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

thank and joining us you, Thank you Todd, for today.

has challenging The for XXXX first half PacBio. been of

spend against driving manufacturing expenses. In are comment platforms $XX commercial related with the cash priorities, to significantly will outlining expect including run-rate on which an drive on year. was quarter, third product us offering business our setting, Susan lead serving for four, and making bright by reduce the in promise to customers quarterly focused and progress There are execution. will our in operating our two, want adopting today, the and gross several of improving initiated we we three, the million, quarter start focusing time QX our as many our markets first, making reduce financial number I now the second customers see was of one, in development non-GAAP the of we million our commercial I then the this are and following support. with to end through top expenses pipeline new a were specifically employees QX, all on below the execution and guidance. burn. Even updated we priorities, and seeing health. On of in of will results. But best-in-class our restructuring, the an we fourth sequential significant Total number last X Revio let's efficiencies; number expectations. we our areas which our I and four more successfully and and results Onso; revenue we that overview continuing early will and adoption call, priorities of for enabling expected our our of strategic of drive Revio growth; to than a basis the in with our However, growth spots progress on significant better genomics believe support their operating in year; and dedication our restructuring, improving product the both human margin number remarks that remainder broaden to annualized $XX remainder mission non-GAAP thank annualized are development pursue reducing signs clinical of outlined revenue our my

Our we believe of ongoing macro purchasing in which is customer reflects and cycles. impact instrument shortfall due a placements, the revenue elongated backdrop difficult to the

included representing Second XX quarter revenue expectations. X Revio our systems below systems,

Although, of we during selling anticipated, the price increased quarter. shipped fewer average Revios than Revio the

instrument that unanticipated and number volumes Europe and the customers, sample are which continued regions we fast believe as procurement quarter, funding elongated for each to see for cycles delays funding our a number experience continue during number is had causing several are delayed; some increasingly due awaiting materializing companies one, the Revio is process, APAC their which two, delay and we’re taking and that longer are number three, we not in of in potential to in expected; We as to seeing include expected we their of purchases. tenders them factors; purchasing organizations than to systems,

of Revio sequencing our University global the a include business, delivered Biobank, Estonian growth of XX% customers million, in customers sequentially sequencing growing in laboratory quarter-over-quarter, and high. driven offerings. EMEA the in growing leading strength its which testing year to their the side The by continue long-read of consumable clinical second we consumable revenue of was Tartu, saw We ramp is year-over-year and XX% testing new scaling EMEA, the services for in Bioscentia, On all-time Germany, during revenue provider and revenue usage. consumable scaling customers quarter. Notable up XX% X% over-year $XX hitting as an with

was was weakness region. has the European United below Munich, Pacific consumables, primarily in region, expectations, Novogene, we in We are lab notably in due serve Revio in growing further research a and brand-new our its Asia project revenue to customers excitement by across believe instance, Germany, China. encouraged total scientific to large the growth community. Despite the reads implemented for the States slightly which in long funding the losing in for the

the including guided million to we now full of will which low of several million, read year equipment instruments the we that of to environment with in drive external year, respect and the this first ever second and PacBio overall headwinds others in of In expenditure the instrument designed range we order for to XXXX. Indeed, rest our continue number the experienced a we $XXX affecting capital-constrained more expectation these utilizing year. believe and than in to to deals implemented capital ease around half some make purchases. requirements believe of PacBio's customers to promotions customers' capital is accessible the HiFi sequencing particularly of to industry, be upfront challenges ahead, actively before, have continuation the working more a to of for economic revenue programs the promotions in placements, $XXX value. In of are primarily while the the due Looking second maintaining several previously, organizations half end operate shipped close quarter, to we the are long

the end not are consumable customers to Additionally, PacBio Revio purchase and partner, which a we the customer the does primarily project appealing purchase our system at United a commitment instrument is program a term. that in X-year announced of customers, lease rental the agreement last States. then the through customers will from Mitsubishi that buy an week attractive eligible to Revio offering for require based. deals option with for to is Capital, offer, the on this leasing directly one Mitsubishi This rent Revio the most of research With the

late to We to instrument the short-read a promotion is attractive make this for expect range accessible for promotion HiFi Onso, most May mid-throughput make even the launched sequencing in of system new to more what a customers. And believe it market. we on broader we the

helped the funnel, our a events per for has year. Onso half $XX,XXX, substantial on anticipate and of garnered drive customers marketing order overwhelming opportunities our we’re held gigabase. and throughout the system quarter. These marketing sales Revio major The XXX during this second attendees have This some of PRISM dozens promotion of a continue half low closing the attracted platform in building X In the As pipeline. Consequently, in already the the already that customer an acquire others with events and interest and were to $X we trade for actively in costs success. the year. we opportunities, which any sequencing world of closed as approximately new as result, sales increased can events ramp-up several order second working NGS in an

On the side, in indications us we give the second half consumable growing seeing year. confidence are that that continue will the of consumables

sequencing now large scaling example, such for the seeing University For we GREGoR and PRECISE the project all Tartu, the of Biobank, project, Estonian up. Singapore are as consortium the projects several

reagents, In are growth. their placing addition, to leading for indicator SMRT quarterly customers see ratios consumables, we longer-term purchase for orders book-to-bill for and positive a potential continue cells as

improve the outlook months a customer for the trends the quarter, about Revio for utilization couple the in utilization in of year. On past chart month base installed highest started utilization rate. cautious have histogram this by we While remainder we marks July of of introduced last remain our region call to the the our year, China and

the fleet. reminder, majority Revio a monitor we can our As the of utilization of

longer utilization QX. to expect, in see might one As this and to newer customers ramp take levels, continued we

more pull into the medium that utilization high-utilization is buckets customers. or compared through we quarter medium we both saw last was utilization what from instruments from However, increased the saw to and encouraging, bucket low high and move

rate our as customers workflows get be as possible opportunity. fast will to our our in focus utilization up to maximize Our to consumable continue planned helping order revenue their simplifying and

that results nearly total HiFi and growing XXXX, We via second XXX+ fastest-growing yet of new customer range score part expanding value our Revio proposition the time, customers total half shows grew Now, sequencers highlights an new to we are in for share data customers survey, significant produced to accounted X.Xx growth who have drive the be PacBio from market encouraged history, the Revio quarter-over-quarter, NPS to quarter year. Revio shipments, gain same adoption the at be data a ability customers. which sequencing grew the data our among applications continue and half of its the At as Sequel let's surveyed. of XX quarter annual II ordered through encouraging among platform highlighting second by In of see of the the in Revio. Further in the look not of remaining commercial continues from opportunities in last first those instrument the addresses. from some sequencing of the to output the from

satisfied out system. XX being satisfied Revio In addition, X the reported or respondents of very with

markets. the organizations, genetic diversity pleased of and is end and multiple research service pharmaceutical core expected Revios Revio. In delivered labs, are of penetration range LDT by providers, diagnostics into types quarter, greater we that and hospitals, human labs, a to including customer diversity more applications research lead customer This customers, children's institutes, are We adopting the companies. second to to our

to enable December. This organization first projects. In by leading complex already to center potentially quarter, human improve for second Kits, company sequence adoption Revio the including started cell-RNA see expect helped is adopted to single research we in with in repeat system samples its in cancer detection second is diagnostic Notably, service the HiFi Kinnex genetic in Thailand continuing sequencing progress revenue improve a of X,XXX-sample research diagnostics, system the project Revio the prominent customers up quarterly the leveraging stream which expand to multiple of companies drive and becoming QX, in as our the placements, throughout X-years system Revio tests next revenue annually in The and also the the to we to scale of a surpassed can testing LDT a Additionally, to these Ecuador, Quest development sequenced into Hospital patient part quarter, a of sequencing HiFi of has delivered plans Revios genomes Revio to Spain, recently neurological long expected PacBio's University bringing a The for launched health system Medicine advantages our labs X,XXX is to to PureTarget of outcomes. Health their support long-term Europe. menus. panel. Chulalongkorn over Faculty disorders, In regions Kinnex expand establish Southern first region. We're provider expansion large-scale its in we and and we capabilities. Company's at Onso. see $X Diagnostics last of in as million de transcriptomics to reads significant variants launched the early their second in adoption some for customers the Texas. In has looking made other oncology also of Especialidades XXX ramp development. use Code, example, and

will Revio's We are input additional also which without consumable capital sharing DNA improvements value example, late The more consumables this will requirements, providing investment. more upgrade increase Revio input and add and developing ever look for are than -- For in we new customers additional methylation-calling expected We stages later the of samples with new this the we consumables, more need expect decrease the system's to forward meaningfully throughput these before. to our capacity, increase unlock about abilities. believe year. significantly

our continuing in we're platform and long-read short-read to progress work to system. a make Additionally, a develop high-throughput low-throughput

Finally, we're cash our customers reducing and while burn. supporting our pipeline and costs R&D

discussed we a restructuring target to As plan our to reduce year non-GAAP last million. with expenses previous savings our we to annualized run $XX rate quarter, expect initiated and million non-GAAP exceeding exit operating of $XX this

financials quarter I'll of in result burn cash we hand the restructuring, a this detail, this call Susan Susan? decline in some fourth will year. With our the to As sequentially the to to that, third believe continue more discuss and quarter

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

due from XX% base discussed, revenue XXXX. of quarter XXXX, was million systems. million the quarter and the ended We the Revio As revenue XXXX compared quarter in quarter we unit decrease of quarter second Instrument in with second product, shipments. in the lower $XX.X $XX.X installed Revio in to in service, the $XX.X of reported $XX.X million, other an million second a XXX of second to

annualized coming revenue XX% second of of Turning Revio the approximately which mix systems. to of systems, remainder of other consumables. in the million Revenue $XX.X system a came with of quarter quarter from reflected year. the in from $XXX,XXX an million pull-through Approximately $XX.X XX% the Revio of increased consumable last second from

Finally, the service quarter, was and in $X.X the million second of XXXX. other revenue million second in to compared quarter $X.X

more Growth internal expectations revenue We modest from and contracts sequential Revio in Revio last of due compared decrease million resulting $XX.X Revio XXXX. represents the XX% the see our to expect the decrease of consumables service than a offset quarter placements, revenue is other was service in exceeded Sequel expected of commencement offset second placements in lower as Americas service perspective, a the to IIe increases decommissions. From year. to compared by contract and to but regional to II revenue of greater

face a For Asia million decreased with over lower $X.X macroeconomic in funding challenges environment. Pacific, revenue revenue XX% continues mainly year, driven prior in by the of which weaker to China,

though programs benefit of until the many expect We from to expect earliest. don't our any customers the XXXX such impact program, government-announced at from stimulus we

EMEA Finally, over revenue decreased million of XX% $X.X the prior year.

usage, region As Revio consumables up as saw we discussed, record by the customers ramped lower was offset which placements. Revio their

P&L. Moving down the

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

the $XX.X realize in quarter in $XX.X quarter basis of million first cost XXXX, compared expenses quarter to second operating related XX% and our sequentially last XXXX. plan since million initiated non-GAAP to realize of of The representing points to cost production Revio second XXXX, were Revio margin approximately instrument to continued quarter's quarter of on gross XX% XXX expenses second XXXX. QX expenses builds. Non-GAAP restructuring in first the as non-GAAP the improved, decrease savings from our of also savings Non-GAAP ASPs quarter we and as from improved an operating as XXXX represented the declined we particular, quarter lowest operating the began

to ended XXXX, XXX at and Regarding at XXX XXXX. end the of the quarter headcount, of we quarter the employees XXX of the with second compared end

charge the related million the assets. was $X.XX of factors, of compared the in acquired Non-GAAP in year. compared among per Our the XXXX, net loss XXXX. Non-GAAP of share-based million expenses included was goodwill second reduced restructuring and the in our headcount. $XX.X intangible quarter of share quarter to representing quarter of total $XX.X non-cash million representing loss a non-cash $X.X price due of a non-GAAP amortization to which million stock million, a reduction of quarter $XX.X impairment of second other last second $X.XX second to in $XX.X the million, expenses, in of net some $XX.X XX% non-GAAP net excluded million, in decline compensation loss $XX.X in operating result restructuring per expenses, to Operating share

$XX.X receivable representing X.X compared $XX.X XX, our inventory XXXX. XXXX. We turns. with the XX, in million, unrestricted $XXX.X cash million to Accounts XX, compared $XX.X and to sheet turns, the XXXX, second increased at in Inventory inventory $XX.X quarter the million compared balance at with second increased Turning with million ended investments, to $XXX.X X.X quarter at representing December with March million, second items. million slightly in quarter March

guidance. to Turning

earlier, mentioned end guidance low $XX low the $XXX the Christian end includes assumes we revenue, million shipments. expect to of of million guided The the revenue of million. range Revio XXXX full around previously $XXX As year year range instrument be full which and of XXX

We annual expect low expect an margin XX% $XXX,XXX which guided the assumes gross to platform. With at the we to our range. also Revio $XX end the million non-GAAP be in previously consumable range, end pull-through revenue, of of our low revenues for XX% of around

beyond discussed, both launched anticipate gross As and we the both year year instruments we this consumables have significant forward. XXXX, end when expected and progress approximately improvements margin to XX% lower expect cost cost quarterly platform. We that the and of expansion than made the unit going Revio on operational we and these improving production to Revio and are will per continue drive

ASPs. mix, second However, customer quarter-to-quarter product our may mix, half based project in total and the gross fluctuate on margins

million assumes Moving expenses. end $XXX and to million non-GAAP and low be to guidance research in and profile, our in of the general our and non-GAAP $XXX The end range range. expenses selling, cash the million diligent administrative million $XXX to $XXX expenses operating spend lower to development expense and operating non-GAAP around burn expect in expenses, we efforts of remain lower operating

We expect non-GAAP continue rate reflects $XX full to decline operating to that savings and XXXX a target. million in year at full XXXX to the exit to expect expenses run year high-end above year the non-GAAP compared reduction significantly

interest the million to $XX to of range. high We million other around be expect end income our $X and

much to Our million cash $XXX operating midpoint. expense cash, in range more representing But allowing us a XXX up importantly, year our of shares and this guidance be cash reduced our expected XXXX. to the discipline average burn quarterly the million, in weighted maintain investments million $XXX We set ending helping expect than outstanding a million cash for still exiting will burn the equivalents of cash and management year at with burn is cash XXXX materially, XXXX. lower to $XXX full

Finally, continued expansion products we We increasing XXXX. new result remain executing shift consumables, strategic beyond mix to and which positive consumables committed expenses by to lower the from lower with production this and cash with flow costs in are XXXX intend with revenue Revio by installed per and of to gross expanding in the the anticipated margins growth to turning end growth minimal our nonâ€GAAP operating and on XXXX do unit base, thereafter. business priorities, in

We updated and assumptions long-term date. I'll later guidance hand some Christian? to final our a at will Christian details remarks. provide on more for back it

you, Thank Susan.

the continue steps and XXXX we I'm by first driving of to the make out our business also encouraged that manufacturing. encouraged taking of our but in difficult necessary operating incredible that we're challenging, non-GAAP has pipeline. our to product expenses reducing half development am progress by I the costs While been streamline certainly

business will expand extremely platform, number I we the more and we on are performance long-read and the the low-throughput large half applications remain of We see Revio leveraging about in we the we positive open technologies. customers provide a progress enable reach us short-read adoption leader and to tools to firmly the cash PacBio into prospects as believe which are ever in several sequencing both of building broader purchases that platform, track new continue platform year will short-read sequencing end value before, our flow a life made that of Revio We're for continue will that, than substantial signs to to more our focused our and to a customer our are increasing to clinically difficult choose customers we growth that optimistic from are science accounts to Q&A. their second on customers seeing the seen the Revio also up which to in by technologies. are return have fleet, seeing on long I'd we've to base. Commercially, for as our like these of becoming Revio and improve with Operator? to customers. We path that call a of XXXX. And in we the

Instructions] The Brennan Dan question [Operator from with TD first comes Cowen.

at will confidence for And new installed This that I maybe I PacBio, instruments is a Dan. It more that on comment the of XXXX made your that. Tom given you focus on up? that utilization about for the a what bit remarks? more prepared consumables earlier like gives through half want the the be installs of talk to you're are of mature you in back -- the year. a is new to measured are do on you sample ramp base bit that customers want get and looks to to a that taking maybe understand coming look lot kind new into

Sure.

we trends in we and And and that have to pretty we're gives what's what a did we was things. saw what different So seeing pockets such exciting -- we result, as of really a those now. saw right in some the is Europe trends second quarter good think confidence I expect happening some those consumable continue couple reasonably me

some clinical-type some even is number First, have high new be related up we second the of consumable utilization we're consistent pull-through. customers we're of higher which really seeing are kinds and that of traditionally bucket. mid then what in is low run then to saw utilization the the consumable to are have higher that stream. bucket, into to is that and get customers, very higher And And speed, utilization actually mid-utilization into customers we larger are moving consistent the seeing in revenue are those the quarter bucket projects pull-through in actually and a kind starting been starting announced customers That those. to which that and

we into long-read And I short-read that us it technology, the adopting XXXX, even see big clinical because of just that, technologies starting move customers can do. to to we're see As can't things more more more expect our fully do of projects.

in there and second mitigating for the XXXX, Now, is quarter factor. a

of are of improvement usage, XXXX on funding One the seeing improving, United of where projects significant its utilization a most for impact the we we're but more in lost or States think consumable which more pull-through large will funding, lot its consumable bodes of our and which back some, future from today. half and I balance, instrument well

And think if do are some to changes the ability run studies on lower on changes? spoken some community follow-up they've on what experts over you POPSEQ excited And topic, run genome. of a to do coverage, that? about kind I think but that that that I could just depth we've still larger-scale XXx sentiment what guess, in that time doing you the focused people are frame into

we've of has Well, over years. big questions been interesting. This that it's last the to address the few one had

for was level coverage. of -- you really of long and arbitrary a following been have those that this been has XXx time, If of you for around space somewhat an

we XXx. But to we've what see extensive world, other XXx customers real is in XXx, know, is pretty some what some done higher lower we genome than the whole and that experiments PacBio customers And comfortable a at alternative below HiFi much than consistently are range technologies comparing coverages, and lower. at even, do much of comparing titration genome. experiments XXx a an HiFi very to sequencing As

Revio, going when with throughput more levels, the stays which the get build improve gigabase we drive too for improve first that those coverage about customers, continue to I the And consumables to want papers at if talked confidence. But further. but will that per at roughly. because will this be we the we for lower Revio will will think continue save amounts. I'm talked shipping I system. coverage end the input that the today, the quite time even more even of we has of the cost of new really the it give today, the get so about year, significantly significantly lower published is And That not many specifics community exciting. also to down front in to DNA of XXx,

increase so we gigabase XXx, cost have sequence continuing at which more to want we drive the they XXx, customers throughput, down, the flexibility, decide. XXx, per will will whatever to are And -- whether they which give XXx, the even

the Tejas question from Savant Stanley. next with Morgan And comes

throughput provide Revio for a capital the Yuko believe program call you on on the for Tejas. higher with make PacBio indicators feedback is new This you key provide that to hurdle Could early that placements And rather Revio? the is Capital capacity substantially announced? access than excess enabled by

Yes.

we closed various our -- systems in promotional under programs. the So QX XX were that of several we

more PacBio for go decision rental, organizations. And the new we are We is and it's reason that funding in were constraints around straight than that Capital. due were Some much the capacity through capital-driven a to when excess purchase, too hoping the still all we in the instruments that timing week there's why great funding where quarter the we close with to not because capacity. have some of research the or close, didn't vast them which through market they almost to program no the those a just of feel reagent commitment last it's Capital and announced Mitsubishi the is or majority

the in that in vast providers, a we see funding. were frankly takes quite Sequel powerful some cases, to receiving IIe than it them some didn't that's acquired service case more in of still time order and the much Revio. timing the majority certainly their with Revio where the funding-related second second the Now, they've close so and it's But quarter, that deals that

quarter about customers any catalyze improvements talked cost last price passed Have from then, of the you cells. providing greater the flexibility on improvements you savings list to And to you in separately, adoption? manufacturing flow manufacturing Onso to lower on

per and Onso promotional with to things. respect we've now particular, the also the $XX,XXX And cost any we lowered you system respect as couple now in get it to we've a With can to capital. certainly at $X. in NGS product, gigabase We done launched Onso, other in late launched we a introduced have. $XX the gig. of pricing May right but And We've as trade when now, a low

So, Onso. And adoption drive yes, long-read majority we doing on back things. that to to benefit, that we've some portfolio, certainly same with to the go taken to passed the it our some of benefit, the quite respect frankly, of to kind and of customers are of

it make price the of up flexibility. our didn't but we're a the think probably XXX margins Our and been cash are on to on margins get pricing, in to as also yields consumables, cost break whole operations indications proud time. And is we you're ability which bigger the significantly that. up, happen. even, the resulting of a that they've improving drive more the out, flow part of, to were drive the but nice better -- especially We Revio this helping our projects and pointed taken need the to bit, a basis quarter, very that in I things is Susan seeing improvement that's out, Turns lot give out cost drive of point down. our of in path production really quarter have ASPs plan with that gross group is one over second Revio And early

comes the And Nambi next with Subbu Guggenheim. from question

That production.

you repeat your question there? please Can Subbu. apologize, I

for at Rikki is Subbu Guggenheim. This on Sure.

beyond the that of Revio and that you're a expecting continue the year, mentioned consumable expecting reduction instrument the You costs by in and XXXX. end you're XX% to

the to how respect the volumes? production much of other due costs the from to So, you products is reductions, is And of carry then with more launch could them? more source cost scaling actions to there how there? And up how is as it of you to much that across this from room reduce much production-based

they to improvements production per to increases improvements. Those were drop great so going Revio not significant going talked we're be manufacturing Yes, costs, well, And not see are will volumes. that's clear, a in due down due we are both about not question. in that se. really and as The consumables a durable -- to to XX% the Rikki, persist, consumables

to instrument move are side, the bomb Revio the bomb do make innovation the and to those been less that -- to able expensive. we've take reductions On due

We're less manufacturer substantial, the in-sourcing So, able or product we're less have fewer is also still algorithms meet contract result, a to GPUs, cost and include which our in high-quality and production. which less the requirements the as drive manufacturing the would that's changes we a And how margin our manufacture, improved ourselves. and for compute which down. They more that manufacturer contract receive, between the drive -- production. very eliminate of relationship

Revio On benefits consumable the increased side, we're the -- consumable we're seeing, seeing yields.

which of And our chain, And us which impact supply up so, level is we then have tightening have been are on the improving, cost. a -- direct yields giving new also we're benefits.

So, you're impacts into -- beyond. and persist subsist durable that XXXX seeing will or into

which which which of forward some terms thing enabled I'll as one on to again, service that to well a add us the to going base, us also revenue going our our in organization, help think restructuring, costs, out that is, to able service is being of lower improve it I restructuring cost that entailed a gross more take is our margin. support structural

good Susan. a That's Yes. point,

those And guidance? into confirm just how can are follow-up, as you reductions cost much a of your baked

very Well, we them, anticipating are real. certainly and they're

Susan? in generally guidance, right, our they're So,

That's right.

we team in-sourcing of enforce more. that confident Christian other that this upside ideas not about And key component, XXXX. a will has are to that embedded A going lot in into had initiated is talked baked that you our that is There we're guidance. in QX. so, not, our reflected more But could is see year. in in manufacturing we're our that reducing presentation. the come in we into still the It that the have graph it But guidance for bomb improvements earnings be if which

Yes.

please. question, Next

comes The Research. Jack next Meehan question Nephron with from

that about if of implies your wanted land $XX I think per like $XX into around in end ask to Even the I low million, half. back confidence sales Christian million the sequentially growing something quarter $XXX you just year-end. million, at

you in the just the really the to did in going build just was can quarter? start is second coming I you any half? orders, in, and So, Or like curious, backlog they're see this timing,

government see it's confidence to the grow general did and our ratio quarter, that quarter, instruments are we actually well year-end building to kind And right Jack. But It's fourth consumables book-to-bill quarter, quarter now. I spending. build some third good the going are year-end X we see and our expected did so be the -- as, we Yes. than see we sales quarter. to improve the as We little have in the from we we may question, the -- bit spending fourth where really, over in are also, a was would funnels, -- a of expect lower backlog. in of third that

if actually, most help the metrics. kinds the out year, in or that of off of line. far versus for years, not $XX million, that not Typically, other far mix year So, of of $XX you look that see from really the at might those of we're percentages it's you terms revenue us. And million,

going you Revio if So, Onso kind out. bookings at unreasonable how is look we're look this of to help. funnels, of we have improving. We And bigger is the not been, which it's also, sales QX. see at you think placements to instrument And nice should funnel we -- more the detailed past, play than if the then, consumables, getting see in it's significantly the

better to getting much customers and of for Some consumable allows agreements, are into a XX of have more those standing months the purchase -- -- those next will which ship visibility as through in us all lot really will the QX on so number.

tough. we have environment The is So, confidence. still economic building

environment going been difficult we -- calls their most the about guidance, to it's we think year. considered talking of quarter. peers still be when was of this we rest capital a the to think We have on I our tough. going be don't And tough see our mean, it I considered

follow-up. about program what's there Is from to build into color half? in is of the terms it trade-ins. revenue versus any you year-end, of relates half Onso second this know predominantly Revio? embedded Onso for one Is on for new the as just talked coming first I And you can share

Yes.

I first half. is significantly I forecast we be in haven't mean, than revenue Onso -- don't better out was Onso but the think, we Onso to -- revenue, it break

if will that you when instruments a relative -- most our look will Revio of basis, the one unit. at be fastest a forecasts So, right, per that growth, on growth lot hold. areas But our more revenue

growth instrumentation, I back the drivers in would of as half. well will Revio growth so, be the as expect the predominant those in consumables, in And scale-up

Doug question Research. from Wolfe comes with Schenkel And next the

on improvement Gross keys PacBio. to the one for of margin is This is Mollman Madeline Doug. of viability financial

of the Just the wondering, for to gross how at thinking end you you margin, that are about expect the be exit given guide? low rate now

you to that one? answer Susan, want

Yes.

So, and are and at you're it's cost year's of at center and gross developing be instruments guided And the pricing our to about we're products that structurally include consumables. the think the how components end of very low launch. XX% margins. we gross XX% manufacturing what front we margin right when margins, and our new we And think we base how had we the reducing to the our margins gross the we much and about --

project some continue our assume grows. leverage revenue gross expand our margins. that mix, structurally, change margins to overall, you as look gross remarks important so, when is gross at look XX%, grow. you some gross our our have my down, quarter-to-quarter quarter-to-quarter. our But grow, margin our takeaway at of prepared expand 'XX course, the such the coming And as base That to gross you sometimes first get that related and done some we'll as revenue cost margins 'XX, that, of think mix, And do margins describe, and there's will I to does can in continues revenues mix. is we've on how ASP the nice as if our That half, will fluctuation revenue in customer fluctuations

think high to Revio -- the And revenues the to consumables. have I enough PacBio is, been thing really to for gives on are consumable its that gross here. for that mix carry revenue gross lower ability one first so I would which to has dependent instruments, time, that margins essential entire margin. add is positively existence generate than that the us contribute truly

the So, developing although fully provide we you the when carry whole uplift. Also, year, lower end to the gross higher that year new products we than grow, the our to the may 'XX kind of of consumables natural guidance, continue exit products. -- we're 'XX, margins as a expect look at will at that existing

we at as front and look for center too, us, contributing, issue to it. It's be and all about question start will those XXXX. XXXX a no so, And

with Piper And Westenberg comes the next from question David Sandler.

Dave. John is on This for

your any sales reduction are the you headcount reduction. thoughts give growth? I'd won't about you First, ask to just like Could that impact confident how on

for the Well, the I think asked you headcount growth reduction question in specifically. sales

make And less so, I'll was And the of address But the did organization impacted it across that first. other we organization. groups. some was the But impacted cuts some. sales truly, than

restructuring, layers we we building have support lot long and this reorganized the infrastructure And so have much in touch, at and is, company. run last of done more can so spent we've a customers with that commercial bit speak, executive fewer the to the a the time so spans organization And to directly. what out of a we commercial --

and I that helping conversations. that's feel And that's confident pretty so, driving

all we executed is this. Of when course, QX

So, we'll the we quarters see encouraging. are is new But few We're we customer do. acting pointing signs which those next over And how faster, the that building relationships. to we early maintaining relationships. are are

significantly you If expecting. progress. those new the we look revenue But platforms, of R&D staffed result like near projects invested -- result we you I that we revenue ahead look frankly, on new was we're And great the quite what But what at when the and was was not are platforms. expected. And, of making QX, cut making fully very actually sure rest we business, the the driving very at the -- in across term R&D. were also focused appropriately focusing

I'm respect the we some very restructuring. very make progress about though had so, painful decisions to And to excited with the even making we're

long on thoughts generally? what sequencing if the you any population the what projects you for and give That'd great. that pipeline be that sequencing appetite And read have looks globally could is like for

part. first Oh, was sequencing question. part What the that for the Pop the was second in of Gen long-read second appetite I general. Yeah, part? missed

plus sample through way So, we're many, many, their the still system. with projects to respect Pop that Gen, are tracking working XX,XXX many

in We bigger happy the of get the to QX. ground off are some very see projects

project the GREGoR Consortium Estonian project Biobank started sequencing. sequencing. The started Precise So, sequencing. started

that's neurology thousands than large us. a are frankly, are infrastructure durable to be thing the source I that expected. surprised this be, of going which their create to those from this as some for really seeing projects next the place the off to on clinical we're think over around for announce -- lots to, quite execute customers months, really that over to it brightest But required real, thousands lots running I clinical have those get to comes down the to happening own strong Certainly which say really do starting funding really And is the testing. to are is a it quarter faster launched year, be other that to year. and is timeline, wouldn't time seeing of And the of panel testing sample all samples, they would well as everything world. see very carrier lots and of new diagnostic the certainly company. One the we are called PureTarget, the That's a really driven creating and XX there see time over starting is adoption respect more expansions revenue. And all all and a see encouraging are a scale. We which cohorts think take lot long in of of, So, projects And are next expectation. these other of I and us I that the I them. fantastic. fleet spot of of projects that panel, just will was we would and probably clinical the kinds These are a opportunities opportunities versions product leveraging the our of of will amount later companies to with in on panel projects

do academic service So, labs. encouraged by sequencing, in the capacity, think with very absorbing particularly kind that population I uptake general. core of some providers and by classic also we the encouraged sequencing are still

help be we'll projects complement distributed see, their working the the capability Revio. low-throughput have allowing be I they in with great instrument many using And and long-read we'll And low-throughput are to a fill long-read customers Revio with eventually, sequencing to wouldn't low-throughput And a HiFi surprised can see more that their which will to we're up. And hard labs. instruments them so, instrument, them so then, have other customers instrument. the get

looking product So, that out forward to getting too. door, the

next Bernstein the comes Bernstein. from with Yves question And

for tailwind. remember on utilization in is in a Yves. competitors China could actually of This Alberto China very that it said mentioned having NGS, customers generally having discussion be not stimulus high I you that with Yesterday, your you rates. on one while a would affect

you these do other in China, for not guys how potentially the customers XXXX, for with customers And especially expect everyone, you? only year region? what a rough the in So, conversations going are after and

a the good funding, think a I you think question. be That's stimulus Yes. any tailwind. funding, -- know, the wouldn't don't I necessarily

a maybe of a it's bit of think to perhaps return I normalcy. a more

we those are base. in it's that, but in competitors and providers low-throughput get add us. The customers -- You the have service revenue opportunity several customer service give been business our as our we providers, that of perhaps more year, then instrument will for out that we and the market, mostly China, for a into get a well, into market projects, tough help stimulus the have service this as year service Those think the give a do having concentrated just low-throughput which the Chinese providers other instrument. as will in that Chinese primary very they into we is particular, market aggregated implications different large than know, some our customers, the and more business of that

rest is at Pacific If few good a you is radically look are strong been not Asia Japan tough. at The whole has very Asia, there not for either. just maybe as below is standing. doing but Southeast the expectation, rest pretty us, a least okay. Pacific, in of Korea but bright of spots, doing actually Asia a bit

market us China for XXXX tough the -- driven really Asia I So, mainly I China be will the XXXX? better Do year, think is this than challenge. that stimulus think do by will help. a overall

Some products new help, there. we'll go will from and,

are saw having is strategy comment which that the large clinical market, a actually scale in your areas actually main how other question I another your We've market you in with would like, equity aside the partnership that most the level? partnership Quest really General, from from are -- next had, what clinical strategy How the the seen you're and would your you applications, well. main and also -- very what to I articulate seeing from going investments your interest could graph And neurological around the articulate there. competitor your and in partnership?

Yes.

whole test, because they're in eliminating to incredible whole know, Germany eliminating even strategy genome the of and a genome tests short-read products result. beachhead compete example, and power one develop in and where all really supplant, first get as kits HiFi and into at that, sequencing. HiFi the for them, economically, This technologies and sense very our of market, do do you is things that and demonstrate BioCentia the to So, short-read can't they're accounts makes tests into those that converting get use and these they're -- sequencing and clinical to, short-read is can long-read then that it many other evident, a using and well, that for foremost,

for our across competitive short-reads workflow. penetrate value And proposition to value if are not accomplish, the so, -- our that impossible, costs and demonstrating strategy spread applications our and by then with entire our is and to economics difficult

are, third more -- many So, of a do. And as panels, now remarkable. We're seeing, for baby early continue first-line is different in using can effective much -- short-read tests. fundamental that's genome these quite disease, disorders coming testing rare and HiFi sequencing where can, battery long-read strategy. The undiagnosed interested about diagnostic the we in their and traction disease the at the carrier genome very do a particularly or which where sequencing seeing fleet, gratifying be we're we're rare problems approach also where this whole expanding customers a diagnostic now than the just, and thinking applications then, where Children's to like frankly, you in replace potential what most we quite kids can course, various Mercy when you where they've do whole whole institutes they're with in seeing other and having long-read can is a genome of

of think in we're really, combination the a the so, lot is saw particularly we blood And where bright that seeing and testing, was QX. reads. of time, the Over oncology using we're one more in to long traction, going those we cancers see biggest for spots -- certainly of us

drive have as input more the we that than requirements enable with we sample As will consumable, do us radio down new ever our before to well.

can't. right one fundamentally really we clinical and do opportunity we can see We're as it providing important. the focused by on that things that others now So, really technologies has, else no very

Scotiabank. Ji from Sung comes question with Nam next And the

A be of and waiting consumables in have your not for been been Sequel existing have are not they lot answered, to be, Revio funding still of might to of do for consumable your so, just to a do kind of or has continue that kind steady terms utilizing that my are pull-through segment that customers, but whatnot, questions there at math or slowdown expect customers? converted the enough, you but any pretty ones yet I rate, them about might doing and this fast wondering of the

Sequel are some. the the of base I down their using customers users install Yes. mean, has down gone generally still that are instruments. pull-through The --

or using their reality using we advantage long-read perhaps which time, move on they're bigger still to they that will to take but over also another the the we the really that's So, still the of low-throughput less, Revio into system. those them system Labs, I capability it's okay, market and, throughput move they'll is pushing, and that we suspect the They're need so of would of they can drive Revio, using on would regularly so are customers samples -- them, some projects to the but consumables. expect when to is SQL Revio, available. I can Core maybe indication Revio keep are outsourcing

it, of on can launch timing you what of but and then, as kind the long-read, you that's a used and in sequencer. long-read And missed call feedback, some And expect program that is that you just to it's a Is I just where correct? bench-top of is just a the to terms there, the platform what's Gotcha. do something a or of clarification, access that then, that plug-and-play? if customer to low-throughput get sort sense an early the launch, sorry

Yes.

So, the low-throughput system. is system certainly bench-top the

we You're program, access right. used as to the With -- bench-top it system that respect Maybe should uses terminology. an Revio. consumables early the have reality the that is the same uses exact the

principle So, there. it -- smart cell tool or cell uses, the XXM as flow the

work to And we it's expect all straight basically of so, the box. it expect, with going -- applications out we to

a think very we'll don't I So, extensive early have access program.

now. we'll our think in to straight much deep market. We're pretty right I go development

to it to We've away. an far call haven't lot that a date, platform a us. the so We -- earnings progress, But do is and launch mission-critical it not made announced an I of I'm going is for we think, do -- haven't not use that. we're

Sykes And the with Matt question comes Sachs. next from Goldman

in interest ones. we've both Just the them X up I'll front. just got time, ask of quick

The first ASPs. Christian, one's on just,

Do quarter. in demand the expect hurting higher is half? of sample mix and of of improve, on the to are in that's then, year? and there the you a to QX onboard ASPs expect of points that? And could you outlined demand, half, the given going just And that higher a driving issues through of persevere made comments you last to those that the the which your ASP? back do that driving re-acceleration what's the in volumes. for any you course those couple the more couple You've have throughout delays procurement the two your or particular to secondly, are of program back One, of just What expectations programs mentions ASPs on customers,

questions, good Yes, Matt.

to I First although we to. to didn't the from of on all, got we didn't the that, know, unit give point a ASPs, going that And to we you ASPs was that out reason were higher. relative The away internal quarter that expectations, just our to are wanted why to get highlighted great vary quarter-to-quarter. was also ASPs the I important. farm numbers, call have

the some you think rest I get you that for what's market will programs, deals promotional and now, drives the the or drives these around important happens in is those? most funnel, it part it products Usually about the on those us right building know ASPs promotions promotional programs, give of probably same year. The interest. to but take, range important gives we're the what opportunities of is stick the

of to promo where consumables. can a any you don't down the instrument speak, the a take is for month, so pay money you customers advantage price and the Some take of promos, instrument, price certain amount consumables, now we like the of of every have baked to the into have but basically the

use think may know run done I'm where, can't the speak. That's customers stream you so that you do and why to they consumables way not project past, a get steady sales. With can and where the a very to I have to because samples, Other of project be with see, in demonstrating for know, the an that'll of know, where and way, customers of they field demand, and have really for that know, persevere. have flexibility procurement excited because about they out respect that where going. But customers Some I either accelerating numbers there our the know people they how they research straight rental. off Mitsubishi be month, just you in, in good worry they a that procurement from so challenges is up. a this much to to, interesting haven't program area that, take to it's to seen us customers, for you our in they're driving and front kind so it's and

be so I year in the continuing one, we and going all the tough -- is next to the perhaps is our the to for even still It's with going much in so think year, tough. deals to just practically can. With next be we market that market capital samples, equipment very everything probably to capital I be tune understand and can, and customers accurately, get accelerate samples are a sale forecast process, fast we it the done number two, as respect takes through ceramic to as think but increase. number to have

over important sequence, more consumables input of the samples. the very and one into you market, Todd be it think we, going is the basis. DNA drive and to probably shows talking it down metrics more are to we year-over-year that those and I can be we that continue applications the new that I about was talked so We going that into when the about sequenced, taking faster, Revio in drive as and that part market to more year more really are Long-reads, also more very -- also last Revio the the applications, -- kept a requirements the new are and very, even we think are market. will the coming coming, Longreads much hold rectified to on develop with go significantly, new that a samples platform. samples fact and of becoming dramatic, X.X-fold What demonstrates sequenced That's do compare One me in Revio

than samples be challenge, market much to into I'm honest. So, on the procurement more solving bullish coming the

I session. Okay. to question-and-answer Todd the This to for remarks. like would conference turn back closing concludes over Friedman our any

attending for We is later soon. conferences, at with Sure. Thanks, today. presentation. look care. Operator: you conference the thanks and we'll many everybody connecting Dave, Take you the now of questions and various quarter forward to The today's the concluded. talk for and time Thank this

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