Q3 2024 Pacific Biosciences of California Inc Earnings Call
Thank you. Thank you.
Speaker Change: Good afternoon, and welcome to pack Bio's third quarter 2024 earnings conference call earlier today, we issued a press release outlining the financial results, we'll be discussing on today's call a copy of which is available on the investors section of our website at www Dot <unk> dot com or as furnished on form 8-K available on the Securities and Exchange Commission website.
Speaker Change: At Www SEC Gov.
Speaker Change: Copies of our earnings presentation is also available on the investors section of our website.
Speaker Change: With me today are Christian Henry President and Chief Executive Officer, and Susan Kennedy Chief Financial Officer.
Speaker Change: On today's call, we will be making forward looking statements, including among others statements regarding predictions estimates expectations and guidance you should not place undue reliance on forward looking statements because they are subject to risks and uncertainties that could cause actual results to differ materially from those projected or discussed.
Speaker Change: Please refer to our SEC filings, including our most recent forms 10-Q and 10-K in our press release.
Speaker Change: Yes releases to better understand the risks and uncertainties that could cause results to differ.
Speaker Change: Claim any obligation to update or revise these forward looking statements except as required by law.
Speaker Change: We will also present certain financial information on a non-GAAP basis, which is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company's operating results as reported under U S. GAAP.
Speaker Change: Reconciliations between historical U S GAAP and non-GAAP results.
Speaker Change: And are are presented in our press release, which is available in the investors section of our web site for future periods. We are unable to reconcile non-GAAP gross margin and non-GAAP operating expenses without unreasonable effort due to the uncertainty regarding among other matters certain acquisition related items that may arise during the year.
Speaker Change: A recording of today's call will be available shortly after the live call in the investors section of our website those electing to use the replay are cautioned that forward looking statements may differ or change materially after the completion of the live call <unk>.
Christian Henry: I'll hand, the call over to Christian.
Christian Henry: Thank you Todd and thank you for joining US today, we're excited to broadcast to you from Denver, Colorado at the American Society of Human Genetics annual meeting. This week, we unveiled several new and exciting products to thousands of researchers and scientists in the human genetics community.
Christian Henry: I look forward to sharing those in other updates on today's call. Our goal is to leave you with the following takeaways first Pac bio is delivering on its strategy to create a suite of platforms with turnkey end to end solutions, enabling our customers to access some of the most advanced sequencing technologies available.
Christian Henry: Our latest launches significantly expand our addressable market in ways that Pac bio has never seen before.
Christian Henry: Although we continue to operate in a difficult macro environment, where customer capital expenditure budgets have been challenged and sales cycles prolonged we have seen several positive signs that our business is returning to growth.
Christian Henry: Third <unk> continues to drive new customers to long read sequencing and open up new demand. This is evident not only in the continued adoption by new pack by our customers, but also in the diversity of customers implementing Pac bio and the adoption of hifi sequencing by large population scale programs.
Christian Henry: And diagnostics and L. D T labs.
Christian Henry: Finally, we are hyper focused on building a sustainable cash flow positive business and have made meaningful progress. This year on driving the production cost of our products down reducing expenses lowering our cash burn and strengthening our balance sheet by reducing our total debt while balancing dilution through our recent.
We announced note exchanged with Softbank.
Christian Henry: We remain committed to our goal of being cash flow positive by the end of 2026.
Christian Henry: Now, let's discuss our product launches last week, we announced a significant upgrade to our radio platform with a new chemistry, we call S. P. R Q or spark this new chemistry leverages the power of our existing twenty-five M smart cell increasing the data output per smart fell by 33%.
Christian Henry: From a target of 90 Gigabases to 120 Gigabases. This.
Christian Henry: This increase enables the radio system to sequence up to 2500 complete phase Hi Fi genomes, a year at a cost below $500 a genome.
Christian Henry: Offering what we believe is the most complete and economical genome on the market.
Like any high by genomic methylation data is included with every run this chemistry update along with our <unk> software upgrades, which improves the accuracy of existing five Napa <unk> capabilities by 10 percentage points and adds additional methylation, calling abilities with six metal a for the five or so.
Christian Henry: Yesterday, giving customers an even more in depth view of the genome.
Christian Henry: Importantly.
Christian Henry: Spark significantly lowers DNA input requirements for for whole genome sequencing.
Christian Henry: For fall to just 500 nanograms in fact, we have now reduced sample input requirements by 30 fold since I joined Pac bio for years ago. Many customers say this is perhaps the most intriguing update because it unlocks even more sample types like saliva or tumor to be sequenced with hi Fi.
Christian Henry: Building on this we've expanded our nano bind pan DNA kit capabilities for high molecular weight DNA extraction of saliva samples, allowing us to offer sample to answer workflows for one of the most common biological sample types.
Christian Henry: We have received fantastic feedback from early access customers, we expect spark to ship globally next months, helping to enable the next wave of sample migration to long read sequencing.
Christian Henry: Notably, we expect to deliver this throughput increase and cost reduction through innovation and manufacturing improvements passing these benefits to our customers and at the same time, improving Ravi is gross.
Christian Henry: Consumable gross margin profile.
Christian Henry: While we expect spire chemistry to advance more large hifi sequencing projects, we realized that some researchers do not have the capital budget to purchase of <unk>, but they still need the extraordinary accuracy and completeness that Ravi O offers.
Christian Henry: So last night, we were thrilled to unveil our latest sequencing platform Vega.
Priced at $169000 Vega is a revolutionary new bench top sequencer designed to make accurate long read sequencing accessible to any laboratory and introduces a new sequencing paradigm in which customers don't have to sacrifice data quality for low capital investment.
Christian Henry: With the run time of just 24 hours users can sequence up to 60 Gigabases of Hi Fi data and utilize onboard analysis with Google beat consensus five met they'll see calling and the multiplexing all at a cost of $1100 per run.
Christian Henry: Vega was developed with the customer in mind. It offers the same hi Fi data quality customers expect from Pac bio and experiments comparing data from Vega and <unk>, we see a correlation of <unk> 996, demonstrating nearly identical data between the two platforms and giving customers.
Christian Henry: Confidence in the consistent high quality data no matter, what hi fly platform.
Christian Henry: Used for their project.
Christian Henry: With only two simplified consumables they get gives users the flexibility and confidence to sequence almost anything.
Christian Henry: RNA sequencing with our connects kits and targeted analysis with pure target to small secret small scale whole genome sequencing projects and microbial genomics Vega has the potential to attract thousands of customers to pack bio hifi sequencing.
Christian Henry: I'm happy to report that platform development is in its final stages, and we expect to commence shipping in the first quarter of 2025 and scaling manufacturing throughout next year.
Christian Henry: Okay.
Tying our platforms together for a seamless user experience is critical to broader adoption and we're pleased to announce our plans to launch our smart link cloud solution in early 2025 with this customers can access store and analyze their hi Fi data without local hardware, making it easier for.
Christian Henry: New and existing customers to ramp up their pacbio sequencing.
Christian Henry: Additionally, DNA stack a pack biocompatible partner has expanded its offerings with its latest software launch instruments.
Christian Henry: This cloud solution is expected to integrate directly with red yellow and Vega to automatically detect new samples and offer users best practice informatics pipelines.
Christian Henry: We believe that seamless and intuitive informatics tools like these can help build a thriving customer ecosystem around our growing installed base and solidify our position as a leading sequencing provider.
Christian Henry: No.
Christian Henry: Let's turn back to third quarter results I'll give a quick update on our performance and discuss our commercial activity total revenue was $40 million up 11% from the second quarter of 2024 with sequential growth in instrument consumable and service revenue.
Christian Henry: Total long read sequencing systems grew quarter over quarter as Q3 revenue included 22 radio systems and five sequel, II systems Interestingly, we continue to see some demand for the sequel to the system, which is an encouraging sign that some customers are seeking a lower throughput platform like Vega, especially in area.
Christian Henry: Like microbial genomics and gene therapy.
Christian Henry: The 22 radio systems were delivered a 22 different customers and year to date approximately 45% of Rev. You shipped were to new to Pac bio instrument customers. This was the second quarter in a row with a radio unit book to Bill of one or greater.
Christian Henry: Additionally, we had a record quarter for the answer system with the most systems shipped since the platform launched last year.
Christian Henry: Consumable revenue of $18 $5 million grew 10% year over year and 8% from the second quarter of 2024.
Christian Henry: Annualized pull through on the radio platform was approximately $255000 also in line with the past couple of quarters with stable utilization and a similar pull through distribution of what we experienced in the first half of this year.
Christian Henry: The output from Pacbio long read sequencing continues to grow with Petabytes sequences, increasing one six fold from Q3 of 2023.
Christian Henry: Cable unit book to Bill in pull through new customer adoption consumable growth and increased data output are all encouraging signs that lead us to believe that we're past the trough we experienced in the first half of 2024.
Christian Henry: With the imminent launch of Vega, and a more powerful radio platform of spark chemistry, we expect to return to growth in 2025 and beyond.
Christian Henry: Vega product development is ahead of our previously anticipated schedule and while we don't expect Vega to cannibalize revving revenue meaningfully we are mindful that there may be some cases, where potential customers may take a little more time to assess our new offerings, which may prolong some sales cycles as a result, we expect fourth.
Christian Henry: Revenue.
Christian Henry: We will be lower than previously anticipated and be flat to slightly up compared to third quarter of 2024 with <unk> system placements and pull through looking similar to that of Q2 and Q3 of this year Susan will touch more on our guidance later.
Christian Henry: Looking back at the third quarter I'm encouraged by the team's commercial successes, even as we continue to operate in this difficult capital environment.
Building on our success last quarter, we continued to see adoption from diagnostic and L. D. T Labs and clinical research for example, using the radio platform a Zen to life Sciences recently launched a long read whole genome sequencing tests for clinical applications. This test will enable precise detection of a range of complex <unk>.
Christian Henry: <unk> alterations undetectable by traditional sequencing approaches. Additionally, myriad genetics acquired its first <unk> system in the third quarter. This leading genetic testing in precision medicine company plans to use backed by a peer target kit to develop a high throughput automated targeted sequencing panel.
Christian Henry: And consolidate current methods, such as PCR and capillary electrophoresis for a subset of genes in their carrier screening test.
Speaker Change: Genius genomics is utilizing radio in a phase two clinical trial with Duke Health and Temple health to a test and further develop its bioinformatics platform, which provides a comprehensive genomic profile and stratification of ALS patients for individualized treatments.
Speaker Change: Proved cost and throughput coupled with the completeness of a hi Fi genome is driving government sponsored precision health and research projects to increasingly utilize long read sequencing to gain a deeper understanding of the genetic diversity of their respective populations.
In September the National Institute of Health of Korea announced that it plans to create a next generation human reference Pan genome based on the Korean population to further research into undiagnosed diseases and difficult to sequence genes related to drug metabolism and strengthen its precision medicine.
Speaker Change: Abilities. The program aims to sequence over 1000 individuals using long reads and pack vial is proud to be part of the pilot phase starting this year.
Speaker Change: Earlier this year, we announced that Singapore's national precision Medicine program precise selected Pac bio as a key sequencing provider today. We are excited to share that we've expanded this collaboration to include our connects full length RNA kit into the program.
Speaker Change: By incorporating full length Isa form data researchers will have access to multi omics data, which can lead to important discoveries about the social environmental lifestyle and genetic factors influencing public health and prevalent diseases in Singapore.
Speaker Change: Meanwhile, publications and evidenced continue to demonstrate the utility of a highly accurate long read sequencing and genetic testing researchers from redbird and other institutions published a preprint with results concluding that long read sequencing can be implemented as a first year diagnostic workflow for germline testing.
Speaker Change: <unk> potentially encouraging it's increased use as a diagnostic tests.
Speaker Change: Tests for diagnosing individuals with rare diseases.
Speaker Change: Similarly in a pre period.
Speaker Change: Research is a watch it at Boston Children's Hospital study in Pediatrics, sensorineural hearing loss, where diagnostic rates have remained static for over a decade at around 40%.
Speaker Change: Hi Fi to solve over 20% of our cohort of previously unsolved cases that had used Exxon and short read whole genome sequencing.
Speaker Change: In microbial in meta genomics researchers from the Salk Institute and others studied head to head comparisons of Pac bio <unk>, Sps and synthetic long reads on generating complete met a genome assembled genomes or mags from longitudinal pediatric microbiome samples.
Speaker Change: They found that quote long read approaches generated 51% to 72 fold more complete mags for Giga base pairs than legacy short read approaches while Pac bio generated the most accurate complete fee mags at the lowest cost end quote.
Speaker Change: We've always believed that long reads.
Speaker Change: We've always believed law reads to be the best suited sequencing method for microbial genomics and with low cost platforms like Vega on the heels of validating studies like this we are highly encouraged that Pac bio compenetrate deeper into this market.
Speaker Change: Let's shift gears to answer in the short read portfolio. It was a record quarter for Pac buyouts, we shipped the most answer systems, yes, two thirds of which were to new pack bio customers. We also welcomed the translational genomics research Institute or <unk> as the first official service provider for SPV sequencing.
Speaker Change: Hoping our short read SPD technology reach a broader clinical customer base.
Speaker Change: We also expanded the breadth of applications STB can address by joining Tenex genomics is compatible partner program integrating ASO into Tenex as workflows will help extend the platform's ability to address the fast growing single cell and spatial biology applications.
Speaker Change: Finally, we were encouraged to see a peer reviewed publication validating the accuracy of SPV chemistry, and its ability to examine rare variance with extraordinary results. The study showed that SBB sequencing chemistry detected targets nets down to 0.0% to 1% at 100000 full depth.
Speaker Change: And <unk>, 1% at 20000 full depth without any error correction methods.
Speaker Change: Notice that traditional SBS sequencing is unable to achieve this accuracy without the use of sophisticated error correction tools.
Speaker Change: I'll wrap it up in a bit with some closing remarks, but before I pass the call to Susan I wanted I wanted to share that Susan will be leaving Pac bio in December to pursue another opportunity outside of life Sciences.
Speaker Change: Susan has been a trusted partner over the past four years and I want to thank her for her contributions and wish. Her every success. We plan to immediately begin searching for Susan's fulltime replacement I'll now pass the call to Susan to review, our financials in a little bit more detail Susan.
Susan Kennedy: Thank you Christian I'm incredibly proud of what we've accomplished over the past four years.
Susan Kennedy: <unk> for Pac Bio's future I'm confident that under Christian's leadership. The team will continue to make tremendous strides in its mission to battery human health through the promise of genomics with that I'll now dive into the quarterly results.
Speaker Change: I will be discussing non-GAAP results, which include noncash stock based compensation expense I encourage you to review our reconciliation of GAAP to non-GAAP financial measures in our earnings press release.
Speaker Change: As discussed we reported $40 1 million in product service and other revenue in the third quarter of 2024 compared to $55 7 million in the third quarter of 2023.
Speaker Change: Revenue in the third quarter was $16 8 million a decrease of 52% from $34 7 million in the third quarter of 2023 due to lower unit shipments. We ended the quarter with 247 cumulative radio system shipments.
Speaker Change: Turning to consumables revenue of $18 5 million in the third quarter increased 10% from $16 9 million in the third quarter of last year.
Speaker Change: <unk>, 77% of consumable revenue came from radio system and the remainder from other systems and other consumables.
Speaker Change: Finally service and other revenue was $4 7 million in the third quarter of 2024 compared to $4 1 million in the third quarter of 2023, we continue to expect modest sequential increases in service and other revenue at the commencement of revenue service contract is expected to more than offset the decrease in <unk>.
Speaker Change: Service contract revenue, resulting from sequel, too and two we decommission.
Speaker Change: From a regional perspective Americas revenue of $20 1 million decreased 31% compared to the third quarter of 2023 with a decline in radio systems, partially offset by record consumables in the third quarter.
Speaker Change: For Asia Pacific revenue of $10 8 million decreased 32% compared to the third quarter of 2023.
Speaker Change: The region, however, exceeded our expectations and while we remain cautious on China. It was encouraging to see sequential quarterly growth for the country as well as sequential quarterly improvement of revenue instrument utilization.
Speaker Change: Finally, EMEA revenue of $9 1 million decreased 17% compared to the third quarter of 2023 with year over year growth in consumables, partially offsetting the year over year decline in instrument revenue.
Speaker Change: Was encouraging to see revenue utilization in the region hit an all time high in the third quarter, primarily driven by momentum in population scale programs.
Speaker Change: Moving down the P&L third quarter 2024, non-GAAP gross profit at 13.1 million represented a non-GAAP gross margin of 33% compared to a non-GAAP gross profit of $18 1 million or 32% in the third quarter of last year.
Speaker Change: Sequential decline in non-GAAP gross margin from the second quarter of 2024 with primarily due to record also placements in the third quarter, which carry a lower gross margin with our promotional pricing offered in the third quarter equaled.
Speaker Change: Well to me systems sold in the quarter at lower Asps.
Speaker Change: Lower radio Asp's in the quarter.
Speaker Change: non-GAAP operating expenses were $62 4 million in third quarter of 2024, representing a 31% decrease from non-GAAP operating expenses of $90 9 million in the third quarter of 2023.
Speaker Change: non-GAAP operating expenses also declined 12% sequentially compared to the second quarter of 2024, as we continued to realize cost savings related to our restructuring plan initiated earlier this year and again it represented our lowest non-GAAP operating expenses quarter since Q3 of 2021.
Speaker Change: Regarding head count we ended the quarter with 575 employees compared to 796 at the end of 2023 and 844 at the end of the third quarter of 2023.
Speaker Change: Operating expenses in the third quarter included noncash share based compensation of $17 1 million compared to $18 6 million in the third quarter of last year.
Speaker Change: non-GAAP net loss was $46 1 million, representing 17 cents per share in the third quarter of 2024 compared to a non-GAAP net loss of $67 9 million, representing 27 per share in the third quarter of 2023.
Speaker Change: Turning to our balance sheet items, we ended the third quarter with $471 million in unrestricted cash and investments compared with $631 4 million on December 31 2023.
Speaker Change: Inventory balances decreased in the third quarter to $65 7 million, representing one six inventory turns compared with $68 6 million at June 32024, also representing one six inventory turns.
Speaker Change: Receivables decreased in the third quarter to $29 4 million compared with $32 4 million at June 32024.
Speaker Change: Before I discuss guidance I wanted to share the details of our note exchange with Softbank as more fully disclosed in our 8-K that we filed today, we signed an agreement to exchange the $459 million aggregate principal amount of the pack bio one 5% convertible senior notes due 2020.
Speaker Change: Eight four 200 million principal amount of newly issued one 5% convertible senior notes due August of 2029, approximately 25 million shares of common stock, which represents deletion of less than 7% and $50 million.
Speaker Change: Of cash.
Speaker Change: We are pleased to announce the transaction, which ones close is expected to reduce the total notes outstanding by 259 million as well as extend the duration by another 18 months, giving us tremendous operational flexibility going for it and it is expected to close on or about November 21.
24.
Speaker Change: Now turning to guidance.
Speaker Change: As Christian mentioned earlier, we expect our fourth quarter revenue will be flat to slightly up compared to the third quarter of 2024 with full year revenue lower than our previous estimate of approximately $170 million.
Speaker Change: Additionally, we expect radio system placements and pull through similar to Q2 and Q3 of this year.
Speaker Change: We expect our full year non-GAAP gross margin to be between 34% and 35%. We continue to improve our per unit cost of <unk> instruments and consumables significantly we expect to end the year with revenue instrument standard Cogs over 10% lower than when we launched the <unk>.
Speaker Change: Platform and consumable unit cost over 20% lower beef costs and operational improvements are expected to continue beyond 2024, driving quarterly gross margin expansion in 'twenty five and beyond at some of our recent cost improvements are expected to be realized in 2025.
Speaker Change: We now expect full year 2024, non-GAAP operating expenses to be 285 million to $290 million.
Speaker Change: This assumes a modest step up in the fourth quarter of 2024, primarily due to a onetime benefit in Q3 related to our bonus accrual that we do not expect to occur in Q4, we continue to expect full year non-GAAP operating expenses to decline in 2025 compared to 2024, we expect to.
Speaker Change: Full year interest and other income to be approximately $10 million, we expect our ending cash cash equivalents and investments to be approximately $385 million, reflecting the expected 50 million cash payment and other fees related to the note exchange with Softbank.
Speaker Change: Excluding this payment our updated guidance is at the low end of our previous 435 million to $450 million range.
Speaker Change: We expect 276 million and weighted average shares outstanding for the full year 2024, reflecting additional shares to be issued related to the note exchange with Softbank.
Speaker Change: Finally, we remain committed to our plan of turning the business cash flow positive by the end of 2006 under various revenue scenarios, which include revenue growth in 'twenty, five and beyond with new products and growing consumables, often increasing radio installed base expanding gross margins with reduced manufacturing per unit.
Speaker Change: Costs, and a continued mix shift to consumables and lower non-GAAP operating expenses in <unk> 25, compared to 24 with minimal growth expected thereafter, we will provide more details behind our assumptions and our updated long term guidance at a later date and more details about our 2025 guidance early next.
Speaker Change: Sure.
Christian Henry: I'll hand, it back to Christian for some final remarks.
Christian Henry: Susan.
Christian Henry: In closing I'd like to discuss our progress on the four strategic priorities. We outlined earlier this year. The first was to improve our commercial execution to drive the adoption of both <unk> and also as I discussed I believe we're past the trough our business experienced in the first half with several green shoots in our business that support our belief that revenue will.
Christian Henry: ROE in 2025.
Christian Henry: Also notched a record quarter approximately 45% of revenue of placements. This year are to new customers and clinical customers and large scale research programs continue to adopt long read sequencing at a pace we've never seen before.
Christian Henry: Second was continuing the development of new platforms that are expected to broaden our portfolio and drive revenue growth as discussed with our launches of spark and Vega and smart linked cloud we've strengthened the value proposition of <unk> opening up hifi sequencing to more customers than ever and developed a cloud.
Christian Henry: Good environment for any user to scale their pack bio projects and this is just the beginning we continue to develop our high throughput short read platform and ultra high throughput long read platform with the goal of dressing customers with both long and short read systems across a full system a full spectrum of throughput.
Christian Henry: Third we are focused on improving gross margin and driving manufacturing efficiencies as we discussed we've lowered our per unit Cogs on radio systems and consumables with the roadmap for further reduction in 2025. Additionally, we develop Vega with gross margin in mind and expect it to be accretive to the company's gross margin as we saw.
Christian Henry: Scale of the platform next year.
Christian Henry: And finally.
Speaker Change: Reduced non-GAAP operating expenses as Susan mentioned, we lowered our full year non-GAAP operating expense guidance by an additional $10 million at $10 million to $15 million, our operating cash burn continues to decline each quarter. This year and we expect a further decline in non-GAAP operating expenses in 2020.
Speaker Change: Five.
Speaker Change: Building, a cash flow positive business remains front and center in our minds and we're committed to our plan of turning cash flow positive by the end of 2026.
Speaker Change: Further we signed an agreement with Softbank to meaningfully reduce and extend the duration of our long term debt, while balancing shareholder dilution and impact on our cash this exchange underscores our commitment to our shareholders and customers to optimize our capital structure and build a long term sustainable business around our industry leading.
Speaker Change: Technologies with the earliest debt maturity is now due in August of 2029. This strengthens our financial position and gives us even greater flexibility so with that I'd like to open it up for questions. Operator, why don't we start the Q&A section.
Speaker Change: We will now begin the question and answer session.
Speaker Change: <unk> a question you May press Star then one on your telephone keypad.
Speaker Change: You are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Our first question comes from Tejas Savant with Morgan Stanley. Please go ahead.
Speaker Change: Hey, guys good evening and I appreciate the time here.
Speaker Change: Maybe Christian I'll start with one on the on the park side of things.
Speaker Change: It's unlocking that $500 per genome price point for you that's pretty darn close to the $200 per genome for the show.
Speaker Change: <unk> side of things offers what has been the feedback from customers on the cost trade off.
Speaker Change: Is the additional resolution that long read offers of course as a difference I think it's about an eightfold difference on throughput as well. So just curious as to what the feedback has been from the field since launch and on that point you made earlier on the lowering of the DNA input requirement can you just help us dimension how.
Speaker Change: Much of an opportunity that unlocks for Ya.
Speaker Change: Yeah, Hey, just thank you for the question I think.
Speaker Change: The feedback on spark has been remarkable quite frankly, and I think the $500 list price.
Speaker Change: It is really a big deal and enables.
Speaker Change: It capitalizes more projects to get started quite frankly.
Speaker Change: What you think about this you only have to run two genomes to get $500. A genome. There's I can't think of any other technologies that have that.
Speaker Change: That kind of pricing and when you start to think about if you're running large scale programs.
Speaker Change: Likely you're going to get a discount off the $500 and so in reality, you're going to be paying a lot less than the $500 for a large scale project.
Speaker Change: And youre going to get all of the.
Speaker Change: Benefits of single molecule native long read sequencing and I think that the customers really have reacted positively and are starting to plan I've had several meetings here at S. H G talking about larger projects that are enabled by the $500.
Speaker Change: Price, but.
Speaker Change: Perhaps just as important is the lowering DNA input at 500 Nanograms now we can yes.
Speaker Change: 500 nanograms.
Speaker Change: There hasn't been a single customer that I've spoken to that says Wow this stuff and unlock a tremendous amount of new demand and I really do think it could be in the order of potentially.
Speaker Change: Potentially millions of samples over time, when you think about you know.
Speaker Change: What we're what we've heard from our customers historically is that a significant proportion of their samples that they are trying to get onto a radio arent there isn't enough DNA coming through the sample process in ordered a high molecular weight DNA being extracted to get through the sample prep process and get onto the <unk>.
Speaker Change: Sir with 500 nanograms that completely changes everything so the combination of the pricing.
Speaker Change: And you know associated with the increased throughput in the price as well as the lowering of the DNA input amount really does open a lot of doors that perhaps we couldn't reach before.
Speaker Change: Got it that's helpful.
Speaker Change: And then switching to the Vega launch or just a couple of quick clean ups actually in terms of just the Max theoretical through question.
Speaker Change: We sort of thinking of it as $1100 per run into 52 weeks gets you to about approaching about 300 K is that is that the right sort of ballpark math.
Speaker Change: And second the people question here is that.
Speaker Change: Revenue is already at most large service providers out there the smaller labs generally outsource to these providers today for that long read needs. So being doesn't picture for the appetite. Among this decentralized settings to access long read in house for presumably a higher price point versus sending samples to the larger labs.
Speaker Change: Yeah.
It's a real interesting dynamic right with respect to what what does.
What does Vegas due for some of those service providers and I think what it will do is first of all cost. It will it will likely open up more demand to the service providers over time, because more and more people will get their hands on high five because vega exists which will own.
Speaker Change: Often up.
Speaker Change: More projects over time, and you'll see that but there will be you know initially probably some tension between the service providers and new Vega users because.
Speaker Change: Historically the service providers.
Speaker Change: They haven't really reduced their prices as fast as we've been able to reduce our prices and I think that Vega will put some pressure on them to <unk>.
Speaker Change: Reduced prices, which will enable more more samples to hit the service provider and.
Speaker Change: You know as big it gets makes it sequencing more ubiquitous that will also help so in the long run I think it will help pretty significantly.
Speaker Change: Your question on Vega pulled through.
Speaker Change: Vega pull throughs probably.
Speaker Change: Theoretical Max is more around 250, K give or take.
Speaker Change: When you think about it I don't think I would I don't think that people should be thinking about 250 K pull through of course, we are not going to make any comments today with respect to pull through we want to see what the demand for the for the system will be.
Speaker Change: First and then see which customers and what projects kind of go onto it but.
Speaker Change: Certainly it will be it.
Speaker Change: It will be pulled through at high margin, which will be accretive to our total gross margin.
Speaker Change: Got it appreciate the color guys. Thank you.
Speaker Change: Yes.
Speaker Change: The next question comes from Kyle Nexen with Canaccord. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking the questions. Congrats on the Vega launch congrats to Susan Good luck to you even look at work with these past four years or so.
Speaker Change: Bummer to see you go but I'm sure if things Whitehead. So two questions. One asked upfront one about the overlap between Baker.
Speaker Change: But the debt, which was good to see on the overlap any early examples are conversations that have kind of refined your thoughts on potential cannibalization between the two platforms and how long that could take the lab somehow.
Speaker Change: The funnel will evolve in the bundle orders convert to Vegas, and things like that and on the designee of the stock is down over 10% after hours. It seems like investors arent really appreciating that refined the maturity extension there could you just speak to like why now is the right time for US all banks do this and why would that provide you with some cushion and flexibility and just to kind of operate.
Speaker Change: Even without freedom, keeping the healthier balance sheet. Thanks.
Speaker Change: Yeah. Thanks, Kyle to two very different questions, but I can I think I can handle both of them.
Speaker Change: First of all with respect to the overlap and potential cannibalization, what's been really interesting in the conversations that I've had.
Speaker Change: With customers that have seen vague in now and that that our existing radio users or potential revenue or users.
Speaker Change: People.
Speaker Change: People that Ryan one around any any scale quite frankly don't see don't see any really any overlap at all they do see bundling opportunities because they see Vega is a potential walk up into lab kind of for top ups and other kind of it's so easy to use that it can just be put into law.
Speaker Change: And then people just walk up and use it but when you think about it it's 60 Gigabases you know.
Speaker Change: Which is basically.
Speaker Change: No less and that's basically one eighth of the output of a <unk>.
Speaker Change: Ron So theres, a very large difference in the in the in Iran. The economics in terms of the throughput the economics.
Speaker Change: For <unk>, although the capital is a lot more expensive.
Speaker Change: The consumables are under $500 a genome now of course launching sparking and.
Speaker Change: Vega is.
Speaker Change: It's not a coincidence that we are launching a at the same time, because we're demonstrating that we're adding value to <unk> and that will continue.
Speaker Change: <unk> to do that as part of our strategy to build a portfolio of sequences of of bench top.
Speaker Change: Mid to high throughput and then ultra high throughput and Theres enough separation there both in economics and throughput that I don't expect to see a lot of cannibalization for people that have scaled projects, but what I do see is that customers that are.
Speaker Change: Looking to get into Hi, Fi, having easier Avenue to get in and over time scale up their sequencing into into ravioli from Vega and I think this is a really important story that we've seen play out in the sequencing market time and time again where customers.
Speaker Change: Kind of move up the value chain, so to speak with respect to sequences has there.
Speaker Change: Their experience with the sequencing technology increases and so that's part of the.
Speaker Change: It is important part of the strategy here.
Speaker Change: The good news on Vega, we've already but we had someone in the booth come up and actually.
Speaker Change: Put down a credit card in that and we accepted the credit card. So we already have.
Speaker Change: That's the kind of excitement or seeing we already have pose.
Speaker Change: So it's you know it's been a fun.
Speaker Change: <unk> 24 hours here of post launch we had over 200 people 200 different potential customers.
Speaker Change: Demo Ing Vega last night at our launch event. So I do think there's a lot of excitement around the product and I'm excited to see how that unfolds into demand over time with respect you know moving to the debt.
Speaker Change: <unk>.
Speaker Change: We've had we've always had a strategy to manage to manage this debt burden over time.
Speaker Change: And that was evidenced as what we did last year with the note exchange for.
Speaker Change: For the first half of the of the debt and pushing that out to 2030, and we had a real opportunity. This time to work with Softbank to set up an arrangement to.
Speaker Change: Basically reduce our debt burden by $259 million for $50 million of cash and $50 million of stock. We have basically the same terms as what we had before so we have one 5% coupon and so we have positive carry on on that amount right now.
Speaker Change: And we have the duration pushed out to August 2029, and for those of you that are concerned about dilution. One of the features of the notes is that they have full flexible settlement and so that means that we can settle the notes either in equity or cash and as we get closer and closer.
Speaker Change: Or to being cash flow positive and as we turn cash flow positive the ability to settle some or all of the notes in cash becomes a real possibility and so.
Speaker Change: That we'll see how that goes over over time.
Speaker Change: With respect to the exact timing of doing it today versus doing it.
Speaker Change: So next year, some time out in the future we feel that our business right now is at a point, where we do think we're going to return to growth, but as we've all seen the mark the market has been.
Speaker Change: Certain of the stock market has been uncertain.
Speaker Change: Market for capital equipment has been uncertain and when we Wade.
Speaker Change: When we weighed this opportunity to take such a meaningful portion of the debt down we thought we felt that this was a.
Speaker Change: Trade that really strengthen the company gave us a lot more flexibility in and quite frankly, so many of our investors have been have been this has been one of the top questions that they've been asking us and so we were listening to some investor feedback as well I'll just add.
Speaker Change: So another reason also Kyle for why now is it is $259 million of a reduction in our debt, which is almost 30% of the total debt we had outstanding and we paid the $50 million of cash at closing and then 7% dilution. We believe that we would not have been able to reduce the.
Speaker Change: That by as much if we waited till later it to pay the same amount in terms of cash and equity we wouldn't have been able to reduce by the debt by as much. If we waited in the future also keep in mind because of the lower principal if you look out over the next three years the interest payments that were making now it is.
Speaker Change: It's about $12 million less than we would've been making if we just kept the debt outstanding.
Speaker Change: Okay.
Speaker Change: Great really helpful answers I'm billing side of things Scott.
Speaker Change: The next question comes from Nathan <unk> with Stephens. Please go ahead.
Speaker Change: Yes.
Speaker Change: Hey, guys, maybe just a few clarifications here on Vega.
Speaker Change: You've talked about scaling manufacturing next year. So is the right way to think about the adoption ramp more more similar to answer though is there any dynamic of pent up demand, we should be taking into consideration.
Well I hope, we will have that conversation as we get to quarter end, we just announced the system last night, we have received some purchase orders so we'll see what the demand.
Speaker Change: The demand curve will look like with actual orders as we go into year end, but I would actually think about the manufacturing ramp closer to.
What what happened in <unk>, where we were able to scale manufacturing over time the product itself is in its very late stages of.
Speaker Change: Development and basically verification now and so we should be able to start shipping. It in early in Q1 as opposed to the end of Q1, but that depends on how well the verification goes and we will and then we will rent we will ramp manufacturing accordingly, and so.
Speaker Change: Part of us highlighting that to investors is too high.
Speaker Change: We believe that we will have a sequential.
Speaker Change: Sequential growth in units.
Speaker Change: Over the course of next year as we as we see what the demand curve looks like and we scale our manufacturing if that helps.
Speaker Change: Got it no that's helpful and then.
Speaker Change: On the comment around building it to be accretive to gross margin could you just clarify whether that that's from.
Speaker Change: From launch or once you scale.
Speaker Change: That's.
Speaker Change: It's really over the course of next year. The first units we shipped in Q1 and perhaps some in Q2 will be a bit lower gross margin because they are.
Speaker Change: They will be the units that.
Speaker Change: Were manufactured at the very end of the development process and become salable units and when you're in the when you're in the late stages of development those units actually cost a lot more to produce.
Speaker Change: The full full routine production routine.
Speaker Change: Earlier units are actually made on a different manufacturing line and therefore, they are more expensive when you move when you transfer that to the regular production line. That's when you see the benefits.
Speaker Change: Cost reduction and then the margins will go up and so when you look out over the course of next year, we do expect them to be accretive to gross margin for the whole year, but it will be in cricket will.
Speaker Change: It might be dilutive in the first quarter or so and then improve from there.
Speaker Change: That's exactly right and then on the consumable side, we should it should be accretive.
Speaker Change: From a consumables perspective on day, one on day, one yes, exactly that's right.
Speaker Change: Perfect. That's helpful. Thanks, guys.
Speaker Change: The next question comes from Dan Brennan with T. D. Cohen. Please go ahead.
Dan Brennan: Great. Thank you thanks for the questions Congrats on all the good momentum here.
Dan Brennan: Just first one just on the kind of fourth quarter outlook and kind of what it portends for I think you said what pull through the same.
Question in the prepared remarks, you talked about a lot of good momentum.
Speaker Change: In terms of kind of what youre seeing in the market. So could you just give us a sense on kind of consumables being flat sequentially is that is that conservative kind of from what youre seeing or just maybe put that in the context of kind of your commentary about the demand environment and then using that as a jumping off point I know you talked about will grow in 2025 discrete right now I think is about <unk>.
Speaker Change: 5% topline growth I know, it's early but maybe you can just characterize a little bit about what grow means.
Speaker Change: Yeah, well, we'll start with <unk>, we will start with Q4 consumables. We do think Q4 consumables will be sequentially up over Q3. So we are we are you know.
Speaker Change: <unk>.
Speaker Change: Utilization.
Levels, particularly in Europe, Europe has a lot of.
Speaker Change: The Estonia project, an MPR you Theres a lot of large scale programs, where even sanger. These.
Speaker Change: These customers are using their instruments at a pretty good clip. So I would expect to see pretty good utilization in Europe in Q4.
Speaker Change: But I think in totality youre going to see you're going to see consumables grow sequentially over Q3 levels. When we start to talk about Q4.
Speaker Change: I promised Todd I wouldn't talk about Q4 guidance yet.
Speaker Change: He has 25 guidance, yes, sorry, that's what I meant.
Speaker Change: But I.
Speaker Change: I do think we do think there all the signs point to grow it, but we have a new product cycle with with.
Speaker Change: With spark with both spark and with Vega, we have you.
Speaker Change: We have increasing installed base driving consumables, even if the consumables stay at the same pull through per unit that will result in growth year over year and you know.
Speaker Change: And then I do think.
Speaker Change: Although it's difficult to see in the first half how the macro environment really looks like.
Speaker Change: I'm, an optimist and I believe that.
Speaker Change: The macro environment will improve somewhat over the course of 2025 and so when you put all those factors together I do think even if the macro environment kind of stays the same we are poised for growth and if we see any improvement in the macro that gives us.
Speaker Change: That gives us the ability to to grow beyond that.
Speaker Change: Today, I am not going to talk about what does it mean in terms of percentages or where the street is now we will what I want to see is how how we do in Q4, what the interest isn't Vega and so that way when we unfold our guidance formally and in 2025, we could have.
Speaker Change: A lot of confidence around it.
Speaker Change: Got it Okay, and then maybe just on.
Speaker Change: The path to cash flow breakeven.
Speaker Change: Both on margins and Opex I know you talked about a lot already in terms of the benefits of these new platforms on gross margins, but maybe you could just spell out a little bit just.
Speaker Change: Youre not going to quantify it but just maybe characterize gross margins.
Speaker Change: The new programs in terms of the other Cogs initiatives you have ongoing and then on the Opex cut program you have in place, which is making good progress just kind of how are you managing that in terms of taking those costs out while still being able to invest for growth.
Speaker Change: Yes, it's a great question, Dan and I think with respect to.
Speaker Change: Gross margins I'll start with radio and I'll start I'll actually talk a little bit about radio consumables, because we see a lot of innovation that's happening inside the company that will continue to drive.
Speaker Change: Drive the production costs or the or the value of the kits.
Speaker Change: In terms of cost of producing consumable kits down and that will.
Speaker Change: A combination of increasing throughput of radio plus driving their production costs down will end up probably.
Speaker Change: Robbie passing some of those benefits on to the customer, but starting to keep some of them to expand our gross margin and so that will give us some real opportunity in 25 to see considerable gross margin expansion.
Speaker Change: We also as we as we.
Speaker Change: <unk> now the <unk>.
Speaker Change: As smart cell production grows we will get more economies of scale with respect to.
Speaker Change: Smart cell production, and therefore that will help the consumables as well and so that's just an area in particular, where we expect to see gross margins improve in 'twenty, five and likely again in 'twenty six and I think that that's a.
Speaker Change: A real strong opportunity with respect to Opex.
Speaker Change: I think.
Speaker Change: The team has done an amazing job of making the hard decisions and staying focused so that we could reduce the do the hard work of reducing the costs. This year and we'll get the full year benefit of it next year of course, but also I see theres more opportunity for us to even stay more focused.
Speaker Change: Focusing on the most important R&D activities that will drive.
Speaker Change: Short term growth and drive margin expansion and then getting <unk>.
Speaker Change: Continuing to build a more effective commercial organization I do think that there's opportunities there to get more leverage out of the commercial organization. So although you may not.
Speaker Change: Tight expense.
Speaker Change: Expenses, there if you can generate more revenue per dollar of commercial spend.
Speaker Change: Quite frankly, that's the best of all worlds and so I do think that there are opportunities there and when we start to rollout 2025, I think we will be able to talk about some of those different kinds of things.
Speaker Change: Okay, Great all right I'll get back in the queue. Thanks, a lot. Thanks Dan.
Speaker Change: The next question comes from Jack Meehan with Nephron Research. Please go ahead.
Jack Meehan: Hey, Thank you good afternoon.
Christian Henry: Christian I was wondering if you could talk about.
Christian Henry: The announcement you had last night, which was the <unk> list price I guess now $599000.
What was I guess, the thought process that went behind bringing that down and I don't know if there's any interplay with the big launch there.
Speaker Change: Color on that yes.
Speaker Change: Yeah. It's a good question and it is I'm glad you highlight $5 99, because this is a milestone for us.
Speaker Change: To be able to offer this system at 599 K we've taken.
Speaker Change: We're sharing some of the productivity improvements that we've made with our customers there, but if you look at our actual asps.
Speaker Change: This isn't this isn't very different than our actual asps and our expectation is that we'll have a little bit more ASP discipline around the $5 99. So we don't really expect drew.
Speaker Change: Dramatic changes in dollars realized for radio.
Speaker Change: Going into next year, but.
Speaker Change: It was apparent to us that customers wouldn't even inquire about.
Speaker Change: To long rates because they heard the instrument was $779000, which as you guys know the asps or.
Speaker Change: Have been lower much lower than that and so we wanted to do with it.
Speaker Change: Establishing.
Speaker Change: New list price because we can't because of the reality is we've taken so much cost out of the system that we can afford to do that and drive further demand. So that's the real driver behind.
Speaker Change: The change we do expect.
Speaker Change: We do expect Asps to remain reasonably consistent with where they are kind of right now.
Speaker Change: Over the course of 2025.
Speaker Change: From a financial perspective, I don't think its really going to.
Speaker Change: <unk> from an ASP perspective, but it's a huge opportunity to drive more demand and drive the message that Pac bio hifi sequencing gives the most advanced sequencing technology and now it's very affordable with all of the advancements we've made.
Speaker Change: Excellent.
Speaker Change: Can you give a mouse a cookie cutter asked for milk when it comes to new products. I was wondering if there was any color you could share around just timing for high throughput for it. Thank you.
Speaker Change: [laughter] given inch they'll take a mile.
Speaker Change: I think today the program continues to go well inside of inside of our R&D program.
Speaker Change: It's in it's in its scale up phase right now and it keeps moving on we are routinely sequencing with billions of reeds.
Speaker Change: At at high quality, there are some technical hurdles that we still have to overcome to get that product to market today I'm not going to.
Speaker Change: Came out a launch date I don't I think.
Speaker Change: Today, we're really focused on driving the spark chemistry, and Vega launch and making that successful, but we still have the resources we need.
Speaker Change: To develop a very high quality high throughput system and.
Speaker Change: As that as that project matures, a little bit more I will share more with everyone.
Speaker Change: Thanks Jack.
Speaker Change: The next question comes from Ross Osborne with Cantor Fitzgerald. Please go ahead.
Speaker Change: Hey, guys. This is Matthew park on for Ross today. Thanks for squeezing me in just one question from US It was good to see sequential improvement in China.
Speaker Change: Wondering if you guys can speak on the general appetite for revenue in China, as we move into 2025, and how you foresee the launch of bigger driving incremental adoption in the region.
Speaker Change: Yes, it's a great. It's a great question and thanks, Matthew for the further question I do think we are seeing.
Speaker Change: <unk> of sample demand in China, which will drive revenue or demand, particularly with.
Speaker Change: With the.
The Big service providers that are really the core of our customer base customer base, there what will be interesting to see as we've we've already heard.
Speaker Change: Tremendous amount of excitement around Vega in fact, we had one of our.
Early access partners in our lab.
Chinese customer in our lab testing Vega.
Speaker Change: What was that last week, I guess two weeks ago before before the earnings and.
Speaker Change: They were they were over the moon, such that I suspect they could be a major customer of Vega and the profile of Vega fits the Chinese market really well at 169 K.
Speaker Change: Very high accuracy great.
Speaker Change: Ability to do epigenetic structural variation phase genomes and I think it's an opportunity for us to penetrate deeper than just the service providers. We have so it'll be interesting to see how the how the our team in China really.
Speaker Change: Drives that opportunity for us and it has the potential to drive.
Speaker Change: Potentially hundreds of instruments over time, and we'll see how we do.
Matt: Thanks, Matt.
Speaker Change: The next question comes from this to be an army with Guggenheim Securities. Please go ahead.
Speaker Change: Hey, guys. Thank you for taking my question.
Speaker Change: Vega opens up more of the market data for you that said I think we would be put into the market determine it gets wider which typically means going into higher number if I count. So then how do you balance the desire to go after this opportunity.
Speaker Change: It doesn't need to increased commercial investment to go into that new segment of the market.
Speaker Change: Boy that is such a great question and my field service team has been asking me that question for about a year now.
Speaker Change: And so you're exactly right as we as we widened our customer base, which is fundamental to what we're trying to achieve as a company by the way is.
Speaker Change: We have to be thoughtful about the support burden and how do you build a commercial infrastructure to support that and the way you start you start by designing a product.
Speaker Change: From the ground up that is simple to use and is focused on this new customer base Vega has.
Speaker Change: Only to consumables and they are and the way Vega is set up is set up that it's very difficult to make mistakes that's you're loading the system.
Speaker Change: Cartridges had been completely re imagine so you have everything you need to sequence right there.
Speaker Change: One of the one of the one of the breakthroughs. We've had is we've had we've.
Speaker Change: We've been able to develop capabilities in the system that allow us to almost to almost always deliver 60 gigabases of data even for new users and that consistency will give the newer users more and more confidence in so kind of what you're hearing is that a lot of the.
Speaker Change: Asian was geared towards simplicity miniaturization ease of use.
And then on that.
Speaker Change: Of course, we added smart link in the cloud and smartly in the cloud gives users.
Speaker Change: Much deeper access into.
Speaker Change: Where they put their data so that they could.
Speaker Change: Stream their data directly up to the crowd cloud and then to a secondary or tertiary analysis software program because the support Burton is actually much more than just thinking about.
Speaker Change: Are the instruments working it's about helping the customers get the answers they need so that they can continue to run their next experiments and as we build out our installed base with big <unk>.
Speaker Change: Simplifying the automatics pipelines, we've done a lot of that over the last year to develop these pipelines continuing to integrate it through the cloud. These are all things all steps that we're taking that will help balance the commercial investment with customer success and with the end game of Vega customers.
Speaker Change: <unk> such a great experience they want to they want to move up to <unk> as their science dictates. We also see an opportunity for sequel.
Speaker Change: Sequel to customers that are still using their instrument that haven't yet.
Speaker Change: Been ready to upgrade to <unk> that gives us an opportunity to office upgrade them to Vega before they ever upgrade to radio and so that's our existing customer base and then we're trying to be very thoughtful about expanding the commercial organization as we see the momentum with new customers. So that's going to be another aspect and then of course in certain.
Speaker Change: Regions selling.
Speaker Change: Selling through distributors also gives us increased leverage from that perspective.
Speaker Change: Thank you. Thank you for that guys.
Speaker Change: Our next question comes from Doug Schenkel with Wolfe Research. Please go ahead.
Speaker Change: Hi, This is madeline moment on for Doug.
Speaker Change: Wanted to touch on <unk> placement, which came in I think a little bit below our industry expectations. I know last quarter. You mentioned some placements that were supposed to close in Q2 got pushed out due to timing and customer funding just wondering if those orders did close in Q3, if they've been pushed out again or if youre seeing any cancellation.
Speaker Change: We have not seen any cancellations, which is great. Some of the orders some of the orders from Q2 did come in in Q3, some did not and there is still on in the funnel hopefully to close in Q4 or.
Speaker Change: You know, that's kind of where I need to look at each one to know exactly but the other thing that happened in Q3, specifically there were there were some tenders in Europe that got delayed at the 11th hour and so delayed in late September and therefore, they didn't close we expect some we expect some.
Speaker Change: Of those to close in Q4.
Speaker Change: And then and then maybe.
Speaker Change: And then perhaps another one of them to close in Q1 and so.
Speaker Change: Yes, the instruments were a little short of our expectations really driven by those.
Speaker Change: Those 10 of those tenders that I'm talking about.
Speaker Change: That said from quarter to quarter.
Speaker Change: You do have things moving in and out and so you know.
Speaker Change: Part of our challenge has been a really these prolonged sales cycles really.
Speaker Change: Creating certainty on when the deals will close and also expanding the total funnel I think spark will drive the new spark chemistry will drive an expansion of the funnel, which will enable us to get back to more historical order order levels as we move in 2025.
Speaker Change: Great. Thank you yeah. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Todd Friedman for any closing remarks.
Alright, well, thank you everybody for joining us on the call today.
Speaker Change: We're gonna be at several investor events.
Speaker Change: This quarter, so hope to connect with several of you there.
Speaker Change: Have a good one to take care.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.