Q4 2024 Pacific Biosciences of California Inc Earnings Call
Good afternoon, and welcome to <unk> fourth 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.
Www Dot FCC dot Gov.
Copy of our earnings presentation is also available on the investors section of our website.
With me today are Christian Henry President and Chief Executive Officer, and Michelle Farmer, Chief Accounting Officer.
Today's call, we will make forward looking statements, including among others statements regarding predictions estimates expectations guidance and the amount of the preliminary estimated noncash impairment charges you should not place undue reliance on forward looking statements because they are subject to assumptions risks and uncertainties that could cause our actual results to differ materially.
<unk> from those projected or discussed.
Please review, our SEC filings, including our most recent forms 10-Q, and 10-K and our press release to better understand the risks and uncertainties that could cause results to differ we disclaim any obligation to update or revise these forward looking statements except as required by law.
We will also present certain financial information.
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 reconciliations between historical U S. GAAP and non-GAAP results are presented in our earnings release, which is available on the investors section of our website for.
For future periods, we are unable to reconcile non-GAAP gross margin and non-GAAP operating expenses without unreasonable efforts due to the uncertainty regarding among other matters certain acquisition related items that may arise during the year.
A recording of today's call will be available shortly after the live call in the investors section of our website.
As 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: I'll hand, the call over to Christian.
Christian: Thank you for joining us today I'll begin by reviewing our fourth quarter and full year 2024 performance highlighting key commercial achievements and providing insights into our outlook.
Christian: Our Chief Accounting Officer, Michel Farmer will walk through the financials in more depth, and then I'll close with our guidance and outlook for the year.
Christian: In the fourth quarter, we reported $39 2 million in revenue driven by the shipment of 23 Ravi our systems. Additionally, we successfully commenced shipments of our Vega bench top platform delivering seven units ahead of schedule for the full year revenue totaled $154 million, reflecting 97 radio.
Christian: Shipments.
Christian: Our customer base continues to expand significantly with the radio platform installed at nearly 200 customers at December 31, notably in 2020 for approximately 45% of all revenue shipments went to new pack bio instrument customers demonstrating strong momentum in attracting users transitioning from others.
Christian: Sequencing technology.
Christian: Meanwhile, there remains a meaningful upgrade opportunity with approximately 125 active sequel to <unk> users in the field many of them could.
Christian: Transition to Raphael for Vega in the coming years.
Christian: The adoption of Pac Bio Hi, Fi long read sequencing continues to accelerate total growth in genomic data out, but accelerated on our platforms with an 81% increase in 2024.
Around 68% growth in 2023, highlighting broader utilization of our technology.
Christian: Since 2020 total sequencing output has expanded more than 12 fold demonstrating a remarkable increase in hifi sequencing activity.
Christian: Correspondingly consumable revenue grew 11% year over year in 2000 $24 million to $74 million, representing a 23% compound annual growth rate since 2020.
Christian: Looking ahead to 2025, we anticipate that customers will continue to navigate an uncertain funding environment much like in 2024 macroeconomic pressures are expected to persist extending sales cycles, particularly for higher Capex life science instrumentation like revenue. Additionally.
Christian: Additionally, the recent announcements regarding NIH funding involving a cap on the institute's direct funding rates have increased the uncertainty in the academic environment, particularly in the United States.
Christian: Considering these factors, we expect 2025 revenue to range between $155 million and $170 million, representing 6% year over year growth at the midpoint and roughly in line with external growth estimates for the next generation sequencing market in 2025.
Christian: While product launches and macro factors have caused our revenue growth to fluctuate over the past few years, it's worth noting that our revenue guidance at the midpoint still reflects a 16% compound annual growth rate since 2020 and significantly outpacing the overall NTS market growth, which again demonstrates the growing adoption of.
Christian: Of our technology.
Christian: Discuss our fall 2025 financial guidance in more detail later in this call.
Christian: Over the medium term as the macroeconomic environment improves we believe that we can achieve sustained double digit revenue growth as Lori sequencing continues to expand into new genomic applications are key priorities for driving growth include expanding the adoption of hifi sequencing by accelerating the uptake.
Christian: Of the Vega bench top platform and enhancing the value and usability of radio with spire chemistry.
Christian: Leveraging recent innovations to substantially increase sequencing throughput, while reducing costs. These advances have the potential to bring long read sequencing closer to price parity with short read technologies deliver.
Christian: Delivering end to end solutions, focusing on clinical applications, and where Pat clouds, Hi Fi technology provide unique advantages like an expert RNA sequencing and peer target a targeted approach for sequencing difficult to sequence genes, notably in 2024 application and extraction kit revenue.
Christian: <unk> grew 56% year over year. Our strategy also includes providing turnkey bioinformatics solutions. So our customers can go from a sample to answer without running complex data analysis pipelines.
Christian: Lastly, as a result of the continued in recent macroeconomic uncertainty as well as the recent NIH announcements, we now anticipate turning cash flow positive exiting 2027.
Christian: We remain focused on lowering our cash burn I believe are approximately $390 million in cash and investments at the end of 2024, well readiness to becoming cash flow positive based on our current assumptions, notably after our note exchange in the fourth quarter. This timeframe of skill positions cash flow a Pac bio.
Christian: To turn cash flow positive well before our first debt maturity in August of 2029.
Christian: While we face challenges in 2024, it was a pivotal year in strengthening our business and advancing our product portfolio. We successfully launched two significant innovations the Vega bench top platform and spark chemistry for revenue with the launch of Vega Pac Bio offers a suite of long read sequencing systems tailored.
Christian: Different customer needs are first in the company's history.
Christian: Vega features a smaller footprint lower capital costs, and reduced throughput compared to raffia, making it an accessible and versatile solution for a broad range of customers. Some of these customers include smaller academic labs focused on a range of applications that require less throughput, including RNA sequencing.
Christian: And smaller Gina core laboratories investigating transcript omics at RNA biology, and larger clinically focused labs utilizing hifi sequencing for targeted panels.
Christian: Early customer feedback has been strongly positive Berry genomics, one of our first Vega customers reported that the platform delivers results identical to previous backed by our systems, while offering notable improvements in hi Fi revealed quality values reduced run times greater data processing efficiency.
And less hands on time.
Christian: As a result of Berry genomics plans to purchase 50 Vega units over the coming years to support its Dallas, EMEA and fragile X assays underscoring the platform's value in clinical applications.
Christian: Beyond clinical markets Vegas versatility extends into biodiversity and environmental genomics at the recent plant and animal Genomics conference. One researcher highlighted how Vegas offers a lower entry point cost increased portability and a throughput so well suited for sequencing bio diversity.
Christian: In remote locations and it also noted how it will facilitate best practices and sequencing unique or difficult to access pharma in the field.
Speaker Change: Another customer from the Johns Hopkins University, and Cold Spring Harbor Laboratory shared how it looks forward to using the platform for many projects spanning the entire tree of life from identifying numerous factors in human disease to diversifying and enriching the food supply with new crops species to understanding the microbial world beneath.
Christian: Our very own fee.
Christian: Our funnel of sales opportunities continues to grow for the Vega platform, especially with potential new customers as nearly three quarters of the customers in our sales funnel have never bought a pack bio sequencer before this demonstrates the potential reach of the platform.
Christian: <unk> delivers versatility the radio system is our most powerful and scalable platform in the fourth quarter, we enhanced the platform. Even further as we started shipping our spire chemistry with spark the radio system can sequence up to 2500 complete Dave Hi, Fi human genomes, a year at a cost below $500 per day.
Christian: Donna.
Christian: While significantly lowering DNA input requirements for whole genome sequencing to just 500 Danna grams. This represents a 75% reduction.
Christian: This helped drive new customer adoption in Q4 like the Jay Craig Venter Institute, which plans to use Ravi out of sequence thousands of full deployed phase G announced over the next several years to find missing heritability, resulting from years of sniff studies and short read sequencing fragments as part of the Institute or.
Christian: We're all going to advanced genetic testing for women's health and genetically diverse populations.
Christian: Last month at the Jpmorgan Healthcare conference, we shared a little bit more about our technology roadmap, which is focused on improving our on market platforms and developing future platforms to expand margins and increase throughput.
Christian: These programs include developing higher density smart cells, which reduced the cost and increase throughput. We expect our next generation of smart cells to yield multiple times. The output of today is 25 M radio smart cells.
Christian: Integrating new smart cell formats that make automating our technology, even easier for customers.
Christian: Migrating to more advanced semiconductor inputs, such as the 300 millimeter wafer instead of 200 millimeter and this can drive the cost of the smart cell down, enabling us to lower our cost to customers and expand our gross margins.
Christian: Innovating on our smart cell and reagent technologies to allow customers to sequence in a smart sell more than one utilizing faster chemistries, which are expected to enable faster run times and more throughput.
Christian: And finally, leveraging our computational biology team and collaborations to offer more informatics capabilities across the end to end solutions to broaden customers access to advanced bioinformatics pipeline.
We've been thrilled with how Vega and <unk> have changed the paradigm of highly accurate long read sequencing and were inspired by the development pathway.
Christian: To scale this technology even further.
Christian: Over the coming years, we look forward to availing. These technologies to the research community, which is already accelerating its pace of discovery with Hi Fi.
Christian: In fact pack biotechnology was decided in over 1000 applications and <unk> in 2024 in particular, we are encouraged by recent publications that substantiate high fives ability to further our understanding of genetic and rare diseases like Radboud University medical centers study analyzing one.
Christian: Hundred challenging patient cases, where short read sequencing failed to identify genetic cause.
Christian: In this study researchers used <unk> and detected 93% of pathogenic variants, including complex structural variant and DNA methylation abnormality. The key takeaway here is not just high <unk> ability to improve solve rates, but it has potential to replace multiple testing modalities.
Christian: As a result, <unk> is expanding its sequencing effort to 5000 additional samples further demonstrating the clinical impact of hifi sequencing in rare disease diagnostics.
Christian: A unique aspect of Pac bio hifi sequencing is its multi ohmic capability that is interrogate RNA and epigenetics. In addition to <unk> DNA.
Christian: This multi omics approach was used in a recent study to diagnose a nine month old patient with non diagnosed rare genetic condition.
Christian: <unk> uncovered a balanced translocation between chromosomes accident 13, disrupting for key genes through distinct mechanisms findings that were missed by short read sequencing.
Christian: We believe these studies highlight our Pac miles advanced sequencing technology enables groundbreaking genetic discoveries, providing new hope for rare disease patients worldwide.
Christian: In 2024, we began to see larger scale genomic testing labs hospitals and medical centers adopt hi Fi with several implementing our peer target library prep kit to develop an improved carrier screening and other genetic test. We've previously disclosed labs like Marriott and quest in the U S which are <unk>.
Christian: Eloping tests on the <unk> system in Europe by essentially a user's hi Fi for routine testing for certain sensory disorders. As previously mentioned Radboud University Medical Center has committed a sequencing 5000 genomes in a clinical setting focused on rare disease.
Christian: With the sequel to Berry genomics is in the final stages of obtaining NFPA approval for its thalassemia carrier screening test in China.
Christian: This is an important test that the prevalence of carriers of this disease represents over 10% of the population in parts of the country with Vegas, Barry plans to expand its carrier screening test to other indications.
Christian: 2024 was a pivotal year in our clinical path with nearly 15% of our revenues coming from LDC labs or children's hospitals, and we have even higher clinical exposure when factoring translational work at research institutes around the world looking.
Christian: Looking back on 2024, we also took decisive actions to improve efficiency reduce costs and lower cash burn, which we believe will position us to continue to improve our financial profile on delivering our commercial and R&D initiatives, we reduced annualized non-GAAP operating expenses by more than $75 million.
Christian: Aligning spending with our strategic priorities as a result, we lowered adjusted cash burn each quarter in 2024.
Christian: We also made progress in taking costs out of our per unit instrument and consumable manufacturing with <unk> system, and consumable Cogs 16, and 22% lower respectively than where we started the year and we see a pathway to further reduce per unit Cogs in 2025.
Christian: We successfully executed on our convertible note exchange, reducing our debt by $259 million and extending the maturity of our 2028 notes by 18 months to August 2029, strengthening our financial flexibility.
Christian: Finally, we are pleased to announce that <unk> has joined as global head of sales and service David brings deep experience in sales leadership across technology and life Sciences and his expertise will be instrumental as we expand our global reach and scale our sequencing solutions.
Christian: We're also delighted to share that Chris Smith has joined our board of directors as CEO of Neogenomics, Chris brings extensive experience expertise and the diagnostics and laboratory testing markets and we look forward to his insights as we advance our clinical strategy, we think that in line for his service on our board of <unk>.
Christian: Down and wish him the best in his future endeavors.
Christian: We are also continuing our search for a new Chief Financial Officer, we're focused on identifying a leader who will help drive our next phase of growth in champion operational efficiency throughout the organization now.
Speaker Change: Now I'll pass the call onto Michelle farmer to discuss our financials Michelle. Thank you Christian I will be discussing non-GAAP results, which included noncash stock based compensation expense.
Michelle Farmer: Currency to review the reconciliation of GAAP to non-GAAP financial measures in our earnings press release.
Michelle Farmer: As discussed we reported $39 2 million in product service and other revenue in the fourth quarter of 2024, which represented a decrease of 33% from $58 4 million in the fourth quarter of 2023.
Michelle Farmer: Instrument revenue in the fourth quarter was $15 3 million or 56% decrease from $35 1 million in the fourth quarter of 2023, primarily driven by lower <unk> shipment. We ended the quarter with 270 emulation revenue.
Michelle Farmer: Turning to consumable revenue of $18 8 million in the fourth quarter is roughly flat to $18 9 million in the fourth quarter of last year, but annualized revenue pull through per system.
Michelle Farmer: At approximately 245 of them.
Michelle Farmer: Finally services and other revenue was $5 1 million in the fourth quarter compared to $4 4 million in the fourth quarter of 2023, driven by an increase in service contract revenue related to <unk>.
Michelle Farmer: From a regional perspective Americas revenue of $20 2 million decreased by 41% compared to the fourth quarter of 2023 as the region is most affected by academic and NIH funding uncertainty for.
Michelle Farmer: Asia Pacific revenue of approximately $8 9 million decreased 33% over the prior year the sequential growth in consumable offset by lower revenue placement.
Michelle Farmer: See you at several countries in the region also faced government funding headwinds with respect to capital expenditures.
Michelle Farmer: Finally, EMEA revenue of $10 1 million and decreased 9% over the prior year period. The region saw record consumables revenue in the fourth quarter with growing <unk> utilization as key projects I guess, Danielle Biobank, Bradford and in five population sequencing program continue to sequence at scale.
Michelle Farmer: Moving down the P&L fourth quarter 2024, non-GAAP gross profit of $12 3 million represented a non-GAAP gross margin of 31% compared to a non-GAAP profit of $11 1 million or 19% in fourth quarter of last year non-GAAP gross margin increased year over year human part.
Michelle Farmer: <unk> for scrap inventory in the fourth quarter of 2023 compared to the third quarter of 2024 gross margin to comp declined by approximately 120 basis points, primarily due to scrap inventory in the quarter related to a temporary decline in smartphone manufacturing yield and lower asps on Raphael.
Michelle Farmer: Certain strategic deals in the quarter, partially offset by per unit cost decreases in revenue instrument and consumable.
Michelle Farmer: non-GAAP operating expenses were $68 6 million in the fourth quarter of 2024 compared to $88 4 million in the fourth quarter of 2023. The decrease primarily reflects a reduction in R&D and SG&A related to our restructuring restructuring initiated in the second quarter of 2024.
Michelle Farmer: The head count we ended the quarter with 575 employees, which was flat to Q3, 2024, and 28% of our 796 employees at the end of the fourth quarter of 2023.
Michelle Farmer: Operating expenses in the fourth quarter included noncash share based compensation of $14 8 million compared to $15 4 million in the fourth quarter of last year.
Michelle Farmer: non-GAAP net loss of $55 3 million, representing <unk> 20 per share in the fourth quarter of 2024 compared to a non-GAAP net loss of $72 5 million, representing 27 per share in the fourth quarter of 2023.
Michelle Farmer: We ended the fourth quarter with $389 9 million in unrestricted cash and investments compared to $471 1 million at the end of the third quarter of 2024 cash outflow in the quarter included approximately $54 million in debt repayment and associated fees related to the convertible note exchange with Softbank.
Michelle Farmer: During the quarter, we conducted an interim goodwill and intangible asset impairment test following a sustained decline in our stock price and market capitalization.
Michelle Farmer: And the preliminary results of this analysis, we recorded noncash impairment charges totaling $90 million, which includes approximately $55 million related to goodwill and approximately $35 million and.
Michelle Farmer: And in process research and development asset the impairment was driven by macroeconomic headwinds and our revised outlook on future cash flows and is excluded from our previously discussed non-GAAP results. It is important to note that these impairment charges are noncash accounting adjustment and do not impact our liquidity operations, our ability to execute on our model.
Michelle Farmer: <unk> strategy.
Michelle Farmer: I'll now return the call to questions and discuss guidance and provide some closing remarks.
Michelle Farmer: As discussed earlier, we expect full year 2025 revenue between 155 and $170 million at the midpoint. This represents a growth rate of approximately 6% compared to 2024 at.
Michelle Farmer: At the midpoint of our guidance range, we expect instrument revenue to grow modestly with growth in Vegas shipments offsetting a year over year decline in <unk> system shipments with annual lives pull through per system in the low to mid 200 range.
Michelle Farmer: As a reminder, our guidance anticipates that customers will continue to navigate an uncertain funding landscape much like in 2024, and the macroeconomic environment, it's consistent with what we've experienced over the past few quarters.
Michelle Farmer: When looking at guidance from a regional perspective.
The change in administration has added further uncertainty to the funding environment in the Americas in the near term based on our initial conversations with customers recently announced federal funding freezes, particularly with NIH intramural spending have added significant uncertainty in the broader academic research community.
Michelle Farmer: Our guidance considers to this uncertainty, especially in the near term on a more positive note accelerating activity in the clinical market is anticipated to offset some of those potential headwinds.
Michelle Farmer: For Asia Pacific, while we anticipate growth in the region in 2025, the funding dynamics in several countries continue to affect capital purchasing timelines for the revenue platform. Additionally, our guidance does not consider the impact of tariffs or other activity that would impact our ability to export products to the region.
Michelle Farmer: We expect EMEA to be the fastest growing region in 2025 as population sequencing programs scale whole genome sequencing in the clinical setting grows and we expand our customer base with Vega looking at Q1, specifically, we anticipate typical seasonality and as a result, we expect <unk>.
Michelle Farmer: Revenue in the first quarter of 2025 to be lower than the fourth quarter of 2024 with radio systems and consumable revenue, partially offset by increased Vega system revenue.
Michelle Farmer: Moving down the P&L, we expect that 2025, non-GAAP gross margin to be between 35% and 40% representing over 400 basis point improvement compared to 2024, and we expect to exit the year above 40%.
Michelle Farmer: We expect to continue removing costs from the <unk> system and consumables and the Vega cost of goods sold per unit is expected to improve as the platform is from pilot manufacturing line to the full production line.
Michelle Farmer: We expect non-GAAP operating expenses to decline, 3% to 7% compared to 2024 and be in the range of $270 million to $280 million, reflecting in large part the annualized <unk> of our restructuring in the second quarter of 2024.
Michelle Farmer: We expect interest and other income to be between $5 7 million in 2025, and the weighted average share count for EPS for the full year to be approximately $299 million.
Michelle Farmer: We expect to end the year with cash and investments balance of approximately $260 million, implying a $130 million cash burn in 2025, or an improvement of $57 million and adjusted cash burn compared to 2020 for.
Michelle Farmer: Finally, as discussed with our current expectation for 2025 revenue growth. We now anticipate turning cash flow positive exiting 2027 as a result of the continued in recent Mac macroeconomic uncertainty as well as the recent NIH announcements.
Michelle Farmer: We remain diligent in lowering annual cash burn and believe our approximately $390 million in cash and investments will bridge us to becoming cash flow positive importantly, after our note exchange in the fourth quarter. This timeframe is still positioned to unpack buyout to turn cash flow positive with meaningful time before our first debt maturity in August.
Michelle Farmer: Of 2029.
Looking ahead I want to reiterate that our primary objective in 2025 is to grow revenue and expand gross margins through four main activities.
Michelle Farmer: <unk> is enabling the full scale release of Vega, which we expect will broaden the reach of our technology in the market and bring more new customers to hifi sequencing.
Michelle Farmer: We aim to accelerate the number of samples on the radio platform through the launch of the <unk> chemistry and application kits revenue has the potential to drive further growth in lira data.
Michelle Farmer: Third we will continue to invest in future product launches to both amplify and diversify our offerings I mentioned several of the exciting initiatives that we're currently working on earlier in this call and finally to progress our clinical strategy to improve outcomes and create durability.
Michelle Farmer: These activities, we believe we can drive growth and market expansion in 2025, while continuing to improve our financial profile I'll look forward to connecting with many of you this quarter at the annual <unk> meeting and Investor conferences.
Michelle Farmer: We will now open up the call to questions.
Michelle Farmer: Thank you Robert.
Michelle Farmer: Ask a question please for a start with one on your telephone keypad.
Michelle Farmer: Is there a question has already been addressed or do you like to remove yourself from queue. Please press Star then two.
Michelle Farmer: Once again that started in one of your other question.
Speaker Change: Today's first question comes from Tycho Peterson with Jefferies. Please go ahead.
Speaker Change: Hey, Thanks, Christian I think you talked about an uncertain funding environment much like 2024, I'm going to take the other side. It's a lot different right now so what specifically have you baked in for NIH disruption in the near term it sounds like a big some of it and did you break down kind of the full freeze on the 15% overhead.
Speaker Change: Well I think yes.
Speaker Change: So thanks Tycho for the question of course, the funding environment is very dynamic in the United States right now there's no question about that but we fully contemplated.
Speaker Change: Some pretty significant headwinds, particularly in the first half of the year.
Speaker Change: You saw we said in our guidance typically a bit of a typical seasonality, but we expect revenues to be down in Q1.
Speaker Change: Versus Q4, partially because of that uncertainty partially because of.
Speaker Change: Kind of typical seasonality and so I do think we have to the best of our ability.
Speaker Change: Kind of baked in what could be a real challenging time into our guidance.
Speaker Change: One thing we've done of course since the since the 15% came out over the last week as we looked at every single opportunity.
Speaker Change: Personally went to each member of the America sales team that has an opportunity closing this quarter to try to get an assessment of <unk>.
Speaker Change: Each each instrument opportunity in particular.
Speaker Change: And.
Speaker Change: The feedback was there still some uncertainty a lot of a lot of positivity about getting the deals done that we that we've forecasted but we still have to get them done I think Tycho one area, where new one area, where you may you may look where we've been really thoughtful here is we've lowered kind of the pull through.
Speaker Change: Expectation.
Speaker Change: So we did 240 or so in Q4, a reset we gave a pretty broad range.
Speaker Change: Low two hundreds.
Speaker Change: Mid two hundreds and that's an area, where you could see some funding freezes or pauses.
Speaker Change: Slow activity and so we're monitoring the situation we think we have given.
Speaker Change: Our responsible guidance here is the other thing on the positive side I would say is we have we're seeing very exciting growth in Europe that is offsetting that is offsetting some of the risk in the Americas and we're also seeing a pretty significant expansion in the clinical side of our business, which isn't.
Speaker Change: Funded by NIH sources, and then finally, we also see Vega.
Speaker Change: Really the sales funnel for Vega as we've talked about we talked about this at jpn continues to grow the quality of the opportunities are strong.
Speaker Change: And I think that that is.
Speaker Change: That is the right product in a situation, where the capital the capital environment and stuff. So hopefully that helps a little bit.
Speaker Change: It does and then on Vegas, I think J P. M. You mentioned you'd only ship seven units because that's all you had available can you maybe just talk on anything you can say on backlog and when do you expect to kind of scale up shipments more meaningfully.
Speaker Change: Yeah. So I mean, we certainly have some backlog.
Speaker Change: We will.
Speaker Change: We will ship over the course of the quarter were scaling up and really what we're doing is the first half of the year, we're producing on the on the R&D. So to speak pilot production line and then in the second half of the year will be on the full production line. So.
Speaker Change: The inventory situation, our ability to deliver will improve each quarter here and by the time, we get into the back half of the year I suspect, we should be able to fulfill the majority of the demand.
Speaker Change: Okay. Thanks, Scott.
Speaker Change: Last one you just you pushed out cash flow breakeven by year I, just want to make sure I know youre guiding below consensus here just over $20 million, but are there other levers you could pull if you need to pull that forward.
Speaker Change: Yeah.
Speaker Change: There certainly are look if we obviously if we can our focus is on driving growth and market gross margin expansion. Those are the those are the obvious key levers, but we certainly are focused on.
Speaker Change: Making sure that we are diligently with how we utilize our resources.
Speaker Change: Saving wherever we can and so there are other opportunities if necessary to.
Speaker Change: Further reduced burn.
Speaker Change: Alright, thank you.
Yes.
Speaker Change: Thank you and our next question today comes from Joe Maxa with Canaccord. Please go ahead.
Joe Maxa: Hey, guys. Thanks for the questions just to kind of follow up on the guidance.
Speaker Change: Why our revenue shipments of the <unk>.
Speaker Change: Behind this year is 24 places we're already about half of that of 'twenty three.
Speaker Change: Why is that product, stating is that macro related market related or is cannibalization from our beta so far and is there further downside to the guidance I know you've baked into challenges to us your ability, but could you just try to like quantifying whats in there for NIH is it like $5 billion or so of the $10 million or so just maybe help us kind of quantify that thanks.
Speaker Change: Yes so.
Speaker Change: First of all I would I would argue that.
Speaker Change: That data is not is not significantly cannibalizing revenue at all and I would also argue that Ravi is not fading at all we are.
Speaker Change: We are really in a.
Speaker Change: One of the most unprecedented macroeconomic times at least in my career and.
Speaker Change: Leasing the space and so when.
Speaker Change: When we when we think about the challenges, we're having with respect to radio and accelerating shipment volume. It really is driven by funding concerns we're seeing all over the world customers publishing more and more using hi Fi needing more scale, we're seeing come.
Speaker Change: <unk>.
Speaker Change: Extolled the virtues of Hi, Fi, specifically as a laundry platform.
Speaker Change: We are winning projects like we've won last year in Estonia et cetera, but but the reality is that the macroeconomic environment is really tough and that continues to be an important driver for expensive.
Speaker Change: More expensive capital equipment, and so when we put our guidance out for 2025, we are considering that its going to continue to be justice top of macroeconomic environment, maybe even tougher.
Speaker Change: So that I would argue that we said we expected.
Revenue shipments to be modestly down from from 2024 levels.
Speaker Change: They could easily there could easily turn the other way.
Speaker Change: Yes.
Speaker Change: If some of the.
Speaker Change: If the macroeconomic headwinds aren't as bad as we think so.
Speaker Change: That's how I would comment on radio and Vega with respect to the funding itself and is there further.
Speaker Change: Further downside to the guidance I think what we've done is we've really taken our best look at.
Speaker Change: At the the funding environment or our sales funnels are opportunities.
Speaker Change: And tried to put together guidance that we felt was very very responsible one of the things thats working in our favor Kyle as I talked about before is that Europe is actually growing really strong and is expected to grow really strong this year and that will drive in and that will that will help our growth Asia Pacific.
Speaker Change: Well it does have we do have country specific challenges.
Speaker Change: Is a very strong platform for that part of the world and we expect to see strong demand there for Vega and then and then we talked about some of our clinical customers like myriad and quest and others. They are scaling up <unk> and carrier screening and other assays and <unk>.
Speaker Change: Let's become routine those are completely additive to growth and so I think we have a lot of a lot of positive areas, where we can grow but of course, we have this significant.
Speaker Change: The headwind I think that pretty much everyone in our industry has been talking about some level. Thanks.
Speaker Change: Thanks, Kyle next question Rocco.
Speaker Change: Absolutely. The next question comes from Dan Brennan to these Howard. Please go ahead.
Speaker Change: Great. Thanks, Thanks for the questions.
Speaker Change: Just to start off just one more on any if you don't mind.
Your exposure what question is around 28% or somewhere in that ZIP code I'm, just trying to get a sense of like wondering kind of what's baked in is it like a 15% kind of <unk> 28 per cent for like a four point headwind. It does something greater than that just kind of wondering like the magnitude of kind of what you've assumed.
Speaker Change: Well I think our total our total NIH.
Speaker Change: Revenue is roughly 20% of revenues.
Speaker Change: And I do think.
I do think you can work.
Speaker Change: It's difficult to the game out down to one dollar I know youre looking for well, it's X million dollars exactly.
Speaker Change: But the reality is that it's a lot more complex than that and I think some of our peers.
Speaker Change: We're helping to try to explain that to the street.
Speaker Change: I think from our perspective, what we're seeing is it's really a deal by the Australia deal by deal institution by institution some institutions have.
Speaker Change: <unk>.
Speaker Change: Targeted fund their instrumentation out of different pools of money other institutions.
Speaker Change: Have the significant overrate that theyre going to absolutely apply and I think it's too early to to really came out dollar by dollar and so what we've done is we've taken a look at our sales funnel and taken a look at R.
Speaker Change: Our opportunity set, particularly in the Americas and evaluated that in its totality.
Speaker Change: Try to come up with guidance for what we thought here's what Americans is going to do here's what Europe is going to do and here's what Asia is going to do and Thats. Why this year, we gave a little more color on a region by region in our guidance. So that you could get.
Speaker Change: Some perspective that yes, it's an important part of our business, but it is not our whole business.
Speaker Change: Thanks, Dan the next question Roger.
Speaker Change: Absolutely. Our next question comes from Doug Schenkel with Wolfe Research. Please go ahead.
Doug Schenkel: Hey, good afternoon guys.
Doug Schenkel: Let me just draw I think it's two or three quick questions.
Doug Schenkel: I'll keep it to two one is on gross margin.
Speaker Change: You are targeting an exit rate above 40%. This year, we were above consensus and your exit rate is actually higher than our estimates. So there are some sunshine on a rainy day.
Speaker Change: Can you talk about the progress you are making on.
Speaker Change: On gross margin and how much gross margin.
Speaker Change: Get to this year.
Speaker Change: If you say revenue comes in closer to where consensus was versus where you are targeting as we start the year. So that's the first topic.
Speaker Change: And then the second is acknowledging there's a lot of things happening outside your control in terms of what you can control are there things that you are moving forward with as we sit here today to reduce friction to adoption of your instruments may be more things like reagent rental type things or other initiatives that.
Speaker Change: It could make it easier for customers to bring in instruments and what could be a tougher environment for capital demand. Thank you.
Speaker Change: Yes. Thank you Jack those are great questions and I appreciate the sentiment at gross margin because I do think it is an area, where we're going to see significant opportunity this year.
Speaker Change: When when what's really happening <unk> seen gross margins in Q4, we had some yield issues on which drove which drove some impact to our GM those who have been largely resolved them.
Speaker Change: On her on her way back we continue to make progress in terms of lowering the per unit cost of both the chips.
Speaker Change: Our smart cells as well as the as well as the instruments themselves we've in sourced a lot.
Speaker Change: More of our instrument manufacturing, which is driving pretty substantial savings and as those instruments go into inventory and then get sold through well start to see the benefit of that as well so.
Speaker Change: We do have a very strong path too.
Speaker Change: <unk> exiting.
Speaker Change: Over over 40 and actually nicely over 40.
Speaker Change: Your point about relative to prior prior consensus is actually an interesting one because you are right its likely that gross margins would be higher if we were the more revenue we do more likely the gross margins are going to be higher and the reason for that is because.
Speaker Change: Youre going to see a greater push as consumables, which carry generally carry higher gross margin and as that mix shift occurs you get a substantial benefit from that and so.
Speaker Change: One of the things we were pretty we're pretty thoughtful about how we thought about our consumable revenues, which.
On the one side.
Speaker Change: If they are lower on your revenue guidance that hurts your gross margin, but at the end up doing a little bit better that will help your gross margins. So those are those are.
Speaker Change: Just kind of give us some color on how to think about how we how we're going to move through the year with gross margin and exit the year quite frankly.
Speaker Change: What we believe will be a really strong position moving into 2026.
Speaker Change: The last is the other part of your question. Yes. There is a lot of stuff that we can do that.
Speaker Change: I'll come back.
Speaker Change: Combat the macroeconomic environment and we do have programs in place we have what we call a run radio program, where you can put.
Speaker Change: Very little money down and bake it in.
Speaker Change: Cost of the instrument into the reagents and consumables, we have a similar program that we launched for Vega.
Speaker Change: Although most customers so far than <unk>.
Speaker Change: Pretty happy with the price of Vega, and I do expect asps to be.
Speaker Change: Pretty strong for Vega here, particularly.
Speaker Change: Particularly in that particularly in 2025, we will see how 26th goes but I think we're off to a strong start there with respect to asps.
Speaker Change: We're also another area, where if you are thinking about how do we accelerate our business is accelerating consumable usage in the way we're doing that is by increasing our bioinformatics investments and capabilities.
Speaker Change: I've had the benefit of being at our sales meeting. This week. So I've had a chance to talk to all of our sales reps and listened to several customer tops and each of the customers.
Speaker Change: <unk> really are driving home the point that informatics matters, a lot and that our informatics capabilities were dramatically improved in 2024 and its really accelerating the activity. So it is a combination of financial financial deals that you can do that enable the cubs.
To get into the technology, but it's also activities like improving the velocity of consumable usage by improving informatics, which then drives more requirements for capacity and ultimately more sales hopefully that helps one thing to add on your gross margin cadence question, Doug We talk.
Speaker Change: Talking about big in the second half of the year moving into the production line and so that over the course of the year Youll see that improvement in gross margin as that gets off the development unit into the full production manufacturing mode.
Speaker Change: Thank you Todd.
Speaker Change: The substantial improvement in gross margin.
Speaker Change: Thanks, Doug we have next question Robin.
Yes, Sir our next question comes from Danielle <unk> with Morgan Stanley. Please go ahead.
Danielle Biobank: Hey, guys good evening and thanks for the time here.
Danielle Biobank: Christian I just wanted to get a sense for how you are incorporating some of the customer concentration risk into your 25 guide.
Danielle Biobank: <unk> demand momentum a couple of times, but it sounds like it is still in the IRA Buda in Dubai that are.
Danielle Biobank: Certainly important there and you've got the battery partnership.
Danielle Biobank: Sort of a flagship customer for you in China and then.
Danielle Biobank: The second part of my question just sticking on the China theme are you seeing any concern from your customers in the region in light of the.
Danielle Biobank: Loopnet in addition to that unreliable entity list or does the fact that there just aren't any great sort of local long read alternative would mean no impact on that gone for you guys.
Danielle Biobank: Yeah.
Danielle Biobank: Yes, those are great questions I'll start with China first and then go backwards.
Danielle Biobank: We are we've had lots of conversations with our Chinese customers.
Danielle Biobank: Interestingly there are no alternatives to what we do in China.
Danielle Biobank: Which certainly.
Decreases our risk of any.
Danielle Biobank: Of any flow back from what what's going on with our competitors and so we don't see that as a big exposure now, while we can't control or predict.
Danielle Biobank: On the export side, if that if the administration decides.
Danielle Biobank: To make some changes there that could be an exposure that we would have and quite frankly I'm not sure. We would have a lot of mitigation to that or some retaliation.
Danielle Biobank: From China itself, but from what we see at this moment, our customers don't see any issue and are continuing to run in.
Danielle Biobank: And I do think there is a lot of it I do think there is an interesting opportunity for Vega inside of China. This year or two and we'll see how that unfolds with respect to cost customer concentration risk right.
Danielle Biobank: It is a.
Danielle Biobank: It is a it's a good news bad news story in the sense that yes, you have some we do have some customers that are running.
Danielle Biobank: Scale programs, but when you sit and talk to these customers like a stone yet they are running at full tilt and they plan to keep running at full tilt and that program is going exceptionally well. We are in fact, we had the leader of the bio banks here at our sales meeting this week and she gave us a great talk and update of what's going on there.
Danielle Biobank: Sure.
Danielle Biobank: One thing the way that risk is going to get mitigated as we do see more customers moving into that large customer category, particularly at some of the diagnostic customers will.
Danielle Biobank: In hopefully in 2025.
Danielle Biobank: Advance their assays into full production and as that happens that they'll be running they'll be running radios at full tilt, which will be very durable revenue in the clinical setting and that that's really what we're trying to go after so that we can balance.
Danielle Biobank: The research population scale with with.
Danielle Biobank: Political revenue that is quite durable and consistent and also on top of that we're seeing customers like the Sanger Institute accelerate there.
Danielle Biobank: Their usage of <unk>, both on the tree of life program, which they've been we've been longtime customers are they've been a longtime customer, but now we've been able to penetrate into the human genetics side, and we're doing a really interesting collaboration with them in RNA.
Danielle Biobank: Sequencing, which will drive some significant sequencing this year so.
Danielle Biobank: Best way to alleviate cost customer concentration is to find more big customers and I think that's what's happening right now.
Rocco: Thanks to Asia next please rocco.
Speaker Change: Absolutely. Our next question comes from Jack Meehan with Macquarie Research. Please go ahead.
Jack Meehan: Thank you good afternoon.
Jack Meehan: I'm, just hoping to get a little bit more color on big.
Jack Meehan: Units shipped in the fourth quarter can you talk about just what the initial revenue was there and then as.
Jack Meehan: As you look to 2025, how does the order book look and kind of what are you assuming in terms of placements.
Jack Meehan: <unk>.
Jack Meehan: Yes, so we haven't we haven't disclosed kind of the ending.
Jack Meehan: The ending orders for 2024, but we have hot.
Jack Meehan: In terms of that we've developed.
Jack Meehan: At this point hundreds of opportunities over 70% of them are new customers. We we would expect to scale manufacturing over the course of.
Jack Meehan: The first half of the year and it's likely that will be more manufacturing limited then that order limited with respect to revenue.
And we will see how that unfolds, but.
Jack Meehan: The revenue in the fourth quarter, if you could imagine yes, seven units at basically a little bit more than less around black Friday.
Jack Meehan: <unk>.
Yes.
Speaker Change: The finance team is looking at me, saying, yes, that's right seven units in the 160 and the 160 K, yes. So.
So we haven't done any we haven't really done any discounting on on the.
Speaker Change: On the on the Vegas system, when when you see the ASP.
Speaker Change: Kind of at the end of Q1, what you'll likely see us.
Speaker Change: Do sell to some distributors in those distributors will get.
Speaker Change: Distributor discount because they end up paying for the service and installation and Thats typical but that would be effectively distributor list price and so I think the ASC I think we set the price right to drive to drive demand and so far we haven't had a lot of objections to the price and so we will see how we do.
Jack Meehan: Thanks Jack.
Speaker Change: Thank you and our next question comes from Sogou Downbeat with Guggenheim. Please go ahead.
Speaker Change: Hey, guys. Thank you for taking my question I'm curious, if you're running into bullish in any of their potential beta sites and how do you think about the possibility of another long lead market.
Speaker Change: And then I have a follow up.
Speaker Change: Yeah. So we haven't really run into Roche to my knowledge at all yet and we Havent had any.
Speaker Change: Any deal stalled because of Roche I don't think that that is a.
Speaker Change: That is I think it will be interesting to see what their technology is when they when they launch it. It's my understanding is that <unk>.
Speaker Change: <unk> focused technology, but the reality is that we don't know and so we will see when.
Speaker Change: When they come out, but and I'm sure there'll be a lot more we'll all learn a lot more about it at <unk> in a couple of weeks and so im looking forward to that but here's here's what I can tell you we have built a portfolio now.
Sequencer scan an end to end solution that the company has never had in its history and that is driving more excitement more discovery more demand than ever before it is unfortunate that we've been in this macroeconomic environment because I do think that that has had an impact of course, but when.
Speaker Change: You look at the the discoveries that are being made the clinical adoption.
Speaker Change: Increase improvement and solve rates in rare disease. The population scale programs like precise in Estonia that we're winning and are expanding.
Speaker Change: We've really we really are making a lot of progress as a leader in moderate sequencing technology and so I feel very confident in our portfolio.
Speaker Change: We will certainly be watching like everyone else does win when the products come out and we'll evaluate it.
Speaker Change: When you followed acquisition.
Speaker Change: Okay. Thank you for that question I'm sure in the current environment you are attempting to really do this guidance on the flip side. If you will do rank order the top three things that could drive upside to your guidance what would be the NBC thinking regulable too big a policeman. So I will tell you the academies market.
Speaker Change: Yeah, I think like if you had to put a top three four for things that would actually drive guidance to the outside.
Speaker Change: I'd say the first would be.
Speaker Change: There are several pop gen projects that we are.
Speaker Change: Working with groups.
Speaker Change: Yes.
Speaker Change: And potentially May may we may end up being able to get those press releases out and start to sequencing those would drive strong <unk> demand because they would be at scale. So.
Speaker Change: The pop Gen programs would drive increased <unk> demand increased revenue of the bandwidth certainly drive.
Speaker Change: <unk> the guidance up to the higher Ed Hot towards the higher end of the second would be the timing of clinical adoption and broader clinical adoption. So we saw we saw rapid commit to 5000 more genomes in rare disease, we have.
Speaker Change: Similar kinds of projects going on in Sweden for example, as they as they continue to scale that will that will be another source of potential upside and then.
Speaker Change: <unk>.
Speaker Change: And then if so.
Speaker Change: I mean, the last one is perhaps the most obvious right if the macro environment improves even a little bit and we have more certainty around NIH funding, perhaps that drives.
Speaker Change: That would certainly drive our guidance in a more positive direction. So those are my top three I would say great.
Speaker Change: Great. Thanks Sundar.
Speaker Change: Questions.
Speaker Change: Oh gosh, we have sung <unk> Nam with Scotiabank. Please go ahead.
Speaker Change: Hi, Thanks for taking the question Christian I was just wondering the 15% revenue coming from clinical do you have a sense of where that could go over the next few years and was wondering if the kind of the growth outlook.
Speaker Change: It's pretty broad based geographically.
Speaker Change: And in terms of the you know the types of applications or are they pretty similar.
Speaker Change: In terms of.
Speaker Change: What did the demand youre seeing in the U S versus ex U S. Thank you.
Yes, that's a really great question and I.
Speaker Change: I don't have a.
Speaker Change: Perfect Crystal ball, there, but I do believe that.
Speaker Change: If that revenue from clinical over say over the next three years could actually represent it could easily double from where we are now 15% to 30% of our total revenue and it's going to come from it's.
Speaker Change: It's going to come from several different areas. It is going to come from rare.
Speaker Change: Rare disease whole genome sequencing in a rare disease context, as a frontline test as we expand further into children's hospitals in the United States and international programs around the world for perhaps like the Netherlands.
Speaker Change: Going to come in panel testing, our peer target our peer targeted panel has really inspired the large clinical testing labs, because we are a pure target. They can they can eliminate their legacy test and operate at much higher multiplex much more with much better and easier answer.
Speaker Change: <unk> to get and therefore, save money and help more patients and so peer target and that will be things like carrier testing looking at attacks is anything where you have.
Speaker Change: Hi.
Speaker Change: Complex Germline driven disease, and then the last area will be.
Speaker Change: We will be.
Speaker Change: In oncology both on the lottery side looking at being able to look at methylation profiles being able to look at both appetite can start to understand more and more about a tumor that will be.
Speaker Change: It's in clinical research right now, but over time say on this three year window, I do think theres going to be opportunities for us too.
Speaker Change: Penetrate parts of that market and grow our revenue. So all in I think it will be one of the fastest growing areas of our business and it perhaps could be at least double that we're doing now in terms of percentage of the total.
Speaker Change: Excuse me.
Speaker Change: Thank you and our next question comes from Yes. Our next question comes from Matthew Sorry from Goldman Sachs. Please go ahead.
Speaker Change: Hi, This is <unk> on for Matt. Thanks for taking my questions. So my first one is what trends you're seeing in the <unk>.
Speaker Change: Reagent rental models placement versus like what percent of instruments Youre seeing.
Speaker Change: Through Capex placements.
Speaker Change: Yes. The reality is we still see the majority of our sales.
Speaker Change: As a straight Capex play since we do have a few are reagent rentals or unique financing type deals.
Speaker Change: Each quarter, we do have a very.
Speaker Change: We do have a very strong leasing partner that we'll do that we'll do lease isn't typically we get a few of those leases down every quarter as well it really depends on the situation, but but the reality is the vast majority are still a capex purchases that's right.
Speaker Change: Okay, Great and then can you talk through the margin contribution from revenue versus vague I understand this may improve throughout the year as you move to production manufacturing, but any numbers you could put around that would be great.
Speaker Change: I am sorry, you are looking for the comparative margins of ravioli and Vega.
Speaker Change: Yes the contribution.
Speaker Change: It's a little too early to disclose.
Speaker Change: On Vega, yet, we need to get through at least the full quarter of production.
Speaker Change: Start start really understanding that but.
Speaker Change: The fact that the <unk> has been in production, we've been able to in source a lot of it and we have taken a substantial amount of the compute costs through down and out through innovation makes the <unk>.
Speaker Change: <unk>.
Speaker Change: Gross margin higher Ed first here the challenge on the revenue side of course is managing the asp's.
Speaker Change: And so making sure.
Speaker Change: Sure the Asps stays in a range on the Vega side, we've positioned it to be a nice gross margin product for us, particularly as we exit as we kind of get to the back half of 'twenty five and beyond in the front half it will be lower in the back half it will start to approach or perhaps even exceed the margin.
Speaker Change: On revenue, we will see how that goes.
Speaker Change: Looking at 2006 and beyond how we could even take further costs out of Vegas. So beyond this year moving into production. There is a pathway beyond that to to reduce costs. Even further for the platform. Yeah. I think this is one thing that maybe people don't appreciate as much.
Speaker Change: Because most most instrumentation companies don't take so much cost out of their instruments after they get on market, but because of our technology.
Speaker Change: <unk>.
Speaker Change: So much of our technology is compute driven and when you think about the cost of the instrument we bid as we improve our algorithms as we improve our smart cells, we're able to take substantial amounts of cost out of out of the instrumentation and that will that will apply whether it's radio or Vega.
Speaker Change: One of the things we did with Vega is of course, we designed it for higher gross margins, we miniaturize things we <unk>.
Speaker Change: Innovated and some of the areas, where there is core expense. So it adds the opportunity to be at a very strong gross margin product, but before we start putting a bunch of numbers around it I want to see us get.
Speaker Change: Few a few quarters under our belt of production to see how we really do at scale.
Speaker Change: Thanks for the question David.
Speaker Change: And our next question comes from Jason Gursky.
Speaker Change: Stevens. Please go ahead.
Jason Gursky: Hey, guys. Thanks for fitting me in here I'll keep it to one on the cash flow breakeven timeline change could you just provide some additional detail around what assumptions did change.
Jason Gursky: Any color on the run rate for revenue or margins that are required to get there.
Jason Gursky: Well I think sure and thank you for the question I mean, I think realistically right.
Jason Gursky: We.
Jason Gursky: Certainly didn't perform as expected in 2024, which lowered our revenue trajectory and in 2025, given the uncertainty in the guidance. We gave we wanted to make sure that we're responsible in thinking through the whole equation.
Jason Gursky: And the whole equation to get to cash flow breakeven and so the core assumptions do you think about our kind of thinking about the midpoint of our guidance right now both on the both on the revenue growth in the.
Jason Gursky: Gross margins and then starting to think about.
Jason Gursky: Modest growth up from there in 2006.
Jason Gursky: 2007, so that by the time, we're getting out of 2007, we are we're exiting cash.
Jason Gursky: Cash flow positive.
Jason Gursky: Basically as if we as we were thinking with 2026 and so.
Jason Gursky: The key is youre going to see we do believe youre going to see gross margins expand over the course of the year. So that we exit we exited in the <unk>. We still believe we can get into the <unk> and beyond.
Jason Gursky: <unk> gross margin and as we continue to scale, our business drive consumable consoles become a greater proportion of the total revenue you start to see that uplift in the combination of those things along with disciplined expense management get to cash flow breakeven.
Jason Gursky: Thanks Nathan.
Speaker Change: Thank you and our final question today comes from <unk> <unk> with Barclays. Please go ahead.
Speaker Change: This is the same one for Lew Thanks for squeezing me in here.
Speaker Change: On revenue pull through took a small step down in <unk>.
Speaker Change: How much of that came from maybe.
Speaker Change: Air pocket from spark N or Vega.
Speaker Change:
Speaker Change: And then just looking ahead at the New guide.
Speaker Change: Low to mid 200000 pull through.
Speaker Change: What does that kind of imply from an instrument capacity utilization perspective now that.
Speaker Change: <unk>.
There's the equation.
Speaker Change: And I know Youre embedding some of the NIH risk in there but.
Speaker Change: Pull through is that so much.
Speaker Change: The lower sequencing costs not offsetting the demand this year.
Speaker Change: I'll leave it there.
Speaker Change: Yeah, so with respect to what.
Speaker Change: Is there an air pocket in Q4, I mean, we did anytime you announced the change in in reagents, you are going to have customers using their existing inventory before shipping shift.
Speaker Change: Shipping more product and so.
Speaker Change: We didn't start shipping thus far created until basically the last what two.
Speaker Change: Two weeks of the quarter. We also ended up with some we also did have some back order.
Speaker Change: For some of our application kits and that back order that was a pretty pretty reasonable amount of back order and so that hurt us as well.
Speaker Change: And so yes, there was a bit there was certainly a bit of that youre right. It was $2 40 versus $1 53 to 54 last quarter. So I think Todd.
Speaker Change: <unk> is saying that's like half of run.
Speaker Change: And so there was certainly some of that when you think about the guidance for the low to mid low to mid two hundreds.
Speaker Change: We certainly are our first priority is thinking through NIH exposure any potential funding freezes that we see with the intramural even even the perception of that.
Speaker Change: Certainly creates anxiety with our customer base and so we're monitoring we're monitoring that but I don't think I don't really think the spark reagents.
Speaker Change: In other words, the increase in throughput because of the reagent creates that that air pocket. In fact, most customers that we've spoken too. So far they are excited about implementing spark and theyre not theyre not doing their tests, they're typically not doing more multiplex onto the same rents, particularly in human whole home.
Speaker Change: <unk> genome applications, and so I think they're just they're they're getting the benefit of more data.
Speaker Change: And so I don't think it's going to have a big impact from that perspective kind of that elasticity.
Speaker Change: Equation that you you kind of talked about.
Speaker Change: Yes, I think that it's really we're being thoughtful about the funding environment and the timing of when studies get started.
Speaker Change: Thanks, Phil.
Speaker Change: Thank you. This concludes the question and answer session I would like to turn the conference back over to Tom Friedman for closing remarks.
Speaker Change: Awesome. Thank you Rocco and thank you for everybody for joining today. Thank you all for the questions and say a few minutes late.
Speaker Change: And as Christian mentioned, we look forward to connecting with a lot of U S GDP and other investor conferences throughout the quarter take care.
Speaker Change: Thank you. This concludes today's conference call.
Speaker Change: You all for attending today's presentation.
Speaker Change: We will now disconnect your lines and have a wonderful day.
Speaker Change: Okay.