Q1 2025 Pacific Biosciences of California Inc Earnings Call

Operator: Good afternoon, everyone, and welcome to the PacBio first quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good afternoon, everyone and welcome to the pack bio first quarter 2025 earnings conference call.

All participants will be in a listen only mode should you need assistance. Please they know a conference specialist by pressing the star key equal advisor, though.

Operator: After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star and then one on your touch-tone phones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded.

After todays presentation, there will be an opportunity to ask questions.

I'll ask a question you May press Star and then one on your Touchtone phone.

All your questions you May press star and Q.

Please also note today's event is being recorded.

Todd Friedman: At this time, I'd like to turn the floor over to Todd Friedman, Investor Relations. Sir, please go ahead.

Speaker Change: At this time I would like to turn the floor over to Todd Cleveland Investor Relations. Sir. Please go ahead.

Todd Friedman: Good afternoon, and welcome to PACBIO's first quarter 2025 earnings conference call. Earlier today, we issued a press release outlining the financial results we'll be discussing on today's call. The copy of which is available on the Investors section of our website at www.pacb.com or is furnished on Form 8K available on the Securities and Exchange Commission website at www.sec.gov. A copy of our earnings presentation is also available on the Investors section of our website.

Todd Cleveland: Good afternoon, and welcome to <unk> first quarter 2025 earnings conference call.

Todd Cleveland: Today, we issued a press release outlining the financial results, we'll be discussing on today's call.

Todd Cleveland: A copy of which is available on the investors section of our website at www Dot Tacb dotcom or as furnished on form 8-K available on the Securities and Exchange Commission website at Www Dot FCC Dot Gov, a copy of our earnings presentation is also available on the investors section of our website.

Todd Friedman: With me today are Christian Henry, President and Chief Executive Officer, and Jim Gibson, Chief Financial Financial Officer. On today's call, we will be making four looking statements, including, among others, statements regarding predictions, estimates, expectations, and guidance. We should not place undue reliance on forward-looking statements because they are subject to assumptions, risks, and uncertainties that could cause their actual results to differ materially from those projected or discussed. Please review our SEC filings, including our most recent forms 10-Q and 10-K, and our press releases, to better understand the risks and uncertainties that could cause results to differ.

Christian Henry: With me today are Christian Henry President and Chief Executive Officer, and Jim Gibson, Chief Financial <unk> Financial Officer.

Christian Henry: In today's call, we won't be making forward looking statements, including among others statements regarding predictions estimates expectations and guidance.

Christian Henry: 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 from those projected or discussed.

Christian Henry: Please review, our SEC filings, including our most recent forms 10-Q, and 10-K and our press releases to better understand the risks and uncertainties that could cause results to differ.

Todd Friedman: We disclaim any obligation to update or revise these forward-looking statements except as required by law.

Christian Henry: We disclaim any obligation to update or revise these forward looking statements except as required by law.

Todd Friedman: We will also present certain financial information on a non-GAAP-based 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.

Christian Henry: We will also present certain financial information on a non-GAAP basis.

Christian Henry: 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.

Christian Henry: Reconciliations between historical U S GAAP and non-GAAP results are presented in our earnings release, the earnings release, which is available on the investors section of our website.

Todd Friedman: 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.

Christian Henry: 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.

Todd Friedman: A recording of today's call will be available shortly after the live call in the investor section of our website. Those electing to use the replay are cautioned that for looking statements. May differ or change materially after the completion of the live call.

Christian Henry: A recording of today's call will be available shortly after the live call in the investors section of our website.

Christian Henry: 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 will now turn the call over to Chris. Thank you, and good afternoon, everyone. Today, I'll share our first quarter 2025 results, highlight recent commercial and strategic progress, and outline our expectations for the remainder of the year.

Christian Henry: I'll now turn the call over to Christian.

Christian Henry: Thank you and good afternoon, everyone today I'll share our first quarter 2025 results highlight recent commercial and strategic progress and outline our expectations for the remainder of the year.

Christian Henry: Following my remarks, Jim Gibson, our new Chief Financial Officer, will discuss our financial results and guidance in much more detail. We reported first quarter 2025 revenue of $37.2 million, which is slightly above our preliminary estimate shared on April 9th and consistent with our internal expectations. Instrument revenue for the quarter was $11 million, lower than compared to the prior year, largely reflecting increased uncertainty in academic funding, particularly in the United States. In total, we shipped 12 Revio systems and 28 Vega systems. bringing cumulative shipments to 282 Revio systems and 35 Vegas. To provide more transparency into our customer dynamics, we've introduced new metrics on slides four and five of our investor presentation, which break out shipment dollars by customer.

Christian Henry: Following my remarks, Jim Gibson, our new Chief Financial Officer will discuss our financial results and guidance in much more detail.

Christian Henry: We reported first quarter 2025 revenue of $37 2 million, which is slightly above our preliminary estimates shared on April nine and consistent with our internal expectations.

Christian Henry: Instrument revenue for the quarter was $11 million compared lower than compared to the prior year, largely reflecting increased uncertainty in academic funding, particularly in the United States. In total we shipped 12 radio systems, and 28 Vegas systems, bringing cumulative shipments of 200.

Christian Henry: 82 radio systems, and 35 Big assistance.

Christian Henry: To provide more transparency into our customer dynamics, we've introduced new metrics on slides four and five of our investor presentation, which breakout shipment dollars by customer type, while we don't expect to share. This segmentation every quarter. We believe it offers helpful context, particularly in.

Christian Henry: While we don't expect to share this segmentation every quarter, we believe it offers helpful context, particularly in light of the current market condition. As shown on slide four in our Q1 Academic and Research Institute segment, represented the lowest percentage of instrument shipments since the Revio launch. We believe that this is the direct result of increased funding pressures our customers are seeing with respect to capital equipment purchase. By contrast, instrument shipments to our other customer segments have remained largely stable over the past several quarters. Notably, we saw growth among our hospital and clinic customers, reflecting continued momentum for HiFi sequencing in clinical and translational research settings.

Christian Henry: Light of the current market conditions.

Christian Henry: As shown on slide four in our Q1, <unk> academic and research Institutes segment represented the lowest percentage of instrument shipments since the radio launch.

Christian Henry: We believe that this is the direct result of increased funding pressures our customers are seeing with respect to capital equipment purchases.

Christian Henry: By contrast instrument shipments to our other customer segments have remained largely stable over the past several quarters, notably we saw growth among our hospital and clinic customers, reflecting continued momentum for hifi sequencing in clinical and translational research settings.

Christian Henry: And despite broader funding headwinds, we continue to attract new customers to PacBio. Roughly half of all Vega and Revio systems shipped in Q1 went to new instrument customers, further showing the expanding market appeal of our HiFi technology. While macroeconomic pressures weighed on system placements, consumables showed strong growth in the quarter. In the first quarter of 2025, consumable revenue reached a record $20.1 million, reflecting 26% year-over-year growth and steady utilization across our growing base of Revio systems. Typical fiscal year end purchasing in Japan also contributed to the strong performance. Notably, unlike instrument shipments, consumable demand from our academic and research institution customers remained stable compared to prior quarters, indicating more resilience in usage-driven spend versus capital projections.

Christian Henry: And despite broader funding headwinds, we continue to attract new customers to pack bio.

Christian Henry: Roughly half of all Vega and Raviolis systems shipped in Q1 went to new instrument customers further showing the expanding market appeal of our Hi Fi technology.

Christian Henry: While macroeconomic pressures weighed on system placements consumables showed strong growth in the quarter in the first quarter of 2025 consumable revenue reached a record $20 1 million, reflecting 26% year over year growth and steady utilization across our growing base.

Christian Henry: Radio systems.

Christian Henry: Typical fiscal year end purchasing in Japan also contributed to this strong performance, notably unlike instrument shipments consumable demand from our academic and research institution customers remained stable compared to prior quarters, indicating more resilience in usage driven spend versus.

Christian Henry: Capital purchases.

Christian Henry: Further underscoring HiFi adoption, total petabase output from PacBio Long-Read sequencers increased 37% year over year, highlighting continued scaling across our installed base.

Christian Henry: Further underscoring hi Fi adoption total petabytes output from Pacbio long read sequencing has increased 37% year over year, highlighting continued scaling across our installed base.

Christian Henry: Turning to our full-year outlook, the macroeconomic environment remains exceptionally challenging. Since our April press release, the impact of newly implemented tariffs between the U.S. and China, combined with additional pressure from proposed NIH budget reductions for fiscal year 2026, have introduced incremental risks that could have an impact on revenue in 2025. In light of these developments, we are adjusting the lower end of our previously guided revenue range by $5 million. We now expect full year 2025 revenue to be between $150 and $170 million. The environment remains dynamic. And should tariff conditions or academic funding further deteriorate, we may face additional headwinds.

Christian Henry: Turning to our full year outlook, the macroeconomic environment remains exceptionally challenging since our April press release, the impact of newly implemented tariffs between the U S and China combined with additional pressure from proposed NIH budget reductions for fiscal year 2026 have introduced incremental risks that cause.

Christian Henry: Could have an impact on revenue in 2025.

Christian Henry: In light of these developments, we are adjusting the lower end of our previously guided revenue range by $5 million. We now expect full year 2025 revenue.

Christian Henry: To be between 150 and $170 million.

Christian Henry: The environment remains dynamic.

Christian Henry: And should tariff conditions or academic funding further deteriorate, we may face additional headwinds.

Christian Henry: That said, we are confident in our strategic direction, anchored by strong customer interest in long-read sequencing, continued momentum in the adoption of HiFi, and a robust innovation. We are also committed to our plan of turning cash flow positive as we exit 2027 and remain focused on disciplined cost management to reduce our cash burn.

Christian Henry: That said, we are confident in our strategic direction anchored by strong customer interest in long read sequencing continued momentum in the adoption of Hi, Fi and a robust innovation map.

Christian Henry: We are also committed to our plan of turning cash flow positive as we exit 2027 and remain focused on disciplined cost management to reduce our cash burn.

Christian Henry: In response to ongoing market uncertainty and headwinds in the industry, we announced and executed on a restructuring plan in April. designed to narrow our strategic focus and reduce our operating So reductions in headcount and non headcount related expenses across all functions. in our organization, we expect to lower annualized non gap operating expense run rate by approximately 45 to $50 million by year. Following these cost reduction measures, we are concentrating our efforts on our highest impact long read platform initiative. We continue to advance development programs aimed at enhancing our existing platforms, such as Revio and Vega, including the future launch of multi-use smart For more information visit www.fema.gov This innovation is designed to further reduce sequencing costs for our customers to unlock higher sequencing volume while simultaneously improving our consumable gross margin.

Christian Henry: In response to ongoing market uncertainty and headwinds in the industry, we announced and executed on our restructuring plan in April.

Christian Henry: Designed to narrow our strategic focus and reduce our operating costs.

Christian Henry: So reductions in head count and non head count related expenses across all functions.

Christian Henry: In our organization, we expect to lower our annualized non-GAAP operating expense run rate by approximately $45 million to $50 million by year end.

Christian Henry: Following these cost reduction measures, we are concentrating our efforts on our highest impact long read platform initiatives.

Christian Henry: We continue to advance development programs aimed at enhancing our existing platforms, such as radio and Vega, including the future launch of multi use smart cells.

Christian Henry: This innovation is designed to further reduce sequencing cost for our customers to unlock higher sequencing volume, while simultaneously improving our consumable gross margins.

Christian Henry: The development program is progressing quickly and we've demonstrated high quality, repeatable reuse results internally. Additionally, we are accelerating development efforts for ultra-high-throughput long-read sequencing. This next-generation platform is expected to significantly increase throughput, enabling whole human genome sequencing costs at or near price parity with short-read technology.

Christian Henry: The development program is progressing quickly and we've demonstrated high quality repeatable reuse results internally.

Christian Henry: Additionally, we are accelerating development efforts for ultra high throughput long read sequencing system.

Christian Henry: This next generation platform is expected to significantly increase throughput, enabling human whole human genome sequencing costs at or near price parity with short read technology.

Christian Henry: I'd also like to provide a brief update on how our restructuring initiative has impacted our short-read sequencing strategy. While we continue to see strategic value in providing both long read and short read sequencing technologies to the market, the current macroeconomic conditions necessitate focusing our resources and investments on areas where we believe we can achieve the greatest market share gains and hold the strongest competitive differentiation. Based on these criteria, we are prioritizing our HIFI technology and the long-read sequencing market and have made the decision to pause development of our high-throughput short-read sequencing class. Although we have paused our development of the high-throughput short-read platform, we remain fully committed to selling the ONSO platform and supporting our current ONSO customers through ongoing commercial support and consumable supply.

Christian Henry: I'd also like to provide a brief update on how our restructuring initiative has impacted our short read sequencing strategy.

Christian Henry: While we continue to see strategic value in providing both long read and short read sequencing technologies to the market. The current macroeconomic conditions necessitate focusing our resources and investments on areas, where we believe we can achieve the greatest market share gains and hold the strongest competitive differentiation.

Christian Henry: Based on these criteria, we are prioritizing, our hi, <unk> technology and the long read sequencing market and have made the decision to pause development of our high throughput short read sequencing platform.

Christian Henry: Although we have paused our development of the high throughput short read platform, we remain fully committed to selling the ASO platform and supporting our current auto customers through ongoing commercial support and consumable supply.

Christian Henry: Moving on to product updates, in the first quarter, we continue to roll out our new Spark Chemistry, which significantly enhances Revio's data output and performance, while reducing the amount of DNA input required. Customer uptake has exceeded expectations with nearly 90% of our Revio Reagent Kit shipments. in the first quarter being SPARC chemistry. We're certainly pleased with our customers' response. Early adopters like Signios Biosciences, a global leader in genetic testing services, reported yield increases of 46 percent relative to their experience with the version one chemistry and emphasized how SPARC's lower sample input requirements has unlocked the ability to sequence previously inaccessible samples.

Christian Henry: Moving on to product updates in the first quarter, we continued to rollout, our new spark chemistry, which significantly enhances revenues data output and performance, while reducing the amount of DNA input required.

Christian Henry: Customer uptake has exceeded expectations with nearly 90% of our radio reagent kit shipments in the first quarter being spark chemistry.

Christian Henry: We're certainly pleased with our customers' response early adopters like Cigna <unk> Biosciences, a global leader in genetic testing services reported yield increases of 46% relative to their experience with the version one chemistry and emphasized how sparks lower sample input requirements.

Christian Henry: Has unlocked the ability to sequence previously inaccessible samples.

Christian Henry: Similarly, the University of Bern highlighted substantial productivity and cost efficiency improvements across various genomic research applications. Turning to Vega, early customer response has been very encouraging. Users are achieving strong yields, consistently exceeding our specification of 60 gigabases of HiFi data per smart. and deploying the platform across a wide range of applications. For example, the Integrated Microbiome Resource at Dalhousie University is using VEGA for microbial genomics and eDNA amplicon sequencing for worldwide client. while Eligen is applying to amplicon sequencing in support of DNA synthesis workflow. We're also seeing the adoption in labs for gene editing research and targeted sequencing applications.

Christian Henry: Similarly, the University of Bern highlighted substantial productivity and cost efficiency improvements across various genomic research applications.

Christian Henry: Turning to Vega early customer response has been very encouraging users are achieving strong yields consistently exceeding our specification of 60 Gigabases of hi Fi data per smart cell.

Christian Henry: And deploying the platform across a wide range of applications. For example, the integrated my microbiome resource at Dallas, Houston University is using Vega for Micra, microbial genomics and E. DNA amplicons sequencing for worldwide client samples, while allergan is applying to.

Christian Henry: To amplify on sequencing and supportive DNA synthesis workflows.

Christian Henry: Also seeing the adoption and labs for gene editing research and targeted sequencing applications.

Christian Henry: These early use cases reflect Vega's accessibility, ease of use, and versatility, enabling us to broaden our customer base, expand into new markets, and bring HiFi sequencing into new labs beyond the traditional large-scale whole genome application. Notably, approximately 50% of vega shipments through Q1 were to new to PacBio instrument customers. Looking ahead, we expect to continue ramping Vega manufacturing through the second quarter and reach a run rate production in the second half of 2025.

Christian Henry: These early use cases reflect vegas accessibility ease of use and versatility, enabling us to broaden our customer base expand into new markets and bring hifi sequencing into new labs beyond the traditional large scale whole genome application.

Christian Henry: Notably approximately 50% of Vegas shipments through Q1 were to new to Pac bio instrument customers.

Christian Henry: Looking ahead, we expect to continue ramping Vega manufacturing through the second quarter and reach a run rate production in the second half of 2025.

Christian Henry: On the informatics front, we recently announced a licensing agreement with the Chinese University of Hong Kong and the Center for Novistics to integrate advanced deep learning models into our sequencing workflows, significantly enhancing methylation detection accuracy and enabling comprehensive analysis of critical epigenetic markers such as 5MC, 6MA, and native 5H. The ability to profile 5-HMC, a dynamic tissue-specific marker implemented in brain development, cancer, and neurodegenerative diseases opens new opportunities in liquid biopsy, cancer detection, and cell-free DNA analysis. Several customers, including clinical customers like GeneDx and Children's Mercy Kansas City Hospital, have recently implemented methylation analysis into their tests, and we believe that the addition of these new models will further strengthen our platform's leadership in epigenetic sequencing and help enable clinical researchers to find greater insights from HiFi genomes.

Christian Henry: On the Informatics front, we reached we recently announced a licensing agreement with the Chinese University of Hong Kong and the center for Nova sticks.

Christian Henry: To integrate advanced deep learning models into our sequencing workflows significantly enhancing methylation detection accuracy and enabling comprehensive analysis of critical epigenetic markers such as five M. C. Six MAA and native five H M C.

Christian Henry: The ability to profile five H M C. A dynamic tissue specific marker implemented in brain development cancer, and neuro degenerative diseases opens new opportunities in liquid biopsy cancer detection and cell free DNA analysis.

Christian Henry: Several customers, including clinical customers like gene Dx and children's Mercy, Kansas City Hospital have recently implemented methylation analysis into their test and we believe that the addition of these new models will further strengthen our platforms leadership in epigenetic sequencing and help enable clinical researchers to <unk>.

Christian Henry: Find greater insights from Hi Fi Gino.

Christian Henry: Moving on to other recent highlights, we are proud to have been selected as the technology partner for the Davos Alzheimer's Collaboratives North American Dementia Registry Project. This initiative aims to build a comprehensive multiomics data set advancing global understanding of Alzheimer's genetics, especially within diverse and underrepresented populations. We also continue to gain momentum with our new and existing clinically focused customers in the first quarter, especially with the hospital and clinic customer base. Revio placements in the quarter included leading institutions such as the Lurie Children's Hospital in Chicago, Imagine Institute in France, and the Institute of Medical Genetics at the University of Zurich.

Christian Henry: Moving on to other recent highlights we are proud to have been selected as the technology partner for the Davos, All timers collaborative North American dimension dementia Registry project.

Christian Henry: This initiative aims to build a comprehensive multi omics datasets advancing global understanding of all timers genetics, especially within diverse and underrepresented populations.

Christian Henry: We also continued to gain momentum with our new and existing clinically focused customers in the first quarter, especially with the hospital and clinic customer base.

Christian Henry: Radio placements in the quarter included leading institutions such as the Leary Children's Hospital in Chicago Imagine Institute in France, and the Institute of medical Genetics at University of Zurich.

Christian Henry: These institutions anticipate leveraging Revio primarily to improve genetic disease testing capabilities and solve more cases for variant detection previously missed with other technologies.

Christian Henry: These institutions anticipate leveraging radio primarily to improved genetic disease testing capabilities and solve more cases for variant detection previously missed missed with other technologies.

Christian Henry: Additionally, we've established a pioneering collaboration with Chulalongkorn University in Thailand to integrate PacBio HiFi whole genome sequencing into their National Newborn Screening Research Program, the first initiative of its kind in Southeast Asia. This groundbreaking project aims to leverage HIFI's unique capability to reveal previously undetected genetic variants, significantly enhancing the precision of early life genetic screening.

Christian Henry: Additionally, we've established a pioneering collaboration with Chulalongkorn University in Thailand to interrogate Pac bio to integrate Pac bio Hi, Fi whole genome sequencing into their national newborn screening research program.

Christian Henry: The first initiative of its kind in southeast Asia.

Christian Henry: This groundbreaking project aims to leverage high five's unique capability to reveal previously undetected genetic variants significantly enhancing the precision of early life genetic screening.

Christian Henry: Finally, we are also pleased to share the initial results from our annual customer survey, which shows a net promoter score of over 50, which is widely considered an excellent rating, underscoring our commitment to customer satisfaction, innovative product development, and exceptional customer service. We've also had the opportunity to connect directly with customers through our global PRISM 2025 event series, our flagship forum for engaging the genomics community and showcasing the future of long-read sequencing. Events held across Asia, Europe, and the United States have brought together researchers, clinicians, and partners to explore the latest PacBio innovations and share real-world insights.

Christian Henry: Finally, we are also pleased to share.

Christian Henry: Initial results from our annual customer survey, which shows the net promoter score of over 50, which is widely considered an excellent rating underscoring our commitment to customer satisfaction innovative product development and exceptional customer support.

Christian Henry: We've also had the opportunity to connect directly with customers through our global Prism 2025 events series, our flagship forum for engaging the genomics community and showcasing the future of long read sequencing.

Christian Henry: Events held across Asia, Europe, and the United States have brought together researchers clinicians and partners to explore the latest Pac bio innovation and share real world insights at.

Christian Henry: At each stop, we've seen strong engagement and enthusiasm, particularly around the accessibility of Vega, the performance gains delivered by SPARC, and the expanding role of HiFi sequencing in clinical research.

Christian Henry: At each stop we've seen strong engagement and enthusiasm, particularly around the accessibility of Vega the performance gains delivered by spark and the expanding role of Hifi sequencing in clinical research. We look forward to concluding this year series next week in Boston.

Christian Henry: We look forward to concluding this year's series next week in Boston.

Christian Henry: Lastly, I'd like to introduce Jim Gibson, our new CFO, who joined PacBio on March 31st. Jim brings over three decades of financial leadership experience across technology, healthcare, and life sciences, including at organizations like Apple, Tesla, and Netflix. as they went through significant transformation and growth. We look forward to his leadership and financial stewardship as we continue building PacBio into a scalable, profitable, and cash flow positive business.

Christian Henry: Lastly, I'd like to introduce Jim Gibson, our new CFO, who joined Pac bio on March 31st.

Christian Henry: Jim brings over three decades of financial leadership experience across technology health care and life sciences, including it organizations like Apple Tesla and Netflix as they went through significant transformation and growth.

Jim Gibson: We look forward to his leadership and financial stewardship, as we continue building Pac bio into a scalable profitable and cash flow positive business with that I will now hand, the call over to Jim Jim. Thank you Christian I'm incredibly excited to join back via the company's strategy and mission resonates deeply with me and I believe we're just.

Jim Gibson: With that, I will now hand the call over to Jim. Jim? Thank you, Christian. I'm incredibly excited to join PacBio. The company's strategy and mission resonate deeply with me, and I believe we're just beginning to unlock the full potential of what this company can deliver to the lifesize.

Jim Gibson: Beginning to unlock the full potential of what this company can deliver to the lifestyle community I look forward to meeting our customers partners and investors in the months ahead.

Jim Gibson: I look forward to meeting our customers, partners, and investors in the months ahead.

Jim Gibson: Now turning to our financial results, we will be discussing non-GAAP results, which include non-cash, stock-based compensation. I encourage you to review the reconciliation of GAAP to non-GAAP financial measures in our earnings precedent. As discussed, we reported $37.2 million in products, service, and other revenue in the first quarter of 2020. compared to $38.8 million in the first quarter of 2024. Instrument revenue in the first quarter was $11 million, a decrease of 42% from $19 million in the first quarter of 2020. due to lower review. We shipped 12 Revio systems in the first quarter of 2025 compared to 28 Revio systems in the first quarter of 2024.

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

Speaker Change: As discussed we reported $37 2 million in product service and other revenue in the first quarter of 2025 compared to $38 8 million in the first quarter of 2024.

Speaker Change: Instrument revenue in the first quarter was $11 million, a decrease of 42% from $19 million in the first quarter of 2024 due to lower revenue of system shipments.

Speaker Change: We shipped 12 <unk> systems in the first quarter of 2025 compared to 28 <unk> systems in the first quarter of 2024.

Jim Gibson: Additionally, we shipped 28 Vega systems in the first quarter of 2020. We ended the quarter with 282 cumulative Rebbio systems. and 35 cumulative Vegas. Turning to consumables, revenue of 20.1 million in the first quarter increased 26% from 16 million in the first quarter of last year, with annualized revenue pull-through per system of approximately 236,000. Finally, service and other revenue was $6 million in the first quarter of 2020. compared to $3.8 million in the first quarter of 2024, driven by an increase in service contract revenue related to revenue.

Speaker Change: Additionally, we shipped 28 Vegas systems in the first quarter of 2025, we ended the quarter with 282 cumulative <unk> system shipments and 35 cumulative Vegas system shipments.

Speaker Change: Turning to consumables revenue of $20 1 million in the first quarter increased 26% from $16 million in the first quarter of last year with annualized revenue pull through per system of approximately $236000.

Speaker Change: Finally service and other revenue was $6 million in the first quarter of 2025 compared to $3 8 million in the first quarter of 2024, driven by an increase in service contract revenue related to <unk>.

Jim Gibson: From a regional perspective, each region reported year-over-year growth in consumable revenue offset by instrument. America's revenue of $16.3 million decreased 8% compared to the first quarter of 2024, with the region continuing to be impacted by government funding headwinds and NIH funding For Asia-Pacific, revenue of $11.6 million decreased 9% compared to the first quarter of 2020. Consumables were particularly strong in the region as review system utilization increased to its highest level since its Complimenting the increased utilization, customers in Japan received their typical fiscal year-end stocking orders, and some customers in China made purchases ahead of potential tailings.

Speaker Change: From a regional perspective, each region reported year over year growth in consumable revenue offset by instrument headwinds.

Speaker Change: Americas revenue of $16 3 million decreased 8% compared to the first quarter of 2024.

Speaker Change: The region continuing to be impacted by government funding headwinds and NIH funding uncertainty.

Speaker Change: For Asia Pacific revenue of $11 $6 million decreased 9% compared to the first quarter of 2024.

Speaker Change: Sue Mobiles were particularly strong in the region as revenue system utilization increased to its highest level since its launch comp.

Speaker Change: Complementing the increase utilization customers in Japan received their typical fiscal year end stocking orders and some customers in China and make purchases ahead of potential tariffs.

Jim Gibson: Finally, EMEA revenue of approximately $9.3 million increased 11% compared to the first quarter of 2020. Europe in particular saw strong Revio placements in the hospital and clinic. Moving down the P&L, first quarter 2025 non-gap gross profit of 15 million represented a non-gap gross margin of 40%. https://www.pacificbiosciences.com Non-GAAP gross margin increased year-over-year due to improved product The gross consumables, which have higher gross margins, represented 54% of total revenue in the first quarter of 2025, compared to 41% of total revenue in the first quarter of 2024. In addition, we realized per-unit cost savings from both Revio Instrument and Revio Consumer.

Speaker Change: Finally, EMEA revenue of approximately $9 $3 million increased 11% compared to the first quarter of 2024.

Speaker Change: Europe in particular struck saw strong revenue of placements in the hospital and clinic customer base.

Speaker Change: Moving down the P&L first quarter 2025, non-GAAP gross profit of $15 million represented a non-GAAP gross margin of 40% compared to a non-GAAP gross profit of $12 6 million or a non-GAAP gross margin of 33% in the first quarter of last year.

Speaker Change: non-GAAP gross margin increased year over year due to improved product mix as consumables, which have higher gross margins represented 54% of total revenue in the first quarter of 2025 compared to 41% of total revenue in the first quarter 2024.

Speaker Change: In addition, we realized per unit cost savings from both revenue instrument revenue of consumables.

Jim Gibson: Non-GAAP operating expenses were $61.7 million in the first quarter of 2025, representing a 29% decrease from non-GAAP operating expenses of $87.2 million in the first quarter of 2020. Operating expenses in the first quarter included non-cash share-based compensation of $8 million, compared to $17.4 million in the first quarter of last The decrease in both non-GAAP operating expenses and non-cash stock-based compensation was primarily due to the restructuring initiative we implemented in the second quarter of 2020. Regarding headcount, we ended the quarter with 570 employees compared to 575 at the end of 2020. 787 at the end of the first quarter of 2020.

Speaker Change: non-GAAP operating expenses were $61 7 billion in the first quarter of 2025, representing a 29% decrease from non-GAAP operating expenses of $87 2 million in the first quarter of 2020.

Speaker Change: Operating expenses in the first quarter included noncash share based compensation of $8 million compared to $17 4 million in the first quarter of last year.

Speaker Change: The decrease in both non-GAAP operating expenses and noncash stock based compensation was primarily due to the restructuring initiatives, we implemented in the second quarter of 2020.

Speaker Change: Regarding head count we ended the quarter with 570 employees compared to 575 at the end of 2024 and 787 at the end of the first quarter of 2024.

Jim Gibson: As a result of our restructuring announced on April 9th, we expect second quarter ending headcount to be approximately five. Non-GAAP net loss was $44.4 million, representing $0.15 per share in the first quarter of 2025, compared to non-GAAP net loss of $71.4 million, representing $0.26 per share in the first quarter of 2024. We ended the first quarter with $343.1 million in unrestricted cash. compared with $389.9 million at December 31, 2020. first quarter 2025 cash payments included at $5 million.

Speaker Change: As a result of our restructuring announced on April nine we expect second quarter, ending head count to be approximately 500.

Speaker Change: non-GAAP net loss was $44 4 million, representing <unk> 15 per share in the first quarter of 2025 compared to non-GAAP net loss of $71 4 million, representing 26 per share in the first quarter of 2024.

Speaker Change: We ended the first quarter with $343 1 million of unrestricted cash and investments compared with $389 9 million at December 31, 2024.

Speaker Change: First quarter 2025 cash payments included a $5 million license payments.

Jim Gibson: In the first quarter, we recorded several items related to our restructuring that impacted our gap. Our GAAP gross loss of $1.4 million included $4.3 million related to the amortization of acquired intangible assets. $4.1 million for a loss on purchase. $7.7 million related to inventory adjustments related to restructuring. Additionally, we recorded GAAP operating expenses of $427.6 million. which included 381.8 million of restructuring charges comprised primarily of 359.3 million of accelerated amortization of acquired intangible assets. 15 million of impairments. Gap operating expenses also included an $18.7 million decrease in the change in the fair value of the contingent consideration.

Speaker Change: In the first quarter, we recorded several items related to our restructuring that impacted our GAAP results. Our GAAP gross loss of $1 4 million included $4 3 million related to the amortization of acquired intangible assets.

Speaker Change: $4 1 million for a loss on purchase commitments and $7 7 million related to inventory adjustments related to restructuring.

Speaker Change: Additionally, we recorded GAAP operating expenses of $427 6 million, which included $381 8 million of restructuring charges comprised primarily of $359 3 million of accelerated amortization of acquired intangible assets and $15 million of impairment charges.

Speaker Change: GAAP operating expenses also included an $18 7 million decrease in the change in the fair value of the contingent consideration.

Jim Gibson: It is important to note that the amortization of acquired intangible assets and impairment charges are non-cash accounts. do not impact our liquidity, operations, or ability to execute on our long-term strategy.

Speaker Change: It is important to note that the amortization of acquired intangible assets and impairment charges are noncash accounting adjustments and do not impact our liquidity operations, our ability to execute on our long term strategy.

Jim Gibson: Now turning to guidance. As we've discussed earlier, we now expect revenue to be in the range of $150 million to $107 million. At the midpoint, this represents a growth rate of approximately 4% compared to 2020. As Christian indicated earlier, we lowered the bottom end of our range by 5 million as the result of uncertainty surrounding our ability to ship new instruments into China without significant However, this continues to be an extremely dynamic macro environment. especially with respect to trade policy and uncertainty surrounding future NIH funding. Our guidance midpoint still assumes a decline in Revio shipments from 2020.

Speaker Change: Now turning to guidance as we've discussed earlier, we now expect revenue to be in the range of $150 million to $170 million at the midpoint. This represents a growth rate of approximately 4% compared to 2024.

Speaker Change: As Christian indicated earlier, we lowered the bottom end of our range by $5 million as a result of uncertainty surrounding our ability to ship new instruments into China without significant tariffs. However, this continues to be an extremely dynamic macro environment, especially with respect to trade policy and uncertainty surrounding future NIH funding.

Speaker Change: Our good guidance mid point still assumes a decline in <unk> shipments from 2024. However, this is offset with growth in Vega and consistent with the first quarter, we expect annual pull through per radio system between the low to mid 200000.

Jim Gibson: However, this is offset with growth in vega and, consistent with the first quarter, we expect annual pull-through per revio system to be in the low to mid $200,000 range. In the Americas, our guidance continues to assume significant uncertainty in the broader academic research. Especially in the new term with accelerating activity in the clinical market anticipated to offset some of the potential. 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 Revio platform. Additionally, recently enacted tariffs may increase headwinds further in the We continue to expect EMEA to be the fastest growing region in 2025 as population sequencing programs scale, whole genome sequencing in a clinical setting grows, and we expand our customer base with VEGA.

Speaker Change: In the Americas, our guidance continues to assume significant uncertainty in the broader academic research community, especially in the near term with accelerating activity in the clinical market anticipated to offset some of the potential headwinds for.

Speaker Change: For Asia Pacific, while we anticipate growth in the region in 2025, the funding dynamics in several countries continued to affect capital purchasing timelines for the <unk> platform. Additionally.

Speaker Change: Additionally, recently enacted tariffs we increased headwinds further in the region.

Speaker Change: We continue to expect EMEA to be the fastest growing region in 2025 as population sequencing programs scale whole genome sequencing in a clinical setting grows and we expand our customer base with very good looking.

Jim Gibson: Looking at Q2, we're forecasting limited sales in China after April 10. And as a result, we expect revenue in the second quarter of 2025 to be flat compared to the first quarter of 2020. Moving down the P&L we continue to expect the 2025 non gap gross margin to be between 35% and 40%. representing an improvement of over 400 basis points compared to 2024 and we expect to exit the year above 40. We continue to expect cost improvements in both the REVIO system and REVIO. Additionally, we expect vega cost of goods sold per unit to improve as the platform moves from the pilot manufacturing line to the full production line later this year.

Speaker Change: Looking at Q2, we're forecasting limited sales in China. After April 10th and as a result, we expect revenue in the second quarter of 2025 to be flat compared to the first quarter of 2025.

Speaker Change: Moving down the P&L, we continue to expect the 2025 non-GAAP gross margin to be between 35% and 40% representing an improvement of over 400 basis points compared to 2024, and we expect to exit the year above 40%.

Speaker Change: We continue to expect cost improvements in both the revenue system revenue consumables. Additionally, we expect bigger cost of goods sold per unit to improve as the platform moves from the pilot manufacturing line to the full production line later this year.

Jim Gibson: We do not directly import any of our materials or components from China, although we do expect that our suppliers have some exposure. Should the U.S. enact tariffs on certain countries in our supply chain, we could face incremental pressure to our cost of goods in the second half of this year. As of now, our guidance does not factor in a material increase in COGs related to charity.

Speaker Change: We do not directly import any of our materials or components from China, Although we do expect that our suppliers have some exposure to the U S. <unk> tariffs on certain countries in our supply chain, we could face incremental pressure to our cost of goods in the second half of this year.

Speaker Change: As of now our guidance does not factor in a material increase in Cogs related to tariffs looking.

Jim Gibson: Looking at Q2, we expect non-GAAP gross margin to be lower compared to Q1, primarily due to product mixes. We expect instrument revenue to make up a greater portion of total revenue. As a result of our restructuring, we now expect non-GAAP operating expenses to decline 14% to 17% compared to 2024 and be in the range of $240 million to $250 million. We expect to continue to realize savings in 2026 and as such anticipate 2026 non-GAAP operating expenses to be lower than in 2025. We continue to expect interest and other income to be between $5 million and $7 million in 2028.

Speaker Change: Looking at Q2, we expect non-GAAP gross margin to be lower compared to Q1, primarily due to product mix as we expect <unk> revenue to make up a greater portion of total revenue.

Speaker Change: As a result of our restructuring we now expect non-GAAP operating expenses declined 14% to 17% compared to 2024 and be in the range of $240 million to $250 million we.

Speaker Change: We expect to continue to realize savings in 2026, and as such anticipate 2026, non-GAAP operating expenses to be lower than in 2025.

Speaker Change: We continue to expect interest and other income to be between $5 million and $7 million in 2025, and the weighted average share count for EPS for the full year to be approximately $299 million.

Jim Gibson: The weighted average share count for EPS for the full year to be approximately $299 million. Additionally, following our restructuring, we expect our ending cash balance of cash and Investments to be higher than previously anticipated and now expect to end the year with approximately $270 million. When excluding the $5 million licensing payment in Q1, this implies a $115 million cash burn in 2025 for an improvement of $72 million in adjusted cash burn compared to 2024. We remain on track towards our plan to achieve cash flow positive by the end of 2027 and believe our $343 million in cash and investments as of March 31st will fund us through this transition.

Speaker Change: Additionally, following our restructuring we expect our ending cash balance of cash and.

Speaker Change: And investments to be higher than previously anticipated and now expect to end the year with approximately $270 million when excluding the $5 million licensing payment in Q1. This implies a $115 million cash burn in 2025 for an improvement of $72 million and adjusted cash burn compared to 2024.

Speaker Change: We remain on track towards our plan to achieve cash flow positive by the end of 2027 and believe we are at $343 million.

Christian Henry: Cash and investments as of March 31 will fund us through this transition I will now hand, it back to Christian for some final remarks.

Christian Henry: I will now hand it back to Christian for some final remarks. In closing, we had a nice start to the year, though we remain cautious given the current macroeconomic environment, including uncertainty around academic funding and the potential impact of trade policy development. By proactively implementing our recent restructuring initiatives, we have emerged as a leaner, more focused organization positioned to successfully navigate these near-term challenges and execute on our long-term strategy. As we look ahead, our strategic priorities remain clear. First, we are committed to expanding the adoption of hi-fi sequencing by building on the strong early enthusiasm for our Vega benchtop platform and by continuing to enhance our Revio platform through the ongoing rollout of SPARC chemistry.

Christian Henry: In closing we had a nice start to the year, though we remain cautious given the current macroeconomic environment, including uncertainty around academic funding and the potential impact of trade policy developments.

Christian Henry: By proactively implementing our recent restructuring initiatives, we have emerged as a leaner more focused organization positioned to successfully navigate these near term challenges and execute on our long term strategy.

Christian Henry: As we look ahead, our strategic priorities remain clear.

Christian Henry: First we are committed to expanding the adoption of hifi sequencing by building on the strong early enthusiasm for our Vega bench top platform and by continuing to enhance our radio platform through the ongoing rollout of spark chemistry.

Christian Henry: Vega expands HiFi's accessibility into a broader and more diverse customer base, while Spark allows Revio users to extract more data from their sequencing runs, using significantly less DNA and Second, we remain dedicated to innovation through future product launches, such as enabling multi-use chip functionality to further reduce sequence. Concurrently, we are advancing our next-generation ultra-high-throughput long-reach sequencing technique. These initiatives aim to deliver hi-fi sequencing at or near price parity with short-read sequencing. significantly broadening our market Finally, we are progressing our clinical strategy to improve outcomes and build long-term durability into our business. This includes expanding our kitted solutions like PeerTarget to genetic testing labs and continuing to drive adoption at hospitals and medical centers around the world.

Christian Henry: They can expand to high fives accessibility into a broader and more diverse customer base, while spark allows <unk> users to extract more data from their sequencing runs using significantly less DNA input.

Christian Henry: Second we remain dedicated to innovation through future product launches such as enabling multi use chip functionality to further reduce sequencing costs concurrently we are advancing our next generation Ultra high throughput long read sequencing technology. These initiatives aimed to deliver hifi sequencing at <unk>.

Christian Henry: Our near price parity with short read sequencing significantly broadening our market potential.

Christian Henry: Finally, we are progressing our clinical strategy to improve outcomes and build long term durability into our business. This includes expanding our kitted solutions like peer target to genetic testing labs, and continuing to drive adoption at hospitals and medical centers around the world.

Christian Henry: With these clearly defined priorities, a streamlined organizational structure, and an increased focus on long-read innovation, we are very well positioned to deliver sustained growth over the coming years and achieve our goal of turning CAF so positive as we exit the pandemic. Thank you again for your continued support. We look forward to updating you on our progress in the quarters ahead.

Christian Henry: With these clearly defined priorities streamlined organizational structure and an increase boes gets on long read innovation, we are very well positioned to deliver sustained growth over the coming years and achieve our goal of turning cash flow positive as we exit 2027. Thank.

Christian Henry: Thank you again for your continued support we look forward to updating you on our progress in the quarters ahead with that I'll turn the call back to the operator to begin the Q&A session.

Operator: With that, I'll turn the call back to the operator to begin the Q&A session.

Christian Henry: Ladies.

Christian Henry: Yeah.

Operator: To ask a question, you may press star and then 1 on your touch-tone phones. If you are using a speakerphone, we do ask that you please skip the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: I just want to ask a question you May press Star and then one on you touched on phones you are using a speakerphone. Please pick up the handset prior to pressing the keys to ensure the best sand quality.

Operator: To withdraw your questions, you may press star 1 to... Again, that is star and then one to join the question queue.

Christian Henry: So draw your questions you May press star two.

Christian Henry: Again that is star and then one to join the question queue.

Matthew Sykes: Our first question today comes from Matthew Sykes from Goldman Sachs. Please go ahead with your question. Hi, thank you for taking my question.

Speaker Change: Our first question today comes from Matthew sites from Goldman Sachs. Please go ahead with your question.

Speaker Change: Hi, Thank you for taking my question. This is Jake on for Matt could you guys talk a little more about the clinical opportunity ahead of you in and how much of this can offset some of the concerns around academic and government, particularly throughout the rest of this year. Thank you.

Jake: This is Jake on for Matt. Could you guys talk a little more about the clinical opportunity ahead of you and how much of this can offset some of the concerns around academic and government, particularly throughout the rest of this year? Thank you.

Christian Henry: Yeah, hi, Jake. Thanks for the question. You know, the it is really an exciting opportunity. And it really started in twenty twenty four as we got the PureTarget panel out into the market and had, you know, significant customers like Quest and Myriad Genetics and others start to adopt that technology. And what we're seeing is that the ability to see parts of the genome that that short read sequencers can't see has been really appealing to these companies. And they're they're developing LDT tests that sit alongside, you know, sit alongside the short read workflows and are eliminating other legacy type tests and technologies in their workflow.

Speaker Change: Yes, Hi, Jay Thanks for the question.

Speaker Change: It is really an exciting opportunity and it really started in 2024 as we got the peer target.

Speaker Change: Panel out into the market and had.

Speaker Change: Significant customers like quest, and and and myriad genetics and others start to adopt adopt that technology and what we're seeing is that the ability to see.

Speaker Change: Parts of the genome that short read sequencing can't see has been really appealing to these companies and they are they're developing a L. D. T test that sit alongside sit alongside the short we workflows and are eliminating.

Speaker Change: Other legacy type tests and technologies in their workflow. So first and foremost these tests will allow them to do things they couldn't do before using sequencing and they make it more economical and so when you look at where we are today, we're expanding that we're continuing to add more.

Christian Henry: So, first and foremost, these tests allow them to do things they couldn't do before using sequencing and they make it more economical. And so when you look at where we are today, we're expanding that. We're continuing to add more more genes to to these panels, increase the level of multiplex. And what that does is it makes it more appealing to more, you know, more of these diagnostic type customers where we think we can get more durable revenue.

Speaker Change: More or genes to these panels increase the level of multiplex and what that does is it makes it more appealing to more.

More of these diagnostic type customers, where we think we can get more durable revenue and so we do think that's an area, where we're effectively doubling down and really focusing on because we think the revenue opportunity. There is significant not just in 2025, but over the next several years the second aspect of this.

Christian Henry: And so we do think that's an area where we're effectively doubling down and really focusing on, because we think the revenue opportunity there is significant, not just in twenty, twenty five, but over the next several years. The second aspect of this is, is in the rare disease world where we continue to see remarkable results using using radio and now with the spark chemistry. And we're seeing expansions of clinicians and clinical researchers use radio in the hospital setting to look at to do research and looking at these rare disease. There's rare disease populations and patients and so we're seeing that we're really seeing that grow aggressively in Europe where we're seeing, you know, in the Netherlands and Sweden, Denmark, other countries.

Speaker Change: <unk> is in the rare disease World, where we continue to see you.

Speaker Change: Remarkable results using using <unk> and now with the spark chemistry.

Speaker Change: And we're seeing expansion of.

Speaker Change: Clinicians and clinical researchers used <unk> in the hospital setting to look at to do.

Speaker Change: Research and looking at these are rare disease rare disease populations in patients and so we're seeing that we're really seeing that grow aggressively in Europe, where we're seeing.

Speaker Change: The Netherlands, and Sweden, Denmark other countries.

Christian Henry: And, you know, you just look at our placements in the first quarter of radio. A lot of them went to that segment. And so we do see this as a way to make up for the potential uncertainty around around funding. Funding in particular.

Speaker Change: and other countries. You just look at our placements in the first quarter of Reveo. A lot of them went to that segment and so we do see this as a way to make up for the potential uncertainty around NIH funding in particular. Thank you very much.

Jack Meehan: Jacob, we'll take the next question. Our next question comes from Jack Meehan from Nephron Research. Please go ahead with your question.

Jacob Woodhead, the next question

Speaker Change: Our next question comes from Jack Meehan from Neffron Research. Please go ahead with your question.

Jack Meehan: Thank you and good afternoon. Um, was curious, um, if you, I had two questions.

Thank you and good afternoon.

Jack Meehan: was curious. I had two questions. The first is within the 2025 guidance, if you could just share any rough expectations for what that might imply for radio and Vega placements, like what you be willing to share.

Christian Henry: The first is, um, within the 2025 guidance, um, if you could just share any rough expectations for what that might imply for Revio and Vega placements, like what you'd be willing to share. And then second is, um, appreciate all the, you know, like the swift actions you're taking, um, you know, as it pertains to the short-read assets. I was curious if this is something I know you're going to support on. So, but is this something you would consider monetizing? Is that something you're evaluating? Just any thoughts on that would be great. Thank you.

And then, second is...

Jack Meehan: I appreciate all the, you know, like the swift actions you're taking. You know, it pertains to the short read assets. I was curious if this is something, I know you're going to support on so, but is this something you would consider monetizing? Is that something you're evaluating? Just any thoughts on that would be great. Thank you. Thank you.

Christian Henry: Yeah, thanks. Thanks for the question. You know, certainly we won't give the specific unit numbers associated with where we see Revio and Vega, but we did say in the prepared remarks that, you know, we do expect Revio shipments to be down in unit terms year over year. And, you know, we do think Vega, you know, Vega has a very significant opportunity to grow.

Thank you. Thank you.

Yeah, thanks. Thanks for the question. You know, Mr. Putin

Jack Meehan: where we see Revio and Vega, but we did say in the prepared remarks that we do expect Revio shipments to be down.

in unit terms year-over-year.

And, you know, we do think Vega...

You know, Vega has a very significant opportunity to grow to grow.

Christian Henry: And I think, you know, the timing of Vega was right, was spot on in the sense that having a desktop platform with a lower capital cost in a challenging macroeconomic environment really has given us a lot of great opportunity. And we've seen, you know, we've seen the funnel continue to grow. And so, you know, I do fully expect Vega to grow in unit placements, you know, perhaps every quarter, but certainly over Q1 levels as we grow, you know, in Q2, and we'll kind of update it as we get into the back half.

Jack Meehan: And I think, you know, the timing of Vega was right, was spot on in the sense that having a desktop platform with a lower capital cost in a challenging macroeconomic environment really has given us a lot of great opportunity and we've seen, you know, we've seen the funnel continue to grow. And so, you know, I do fully expect Vega to be, to...

Jack Meehan: Roe in unit placements, perhaps every quarter, but certainly over Q1 levels as we grow in Q2 and we'll kind of update it as we get into the back half.

Christian Henry: Additionally, what we're seeing, of course, is that as we achieve manufacturing scale up, the gross margin associated with vega will improve over the course of the year, which is great for us because we will have a significant cost reduction as we get to production scale, moving from the R&D or prototype production line to the operational manufacturing line. And so we would expect not only placements to grow, but profitability or gross margin per system to grow over the course of the year as well. So we're pretty excited about that.

Additionally, what we're seeing, of course, is that...

Jack Meehan: We're as we achieve manufacturing scale up, the Gross Margin Associated with Vega will improve over the course of the year.

which is great for us. [inaudible]

Jack Meehan: because we will have a significant cost reduction as we get to production scale moving from the R&D or prototype production line to the

Jack Meehan: to the operational manufacturing line. And so, we would expect not only placements to grow, but profitability or gross margin per system to grow over the course of the year as well. So, we're pretty excited about that.

Christian Henry: With respect to short reads, it is a challenge. It is difficult, given the environment, to keep advancing both the long and the short read at the same time.

Jack Meehan: With respect to short aids, you know, it is a challenge, you know, it is difficult to give in the environment to, you know, keep...

Jack Meehan: Keep advancing both along on the short read at the same time, and so we did make the tough decision to...

Christian Henry: And so we did make the tough decision to really double down on long read, where we have very significant competitive advantages. And so we are evaluating all of our alternatives with respect to the short read platform. We continue to support our on-site customers in the field. And with the high throughput system, we have made a lot of progress with getting that system developed. And so it is in a state now where it could be valuable. And so we'll explore that.

really doubled down on long reed where we have...

Jack Meehan: You know, very significant competitive advantages. And so we are evaluating, you know, all of all of our alternatives.

with respect to the...

Jack Meehan: The short-read platform. We continue to support our also customers in the field, and with the high throughput system, you know, we have made a lot of progress with getting that system developed.

Jack Meehan: and so it is in a state you know now where it could be valuable and so we'll explore that and as we you know as we have more information we'll certainly share it with you guys. Thank you very much.

Christian Henry: And as we have more information, we'll certainly share it with you guys.

Kyle Nixon: Next question. Our next question comes from Kyle Nixon from Canaccord Genuity. Please go ahead with your question.

Speaker Change: Next question. Our next question comes from Kyle Mikson from Canacor Genuity. Please go ahead with your questions.

Alex: Hi, everyone. This is Alex along with Kyle Mikson. Thanks for taking my question. So I think one place to start would be if you could just kind of discuss what exactly you factored into your decision to pause the development of the high throughput short-read sequencer. Essentially, it's just a mix of computation as well as the poor funding environment. Thanks.

Hi everyone, this is Alex, along with Kyle Mikson [inaudible]

Alex: If you're taking my question, so I think one place to start would be if you could just kind of discuss what exactly you factored into your decision to pause the development of the half-throughput short read sequencer, essentially it's just a mix of competition as well as the poor funding environment. Thanks.

Yeah, yeah, thank you for the question. I mean, certainly we, you know, in making the decision

Alex: We had to consider several things. First, the macroeconomic environment and where our revenues

Alex: Revenues and margins that are needed to fund development are. That was one thing we had to consider. Second, we had to consider, you know...

Alex: Where are we strongest in the market and where do we see the biggest opportunities when you're evaluating?

Alex: in the most certainty around winning, and so that was something we considered. And then the third thing, very, very importantly, the progress we've made in R&D on the long-read side.

Alex: has just been quite frankly breathtaking over the last 12, 18 months.

Alex: You saw that we launched the Spark Chemistry last year, you know, in my prepared remarks, we talked about one customer that's seeing, you know, 46% increase in throughput

Alex: for Smart Cell. That, you know, we're seeing consistent improvement across the board relative to where customers were.

Alex: Before Spark Chemistry, and so we see the opportunity to add more value to that platform, and so we certainly want to keep investing.

Alex: And then when we start to look at the advances we continue to make...

Alex: in preparing for the ultra-high-throughput-long-replatform, things like multi-use, things like advances in our next-generation smart cell programs.

Alex: You know, things have gone perhaps faster than we expected, which means that we could get a new platform to market sooner and in all of our conversations with our core customers. Thank you very much.

Alex: You know, there's not a single customer that I talk to that says, gosh, I want I would like more throughput and and more and better pricing and we think that our next generation of products here.

With the with the progress that we've made

Alex: We'll get as close to price parity with short-read genomes and provide

Very significant amounts. [inaudible]

of throughput.

so that even the highest-scaled labs

in the world. .

could consider long-read sequencing in germline genomics in particular. And we believe that we...

We certainly have the technical capability and the market presence [inaudible]

to win a significant portion of that.

Germline Genetics Business.

Say, over the next five years and so-

Those were the decisions [inaudible]

Alex: Those were the factors that went into the decision. It's never an easy decision. We were encouraged by what we've done on the short-lead side, but when you're sitting in an environment like this right now, being lean, being focused and prioritizing is absolutely essential, and that's what we did.

William Ruby: All right, thank you very much.

Thank you very much.

Christian Henry: One last one from May. So we're essentially six months post Vega launch announcement. Can you just discuss if there's been any cannibalization of Revio by Vega? And then importantly, what was your level of confidence in being able to eventually transition Vega customers into more Revio placements?

One last one from me.

Christian Henry: Thank you. Yeah, that's a good question. And so, you know, you're, you're right, we announced the, we announced Vega back in November, I believe, early November, and we started shipping the product in December. And, and, you know, we've seen very strong strong demand from a funnel building as well as, you know, in this environment to to place the number of systems we did in Q1. I was actually quite quite pleased with that and I think what we're seeing is we're not seeing cannibalization of Revio from Vega but we are seeing situations where a customer may want is certainly wants a Vega but they don't have the funds right now and so they decide to get you know they decide to buy a Vega instead and we've seen that in several cases in in Q1 and we continue to see that a bit but it's not I wouldn't call it cannibalization that hey I've decided that Vega is all I need and not Revio it's I need Revio but I can't I can't afford Revio right now for funding considerations but I can get started with Vega and we're seeing that so I believe that those customers over the next few years as the funding environment improves you know we'll we'll see Revios sitting right alongside Vegas and vice versa in fact we are seeing customers that have Revios buy Vegas for and the reason why they do that is is for you know kind of rapid turnaround or their Vegas already fully occupied and they want to have you know they want to have additional sequencing capacity you know available to them and so I do think they're they're symbiotic they're not really cannibalizing and and so we really haven't seen that and then I think the last thing is I just would mention if you look at the funnel you know I think our funnel is is well over 50% new customers and so the strategy of penetrate of you know broadening our reach through Vega and then ultimately transitioning to you know getting those customers to transition to Revio over time is certainly working at this point particularly in this challenging macroeconomic and climate.

Alex: Strong demand from a funnel building as well as you know in this environment to.

Alex: To place the number of systems. We did in Q1 I was actually quite quite pleased with that and.

Alex: And I think what we're seeing is we're not seeing cannibalization of Rev.

Speaker Change: Ravi Oh from Vega, but we are seeing situations, where a customer may want is certainly wants a vega, but they don't have the funds right now and so they decided to get they decided to buy a dagger instead and we've seen that in several cases in in Q1, and we continue to see that a bit but it's not.

Speaker Change: I wouldn't call it cannibalization that hey, I've I've decided that Vega is all I need and not rather yeah, it's I need Rev Yo, but I can't I can't afford radio right now for funding considerations, but I can get started with Vega and we're seeing that so I believe that those customers over there.

Speaker Change: Next few years as the funding environment improves.

Speaker Change: Will.

Speaker Change: We will see <unk> sitting.

Speaker Change: Alongside Vegas, and vice versa. In fact, we are seeing customers that have <unk> by Vegas.

Speaker Change: For and the reason why they do that is for kind of a rapid turnaround or they're big is already fully occupied and they want to have you know they want to have additional sequencing capacity.

Speaker Change: Available to them and so I do think there they're symbiotic there not really a.

Speaker Change: Cannibalizing and so we really haven't seen that and then I think the last thing is I just would mention if you look at the funnel I think.

Speaker Change: Our funnel as is.

Speaker Change: Well over 50% new customers and so the strategy of penetration of broadening our reach through Vega, and then ultimately transitioning too.

Speaker Change: Getting those customers to transition to radio over time is certainly working at this point, particularly in this challenging macroeconomic climate.

Speaker Change: Thanks Al.

Matthew Carrico: Thank you.

Speaker Change: Thank you please.

Harrison: Our next question comes from Matthew Carrico from Stevens, please go ahead with your question. Great. This is Harrison on for Mason. Good afternoon, and thanks for taking the question. I wanted to start with how much visibility you think you have into the vega. funnel and how does your confidence in the outlook there compared to that of revenue? Are the error bars there around the the vega placements more narrow?

Speaker Change: Our next question comes from Masso curriculum.

Speaker Change: Stevens. Please go ahead with your question.

Speaker Change: Great.

Speaker Change: Personal information good afternoon, and thanks for taking the questions.

Speaker Change: I wanted to start with how much visibility do you think you have into the Baker.

Speaker Change: Funnel and how does your confidence in the outlook there compared to that of revenue are the arrow bars there around.

Speaker Change: The debate placements more narrow.

Christian Henry: Okay, we'll start there with visibility. Now, it's interesting, when you have a lower cost capital instrument, you have many, many more units that are sitting in the funnel. So that gives you many more shots on goal in any given quarter to achieve, you know, the unit numbers and and as a result, the revenue. And so, you know, I do think the quarter to quarter visibility is pretty reasonable right now in the near term. You know, as you get further out, of course, it becomes, you know, they become more, these are conversations and they progress, you know, and they progress from quarter to quarter.

Speaker Change: Okay, we'll start there with visibility now it's interesting when you have a lower cost capital instrument. You you have many many more units that are sitting in the funnel. So that gives you many more shots on goal in any given quarter to achieve the unit numbers.

Speaker Change: And as a result, the revenue and so I do think that quarter to quarter visibility is pretty reasonable right now in the near term as you get further out of course it becomes.

Speaker Change: They become more these are conversations and they progressed they progress from quarter to quarter and so overall I would say our visibility is pretty strong. We've just had these prism events that I discussed in my prepared remarks and.

Christian Henry: And so, overall, I would say our visibility is pretty strong.

Christian Henry: We've just had these PRISM events that I discussed in my prepared remarks. And, you know, in the Asia Pacific, which meeting held in Vietnam, there were several, you know, several POs that, that, you know, or PO commitments that were that came in right during the meeting. And another thing is we've had, you know, Bluebird kind of deals come in for Vegas systems, you know, that no one was expecting, and they just are coming in. And so, you know, I think that that's, that's additive to improving your visibility around how you're forecasting. And, you know, if you are thoughtful in how you put your forecast together, you know, you, you, you certainly have enough to get some, you know, reasonable confidence that you can achieve, you know, your forecast numbers.

Speaker Change: In the Asia Pacific with a meeting held in Vietnam there were several.

Speaker Change: Several pose that that you know our <unk> commitments that were that came in right. During the meeting and another thing is we've had.

Speaker Change: Bluebird kind of deals come in for Vegas systems.

Speaker Change: No one was expecting and they just are coming in and so you know.

Speaker Change: I think that that's that's additive to improving your visibility around how you're forecasting and if you are thoughtful in how you put your forecast together you know you certainly have enough.

Speaker Change: To get some reasonable confidence that you can achieve.

Christian Henry: And so, I feel pretty, I feel pretty good about it right now.

Speaker Change: Your forecast numbers, and so I feel pretty I feel pretty good about it right now.

Christian Henry: You know, I think we are just like all of our peers, we're wrestling with, with trade policy and tariffs. And, you know, what does that mean for demand outside the United States is, as I think most of you know, about half of our revenue comes, a little more than half of the revenue comes from outside the United States. And so, you know, we've done a lot of work on thinking about tariffs from the revenue perspective, as well as from the, the cost perspective. And as we put our guidance together, you know, we tried to certainly consider all of those dynamics.

Speaker Change: You know I think we are just like all of our peers were wrestling with.

Speaker Change: Trade policy and tariffs and what does that mean for demand outside the United States is as I think most of you know about half of our revenue comes a little more than half of the revenue comes from outside the United States and so we've done a lot of work on thinking about tariffs from the revenue perspective, as well as from the <unk>.

Speaker Change: Cost perspective, and as we put our guidance together we.

Speaker Change: Tried to certainly consider all of those dynamics.

Christian Henry: Got it. And sticking to your guidance there, given the fluid market backdrop, could you just speak to some of the upside and downside scenarios of Revio pull through this year? I know there's lots of moving parts there, but what's really baked in? and the Bollard Guide this year. Does it rely on any large-scale projects starting up in the back half? And if so, how much visibility do you have into those? The upsides, you know, the upsides to our plan would be certainly more more clinically driven placements of revios, maybe a little bit higher utilization than than what we're forecasting.

Speaker Change: Got it and sticking to your guidance there given the fluid market backdrop could you just speak to some of the upside and downside scenarios of revenue pull through this year.

Speaker Change: There's lots of moving parts, there, but what's really baked in.

Speaker Change: Into the Bolter got this year does it rely on any large scale projects starting up in the back half and if so how much visibility do you have into those.

Speaker Change: Yeah, you know we've taken a very conservative approach, where most of the most large type projects would be upside to our forecast I think that that's.

Speaker Change: Certainly the right way to play that in and the reason why we do that is because.

Speaker Change: Hi.

Speaker Change: The timing of when.

Speaker Change: A large project get agreed to contracted.

Speaker Change: Systems installed in the sample starting to flow can be highly variable and so when you start to think about it in the context of your financial guidance, you would much rather see that as kind of upside as opposed to core and so we've generally taken that approach one of the things we pointed out in our.

Speaker Change: A dec is that.

Speaker Change: Yeah that consumable revenue with principally and Thats really <unk>.

Speaker Change: At this point.

Speaker Change: Has been pretty consistent across our customer base.

Speaker Change: So each customer segment, we haven't seen dramatic changes in in consumable usage.

Speaker Change: And and so when you think about our assumptions in the guidance with respect to pull through.

Speaker Change: Using that low two hundreds you know to kind of mid two hundreds pull through assumption in preparing our guidance and of course, we go a lot more granular than that you know we look in each territory. We we try to look evaluate different account types in.

Speaker Change: As we as we continue to place more radios into commercial accounts diagnostic.

Speaker Change: Diagnostic accounts political accounts.

Speaker Change: They're pretty consistent users of the product and they're not as project driven and so that can give you better confidence and certainty around.

Speaker Change: Around the utilization slash pull through levels and so we tried to we tried to show a little bit about that if you look at our revenue picture. The challenge is really on.

Speaker Change: Instrument placements in uncertain in an uncertain time, the second challenge is of course, China, where.

Speaker Change: Right now, we're able to ship our reagents into the country.

Speaker Change: But without a significant burden of tariffs, but but instruments are.

Speaker Change: Our subject to tariff rate the Allen.

Speaker Change: Certainly that's had an.

Speaker Change: On impact and so that will be something that we'll be monitoring and its the real reason why we lowered the bottom end of the guidance, if China stays shut off in and NIH.

Speaker Change: H budget has a hard time getting.

Speaker Change: Getting approved or or has such a massive cut that you know it will force most people to pause those could certainly have an impact on us and we tried to consider it when we gave our original guidance.

Speaker Change: For the year, we gave a pretty wide range, knowing this uncertainty and that's why we feel we felt comfortable that.

Speaker Change: We didn't have that we didn't have to make significant change to our guidance.

Speaker Change: The upsides the upsides to our plan would be certainly more.

Speaker Change: Put more clinically driven placements of <unk>.

Speaker Change: Maybe a little bit higher utilization than than what we're forecasting and then of course being able to ship instruments into China would be a positive.

Christian Henry: And then, of course, being able to ship instruments into China would be a positive would certainly be a positive tailwind.

Speaker Change: It certainly be a positive tailwind for us.

Christian Henry: Thank you. Great. That all makes sense. Yep.

Speaker Change: Thank you, Greg and that all makes sense.

Speaker Change: Yes.

David Wattenberg: Our next question comes from David Wattenberg from Piper Sandler. Please go ahead with your question. All right. Close enough. Thank you very much for taking the question. So let me maybe just talk about some of the pull through. It's been kind of in that mid 2000 range. Obviously, the theoretical max is higher than that. And I think you have a lot of good amount of customers that are doing that.

Speaker Change: Our next question comes from David Washington, Berg from Piper Sandler. Please go ahead with your question.

Speaker Change: Alright.

Speaker Change: Thank you very much for taking the question so.

Speaker Change: Let me, maybe just talk about some of the pull through its been kind of in that bid.

Speaker Change: Range, obviously that the theoretical Max is higher than that and I think you have a lot of good amount of customers that are doing that so.

Christian Henry: So you can talk about, you know, maybe some of the strategic plans on getting it up to, you know, maybe above three thousand three hundred thousand a placement. And, you know, what that could do with adjusted, you know, some of some of the gross margins, if you were able to kind of get that up. I got a couple more things. Yeah, well, I mean, first and foremost, you know, Obviously this is fundamental to the business. You saw gross margins were much higher than expectation in the quarter and that's because you know for a couple reasons.

Speaker Change: So you can talk about maybe some of the strategic plans on getting it up to <unk>.

Speaker Change: It maybe above 3000 300000 of placement and what that could do with adjusted.

Speaker Change: But some of the gross margins. If you were able to kind of get that up and I got a couple more things.

Speaker Change: Yeah, well I mean first and foremost you know.

Speaker Change: Obviously this is fundamental to the business. He saw gross margins were much higher than our expectation in the quarter and that's because you know for a couple of reasons. The first reason is that the product mix is improving and this is what we've talked about over and over again that as consumers become a <unk>.

Christian Henry: The first reason is that the product mix is improving and this is what we've talked about over and over again that as consumers become a greater proportion of revenues we will see significant lift up in gross margins and so going from the mid 200s to 300 you know thousand plus is front and center and there's probably two or three fundamental things that we need to Number one, we need to continue to make make the product easier to use out of the gate. So a new customer, you know, doesn't take three to six months to really get up to speed and running at some level of capacity.

Speaker Change: Greater proportion of revenues, we will see significant lift up in gross margins and so going from the mid two hundreds two to 300.

Speaker Change: <unk>.

Speaker Change: <unk> thousand pluses is front and center and there's probably two or <unk> things that we need to do number one we need to continue to make.

Speaker Change: Make the product easier to use out of the gate, so a new customer.

Speaker Change: Doesn't take.

Speaker Change: Three to six months to really get up to speed and running at some level of capacity. If we can do that every little bit will accelerate in fact, it's hard.

Christian Henry: You know, if we can do that, every little bit will accelerate. In fact, you know, Todd You know, what we really need is one more run per customer per month to change, you know, to go from, say, the mid-200s to 300,000 plus. So, that's what we're talking about, one more run per customer per month, you know, 12 more runs per customer per year, and we're there. So, it's, you know, driving the early phases of adoption, driving to customers that are high-utilization customers, like the diagnostic, like the Quest Lab Corps, you know, myriads of the world, driving the, you know, driving the rare disease in the hospitals, in other words, making, you know, making more and more samples accessible.

Speaker Change: We want we really need is one more run per customer.

Speaker Change: Per month.

Speaker Change: The change to go from say the mid 200 to 300000, plus so that's what we're talking about one more runs per customer per month.

Speaker Change: 12, more runs per customer per year, and we're there. So it's driving the early phases of adoption driving to customers that are high utilization customers like the diagnostic like the quest lab cores, you know maybe areas of the world draw.

Speaker Change: Driving the driving the rare disease in the hospitals in other words, making may.

Speaker Change: Making more and more samples accessible and then the last piece of course, we did some of it last year by significantly reducing DNA input we opened up.

Christian Henry: And then, the last piece, of course, we did some of it last year by significantly reducing DNA input. We opened up Revio to effectively millions of samples that we could not sequence before because we required too much DNA, and so that's, you know, that was important because that enabled more projects to get on, and then it's enabling more applications. So, for example, at our PRISM conference yesterday, they showed great results using FFPE samples on our sequencers, which many people thought that that wasn't really feasible, and, you know, at the conference, there was a talk yesterday that showed fantastic results from FFPE.

Speaker Change: Oh two.

Speaker Change: Effectively millions of samples that we could not sequence before because we required too much DNA and so that's.

Speaker Change: That was important because that more projects to get on and then it's enabling more application.

Speaker Change: So for example at our Prism conference yesterday, they showed great results using a F F. P F.

Speaker Change: F P samples.

Speaker Change: On our sequences, which many people thought that that wasn't really feasible.

Speaker Change: At the conference there was a talk yesterday that showed fantastic.

Christian Henry: So, adding more applications will drive more opportunities to use the system. Lowering DNA input allows more samples to get on. proving the execution and the ease of use to make it easier and then selling to those customers that are really the high runners, all of those aspects can contribute to one more run per customer per month. And now you're over three hundred K in pull through. And, of course, you know, the gross margins are already higher than the instrument. So that will certainly drive the whole picture. So it's very doable. We're we're making we are making progress on all the key points.

Speaker Change: So, adding more applications will drive more opportunities to use a system or a DNA its foot allows more samples to get on.

Speaker Change: The execution and the ease of use to make it easier and then selling to those customers that are really the high runners all of those.

Speaker Change: Aspects can contribute to one more ron per customer per month, and now you're over 300 K.

Speaker Change: And pull through and of course.

Speaker Change: The gross margins are already higher than the instruments. So that will certainly drive the whole picture. So it's very doable. We're make we are making progress on all the key points.

Christian Henry: You know, now we just need to see we need some time to see it manifest. Got it.

Speaker Change: Now, let's see.

Speaker Change: We need some time to see it manifest.

David Wattenberg: I'll just ask maybe a quick one on on on tariffs here. Has this been able have you had any problems with maybe some of the inputs or cost reductions or see that coming in? You know, can you remind us U.S. based manufacturing versus where you are outside the U.S.? And then with regards another regards to tariffs, you know, I do know that one of your competitors has had a tariff surcharge or plans on implementing one. Is there any opportunities, you know, assuming you do have more U.S. manufacturing and won't be subject to much to to kind of compete a little bit more on price?

Speaker Change: Got it.

Speaker Change: Maybe a quick one on on on tariffs here has this been able have you had any problems with maybe some of the inputs are cost reductions or see that coming in can you remind us U S based manufacturing.

Speaker Change: Where you are outside the U S and then with regards to another regards to tariffs.

Speaker Change: You know that one of your competitors has.

Speaker Change: How did tariff surcharge or plans on implementing one is there any opportunities.

Speaker Change: Yeah, assuming you do have more U S manufacturing and won't be subject to much to to kind of compete a little bit more on price. Thank you and I'll take it off line from there.

Christian Henry: Thank you. And I'll take it offline from there. Yeah, I think that, you know, so we've been evaluating tariffs from every direction, like all of our peers, and certainly, I'm certainly sure they have been. And, you know, at this point, we certainly could implement a surcharge, we've, at this point, we feel like our supply chain is in a position where, where we don't think there's a significant impact. And therefore, we don't need to burden our customers with a price increase, unless we really start to feel the effects. When you think about where our supply chain on, on chips, on smart cells, you know, that's a long supply chain.

Speaker Change: Yeah, I think that you know so we've been evaluating tariffs from every direction like all of our peers and certainly I'm certainly sure they have been.

Speaker Change: At this point.

Speaker Change: We certainly could implement a surcharge.

Speaker Change: At this point, we feel like our supply chain is in a position where we're we don't think there's a significant impact and therefore, we don't need to burden our customers.

Speaker Change: With a price increase unless we really start to feel the effects.

Speaker Change: When you think about where our supply chain on on chips on smart cells. You know that's a long supply chain. So we carry a fair bit of inventory that that won't be subject to tariff for quite a while here.

Christian Henry: So we carry a fair bit of inventory that, that, you know, won't be subject to tariff for quite a while here. You know, we have most of our, most of our inbound products, we don't source a lot from China. So, you know, perhaps some of our suppliers do, and we will ultimately see some, you know, some impact for that. But so far, you know, we haven't seen a dramatic impact. And, you know, if we do, you know, we may have to implement a surcharge like others might. But, you know, we want to make sure that we continue to grow our opportunity.

Speaker Change: We have a.

Speaker Change: Most of our all most of our inbound.

Speaker Change: <unk>, we don't source a lot from China, so, perhaps some of our suppliers do and we will ultimately see some.

Speaker Change: Some impact for that but so far we haven't seen a dramatic impact.

Speaker Change: If we do you know we may have to implement a surcharge like others might but.

Speaker Change: We want to make sure that we continue to grow our opportunity.

Christian Henry: And, you know, one of the things we've been trying to do is make the system more economical. And so to the extent we can manage our gross margins within, you know, within the ranges that we expect, and, and we can, you know, ship our products globally around the world, you know, we're going to, we're going to really support our customers here and, and continue to grow our business. But, you know, if we do see, you know, if we do see some real challenges, you know, we may have to implement something like that down the road, but we're just going to keep monitoring.

Speaker Change: And one of the things we've been trying to do is make the system more economical and so to the extent, we can manage our gross margins within.

Speaker Change: Within the ranges that we expect.

Speaker Change: And we can ship our products globally.

Speaker Change: Around the world, we're going to we're going to really support our customers here and continue to grow our business.

Speaker Change: But if we do see.

Speaker Change: If we do see some real challenges, we may have to implement something like that down the road, but we're just going to keep monitoring at this point, we feel pretty good about what we're doing.

Dan Brennan: At this point, we feel pretty good about what we're doing. Thank you. Thanks for the questions, David. Yep.

Speaker Change: Okay. Thanks for that.

Speaker Change: Okay.

William Ruby: And our next question comes from Dan Brennan from TD Cowen. Please go ahead with your question.

Moderator: And our next question comes from Dan Brennan from TD Cowen. Please go ahead with your question.

William Ruby: Hi, this is William Ruby for Dan. Thank you for the questions. I've got two questions. One would just be if you could just kind of walk through your demand trends in EMEA, in your funnel there. And then there's a broader question on your long-term plans to get to pre-cash flow positive. What are the key drivers for this? What has to happen for this to happen? And how is the current environment impacting your ability to get there? Thank you. Yeah, good questions, William. You know, first, EMEA, we expect EMEA to be our fastest growing region for the year.

Speaker Change: Hi, This is William Ruby Ultra Dan Thank you for the questions.

Speaker Change: I've got two questions. One would just be if you could just kind of walk through your demand trends in EMEA and your funnel there.

Speaker Change: And then just a broader question on your long term plans to get to free cash flow positive what are the key drivers for this what has to happen for this to happen and how does the current environment impacting your ability to get there. Thank you.

Speaker Change: Yeah good questions William.

Speaker Change: First EMEA, we expect EMEA to be our fastest growing region for the year and that's really driven by.

Christian Henry: And that's really driven by, you know, by the rare disease market. We're seeing a great uptake in Revio in EMEA, because that's where, you know, they really are leading the rare disease charge and leveraging the power of HiFi to drive rare disease. And we're seeing that in the Netherlands, we're seeing it in Sweden, we're seeing it in Denmark. I believe Zurich, an order from Zurich this quarter, you know, came in for that exact reason. We're seeing it in Germany. So it's a pretty broad, you know, Institute in France this quarter had a, in Q1 had a Revio as well.

Speaker Change: You know by the rare disease market, we're seeing.

Speaker Change: Great uptake in <unk> in EMEA are because that's where they really are leading the rare disease charge and leveraging the power of <unk>.

Speaker Change: Hi Fi to drive rare disease, and we're seeing that in the Netherlands, we're seeing it in Sweden, we are seeing a Denmark I believe zerkle on order from Zurich This quarter.

Speaker Change: It came in for that exact reason, we're seeing it in Germany, So it's a pretty broad.

Speaker Change: Institute in France, This quarter had around in Q1 had a radio as well.

Christian Henry: So it's being, it seems as though that's accelerating. And if you look at, you know, in Europe, in particular, that's really where we're seeing, you know, some, some strong Revio opportunities. But we're also seeing big opportunities with the smaller, you know, with the smaller customers, new customers in the UK, which has traditionally been, you know, driven by Sanger as our biggest customer, but now we're, we're getting traction across the board there. So I think EMEA, you know, we do expect it to be our fastest growing region for the year. And, you know, and we'll see how that's going.

Speaker Change: So it's it's being it seems as though that's accelerating and if you look at.

Speaker Change: If you look at the demand I think that's you know in Europe in particular, that's really where we're seeing.

Speaker Change: Some strong revenue opportunities, but we're also seeing data opportunities with the smaller with the smaller customers new customers in the U K, which has traditionally been.

Speaker Change: Driven by Sanger as our biggest customer, but now we're just we're getting traction across the board. There. So I think EMEA, we do expect it to be our fastest growing.

Speaker Change: Region for the year.

Speaker Change: And.

Speaker Change: And we'll see how that's going with respect to free cash flow what has to happen for us to get to cash flow breakeven in 2027.

Christian Henry: With respect to free cash flow, what has to happen for us to get to cash flow break even in 2027? You know, there's really a couple of fundamental things. You know, first, we do have to grow from here on the top line. So, you know, we, Revio has to continue growing. Consumables have to, you know, continue growing. You know, just to reiterate, right, we had an all-time record Q1 quarter, 20 million, 20.1 million in consumables. That's going to really help us as we see consistent, you know, consumable usage growing in that area. So, I think that has to keep going.

Speaker Change: Really a couple of fundamental things.

Speaker Change: We do have to grow from here on the top line. So you know.

Speaker Change: Radio has to continue growing consumables have to continue growing.

Speaker Change: Just to reiterate right. We had an all time record Q1 quarter 20 million to $20 1 million in consumables.

Speaker Change: That's going to really help us as we as we see consistent.

Speaker Change: Consumable usage growing in that area. So I think that that has to keep going second we have to continue to drive innovation to make radio more valuable. So we can continue to drive placements, which will improve our top line and then third we do expect that the.

Christian Henry: Second, we have to continue to drive innovation to make Revio more valuable so we can continue to drive placements, which will improve our top line. And then, third, you know, we do expect that the high, the ultra-high throughput Longreach system will start to contribute to revenue in this horizon. And so it's important to get revenue from that as well. So we need to see our revenues grow. We do need to see our gross margin expand from where we were in 2024. And, you know, we do think we have a very strong pathway to make that happen.

Speaker Change: Hi, the ultra high throughput.

Speaker Change: Short long read system will start to contribute to revenue in this horizon and so it's important to get revenue from that as well so we need to see our revenues grow.

Speaker Change: We do need to see our gross margin expand.

Speaker Change: From where we were in 2024 and we do think we have a very strong pathway to make that happen and you saw Q1, we're off to a great start there.

Christian Henry: And you saw Q1, we're off to a great start there at over 40 percent. So I'm actually really proud of that. And then we have to be tight and manage expenses. You saw we had a significant reduction in spending last year. We have another significant spending this year. We'll get the full benefit of the restructuring in April in. you know, through through the remainder of this year, but really, the whole benefit will be felt in 26. And I think the combo of those is really what sets us up to, you know, to get to cash flow break even by the end of by the end of Q4 of 2027, you saw that our cash burn this year, you know, is roughly what $115 million for guidance, our guy in our guided cash burn.

Speaker Change: Over 40%, so I'm actually really proud of that and then we have to be tight and manage expenses.

Speaker Change: You saw we had a significant reduction in spending last year, we have another significant under spending this year, we will get the full benefit of the restructuring in April in.

Speaker Change: Through through the remainder of this year, but really the whole benefit will be felt in 'twenty six and I think the combo of those is really what sets us up too.

Speaker Change: To get to cash flow breakeven by the end of.

Speaker Change: By the end of Q4 of 2027, and you saw that our cash burn this year is roughly $115 million for.

Speaker Change: For guidance or in our guided cash burn and so we've made dramatic strides in improving our cash burn and we will continue to do so.

Christian Henry: And so, you know, we've made dramatic strides in improving our cash burn, and we will continue to do so. And so we have a lot of, there's a lot of excitement. We have to grow our revenues from here in order to make all of this work. There's no doubt about that. But we have the products, we have the innovation. And I do think even in this challenging environment, customers are using their sequencers and those sequencers are driving consumable revenue, which is good gross margin. Hopefully that helped. Thank you, yes.

Speaker Change: And so we have a lot of.

Speaker Change: There's a lot of excitement.

Speaker Change: We have to grow our revenues from here in order to make all of this work there is no doubt about that but we have the products. We have the innovation and I do think even in this challenging environment customers are using their sequences and those sequences are driving consumable revenue, which is good gross margin. So.

Speaker Change: Hopefully that helps.

Speaker Change: Thank you yes.

Operator: So we're at the bottom of the hour here, so we'll wrap up the call. Thank you everybody for joining. I'm looking forward to connecting with you all at the conferences and meetings ahead this quarter, and have a good day. Bye bye.

Speaker Change: Well no.

Speaker Change: So we're at the bottom of the hour here. So we'll wrap up the call. Thank you everybody for joining looking forward to connecting with you all at the conferences and meetings I had this quarter and have a good day bye bye.

Operator: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your line.

Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.