PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Q1 FY2025 earnings call

Christian Henry shared Q1 2025 results, noting revenue was slightly above preliminary estimates. Instrument shipments were affected by academic funding uncertainty, while consumables showed robust growth. The Spark chemistry rollout exceeded expectations with nearly 90% of Revio reagent kit shipments being Spark. Vega had early positive adoption with approximately 50% of shipments going to new customers. The company announced a restructuring plan to reduce the annualized non-GAAP operating expense run rate by approximately $45 million to $50 million. Advancements in Revio and Vega development, including multi-use SMRT Cells and an ultra-high throughput long-read sequencing system, were highlighted. Informatics updates included a licensing agreement for methylation analysis. PacBio was selected as a technology partner for the Davos Alzheimer's Collaboratives project and gained momentum with clinically focused customers. Restructuring impacted the short-read sequencing strategy, with focus on HiFi technology and the long-read market.

In the first quarter of 2025, PacBio reported revenue of $37.2 million. Instrument revenue was $11 million, a 42% decrease from the prior year due to lower Revio system shipments (12 Revio systems shipped in Q1 2025 compared to 28 in Q1 2024) and 28 Vega systems shipped. Consumable revenue reached a record $20.1 million, representing a 26% year-over-year growth, with an annualized revenue pull-through per system of approximately $236,000. Service and other revenue was $6 million, up from $3.8 million in Q1 2024. Regionally, Americas revenue decreased 8% due to government funding headwinds; Asia-Pacific revenue decreased 9% but had strong consumables growth; EMEA revenue increased 11% with strong Revio placements in the hospital and clinic customer base. Consumables, which have higher gross margins, accounted for 54% of total revenue in Q1 2025 compared to 41% in Q1 2024.

PacBio now expects full-year 2025 revenue to be in the range of $150 million to $170 million, lowering the lower end by $5 million due to uncertainties from US-China tariffs and proposed NIH budget reductions for FY 2026. The guidance midpoint represents approximately 4% growth compared to 2024. Revenue in Q2 2025 is expected to be flat compared to Q1. Non-GAAP gross margin is expected to be between 35% and 40% in 2025. Non-GAAP operating expenses are expected to decline, with 2026 expenses lower than 2025. The company aims to be cash flow positive by the end of 2027.

The macro-economic environment remains challenging with uncertainties from US-China tariffs and proposed NIH budget reductions for FY 2026. Industry headwinds and potential further deterioration of tariff conditions or academic funding could impact revenue. Restructuring initiatives have uncertainties related to execution and their impact on the company's strategic focus.

Q: Talk about the clinical opportunity and how it can offset academic concerns.

A: Christian Henry mentioned the clinical opportunity with the PureTarget panel adoption by customers like Quest and Myriad, expanding panels and the use of Revio in rare disease scenarios in hospitals. He stated this could make up for potential uncertainties around NIH funding.

Q: Discuss if there is cannibalization of Revio by Vega and confidence in transitioning Vega customers to Revio.

A: Christian Henry said there is no cannibalization of Revio by Vega. Instead, customers may buy Vega due to funding constraints but have the potential to transition to Revio as funding improves.

Q: Talk about Vega visibility and Revio pull-through in guidance.

A: Jim Gibson discussed good visibility for Vega with a strong funnel, and a conservative approach on Revio pull-through with large projects seen as upside.

Q: Discuss tariffs impact and manufacturing.

A: Christian Henry noted the company is evaluating tariffs, with no immediate surcharge planned, and sees opportunities to compete on price with US manufacturing.