Earnings call transcript: Pacific Biosciences Q2 2025 beats revenue expectations, stock surges

Pacific Biosciences of California (PACB) reported its financial results for the second quarter of 2025, surpassing revenue expectations and showing a smaller-than-expected loss per share. The company posted a revenue of $39.8 million, exceeding the forecast of $36.66 million, representing an 8.57% surprise. The earnings per share (EPS) came in at a loss of $0.13, better than the anticipated loss of $0.17, marking a 23.53% surprise. According to InvestingPro data, the company maintains a Fair financial health rating despite trailing twelve-month losses of $657.75 million. InvestingPro subscribers have access to 7 key investment tips for PACB, including detailed insights about its financial health and market position. Following the earnings release, the stock experienced significant movement, closing at $1.26, down 8.7% during regular trading hours, but surging 10.32% to $1.39 in premarket trading the following day. With a beta of 2.17 and year-to-date returns of -31.15%, InvestingPro data shows PACB’s stock movements are notably volatile. The company’s market capitalization stands at $378.11 million, with analyst price targets ranging from $1.25 to $3.00 per share.

Key Takeaways

• Pacific Biosciences beat revenue expectations with an 8.57% surprise.
• The company reported a smaller-than-expected EPS loss of $0.13.
• Stock surged 10.32% in premarket trading after the earnings release.
• International growth was strong, particularly in APAC and EMEA regions.
• The company launched new products, including the Spark Chemistry and Vega platform.

Company Performance

Pacific Biosciences demonstrated robust performance in the second quarter of 2025, with a 10% year-over-year increase in revenue. The company is strategically expanding its presence in the clinical and research markets, leveraging its unique HiFi technology. InvestingPro analysis reveals a concerning cash burn rate, with negative free cash flow of $178.13 million in the last twelve months. The company maintains strong liquidity with a current ratio of 6.68, though its debt-to-equity ratio stands at 7.66. Despite a decline in instrument revenue, the company saw an 11% increase in consumables revenue, driven by innovations like the Spark Chemistry and Vega platform.

Financial Highlights

• Revenue: $39.8 million, up 10% YoY and 7% sequentially.
• Earnings per share: Loss of $0.13, better than the forecasted loss of $0.17.
• Non-GAAP Gross Margin: 38.3%
• Cash and Investments: $314.7 million

Earnings vs. Forecast

Pacific Biosciences exceeded revenue forecasts by 8.57%, reporting $39.8 million against an expected $36.66 million. The EPS loss of $0.13 was also better than the forecasted loss of $0.17, resulting in a 23.53% positive surprise. This performance indicates a strong quarter relative to expectations, reflecting effective cost management and strategic growth initiatives.

Market Reaction

The company’s stock closed down 8.7% at $1.26 following the earnings announcement but rebounded in premarket trading, surging 10.32% to $1.39. This volatility reflects investor optimism about the company’s better-than-expected financial results and strategic positioning in the market, despite initial negative sentiment.

Outlook & Guidance

Pacific Biosciences maintained its full-year revenue guidance of $155 million to $165 million. The company expects mid-teens growth in consumables revenue and a decline in instrument revenue. It is targeting a gross margin above 40% by year-end and aims for positive cash flow by 2027.

Executive Commentary

CEO Christian Henry highlighted the company’s competitive edge, stating, "HiFi technology is fundamentally different from anything else in the market." He also emphasized the potential of their platforms, saying, "We believe no other platform matches this level of biological insight at scale."

Risks and Challenges

• Uncertainty in NIH funding could impact future revenue.
• Decline in instrument revenue may continue to pressure margins.
• Achieving positive cash flow by 2027 requires disciplined cost management.
• Intense competition from short-read sequencing technologies.
• Macroeconomic factors could affect international expansion plans.

Q&A

During the earnings call, analysts were particularly interested in the company’s plans to manage costs and the potential impact of NIH funding uncertainties. Executives addressed these concerns by highlighting strong sales funnels for the Vega platform and the cost-saving potential of reusable SmartCell technology.

Full transcript - Pacific Biosciences of California (PACB) Q2 2025:

Conference Operator: Good afternoon, and welcome to the PacBio Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Todd Friedman, Director of Investor Relations. Please go ahead.

Todd Friedman, Director of Investor Relations, PacBio: Good afternoon, and welcome to PacBio’s second quarter twenty twenty five earnings conference call. Earlier today, we issued a press release outlining the financial results we’ll be discussing on today’s call, a copy of which is available on the Investors section of our website at www.pacb.com or as furnished on Form eight ks 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. With me today are Christian Henry, President and Chief Executive Officer and Jim Gibson, Chief Financial Officer. On today’s call, we will be making forward looking statements, including, among others, statements regarding predictions, estimates, expectations and guidance.

You should not place undue reliance on the 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. Please review our SEC filings, including our most recent Forms 10 Q and 10 ks and our press release to better understand the risks and uncertainties that could cause results to differ. We disclaim any obligation to update or revise these forward looking statements except as required by law. We will also present certain financial information on a non GAAP basis, which is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company’s operating results as reported under U. S.

GAAP. Reconciliations between historical U. S. GAAP and non GAAP results are presented in our earnings release, which is available on the Investors section of our website. For 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.

A recording of today’s call will be available shortly after the live call in the Investors section of our website. Those electing to use the replay are cautioned that forward looking statements may differ or change materially after the completion of the live call. I’ll now turn the call over to Christian.

Christian Henry, President and Chief Executive Officer, PacBio: Thank you, Todd, and good afternoon, everyone. Our financial results in the second quarter demonstrate that we continue to make significant progress towards our goal of increasing the adoption of our long read sequencing platforms and driving the company towards positive cash flows. We delivered both year over year and sequential revenue growth, reduced our quarterly cash burn, and we are on track to achieve the strategic initiatives that we laid out earlier this year. We reported $39,800,000 in revenue, up 7% sequentially and 10% compared to Q2 of last year. This was driven by strong international growth with revenue in our APAC and EMEA regions combined up 45% compared to 2024.

Non GAAP gross margin was 38.3%, ahead of our expectations, driven by a favorable product mix with a better than expected contribution from consumables. And we ended the quarter with approximately $315,000,000 in cash investments, also above plan, reflecting our continued cost discipline and lower than expected operating expenses. Second quarter instrument revenue was $14,200,000 up sequentially and down 4% year over year as funding constraints, particularly with academic and government customers, continued to pressure higher CapEx purchases. Consumables were strong during the quarter with revenue totaling $18,900,000 up 11% year over year and ahead of our expectations. Annualized REVIO pull through remained within our expected range of the low to mid 200,000 per system, with steady utilization across our installed base.

Our recently launched Spark chemistry is driving growth and expanding HiFi adoption. Compared to prior chemistry, it increases throughput up to 33%, lowers the cost per genome and reduces DNA input requirements fourfold. As a result, sequencing Gigabase output hit an all time high in Q2, up approximately 66% year over year. Turning to the full year outlook. At this point, we are starting to see the impact from tariffs in China to be lower than we expected last quarter.

However, it continues to be difficult to predict how tariffs will ultimately impact our business, particularly in China. Capital spending remains constrained, particularly among U. S. Academic institutions, which continue to face government funding headwinds and NIH related uncertainty. Taking these factors into account, we are maintaining the midpoint of our full year revenue guidance and narrowing the range to 155,000,000 to $165,000,000 representing 1% to 7% growth over 2024.

At the midpoint, this assumes mid teen growth in consumables revenue as REVYO utilization continues to ramp across a growing installed base, partially offset by mid teen decline in instrument revenue due to the current macroeconomic environment, including uncertainty around academic funding. Despite these macroeconomic headwinds, we continue to see broad adoption of our HiFi sequencing platforms across research, translational and clinical markets. In the second quarter, we shipped 15 REVIO systems and 38 VEGA systems, bringing our cumulative totals of installed base to two ninety seven REVIO and 73 Vega systems. On the Revio side, 60% of the placements went to brand new customers and one third were to LDT diagnostic or hospital labs, encouraging signs that HiFi is gaining share in these labs, replacing a number of legacy technologies. This is especially true in genetic and rare disease testing.

A few recent examples include VarianTyx, a diagnostics lab based in Boston and a new to PacBio customer that is seeking to improve key genetic disease assays by using Revio and PacBio HiFi sequencing in lieu of legacy sequencing technologies. GeneDx also added another Revio to its fleet in the second quarter and plans to incorporate our pure target chemistry to further advance key tests. Additionally, we placed additional REVIO systems into hospital systems in Northern Europe, where HiFi is being used to advance the understanding and improve solve rates for rare disease at scale. Turning to Vega, the PacBio team has built a robust platform. We’re extremely pleased with the system’s continued momentum and strong performance in the field.

In the second quarter, nearly 60% of Vega shipments were to new PacBio customers. And since launching in very late Q4 last year, Vega has brought over 40 new laboratories into the PacBio ecosystem, a number we expect to grow into the future. Importantly, Vega is not just broadening our customer base, it’s also expanding the range of applications HiFi can support. We’re seeing strong adoption among smaller labs and new market segments, and approximately 70% of Vega customers are using the platform for non whole genome applications, including small amplicon sequencing, targeted panels and microbial genomics. That’s exactly the kind of accessibility and versatility we designed Vega to deliver and it’s performing exceptionally well.

Customer runs consistently exceed our specifications across a range of insert sizes with HiFi read lengths and yields often surpassing expectations. At the Charles University in Prague, for example, one researcher shared how switching to Vega has significantly improved his lab’s scientific output. By eliminating months of troubleshooting associated with incomplete short read data, he’s able to double his publication rate while significantly improving data quality, starting projects with complete chromosomes from the outset. With its lower capital cost, compact footprint and integrated analysis tools, we believe Vega is opening new segments of the genomics market to PacBio, including labs and institutions that were previously out of reach for long read platforms. Miami University in Ohio is another great example.

Researchers at the institution shared that the system was intuitive to operate with streamlined informatics capabilities and they plan to use the platform across a wide range of applications, including single cell, epigenetics and immunology. They also noted that BIG is more cost effective than the leading low throughput short read next generation sequencing platform with run costs that align well with the funding models common in many academic and translational research settings. We’re also seeing growing momentum in population scale and multi omic initiatives around the world. In July, PacBio HiFi technology powered the first Arab human pan genome published in Nature Communications. This study uncovered millions of previously undetected variants, reinforcing the importance of long read accuracy when it comes to capturing genetic diversity and improving reference genomes.

We believe studies like this demonstrate why highly accurate long read sequencing is foundational to large scale population genomics programs, especially those seeking to expand inclusion across historically underrepresented groups. We also recently announced that PacBio has joined the 1,000 Genomes Long Read Project, a major global effort that is expanding beyond its original NanoPOR only design to now include HiFi based sequencing. As part of this next phase, PacBio plans to contribute full isoform full length isoform RNA data from roughly 1,000 samples using our Kinects RNA kits and REVIO systems. The program’s leaders specifically selected Kinects for its data quality, isoform resolution and throughput, offering what we believe is a clear advantage over existing short read and long read transcriptomic methods. With simplified PrEP, low RNA input requirements and scalable output, Connex is uniquely suited for large scale multipopulation studies.

This collaboration highlights how researchers are increasingly turning to HiFi and Connex to drive deeper insight into gene regulation and transcript diversity at population scale. As previously mentioned, we’re also seeing continued progress in clinical sequencing applications as well. Quest Diagnostics, for example, announced that its ATHENA Diagnostics division is using PacBio HiFi sequencing to enhance its ataxia movement disorder panel. Built on Revvio and powered by our pure target chemistry, this assay can detect repeat expansions and complex variants that can be frequently missed by conventional short read tests. It’s a clear example of how HiFi sequencing is making its way into routine clinical workflows, enabling more comprehensive and accurate testing.

We’re also expanding our clinical footprint internationally. Recently, we announced a new agreement with Haorai Gene, a leading genomics distributor in China with deep expertise bringing long read sequencing into clinical use. Haorai has already played a pivotal role in advancing HiFi based testing in the region. They launched a HiFi based HLA typing product in 2022 and they’ve since deepened collaborations with major blood centers to expand national research efforts in rare blood classification, antigen mapping and applications that demand the high resolution, allele level accuracy that HiFi uniquely provides. Through this partnership, we expect to further grow our clinical presence in the transfusion medicine and hematology markets in China.

In translational research, we were honored to be selected by Target ALS to support the largest global ALS genomic study utilizing HiFi sequencing to date. This project is expected to use Revio to generate whole genome data from thousands of ALS patient samples, aiming to uncover the complex genetic contributors to this devastating disease and generate the largest long read open access database for ALS. ALS presents a challenging genetic landscape marked by structural variants, repeat expansions and non coding elements, many of which are invisible to traditional sequencing. We believe HiFi’s length and accuracy make it particularly capable of resolving these difficult regions, helping researchers discover new links between genetic variation and disease progression. And because the data from the study will be made broadly available, it has the potential to accelerate discoveries that lead to better diagnostics, new therapeutic targets and ultimately hope for people living with ALS.

And beyond HiFi adoption, we’re also helping define the next generation of genomic benchmark. Earlier this week, a study published in Nature Methods introduced the PLATUM Pedigree Benchmark, the most comprehensive family based variant dataset ever released. Developed by scientists at PacBio alongside collaborators at the University of Washington, University of Utah and others, this benchmark characterizes not just simple variants, but also complex and repeat rich regions that have traditionally been excluded from reference datasets. This resource was used to retrain Google’s deep variant AI model, resulting in a 34 reduction in erroneous variant calls genome wide with even greater improvements in the most difficult regions. It’s a powerful validation of how HiFi data is improving the performance of AI based tools and reinforcing PacBio’s position as a leader in sequencing accuracy.

Looking ahead, we’re also making strong progress in the development of our multi use SmartCell capability, a key innovation that will allow customers to run a Revvio SmartCell, the most expensive component of our consumable multiple times. This is a major step towards reducing the cost per genome for our customers and at the same time, improving our own gross margin. We believe this capability will help unlock larger scale projects, increase flexibility and create more value for customers doing high throughput research and clinical sequencing. We look forward to sharing more about this innovative technology at a later date. I’ll now hand the call over to Jim to discuss financials before I finish with a few closing remarks.

Jim?

Jim Gibson, Chief Financial Officer, PacBio: Thank you, Christian. I’ll be discussing non GAAP results, which include non cash stock based compensation expense. I encourage you to review a reconciliation of GAAP to non GAAP financial measures in our earnings press release. As discussed, we reported $39,800,000 in product, service and other revenue in the 2025 compared to $36,000,000 in the 2024. Instrument revenue in the second quarter was $14,200,000 a decrease of 4% from $14,700,000 in the 2024 due to lower REVIO unit shipments, partially offset by 38 VEGA systems as we commenced shipping this platform late last year.

We ended the quarter with two ninety seven cumulative REVIO system shipments and 73 cumulative Vega system shipments. Turning to consumables, revenue of $18,900,000 in the second quarter increased 11% from $17,000,000 in the 2024, with annualized revenue pull through per system of approximately $219,000 Vega consumables continue to grow sequentially with the expansion of the installed base and we anticipate providing expected pull through range at a later date once there is a larger and more established installed base. Finally, service and other revenue grew approximately 57% to 6,700,000 in the second quarter compared to $4,300,000 in the 2024, driven by an increase in Revio service contract revenue and revenue related to a large population sequencing program in Southeast Asia. From a regional perspective, Americas revenue of $17,700,000 decreased 15% compared to the 2024, with the region most affected by government funding headwinds and NIH funding uncertainty. We’re pleased to see Vega making progress with this customer base as over half the systems went to academic or government customers.

For Asia Pacific, revenue of $12,600,000 increased 53% compared to the 2024, driven by increased REVIO and VEGA placements and increased revenue from a population sequencing project in Southeast Asia. EMEA revenue of $9,500,000 increased 35% compared to the 2024. Building off momentum in the first quarter, the region continued to see strength in REVIO placements in the hospital and clinical researcher customer base and growing demand for the Vega platform. Moving down the P and L. Second quarter twenty twenty five non GAAP gross profit of $15,200,000 represented a non GAAP gross margin of 38% compared to a non GAAP gross profit of $13,200,000 or 37% in the 2024, primarily due to higher consumable margins.

Consumable margins improved in the quarter as a result of lower revenue consumable per unit costs. This was partially offset by lower instrument margin as we work towards shipping our production rate VEGA systems in the 2025. Non GAAP operating expenses were $58,100,000 in the 2025, representing an 18% decrease from non GAAP operating expenses of $71,000,000 in the 2024. Operating expenses in the 2025 included non cash share based compensation of $11,000,000 compared to $16,100,000 in the 2024. The decrease in both non GAAP operating expenses and non cash stock based compensation was primarily due to the restructuring initiative we implemented earlier this year.

Regarding headcount, we ended the quarter with four ninety one employees compared to five seventy five at the end of twenty twenty four and five eighty one at the end of the 2024. Non GAAP net loss was $40,000,000 representing $0.13 per share in the 2025 compared to a non GAAP net loss of $55,200,000 representing $0.20 per share in the 2024. We ended the 2025 with $314,700,000 in unrestricted cash and investments compared with $389,900,000 at 12/31/2024 and $343,100,000 at 03/31/2025. Turning to guidance. As discussed earlier, we are maintaining our revenue guidance midpoint, but narrowing the range to $155,000,000 to $165,000,000 as we believe the prior downside scenario to China in 2025 has been significantly mitigated while the upside case continues to be pressured by the academic funding environment.

Like last quarter, this continues to be an extremely dynamic macro environment, especially with respect to trade policy and uncertainty surrounding future NIH funding. Our guidance midpoint assumes consumable revenue grows in the mid teens compared to 2024, partially offset by a mid teens decline in instrument revenue. Consistent with the 2025, we expect annual pull through for Revvio system to be in the low to mid 200,000. 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 Asia Pacific, we continue to anticipate revenue growth in the region in 2025.

Though we expect a slight sequential decline in Q3 compared to Q2 due to modest tariff related order acceleration in the first half of the year. We continue to expect EMEA to be the fastest growing region in 2025 as population sequencing programs scale, whole genome sequencing and clinical settings grow and we expand our customer base with Vega. Looking at Q3 revenue, we expect revenue to be roughly flat on a sequential and year over year basis, partially due to a sequential decline in APAC after a strong Q2. Moving down the P and L, with the 2025 coming in better than we expected and per unit cost reductions expected on the REVU instrument and consumables in the Vegas system in the second half, we are raising our 2025 non GAAP gross margin guidance range and now expect it to be between 3740% and we continue to expect to exit the year above 40%. As mentioned, we are operating in an environment with trade policy uncertainty and if U.

Enacts 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 tariffs. We continue to be focused on our spend. We now expect non GAAP operating expenses to be in the range of $235,000,000 to $240,000,000 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 now expect interest and other income to be between $6,000,000 and $8,000,000 in 2025 and the weighted average share count or EPS for the full year to be approximately $298,000,000 We continue to expect our ending cash balance of cash and investments to be approximately $270,000,000 at the 2025.

When excluding the $5,000,000 licensing payment in Q1, this implies $115,000,000 cash burn in 2025 or an improvement of $72,000,000 in adjusted cash burn compared to 2024. We remain on track towards our plan to achieve positive cash flow by the 2027 and believe our $315,000,000 in cash and investments as of June 30 will fund us through this transition. I will now hand it back to Christian for some final remarks.

Christian Henry, President and Chief Executive Officer, PacBio: To close, I want to come back to the core of why we believe the company is positioned to deliver long term value to its stakeholders. HiFi technology is fundamentally different from anything else in the market. It enables researchers and clinicians to read native single DNA molecules at lengths of up to 25 kilobases with exceptional accuracy, while simultaneously detecting epigenetic modifications such as five methyl C and six methyl A in the same sequencing run at no additional cost. We believe no other platform matches this level of biological insight at scale. With Spark Chemistry, Connects RNA kits, pure target panels and our upcoming multi use SmartCell capability, we’re delivering true end to end solutions, reducing barriers to adoption through improved cost efficiency, higher throughput and workflow simplicity.

Together, these innovations are setting the stage for broader adoption in clinical and population scale genomics. We believe that we are well on the path to supporting not just tens of thousands of genomes, but ultimately hundreds of thousands to even millions of genomes. And we’re doing this with focus and financial discipline. By investing efficiently and narrowing our strategic priorities, we’ve meaningfully reduced our cash burn and are on track toward our goal of becoming cash flow positive as we exit 2027. That’s the opportunity ahead.

That’s why we’ve refocused on long read innovation. And that’s why we believe PacBio is well positioned to lead the next chapter of genomic medicine. With that, I’d like the operator to begin the Q and A portion of this call.

Conference Operator: We will now begin the question and answer session. The first question is from David Westenberg with Piper Sandler. Please go ahead.

David Westenberg, Analyst, Piper Sandler: Hi, great job on the quarter and thanks for taking the question here. I want to start off with the tough macro situation in The U. S. Are you seeing an impact just instruments? Are you seeing any kind of differences in consumable behavior, either by stocking or even putting off?

And then I just wanted to follow-up on that one and just ask, the Senate definitely sounds like they support NIH and will not allow the cuts to go through. Are you hearing the actual labs feeling that way? Or do they really need to see the proof in the pudding here?

Christian Henry, President and Chief Executive Officer, PacBio: Yes. Thanks, David. And appreciate the kind words on the quarter. We’re proud of what we accomplished in Q2. It is the macro continues to be tough in The U.

S. And that certainly impacts instruments. In fact, most of our revio placements were to commercial type providers and not academic customers in the quarter. And I think that’s going to continue until we get some more clarity around NIH. Consumables is a little bit different.

What we’re seeing is consumable utilization across the board has been basically pretty healthy and even trending up in some modest increments here and there. But what we don’t what it’s always difficult to know is what experiments are customers putting off because of the NIH uncertainty and that’s there certainly is some of that. But so far in The United States that hasn’t hurt our consumable revenue and we think the back half of the year will continue to look strong on the consumable front. With respect to the government and NIH, I do think customers are cautious. They are skeptical of the government right now in general because of all the upheaval.

When I talk to funding bodies and administrators, the people making the decisions, there still is confusion. There still is high levels of uncertainty when funding will happen. And so, we’ve heard the same thing you have that the Senate is very supportive of the NIH. We believe that the cuts probably won’t be as dire as perhaps has been outlined earlier in the year, but we will have to wait and see. Where I want to leave this, at least with the NIH, is the reality is the rest of the business across the world is growing extremely strong.

We saw our international growth at 45%. In fact, EMEA individually grew 35% in the quarter and APAC grew 53% in the quarter. So these are really strong results and they’re really driven by in EMEA, well, actually in both territories, increasing adoption and utilization of Revvio with driving our ability to land and expand across a much broader array of accounts than we ever could. So we’re very encouraged by the portfolio right now, and we just have to figure out how to keep moving in The U. S.

In this tough macro.

David Westenberg, Analyst, Piper Sandler: Got it. I wanted to follow-up on Vega because I think instrument revenue probably beat all of us. Can you talk about the dynamics? I mean, before Vega, I think we had this conversation about overcapacity in the market. You did mention 60% are new to new customers.

So I’m curious if these were predominantly actually ones that were outsourcing to large institutions in the past and you actually are seeing that dynamic where instead of sending it out to insources, they’re insourcing it and you’re seeing not kind of overcapacity. So supply and demand are more in equilibrium today than maybe a few years or a few quarters ago.

Christian Henry, President and Chief Executive Officer, PacBio: Yes. I think that it’s always when you look at the new customers, most of the time those customers probably have done some experiments that have been outsourced to get them into long reads, but not always. And it’s really the array of applications, microbial, small amplicon sequencing, targeted panels, things like that, that where Vega is a perfect fit. And so they can those customers can implement it in their lab with much faster turnaround than if they were to outsource it. At $169,000 list price, it’s a great bargain.

And in fact, if you look at Vega compared to low throughput short read sequencers leading short read sequencers, it’s actually cheaper to run Vega than it is to run those other low throughput platforms. And so we’re seeing some customers saying, hey, I’ve always wanted to get into long reads and now I’m surprised at how inexpensive it is and how easy it is to use as I kind of pointed out in my prepared remarks. And so I do think there’s a bit of balance in the market relative to a few quarters ago, as you kind of said. And it was this has been the strategy that we outlined in 2021, quite frankly, that you have a suite of sequencers that meet the customers where they are with a combination of throughput, cost and relative performance, but all of them with the hallmark of PacBio HiFi, highly accurate epigenetics in every run for free and single molecule sequencing so that you can do a lot more with the product. So we’ll see.

Todd Friedman, Director of Investor Relations, PacBio: Thanks for the questions, Dave. Gary, we’ll take the next question in the queue.

Conference Operator: Next question is from Jack Meehan with Nephron Research. Please go ahead.

Jack Meehan, Analyst, Nephron Research: Hey guys, good afternoon. Wanted to talk about clinical customer adoption. It felt like in the script, you made a lot of progress on that front over the last few quarters. Is it possible to get a rough estimate of how much of your consumables are coming from clinical now and just how that growth rate compares to the overall?

Christian Henry, President and Chief Executive Officer, PacBio: Yes. I mean, right now, it’s roughly 15% of our consumables are coming from those clinical customers. And that’s a figure that’s growing. And we expect to see that continue to grow. Most of these clinical customers are still in validation phase and developing their assays and preparing them for prime time.

A few of them like Quest have launched products, which is super exciting to see. But so I do think 15% is as a proportion probably will grow over time here and will be a key driver of consumable growth overall.

Todd Friedman, Director of Investor Relations, PacBio: And when we factor in translational clinical research too, so like the ALS program we’re part of, that’s not included in the 15%.

: Got

Todd Friedman, Director of Investor Relations, PacBio: 15% is mainly CX and LDT labs or direct in hospitals for genetic disease. There’s if you add in clinical research on top of that, it’s a much larger figure.

Jack Meehan, Analyst, Nephron Research: Got it. And then the revenue pull through in the quarter, I know it can bounce around a little bit, stepped down from 1Q, the guide assumes it picks up. I was just curious the dynamics around pull through in the quarter. Do you think any of the funding issues might have impacted that? And also how did the Spark rollout kind of influence overall consumables revenue?

Thank you.

Christian Henry, President and Chief Executive Officer, PacBio: Yes. So if we think about pull through as always, it does bounce around from quarter to quarter. And in the quarter, it did step down a little bit from Q1. But in Q1, we had the Japan impact, for example, that had a very significant bump to Japan was year end and therefore we had an inordinately high number of consumables going into Japan in the quarter. And so that kind of helped boost abuse Q1.

Q2, we really it was a pretty normalized quarter. I suspect that it’s kind of bouncing around in the range. I don’t expect it to I do think it will continue to bounce around in that range through the rest of this year. And probably, key a key change point will be, as we were talking about before with clinical, is as these bigger customers start to use it in routine ways, I suspect that might have an impact on it. If you look at Spark, the Spark chemistry has quite remarkable actually.

We were seeing up to a 33% improvement. So that’s basically lowering the cost per sample for our customers and enabling more samples to get on the system. Could that have a modest impact in the short run? Perhaps. We’re seeing probably at this point though, over 90% of our runs are with the Spark chemistry.

And so any pull through impact from that will probably normalize itself out over, say, this quarter, next quarter. We’re kind of seeing all of that adoption effectively happening now. So we’ll start to see a normalized rate from it, if that makes any sense.

Conference Operator: Next question is from Kyle

Jim Gibson, Chief Financial Officer, PacBio: Mixon with

Conference Operator: Canaccord. Please go ahead.

Kyle Mixon, Analyst, Canaccord: Hey, guys, thanks for the questions. Congrats on the quarter. I’m going to ask multipart question. The first is on the clinical, just a follow-up to Jack. You said thirty three percent or I guess a third of the REVEAL placements were to LDT or hospital labs and you’re replacing like a C Tech.

I would want to ask if these labs are typically using multiple long rate technologies. I’m curious if you’re winning head to head or permanently displacing legacy short or long rate. And then secondly on the placements, I mean the insurance were great in the quarter as Dave said before. Are you thinking about placements going forward? Was there any pull forward, I guess, from areas besides Asia, for example, in the second quarter?

Kyle,

Christian Henry, President and Chief Executive Officer, PacBio: can you repeat the second part of the question again because I didn’t quite I didn’t get it all written down actually.

Kyle Mixon, Analyst, Canaccord: Yes. I just asked two upfront to avoid being taken off. So just instrument placements going forward, given it was you were ahead of expectations and we saw expectations in the second quarter. And I was thinking that remind them might have been a pull forward or like an acceleration from 3Q to 2Q. So just thinking about like a run rate for placements going forward if we should use the second quarter as a good basis.

Christian Henry, President and Chief Executive Officer, PacBio: Okay. Fair enough. Okay. We’ll start with the clinical labs. So these many of these labs are using multiple technologies, multiple sequencing technologies.

Most of them certainly use short read sequencing technologies. And what’s happening is that they’re implementing our technology alongside the short read sequencing technology to help them get answers that they couldn’t get and we’re replacing legacy molecular biology techniques such as PC various PCR, Southern blot, other things. In some of the labs where we won head to head, we are replacing other long read technologies, which is exciting. But in many labs, they’re running they’re definitely running multiple technologies. What we’re hearing from our customers is now that we’ve achieved the innovation with PureTarget and with Spark Chemistry, the economics of running Revvio in a clinical setting are fit within their envelopes and the accuracy and the performance of our system and the ease of informatics is significantly better than other long read technologies, which will help them be more efficient, save money and get better answers to patients.

And we’re very excited about what’s happening in the clinical accounts. And we’ve designed our products to be very, very robust and very easy to use And given the track given the where most of the team has come from, you can imagine that’s kind of just ingrained in what we’re all about. So very excited about that. If you look at instrument placements into the back half of the year, we expect to see Vega continue to grow.

And we don’t think we’ve hit the steady state placement rate by any stretch. We do think there’s a lot of opportunity there. The sales funnel continues to grow. One of the things that we’re really excited about with respect to Vega is that we’re seeing the sales cycle be much faster than Revio. And we’re seeing lots of opportunities crop up in the first month of the quarter, for example, and close intra quarter, which isn’t that common quite frankly with Revio.

And so the velocity of sales of Vega is helping us and I do expect to see its grow in the back half. Vega will be dependent to I mean, Revio will be dependent on how NIH funding kind of emerges. We still see tremendous amounts of opportunity internationally. And as we’ve said, even as we said back in February, we thought Europe would be our fastest growing region this year. We continue to believe that.

A lot of that is based on rare disease work with Revio. So I think that we will see our forecast now are kind of flattish on revio sorts of placements as a baseline and maybe we’ll do a little better some quarters, a little lower some other quarters, if that helps.

Kyle Mixon, Analyst, Canaccord: That was perfect. Yes.

Conference Operator: The next question is from Doug Schenkel with Wolfe Research. Please go ahead.

Doug Schenkel, Analyst, Wolfe Research: Hey, guys. Thanks for taking the questions. So my first question is just

Conference Operator: Mr. Schenkel, your phone is breaking up.

Christian Henry, President and Chief Executive Officer, PacBio: Doug, you broke up. Can you start over for us?

Doug Schenkel, Analyst, Wolfe Research: Is that any better, Gus?

Christian Henry, President and Chief Executive Officer, PacBio: Yes, it is actually.

Doug Schenkel, Analyst, Wolfe Research: Guys, can you hear me now?

Christian Henry, President and Chief Executive Officer, PacBio: We can.

Doug Schenkel, Analyst, Wolfe Research: Okay. Very sorry about that. So, for taking the questions. The first one is on, I was going to say backlog, but it’s not really backlog. It’s almost like the activity that’s really close to officially getting an order on Vega and on Revvio.

I’m asking because I’m just wondering like how close you are to getting orders that you think would turn into orders and ultimately revenue if we got a good or better than bad or better than worst case NIH funding scenario. I’m wondering if like if there’s any way to quantify almost the pent up demand that exists pending resolution. And I’m also wondering if that’s a potential source of revenue upside this year or if that’s something we should be contemplating as we look ahead to 2026.

Christian Henry, President and Chief Executive Officer, PacBio: Yes, Doug. That’s boy, that is a crystal ball question. No question about it. And thank you for that. The Todd and I were actually just talking about that before the call looking at the third quarter forecast and where we are right now.

And the what’s really interesting is that the number of near forecasted opportunities is significant, much more much bigger than what we normally see. And I think I would probably and I’m speaking principally of Vega by the way. And I would characterize that as probably what you’re trying to get to and I can’t give you a number really. Don’t think that really makes sense. But you are right that we’re seeing a lot of opportunities that are near opportunities that we will that are not in the official forecast, but are near the forecast.

And so depending on for example, let’s say that there is a budget flush in the third quarter, Some of those could probably come to fruition, which would likely be a source of upside for us. We’re not anticipating any budget flush. I don’t think that it until we get some resolution on what’s going on with the NIH, it’s difficult to know. But it certainly could be a source of opportunity. We’re also seeing that outside even outside The United States, because the sales funnels are improving overall.

And so what will be interesting for us to execute on in the second half is how do we accelerate those near opportunities into real opportunities that close that may not be completely dependent on NIH. They might be dependent on other macro factors. I do think that that’s a source of potential upside for 2025 and certainly sets the stage for 2026.

Doug Schenkel, Analyst, Wolfe Research: Okay. Super helpful. One technology roadmap question. You’ve talked about development of reusable smart cells, understanding those would help reduce costs for customers. I’m just wondering, which type of customers, essentially which customer class do you think would be more open to this?

Is this something that you think could work on the research side? But as you think about clinical endeavors, is it really less relevant in that category? Thank you.

Christian Henry, President and Chief Executive Officer, PacBio: Yes, Doug. No, we’ve had lots of conversations with all kinds of different customers. And customers are really excited about it, whether it’s clinical customers or research customers. So we think it will be a broad adoption of this capability. Now we will we’re going to be very thoughtful about how we roll this technology out because it is real innovation and the industry hasn’t seen this before in a meaningful sort of way.

And so we will focus on our higher volume, high throughput customers likely first because they’ll get the most benefit out of it. The way we will implement the technology will be in a very automated way. So it’s very customer friendly and simple, consistent with everything we try to do here at PacBio. And so we do think that that will really help those higher throughput customers, both on the clinical side and on the research side. And the beautiful thing about this technology is not only does it lower the cost per sample for our customers, it substantially increases our gross margin at the same time.

So it’s one of those unique innovations that provides a double win, lower prices and higher gross margins, which is what we’re looking for.

Todd Friedman, Director of Investor Relations, PacBio: Thanks, Doug.

Conference Operator: The next question is from Subbu Nambi with Guggenheim Securities. Please go ahead.

Subbu Nambi, Analyst, Guggenheim Securities: Hey, guys. Thank you for taking my question. You saw a really strong performance outside The U. S. And I know you’re assuming status quo for the tariff environment.

But how much growth internationally is factored into your guidance with respect to tariffs? And is there any risk that outperformance internationally could be a risk to guidance?

Christian Henry, President and Chief Executive Officer, PacBio: Yes. Suva, that’s a great question. We’ve considered we have been thoughtful about how we think about tariffs. And so we’re not saying tariffs that we’re out of the woods on tariffs. And so we’ve taken a pretty conservative view on that.

In spite of that, we’ve seen substantial growth in the first half and we think that will continue in the second half. Especially with respect to China, we’ve been the situation continues to be volatile and none of us really know where the answers are. So we have built our guidance around more conservative cases than less, but perhaps not as conservative as we were last quarter, is the best way to see that. And the reality is we’re already halfway through the year. So when you were looking into Q2, starting with Q2, you were if you remember when we gave the guidance then, we were still all trying to grapple with Liberation Day and what China was saying what we were saying and China was saying and what The U.

S. Was saying about China. We think it’s a little bit more clear now, but not much. So we didn’t overreach on that at all. We’re still taking a very conservative view with our guidance.

Subbu Nambi, Analyst, Guggenheim Securities: Perfect. Thank you so much guys.

Conference Operator: The next question is from Tycho Peterson with Jefferies. Please go ahead.

Todd Friedman, Director of Investor Relations, PacBio0: Hi team. This is Priya on for Tycho. Just a question on pricing. Are you able to take price to account for tariff dynamics? I know one of your competitors had called out a 5% tariff surcharge.

So I was wondering what your thoughts are on pricing there?

Christian Henry, President and Chief Executive Officer, PacBio: So we have not adjusted pricing for any tariff dynamics. And quite frankly, we’re not really seeing any tariff impacts. And so at this point and so I think that’s masked as just a price increase, not a tariff surcharge. I think if we really were seeing tariff a significant impact from tariffs, we would certainly have to evaluate whether we either change our price or add a surcharge as others will do. But at this point, I don’t think we’ve seen any substantial impact to merit kind of evaluating that.

But we would if we needed to.

Todd Friedman, Director of Investor Relations, PacBio0: Awesome. Thank you.

Conference Operator: The next question is from Mason Caracao with Stephens. Please go ahead.

Todd Friedman, Director of Investor Relations, PacBio1: Hey, guys. A lot’s been asked here, but maybe I’ll just stick to one. You’ve highlighted how some of these larger scale projects, like the Estonia Biobank has helped driven strength in Europe. How concentrated, I guess, is 2025 revenue in these types of initiatives? And do you see similar opportunities, similar POPC projects on the horizon that could sustain EMEA growth into 2026?

Christian Henry, President and Chief Executive Officer, PacBio: Yes. That’s great question, Mason. Thank you so much. So you’re right. The larger scale like the Estonia project has helped buoy some of the growth in Europe.

But one thing I’ll point out is in the second quarter, the European team placed Revios into several hospitals in the Nordic region for rare disease clinical rare routine clinical rare disease, starting with translational research, but really moving into what you could consider national programs for rare disease. And so the growth in Europe has actually been much broader based than just the Estonia project. It has been with principally in what we’re seeing in this rare disease in the hospital setting. So this is all clinical and it’s happening throughout The Nordics and into the continent of Europe itself. And so we’re actually pretty excited about that.

Looking at the rest of the world, there are several POPC programs that are percolating around and moving forward, whether that’s the Precise program continuing on in Singapore, programs in Thailand, programs in other parts of the world as well. These are all significant opportunities, and I wouldn’t be surprised if in 2026, some of these projects actually start driving PacBio’s revenue growth. We haven’t I don’t want to report on anything we don’t any projects we don’t have yet, but I do think that there’s a lot of substantial opportunity. And there’s and these are principally outside The United States where there’s funding available. So stay tuned on that and I look forward to keeping you posted.

Kyle Mixon, Analyst, Canaccord: Perfect. Thanks.

Christian Henry, President and Chief Executive Officer, PacBio: Yes.

Conference Operator: The next question is from Luke Sergott with Barclays. Please go ahead.

: Hey, this is Jake on for Luke. Thanks for the question. So you mentioned not being able to supply some customers with Spark regions at the end of 1Q, so you had some back orders. Have those capacity constraints been addressed? And could you quantify how much of 2Q consumable revenue was pushed out from 1Q if it was material?

Christian Henry, President and Chief Executive Officer, PacBio: Yes. I mean, I think we had we did have some backorder in Q1, and we resolved a lot of that during the quarter. A lot of it was the sequencing, the reagents. And so what we did in 2Q was we increased the batch sizes of our production, which has helped us kind of get our arms around delivering on time to these customers. We still have some back order here and there, it’s not really a material push into Q3 at this point.

I think we’ve solved the vast majority of the issues.

: Great. That’s helpful. Thank you.

Christian Henry, President and Chief Executive Officer, PacBio: Yes.

Conference Operator: The next question is from Tom Stevens with Cowen and Company. Please go ahead.

Todd Friedman, Director of Investor Relations, PacBio2: Hi, all. Thanks for taking my question here. Just another one on the reusable flow cell. So are you guys still committed to scaling throughput longer term? Or has the model switched to kind of consistent throughput but much higher gross margin?

And then I’ve got another follow-up on kind of your unit costs.

Christian Henry, President and Chief Executive Officer, PacBio: Yes. No. So consistent with our strategy, our objective is to deliver not only lower costs and higher gross margin, but also higher throughput. Our objective is to get close to price parity with short read sequencing and at the same time, get close to parity with the scale of short read sequencing too. We think the future will require both for us to achieve both of those aspects.

We’re starting with we have our programs in place to develop a higher throughput sequencer. You can imagine we’re always working on those kinds of projects. And then at the same time, we are developing the multi use SmartCell that will enable lower prices. And so the combination will enable us to be successful at competing for the millions of samples that are available in the market for us to go after. So we’ve got both going on.

Todd Friedman, Director of Investor Relations, PacBio2: That’s really helpful. And then just a quick one on kind of unit costs. You’ve also made really, really good progress here, in a kind of low revenue environment. Have you

Christian Henry, President and Chief Executive Officer, PacBio: changed,

Todd Friedman, Director of Investor Relations, PacBio2: how you guys are perceiving the long term gross margin outlook given kind of the effective unit cost cuts you’ve been able to make in the last couple of quarters? Or is it just executing on a plan you guys already had in place?

Christian Henry, President and Chief Executive Officer, PacBio: Well, I think we haven’t updated our long term gross margin guidance and perhaps we’ll do that at another time. But of course, our objective is to dramatically increase our gross margins from here. And part of that is making fundamental innovation improvements, both on the SmartCell side and on the instrument side. And we’re making progress every quarter on driving the cost of instrumentation down, increasing the yields of SmartCells. We had near record yields for SmartCells in the second quarter, which helping push us forward.

And so what we’re doing is we’re putting all of the fundamental cost improvements in place. And then as we scale, we’ll get the economies of scale benefits, which will be a further push to help gross margins. But we haven’t updated the guidance for the long run. But at this point, we’re laser focused on exceeding exiting the year exceeding 40%. And then I’m sure we’ll communicate at the right time the next rung on the ladder up in 2026.

But I do think there is substantial opportunity to significantly increase gross margin here over the next few years.

Todd Friedman, Director of Investor Relations, PacBio2: Thanks, Christian. Appreciate that.

Christian Henry, President and Chief Executive Officer, PacBio: Yes.

Conference Operator: The next question is from Yuko Oku with Morgan Stanley. Please go ahead.

Todd Friedman, Director of Investor Relations, PacBio3: Hi. This is Jason on for Yuko. A lot’s been asked, just going to stick to one. So I just want to understand the type of applications on Vega. How similar or different are those applications compared to the main ones on Revvio?

Are the applications similar enough where Vega customers could transition to Revio in the long run if they need higher throughput? Or are some applications just more economical to run on Vega? Yes.

Christian Henry, President and Chief Executive Officer, PacBio: That’s a great question. So the great thing about our technology is the applications are applicable across the instrument portfolio. Some may choose, for example, microbial applications, 60 gigabases of sequencing of HiFi sequencing is pretty is a substantial amount of sequencing. But if they need more scale, we have multiplex technologies that will allow them to multiplex more samples and take advantage of the throughput of Revvio. And so it really becomes what is the scale of samples that the customer is looking at and how and what is the flow of samples in their labs.

And so for example, you don’t really get and this happens with other vendors too, where it requires an incredible amount of samples to get on a low cell, for example, to in order to get the lowest price per sample that you can, we would face the same some of the same things some of the same challenges on Revio in certain very small genome applications. So if you have a lot of samples, it’d be no problem. And if you have a lot of samples consistently, it’d be even easier. But it is such that they the customers can easily go from Vega to Revio and Revio back to Vega depending on what their needs are at the specific time.

Todd Friedman, Director of Investor Relations, PacBio3: Great. Appreciate the color.

Todd Friedman, Director of Investor Relations, PacBio: Yes. So we’re at the top of the hour. So we’ll wrap it up here. Thank you everybody for all the questions. We look forward to connecting with you at several conferences later this quarter and when we report our Q3 results next quarter.

Have a good one.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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