Good afternoon, everyone. And welcome to the PacBio First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please also note today’s event is being recorded. At this time, I’d like to turn the floor over to Todd Friedman, Investor Relations. Sir, please go ahead.

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, a copy of which is available on the Investor’s section of our website. A copy of our earnings presentation is also available on the Investor’s 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 make forward-looking statements including, among others, statements regarding predictions, estimates, expectations, and guidance. You should not place undue reliance on forward-looking statements because they are subject to assumptions, risks and uncertainties that could cause our actual results to differ materially from those projected or discussed. Please review our filings with the SEC to better understand the risks and uncertainties that could cause results to differ. 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 US GAAP. A recording of today’s call will be available shortly after the live call. 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 will now turn the call over to Christian.

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. We reported first quarter 2025 revenue of $37.2 million, which is slightly above our preliminary estimate shared on April 9 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 Vega systems. We've introduced new metrics to provide more transparency into our customer dynamics. While we don't expect to share this segmentation every quarter, we believe it offers helpful context, particularly in light of the current market conditions. The Academic and Research Institute segment represented the lowest percentage of instrument shipments since the Revio launch. We believe this is a direct result of increased funding pressures on capital equipment purchases. 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. 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, reaching a record $20.1 million, reflecting 26% year-over-year growth. 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 spending versus capital purchases. 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 impact 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 million and $170 million. The environment remains dynamic, and should tariff conditions or academic funding further deteriorate, we may face additional headwinds. 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 map. 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. 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 costs. We expect to lower our annual non-GAAP operating expense run rate by approximately $45 million to $50 million by year-end. Following these cost reduction measures, we are concentrating our efforts on our highest impact long-read platform initiatives. We continue to advance development programs aimed at enhancing our existing platforms such as Revio and Vega, including the future launch of multi-use SMRT Cells. This innovation is designed to further reduce sequencing costs for our customers to unlock higher sequencing volume while simultaneously improving our consumable gross margins. The development program is progressing quickly, and we've demonstrated high-quality, repeatable reuse results internally. Additionally, we are accelerating development efforts for our ultra-high throughput long-read sequencing system. This next-generation platform is expected to significantly increase throughput, enabling human whole genome sequencing costs at or near price parity with short-read technology. I'd also like to provide a brief update on how our restructuring initiative has impacted our short-read sequencing strategy. We continue to see strategic value in offering both long-read and short-read sequencing technologies to the market, but the current macroeconomic conditions necessitate focusing our resources and investments on areas where we believe we can achieve the greatest market share gains. 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 platform. 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. Moving on to product updates. In the first quarter, we continued 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 Spark chemistry. Early adopters reported yield increases of 46% relative to their experience with the version one chemistry, highlighting how Spark's lower sample input requirements unlocked the ability to sequence previously inaccessible samples. Similarly, the University of Burn highlighted substantial productivity and cost efficiency improvements across various genomic research applications. Early customer response to Vega has been very encouraging. Users are achieving strong yields, consistently exceeding our specification, and deploying the platform across a wide range of applications. We are also seeing adoption in labs for gene editing research and targeted sequencing applications. Moving on, we've recently announced a licensing agreement to integrate advanced deep learning models into our sequencing workflows, significantly enhancing methylation detection accuracy. Several customers have 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. We're proud to have been selected as the technology partner for the Davos Alzheimer's Collaboratives North American Dementia Registry project, advancing understanding of Alzheimer's genetics. We continue to gain momentum with our clinically focused customers in the first quarter, especially with the hospital and clinic customer base. Revio placements in the quarter included institutions leveraging Revio primarily to improve genetic disease testing capabilities. Additionally, we've established collaboration with Chula Longhorn University in Thailand to integrate PacBio HiFi whole genome sequencing into their newborn screening research program. This project aims to leverage HiFi's unique capability to reveal previously undetected genetic variants. Finally, we are also pleased to share the initial results from our annual customer survey, which shows a Net Promoter Score of over 50, underscoring our commitment to customer satisfaction and product development. With that, I will now hand the call over to Jim Gibson, our new CFO, who joined PacBio on March 31st. Jim brings over three decades of financial leadership experience across technology and life sciences. We look forward to his leadership as we continue building PacBio into a scalable and profitable business.

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 life sciences community. Now, turning to our financial results. 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. Instrument revenue in the first quarter was $11 million, a decrease of 42% due to lower Revio system shipments. We shipped 12 Revio systems in the first quarter of 2025 compared to 28 Revio systems in the same period last year. Additionally, we shipped 28 Vega systems in the first quarter of 2025. We ended the quarter with 282 cumulative Revio system shipments and 35 cumulative Vega system shipments. Turning to consumables, revenue of $20.1 million in the first quarter increased 26% from $16 million in the first quarter of last year, driven by high utilization across our growing base of Revio systems. From a regional perspective, each region reported year-over-year growth in consumable revenue, offset by instrument headwinds. Americas revenue of $16.3 million decreased 8%. For Asia-Pacific, revenue of $11.6 million decreased 9%. EMEA revenue of approximately $9.3 million increased 11% compared to the same period last year. First quarter 2025 non-GAAP gross profit of $15 million represented a non-GAAP gross margin of 40%. Non-GAAP gross margin increased year-over-year due to improved product mix and per unit cost savings from both Revio instrument and Revio consumables. Non-GAAP operating expenses were $61.7 million in the first quarter, representing a 29% decrease from non-GAAP operating expenses of $87.2 million in the same quarter last year, primarily due to the restructuring initiative. Our GAAP gross loss included restructuring-related items and our GAAP operating expenses included significant restructuring charges. It is important to note that the amortization of acquired intangible assets and impairment charges are non-cash adjustments that do not impact our liquidity. Now turning to guidance, we expect revenue to be in the range of $150 million to $170 million, with our guidance midpoint reflecting a growth rate of approximately 4% compared to 2024. While uncertainty remains regarding tariff impacts, we are setting realistic expectations for growth in consumables and maintaining a focus on profitability.

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. By proactively implementing our recent restructuring initiatives, we have emerged as a leaner organization positioned to navigate these near-term challenges. Our strategic priorities remain clear, focusing on expanding the adoption of HiFi sequencing and driving long-term value through innovation.

Our first question today comes from Matthew Sykes from Goldman Sachs. Please go ahead with your question.

Hi. Thank you for taking my question. Could you talk 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?

Hi, Jake. Thanks for the question. It really started in 2024 as we got the Pure target panel out into the market and had significant customers like Quest and Myriad Genetics adopt that technology. The ability to see parts of the genome that short-read sequencers can't see has been appealing to these companies. These tests allow them to do things they couldn't do before, making it more economical and appealing. We're also seeing expansions in the rare disease world where clinicians are using Revio for research. This area is growing aggressively in Europe, and we see this as a way to offset potential uncertainty around NIH funding.

We’ll take the next question.

Thank you. I had two questions. First is within the 2025 guidance, could you share rough expectations for Revio and Vega placements? Second, as it pertains to the short-read assets, is this something you might consider monetizing?

We expect Revio shipments to be down in unit terms year-over-year, but we believe Vega has significant growth opportunities. The timing of Vega being a desktop platform with lower capital costs has given us great opportunities. As for short reads, we decided to double down on long-read because we believe that's where our competitive advantages lie. We are evaluating alternatives with respect to the short-read platform.

Could you discuss what factored into your decision to pause the development of the high-throughput short-read sequencer? Was it competition, funding environment?

We had to consider several factors, including the macroeconomic environment and where we see the biggest opportunities. The progress we've made in R&D on the long-read side has been remarkable. We are seeing consistent improvement with long-read technology. We believe our next-generation products will offer significant amounts of throughput and will help us enter new markets.

Has there been any cannibalization of Revio by Vega? What is your confidence in transitioning Vega customers into more Revio placements?

We're not seeing cannibalization of Revio from Vega, but some customers are opting for Vega due to funding issues. We're seeing a symbiotic relationship between Revio and Vega, where customers will purchase both over time.

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 compare to that of revenue?

When you have a lower cost capital instrument, you have many more units that are sitting in the funnel, providing reasonable visibility. Just like our peers, we're wrestling with trade policy and tariffs, but our forecast confidence is strong right now.

Could you speak to some of the upside and downside scenarios of Revio pull-through this year?

We've taken a conservative approach regarding large projects as they are typically upside to our forecast. Consumable revenue has been consistent, allowing us to believe in a mid-200s pull-through, while uncertainties around instrument placements remain.

Can you discuss your strategic plans for getting pull-through above $300,000 per placement? What do you need to do?

To increase pull-through, we need to improve the product's ease of use and engage high utilization customers. Lowering DNA input while demonstrating more applications will contribute to achieving that goal. We're making progress on all key points and need to see it manifest.

Could you walk through demand trends in EMEA and how your long-term plans to get to free cash flow positive are impacted by the current environment?

We expect EMEA to be our fastest-growing region for the year, driven by the rare disease market. To achieve free cash flow positive status, we need to grow revenue, innovate, and manage expenses effectively. Our cash burn is improving but revenue growth from Revio and consumables is vital. 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 ahead this quarter, and have a good day.

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.