Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successfully initiated a significant restructuring, expected to reduce non-GAAP operating expenses by over $75 million annually.
- Consumable revenue grew 24% year-over-year and 7% sequentially, with notable strength in EMEA.
- Several large projects, such as the University of Tartu and the Estonian Biobank, are scaling up, indicating future growth in consumables.
- Revio continues to be the fastest-growing instrument in the company's history, with new customers accounting for nearly half of total shipments.
- Significant progress in research and development, including new Revio consumables expected to increase throughput and decrease DNA input requirements.
Negative Points
- Total revenue in Q2 was $36 million, below expectations due to a shortfall in instrument placements.
- Ongoing impact of a difficult macro backdrop and elongated customer purchasing cycles affecting revenue.
- Revenue from the Asia Pacific region decreased 36% year-over-year, driven mainly by lower revenue in China.
- Non-GAAP net loss was $55.2 million, representing $0.20 per share in Q2 2024.
- Full-year revenue is now expected to be around the low end of the previously guided range of $170 million to $200 million.
Q & A Highlights
Q: I want to focus on your consumables ramp for the back half of the year. What gives you confidence coming into 2025 that you do get that utilization up?
A: We saw a good consumable result in Q2, especially in Europe. Customers in the low utilization bucket are moving to mid and high utilization, driven by larger projects and clinical customers. Despite a large U.S. project losing funding, we expect more clinical customers to adopt our long-read technology, which will drive future instrument pull-through and consumable usage.
Q: Could you provide early feedback on the new PacBio Capital program announced?
A: Several systems closed in Q2 were under promotional programs, including PacBio Capital. The new Mitsubishi Capital program offers a straight rental with no reagent commitment, which is great for research organizations. Most deals that didn't close were due to funding constraints, not excess capacity.
Q: You mentioned a 20% reduction in Revio instrument and consumable costs by the end of the year. How much more room is there to reduce costs from there?
A: The 20% reduction is mainly due to innovation and improved manufacturing processes, not increased volumes. We are in-sourcing more production and improving yields, which are durable impacts that will persist into 2024 and beyond.
Q: How confident are you that the headcount reduction won't impact sales growth?
A: The sales organization was less impacted than other groups. We reorganized to have fewer spans and layers, allowing more executive touch with customers. Early signs indicate we are maintaining and building customer relationships and acting faster.
Q: What does the pipeline look like for population sequencing projects globally, and what is the appetite for long-read sequencing?
A: We are tracking many large projects. Some big projects started sequencing in Q2, and we see lots of opportunities globally. Clinical adoption is also increasing, driven by new products like PureTarget, which are being used for various clinical tests.
Q: How are conversations going with customers in China, and what do you expect for 2025?
A: Our business in China is mainly with large service providers. The stimulus may help return to normalcy. Asia Pacific as a whole has been tough, but we expect 2025 to be better with new products and potential stimulus benefits.
Q: How would you articulate your strategy in the clinical market, and what are the main areas of interest?
A: Our strategy is to develop products that compete with short-read sequencing and demonstrate our value proposition. Early applications include rare and undiagnosed disease, carrier testing, and whole genome approaches. We also see potential in oncology testing.
Q: Are existing Sequel customers still utilizing consumables at a steady rate?
A: Sequel users are generally using their instruments, though pull-through has decreased. They may outsource bigger projects to Revio Core Labs. We expect them to move to Revio or the low-throughput system over time.
Q: What is the timing for the launch of the low-throughput long-read system?
A: The low-throughput system uses the same consumables as Revio and will work with all applications out of the box. We are deep in development and expect to go straight to market without an extensive early access program.
Q: What is driving higher ASPs, and what are your expectations for the back half?
A: ASPs were higher due to not giving away the farm to meet numbers. We expect ASPs to remain around the same range. Promotional programs help build the sales funnel and drive interest. We see procurement challenges persisting, but sample volumes are increasing, which will drive more samples into the Revio platform.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
