Pacific Biosciences of California, Inc. Canaccord Genuity's 46th Annual Growth Conference

Appreciate it. Great. Good morning, Kyle.

Sure. All right, Kyle. Again, thanks for inviting us to Canaccord to speak this week. First, we finished the second quarter with $39 million in revenue, up sequentially from the prior quarter. Solid consumable revenue, $20 million, so we were happy with that. Instruments at about $13 million and services at six. Services down slightly. We finished a big population genetics study over in Asia year-over-year, so that slightly decreased our service revenue. We were happy with our growth in consumables, especially related to clinical. We had 67% growth in our clinical business, which is really an area we're leaning into. So we're excited to see that performance. Also really excited with some of the expansion in our fleets.

We had two big deals with two existing customers to expand our fleet with Revio, and then we did a really large deal with a new population genomics initiative that we will be talking about a little more in Q3 that shipped 5 Revio. We are really excited with that deal as well. So continued strong demand for Revio. We believe primarily driven by the SPRQ-Nx launch, which this was also the first quarter of the commercial launch of SPRQ-Nx. We released that in May, so great reception from our customers on that as well. Then I think as important as the company continues to lean in heavily to the SPRQ-Nx transition, as well as kind of leaning heavily into clinical, we completed the transition to Mark Van Oene as our new CEO. He stepped into that role. We announced that last week.

That is something that has been in the works for a few years. He joined PacBio about 5 years ago, and in that time, he ran R&D. He was in charge of successfully launching the Revio, successfully launching the Vega, as well as successfully launching our SPRQ-Nx chips, as well as our original SPRQ chemistry. He also ran operations, so got intimately involved in driving operations and came from a long history of commercial when he was at Illumina. We are really excited for Mark. He is really focused on kind of expanding our presence in the clinical markets and really sort of continuing to expand the growth we are seeing in EMEA and the rest of the world. Some of those big successes we are seeing in EMEA, we want to replicate in both the U.S. and Asia Pac.

Mm-hmm. A couple things, yeah. One of the things that we've been impacted by this year, and we anticipate somewhat next year, is this dramatic increase in compute prices. One of the things we've committed to the street is to get ourselves cash flow positive around the launch of our next tool. In light of the continued impacts of the compute and memory shortage, as well as slightly slower uptake of SPRQ-Nx than we anticipated, we did a targeted reduction in force, and we went and we reduced marketing. We're now specialized. We're going to focus on the clinical market. We think we have a fantastic presence already in academic and government. The plant and animal, we're well-known in those areas.

What we've decided to do is have a targeted marketing team focused on clinical, and they're going to be joining the commercial team. I think that's one of the things Mark brought to this is he wants to see that as one united team. In doing that, we reduced marketing fairly substantially. We also reduced our spans and layers. We went through the company and took out some of the folks that were focused more on management than execution, and I think one of the things that's important as we move towards continuing our success with SPRQ-Nx and the launch of our next tool, we really want people that are hands-on with the business and our customers, quite honestly. That was what the reduction in force focused on.

Part of the reason we did it, as I said initially, 2027 is the area we're really going to start showing, we believe, some growth overall, especially with the launch of our next tool towards the latter half of 2027. One of the things this reduction in force allows us to do is really focus on reducing our comp and benefit expense. We anticipate $15 million to $20 million in decreased expenses related to that. As well as in 2027, we should be on the other side of most of the major spend we have for our new high throughput box. We believe we're looking at between $30 million and $40 million of decreased spend in 2027, and that helps extend our cash runway.

It really is about making sure the company is successful, focused on executing in the areas that we're winning in, and making sure everyone's focused on that. That was why it was the perfect time to do the restructuring with Mark's promotion, because that's what he's really focused on.