Pacific Biosciences of California, Inc. 2026 Q2 Earnings Call

Please go ahead. Good afternoon and welcome to PacBio's second quarter 2026 earnings conference call.

With me today are Mark Van Oene, President and Chief Executive Officer, Jim Gibson, Chief Financial Officer, and Christian Henry, PacBio board member and advisor. 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 8-K, 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. On today's call, we will make forward-looking statements, including, among others, statements providing 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 SEC filings, including our most recent Form 10-Q and 10-K, and our press releases 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 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. Reconciliations between historical US 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're 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.

Mark? Thank you, and good afternoon, everyone.

On behalf of the team, thank you, Christian, for your six years of leadership. I'm honored and excited to step into this seat, and I'm grateful for the support of you, our leadership team and board, who I've been working closely with to execute the seamless transition. Since joining in 2021 as Chief Operating Officer, I had the pleasure of leading the R&D organization that built the Revio and Vega instruments, and more recently oversaw development and rollout of the multi-use SMRT Next chemistry. My recent commercial leadership focus has leveraged the strength of our clinical account engagement, which has proven particularly effective in the EMEA region.

Looking ahead, my priorities will be directly built on this foundation, taking what's worked in EMEA and scaling it globally, driving SMRT Next adoption across accounts, and growing our understanding of disease biology and biomarker discovery by enabling greater high-throughput, cost efficiency, and data access. I'm energized by the multiple catalysts in front of us and confident in what's ahead as we take PacBio into its next phase of growth. Part of that next phase means operating with a leaner team focused on our highest priority growth drivers. I want to address a targeted reorganization we initiated late last week. We are integrating our marketing organization more closely with the rest of our commercial organization to ensure we maximize the growth opportunities we continue to see in the clinical market. This new aligned structure will sharpen our focus and strengthen our support for our clinical customers.

We also reviewed the broader organization to reduce management spans and layers. Importantly, I want to reiterate that none of our key R&D platform projects were impacted by this reorganization. Turning to discuss our recent performance and where I see the business going from here. Our second quarter was highlighted by the full global commercial rollout of our new SPRQ-Nx chemistry. Access to our SPRQ-Nx beta program was in high demand in Q1, and feedback was highly positive as we approached launch. I am pleased to report that customer enthusiasm for SPRQ-Nx has remained strong since full launch. In fact, in June, over a third of our install base opted into our new instrument software that facilitates usage of SPRQ-Nx, particularly its multi-use capabilities.

As a reminder, SPRQ-Nx provides a significant increase in sequencing throughput per run, and new customers are now able to use each SMRT Cell up to three times. This improves the economics for our customers and enables us to compete for substantially larger projects where competitive economics are crucial to winning. Many of our high throughput customers are currently in the process of validating the new multi-use workflows in their own laboratories, and we expect to see them ramping up SPRQ-Nx usage over the coming months. As a result, we believe SPRQ-Nx will be a significant driver of volume in the second half of the year and beyond. Against the backdrop of the SPRQ-Nx launch, our organization continued to execute on key priorities, including growing the evidence base of scientific validation for our HiFi platform through multiple significant publications.

We believe these speak to the utility of long-read genome sequencing for rare disease diagnostics. In addition, we continue to make progress commercially. We delivered $39 million in second quarter revenue, a step up from Q1. Total revenue was roughly flat year-over-year, driven by growing consumables and new Revio and Vega placements as we commenced the full rollout of SPRQ-Nx chemistry. Another benefit of the SPRQ-Nx economics is that we saw several customers expand their Revio fleet with multi-system orders to take on larger projects and programs. Additionally, we closed and shipped a significant order for several Revio systems to a new population scale customer that we expect to be in sequencing in the third quarter. Looking closer at our consumables performance in the quarter, total consumable revenue for the quarter was $20.1 million compared to $18.9 million the prior year period.

We continue to see strong adoption in the clinical market as shipments to clinical customers grew 67% year-over-year and represented a mid-teens% of total consumables shipments. We expect clinical shipments to continue growing as customers move to full commercialization mode across our install base. However, we now expect consumables pull-through for the full year to be $200,000-$225,000 per Revio system due to the pace of demand we are experiencing today. The narrower range reflects the timing of customer purchases, as several accounts that received large Q1 shipments are now working through existing inventory while evaluating the multi-use feature. As we continue to roll out the SPRQ-Nx transition into late 2026 and 2027, we anticipate this range increasing.