Pacific Biosciences of California, Inc. Q4 FY2025 earnings call

• Fourth quarter results exceeded expectations with record consumable revenue and strong instrument placements for Revio and Vega platforms.
• Fourth quarter revenue reached $44.6 million, driven by consumable revenue growth.
• Full-year 2025 total revenue was $160 million, with consumables driving most of the growth.
• Shipped 21 Revio and 42 Vega systems in the fourth quarter, with cumulative shipments at 331 Revio and 147 Vega systems.
• Focus on clinical adoption in rare disease, oncology, and carrier screening, with examples like University of Washington Medicine and Ambry Genetics using HiFi sequencing.
• SparkNex consumable chemistry is a key advancement, with a beta program expanding and new data showing improved yields and economics.
• Sale of short-read sequencing assets strengthened the balance sheet and extended cash runway.
• Non-GAAP gross margin improved from 27% in 2023 to 40% in 2025, and non-GAAP operating expenses decreased from $355 million in 2023 to $230 million in 2025, with improved cash burn.

In the fourth quarter, revenue grew 14% year over year and 16% quarter over quarter to $44.6 million. Consumable revenue grew 15% year over year, and instrument revenue increased 13%. For the full year 2025, total revenue was $160 million, a 4% increase from 2024. Consumables revenue rose 16%, instrument revenue decreased 18%, and service and other revenue increased 36%. Regionally, Americas revenue increased 3% in the fourth quarter, Asia Pacific revenue increased 4%, and EMEA revenue increased 45%. For the full year, Americas revenue decreased 8%, Asia Pacific revenue increased 6%, and EMEA revenue increased 27%. Non-GAAP gross margin was 40% in both the fourth quarter of 2025 and the full year 2025. Non-GAAP operating expenses were $56.2 million in the fourth quarter of 2025 and $229.9 million for the full year 2025.

• Anticipate 2026 revenue to be between $165 million and $180 million, representing approximately 8% growth at the midpoint of $172 million.
• Expect a 100 to 400 basis point improvement in non-GAAP gross margin in 2026, driven by higher consumables mix and the introduction of SparkNex.
• Non-GAAP operating expenses are expected to slightly improve compared to 2025 levels as operating expenses are tightly managed and investment in next-generation sequencing continues.
• Assumes a muted academic spending environment with no broad recovery in capital spending for academic customers.

• Uncertainty regarding certain acquisition-related items makes reconciling historical U.S. GAAP and non-GAAP results difficult for future periods.
• Volatility in components like memory costs associated with Revio and Vega instruments may impede gross margin improvement.
• Litigation expenses in 2026 will be incremental from long-standing litigation.

Q: Regarding Revio pull through, how should we think about pull-through progression as Spark chemistry lowers per-sample cost? Will that lower cost drive higher utilization, or does it risk pulling revenue forward? On consumables, what gives confidence that growth is structurally sustainable versus being driven by a smaller cohort of power users? And going forward, how to think about steady-state mix between Vega and Revio and its implication for average system ASPs?

A: Revio pull through was stable. SparkNex will likely increase utilization and expand market share by lowering per-sample cost. Consumables growth is structurally sustainable due to the expanding market for HiFi sequencing in clinical applications. Vega targets new customers in microbiology and metagenomics, while Revio focuses on discovery and clinical whole genome sequencing; both are expected to scale in 2026, impacting average system ASPs.

Q: What should we expect OUS to do this year from a clinical growth perspective? And did you see any budget flush, particularly from Europe in Q4 2025?

A: OUS clinical growth is expected in rare disease, whole genome sequencing, and EMEA, with a shift from pilot to production. There was no significant budget flush in Q4 2025, but there was an opportunistic purchasing win.

Q: When thinking about international expansion for multi-use SMRT Cells, how are you considering rollout in tandem with the U.S. if your aim is to keep elasticity contained this year?

A: The multi-use SMRT Cells beta program started in the U.S. and will expand to EMEA and APAC over the next couple of weeks, with rollout monitored to ensure samples are placed on systems at favorable pricing.

Q: Where is the biggest opportunity to reduce OpEx spending in 2026 without hindering recovery? And what about industrial weakness?

A: Opportunities to reduce OpEx include managing G&A, R&D, and insourcing to cut production costs. Industrial weakness refers to the agricultural part of the business being weak due to funding challenges.

Q: On the short-read divestment, any costs taken out of the P&L? And on long-read vs standard of care, does cost improve when going to long-read?

A: No substantial additional costs have been taken out from the short-read divestment yet. Long-read sequencing with HiFi provides better diagnostic yield, faster turnaround time, and lower cost by consolidating multiple tests into one assay.

Q: How to think about SparkNex balancing elasticity of demand with price headwind over next few years?

A: SparkNex allows substitution of HiFi for other technologies, with samples already available. Elasticity may be lumpy, but the early access phase is managed to ensure samples are ready, driving consumable revenue.

Q: Any color on first quarter pacing and component volatility driving gross margin guide?

A: Q1 is expected to be lower than Q4 but higher than Q1 2025. Component volatility, such as memory shortages, impacts compute costs and is factored into the 100 to 400 basis point gross margin guide.

Q: On placements and pull through, color on how to think about that across Vega and Revio? Burn target in 2026? What will it take to see U.S. clinical growth accelerate?

A: Revio pull through is expected to be in the $225,000 to $250,000 range, and Vega pull through in the $25,000 to $40,000 range. Burn may be slightly higher in 2026 due to alpha and beta builds of the next-generation system. U.S. clinical growth will accelerate with expansion of the targeted sequencing panel and demonstrations of favorable economics.

Q: Are you guys expecting multi-system placement orders to become more common in 2026? And if so, should we expect that to have an impact on ASP via discounts?

A: Multi-system placement orders may become more common, with variable timing. Fleet additions are positive for revenue and gross margin, with potential ASP trade-offs for accelerating consumables.