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Good day, and welcome to the PacBio Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Carrie Mendivil with Investor Relations. Please go ahead.

Good afternoon, and welcome to PacBio's Third 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 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. 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 SEC filings, including our most recent Forms 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 U.S. GAAP. Reconciliations between historical U.S. 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 are 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 a 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.

Thank you, and good afternoon, everyone. Starting with our top line performance in the third quarter, revenue came in at slightly below our expectations at $38.4 million, primarily due to fewer than expected Vega shipments in Europe and lower than expected revenue on ASPs. However, our consumable revenue was well above our forecast and once again at an all-time high reaching $21.3 million, demonstrating strong progress towards our goal of increasing adoption of our long-read sequencing technology. As a result of this strength in consumables, non-GAAP gross margins were 42%, our highest level since 2022. Looking at our regional performance. At the beginning of the year, I said we expected EMEA to be our fastest-growing region in 2025. This continues to be the case and in Q3, EMEA saw growth of 18% on a year-over-year basis. The growth in EMEA was driven by approximately 50% year-over-year increase in consumable revenue that was partially offset by the miss in Vega placements. Our strong growth in consumables was driven primarily by our commercial and clinically-focused customers. In the Americas, the funding environment continues to be challenging, especially for academic and government research customers who are dependent on NIH and other public budgets. As a result, procurement cycles continue to be elongated. In the third quarter, we did not see a significant end of government year budget spend in this region. We are anticipating a similar funding environment in 2026. Finally, in Asia Pacific, the funding environment continues to be challenged. However, we achieved our revenue forecast for the quarter, albeit at lower than expected ASPs. This was partially offset by exceeding our forecast for consumables in the region, and our largest customers continue to have very high utilization rates and pull-through. Looking specifically at China, we exceeded our expectations and continue to see strength in the region. From a product perspective, we shipped 13 Revio systems and 32 Vega systems in the third quarter, bringing our cumulative shipments to 310 and 105 systems, respectively. Approximately 75% of the Revio shipments were to new customers. We placed several Revio instruments with key institutions at lower prices, which resulted in lower ASPs for the third quarter. However, we believe these strategic accounts will ultimately drive higher utilization and above average consumable pull-through. For Vega, shipments came in below our forecast, particularly in Europe, as several instruments were stuck in procurement processes that extended beyond the end of the quarter. Encouragingly, we have already received purchase orders for some of those units that were originally forecast in Q3. Vega ASPs continue to be strong and were flat sequentially. We're confident in the long-term opportunity of the Vega platform given its attractive price point and ability to bring new customers into the PacBio ecosystem. Importantly, approximately 60% of the Vega placements went to new-to-PacBio customers, and we continue to believe Vega will serve as both an entry point and an upsell opportunity for Revio over time. Turning to consumables. Revenue grew 15% year-over-year to $21.3 million in Q3, another record. This performance was supported by broad adoption of our SPRQ Chemistry and steady utilization across our growing installed base. This also led to a roughly 65% increase in total gigabases of sequencing output. Revio annualized pull-through was approximately $236,000 per system, near the high end of our guided range, a sign of durable demand from our customers. Over the course of the third quarter, our sales funnel improved, particularly for Revio. Looking forward, we expect to ship more Revio and more Vega instruments in Q4 than we did in any other quarter this year. As a result, we expect total fourth quarter to grow both year-over-year and quarter-over-quarter with approximately 10% sequential growth. Given our Q3 performance, we are narrowing our revenue guidance for the full year of 2025 to the low end of our range and now expect revenue to be between $155 million to $160 million. Jim will provide more details on our expectations for the remainder of the year shortly. Reducing our cash burn has also been a key focus this year. And in Q3, we achieved another quarter of sequential improvement, with cash burn totaling $16 million. We continue to expect total cash burn of approximately $115 million for 2025, an improvement of more than $70 million compared to 2024. As we continue to recognize benefits from our restructuring, our improvements to gross margin and continued expense discipline, I believe we are well on our way to achieving our goal of reaching cash flow breakeven as we exit 2027. Our team at PacBio continues to advance our core initiatives that will define the next phase of our growth. Let's start with our clinical opportunity. We are making significant advancements to deliver on our vision to lower barriers to adoption and enable clinicians worldwide to deliver more precise answers to patients and their families. Yesterday, we announced that the Sequel II CNDx system has received Class III Medical Device Registration approval from the National Medical Products Administration in China through our long-standing partnership with Berry Genomics. This marks the first known regulatory approval of a clinical-grade long-read sequencer anywhere in the world, signaling a new era for precision medicine and high-accuracy genomic testing in China. Berry plans to start by launching the Sequel II CNDx system, which will run their recently approved thalassemia test in hospitals throughout China. Berry also intends to expand the use of HiFi technology to more clinical assays like congenital adrenal hyperplasia, fragile X syndrome, spinal muscular atrophy, Duchenne muscular dystrophy and other complex single-gene disorders and panels, and has indicated that these assays also work very well on the Vega system in clinical research applications. High-incidence genetic disorders such as thalassemia, spinal muscular atrophy and fragile X syndrome often involve complex variant types that are difficult or impossible to detect using short-read sequencing. With the Sequel II CNDx system, Chinese clinicians will be able to access all aspects of the genome, capturing single nucleotide variants, insertions and deletions, copy number variants, structural variants, repeat expansions and, of course, methylation with exceptional accuracy. We estimate that the potential testing market for thalassemia alone can be in the hundreds of thousands of samples per year in China. As demand for comprehensive genomic testing continues to grow, we are focused on expanding the potential clinical utility of HiFi sequencing. Earlier today, we were excited to share that the first major study demonstrating the clinical research power of HiFi genomes was published by the HiFi Solves EMEA Consortium. This study shows that PacBio HiFi sequencing, combined with Paraphase, a dedicated haplotype-based variant caller, uncovered all known clinically relevant variants present in the study population, even in the hardest to sequence regions of the genome, demonstrating its readiness to power the future of clinical discovery. As a result, we believe researchers and clinicians will be able to save time and significant cost by turning to HiFi first. HiFi genomes revealed a complete picture of genetic variation that can truly change how rare diseases are understood and studied. We believe that these findings position HiFi as the clear path forward toward clinical-grade genomics. Beyond expanding access and demonstrating clinical utility, we've also had several recent wins expanding the use of HiFi in the clinical research setting. First, Children's Mercy hospital launched a single test HiFi-based assay for genetic disease diagnosis. This replaces multiple legacy workflows with one comprehensive test, providing faster time to answer and more accurate results for patients and their families. Additionally, Children's Mercy is expanding the use of HiFi into pediatric oncology. Additionally, in September, we launched the enhanced PureTarget portfolio, a family of products designed to target some of the most challenging regions of the genome. The family includes a carrier screening panel for inherited reproductive conditions, a repeat expansion disorder panel for neurological diseases and a control panel to support custom assay design and validation. These panels are available in 24 and 96 sample kit formats to meet the needs of a variety of clinical researchers. These kits enable labs to replace several specialized tests with one flexible workflow that works for both clinical and large-scale screening programs. Several of our customers are leveraging the PureTarget portfolio to develop specific assays for carrier screening. Carrier screening is one of the most widely ordered genetic tests worldwide with millions of couples screened each year. It is a large, durable and highly relevant market because identifying carriers before or during pregnancy can have a profound impact on family planning and medical decision-making. Importantly, many of the most medically relevant genes in carrier screening are some of the most challenging to assay with short-read sequencing due to pseudogenes, repeats or structural complexity. HiFi sequencing works to resolve these challenges, providing complete, safe and highly accurate results where legacy approaches often fall short. With our new HiFi-based PureTarget portfolio, we believe PacBio is uniquely positioned to deliver a more reliable and comprehensive standard for this essential area of genetic testing and to support our customers in making carrier screening more accessible at scale. Beyond the clinical research setting, our technology is uniquely positioned for large population scale studies. Our HiFi technology and integrated solutions have recently been selected for several of these types of large-scale studies. A great example of this is the recently announced long-life family study, a major project led by the National Institute on Aging. This project will employ Revio systems with SPRQ-Nx chemistry to generate comprehensive genomes and epigenomes from up to 7,800 participants. The goal is to help identify genetic and epigenetic clues underlying healthy aging and exceptional longevity, making this one of the world's largest long-read studies of aging to date. Another example is the Korean Pangenome Reference Project, which recently selected our HiFi sequencing technology as its primary platform. This study is a landmark national initiative led by the Korea Disease Control and Prevention Agency, a part of the National Institute of Health. It will generate the first large-scale telomere-to-telomere quality reference genomes representing the Korean population and integrate the data into the global Human Pangenome Reference Consortium. Specifically, the study of more than 1,000 participants will utilize PacBio's integrated sequencing solution across the workflow, including HiFi whole genome sequencing, Kinnex full-length RNA analysis, enabling the precise transcriptome profiling and CiFi technology for chromosome-scale analysis, detecting structural variants and complex genomic features. By building a more inclusive and comprehensive reference, the initiative is expected to accelerate discovery of population-specific variants, help improve insights into unexplained diseases and support the development of precision diagnostics and therapies. HiFi is an essential component of helping researchers explore the full spectrum of human genomic diversity in these types of large-scale studies. Another key example of how -- is a new study published by the All of Us Research Program, which is funded by the NIH to amass longitudinal health data and genome sequences of 1 million U.S. participants with the goal of advancing precision medicine research and fueling new insights into human health. Powered by PacBio technology, the study found that standard short-read sequencing only detected half of the disease-associated structural variants in their cohort. This revelation shows just how much of the human genome has remained out of view until now and fundamentally redefines what it means to truly see everything in the human genome. Over the past several years, we've been very focused on productizing our technology and developing the sample-to-answer workflows that researchers and clinical laboratories demand. To do this, we have dramatically lowered DNA input requirements and enabled several different sample types, including saliva, buccal and even FFPE to our workflows. We've built the PacBio Compatible program to ensure robust automation solutions are available to our customers as we scale. And we've launched 2 new long-read sequencing platforms and developed a bioinformatics suite that helps our customers take advantage of HiFi technology. With a robust end-to-end solution in place, we've turned our attention to dramatically lowering the cost of sequencing on our Revio platform through a groundbreaking new chemistry, SPRQ-Nx. Earlier this month at The American Society of Human Genetics Conference held in Boston, we unveiled our new SPRQ-Nx chemistry, marking a defining moment for PacBio. We believe that SPRQ-Nx will help dramatically lower the cost of a human genome sequencing to less than $300 per genome at scale, making our technology economically competitive with many short-read sequencing platforms. Additionally, SPRQ-Nx is designed to improve our methylation-calling performance and adds the ability to automatically call methyl-hydroxy C, another important epigenetic marker. But we believe the most revolutionary aspect of SPRQ-Nx is the ability to use the SMRT Cell multiple times. The SMRT Cell is by far the most expensive component of our consumable. By reusing the SMRT Cell, we can reduce the cost of sequencing for our customers and improve our gross margins simultaneously, a rare win-win. Multi-use SMRT Cells will be launched for Revio in a fully automated way, allowing for a seamless customer experience. Initially, customers will be able to reuse the SMRT Cell one additional time. And over the near term, we expect to increase the number of uses. More than 100 customers have already demonstrated interest in beta testing SPRQ-Nx on Revio. We expect to initiate the beta testing program later this month and then move to an early access phase in 2026. This is not like a typical beta test as the beta test group is paying for the consumables, a strong signal as to the underlying demand for this new chemistry. Once the early access program is complete, we plan to roll out SPRQ-Nx to all Revio customers in 2026. We are also continuing to broaden the application of HiFi sequencing. Most notably, we announced a new partnership with EpiCypher to integrate their Fiber-seq workflow into the PacBio Compatible program. Fiber-seq enables single molecule mapping of chromatin accessibility, methylation and sequence variation in one assay, adding another dimension of epigenetic insight to HiFi and complementing our existing strengths in the genome, transcriptome and methylome sequencing. In October, we also announced an expanded partnership with seqWell. Under this agreement, PacBio will distribute seqWell's LongPlex Kit, a scalable, easy-to-use sample preparation solution designed for HiFi sequencing. LongPlex streamlines DNA sharing and multiplexing, enabling hundreds of samples to be prepared in a single run. By reducing prep bottlenecks, this kit is designed to make long-read sequencing more accessible for low-pass whole genome sequencing, plasmid sequencing and microbial genomics. Together with our existing workflows, LongPlex gives researchers more choice across high-throughput applications and may help accelerate the adoption of HiFi for large-scale studies. Overall, I'm excited about the progress we are making to broaden our footprint and advance our technology to create more value for customers doing high-throughput research and clinical sequencing. I'll now hand the call over to Jim to discuss our financials before I finish with a few closing remarks. Jim?

Thank you, Christian. I will discuss non-GAAP results, which include non-cash stock-based compensation expense. I encourage you to review the reconciliation of GAAP to non-GAAP financial measures in our earnings press release. We reported total revenue of $38.4 million in the third quarter of 2025 compared to $40 million in the third quarter of 2024. Instrument revenue in the third quarter was $11.3 million, a 33% decrease from the third quarter of 2024 and a 20% decrease from the second quarter of 2025. The year-over-year decrease was driven by lower Revio unit shipments, partially offset by 32 Vega systems as we began shipping this platform late last year. Turning to consumables. Revenue increased to a new record of $21.3 million in the third quarter, an increase of 15% compared to the third quarter of 2024. This represented a 12% sequential increase. Annualized Revio pull-through per system was approximately $236,000, an increase compared to approximately $219,000 in the second quarter of 2025 due to increased utilization in our top accounts. Vega consumables grew sequentially with the expansion of the installed base. As we do with the Revio, we anticipate providing an expected pull-through range for Vega as we get further into the commercial launch and have a more established installed base. Finally, service and other revenue grew approximately 25% to $5.8 million in the third quarter compared to $4.7 million in the third quarter of 2024, driven by an increase in Revio service contract revenue. From a regional perspective, Americas revenue of $18.1 million decreased 10% year-over-year and increased 2% sequentially. The year-over-year decline was primarily driven by continued caution in academic capital spending, which weighed on Revio demand. We were encouraged by Vega's momentum as Q3 marked our highest U.S. placements to date, with 69% going to new PacBio customers. For Asia Pacific, revenue of $9.6 million decreased 11% compared to the third quarter of 2024 and decreased 24% sequentially. The year-over-year decline reflected fewer Revio placements compared to the prior year. EMEA revenue of $10.7 million increased 18% compared to the third quarter of 2024 and increased 14% sequentially. The year-over-year increase was led by approximately 50% growth in consumables, supported by higher utilization and an expanding Revio installed base. Moving down the P&L. Third quarter 2025 non-GAAP gross profit of $16.2 million represented a non-GAAP gross margin of 42%, compared to a non-GAAP gross profit of $13 million or 33% in the third quarter of 2024. Non-GAAP gross margin increased year-over-year due to improved product mix as consumables have higher gross margins and represented approximately 55% of total revenue in the third quarter of 2025 compared to approximately 46% in the third quarter of 2024. We transitioned our Vega system to full-scale production and realized lower per unit manufacturing costs. Additionally, Revio SMRT Cell manufacturing yields improved and trended above historical levels in the quarter. Non-GAAP operating expenses were $53.9 million in the third quarter of 2025, representing a 14% decrease from non-GAAP operating expenses of $62.4 million in the third quarter of 2024. Operating expenses in the third quarter of 2025 included non-cash share-based compensation of $10.1 million compared to $17 million in the third quarter of 2024. The decrease in both non-GAAP operating expenses and non-cash stock-based compensation was primarily due to the recent restructuring initiatives. Regarding headcount, we ended the quarter with 490 employees compared to 575 at the end of 2024. Non-GAAP net loss was $36.8 million, representing $0.12 per share in the third quarter of 2025 compared to a non-GAAP net loss of $46 million, representing $0.17 per share in the third quarter of 2024. We ended the third quarter of 2025 with $298.7 million in unrestricted cash and investments compared with $389.9 million at December 31, 2024, and $314.7 million at June 30, 2025. Turning to guidance. As Christian shared, we expect a stronger Q4 with revenue growing approximately 10% sequentially. The strength in revenue growth is expected to be driven by more Revio placements and a continuation of the strength in consumables we have seen over the course of this year. We are particularly encouraged by the durability of our consumables business and the growing momentum we are seeing in clinical applications. As a result of our Q3 performance, we are narrowing our revenue guidance for the full-year 2025 to the low end of our range and now expect revenue to be between $155 million to $160 million. Moving down the P&L. We continue to expect to exit the year with non-GAAP gross margin above 40%. We expect our ending balance of cash and investments to be greater than $270 million at the end of 2025. When excluding the $5 million licensing payment in Q1, this implies approximately $115 million cash burn in 2025 or an improvement of more than $70 million compared to 2024. We believe, based on our current assumptions, our $299 million in cash and investments as of September 30 is sufficient to reach cash positive cash flow by the end of '27. I'll now hand it back to Christian.

Thanks, Jim. Our focus centers on one goal, increasing adoption of HiFi long-read sequencing across the sequencing market, especially in clinical applications and large-scale whole genome projects. As we close out 2025, I believe PacBio is well positioned to deliver long-term value to our stakeholders. Our HiFi technology is fundamentally different than anything else in the market, supporting our mission to enable the promise of genomics to better human health. With the upcoming launch of our new SPRQ-Nx chemistry with multi-use SMRT Cells, we believe we can dramatically improve the economics for long-read sequencing, which will help us penetrate the clinical market and expand our opportunity into large population scale programs. And finally, we are investing efficiently by focusing on our strategic priorities. This has resulted in meaningful reduction in our cash burn, and we are tracking toward a goal of achieving positive cash flows exiting 2027. We believe our strategy positions PacBio for long-term growth, and we are confident in our ability to lead the next era of genomics. With that, we will now open it up for questions. Operator?

[Operator Instructions] Our first question comes from Kyle Mikson with Canaccord.

So on instruments, a little soft in the quarter, I guess. I heard all the dynamics going on. But I just wanted to break that down into the 2 products. So with Revio, ASPs looks like a little bit weaker this quarter, less than $500,000 per share versus the list price of $599,000. Maybe just talk about what that could be going forward. If you could quantify that, that would be great. And then with Vega, interesting to see that kind of sequentially decline this early in the launch. How many placements were pushed out to future quarters due to the EMEA challenges?

Yes. Thanks, Kyle, for the questions. I'll start with Revio. Revio ASPs were lower this quarter. And my expectation is fourth quarter ASPs will actually recover. And when we look at where we placed the systems, we placed them into some very strategic accounts. So, they ended up with lower ASPs, but we believe that they will have high throughput. And so as a result, you'll see better consumable usage, which will drive revenue there. So, that's generally a smart decision. And then with respect to Vega, we did have a shortfall in Vega. And there was roughly half a dozen or so instruments that were in Europe that were stuck in various stages of procurement. None of those are lost as opportunities. As I said in the written remarks, some of them have already gotten through and are now POs. And I don't know if they've been shipped yet or not, but they'll be shipped in Q4. And so I think that was a temporary issue with procurement processes. I do think that the big opportunity continues to be really strong and the funnels are strong. So it's really a question of the timing from quarter-to-quarter. The one other comment I will make, we did have one Revio system that unfortunately failed installation testing, and so it didn't get recognized. It will be recognized in Q4, and that one had a much, much higher ASP. So, that would have pulled the numbers up a little bit. We'll see that in Q4, and that's really just a timing thing. Yes, I think we're ready for the next question.

Our next question comes from Doug Schenkel with Wolfe Research.

This is Madeline Mollman on for Doug. I just wanted to touch on the gross margin. It was a little bit stronger in the quarter than I think we were expecting, and it was above your full-year guide. Can you just sort of bucket out how much of that was mix versus some of the other things you called out? It looks like maybe services gross margin was a little stronger this quarter as well. And then thinking -- how should we be thinking about gross margin as we head into 2026?

Yes. Thank you for the question, Madeline. Gross margin was really strong in the quarter, and it was above our internal forecast. Part of that is really related to the shortfall in instruments, of course, because the product mix is really the biggest contributor to pushing gross margins forward. We did see nice -- we -- our yields in SMRT Cell manufacturing are basically at all-time highs right now. We saw cost reductions -- we're seeing cost reductions on the Vega system on the Revio system as well. So the production side, we're really focused on driving costs down, and that's helping. But the biggest contributor to the outperformance in the quarter was the strength in consumables. We had an all-time record for consumables and coupled with the production costs being better, that bodes really well for us. When we look forward into '26, we're not going to give any guidance on gross margin, but we certainly think that as consumables becomes a bigger part of the story, gross margins have a very strong chance of growing even from here. And I think that, that's really the beginning of the story. We've made a tremendous amount of progress on the gross margin line in the last 4 or 5 quarters. And I do think we're going to continue improving as consumables continue growing and as instruments get to more normalized revenue levels, the lower production cost. One thing I will also say is in third quarter, we didn't see a major impact on tariffs in the quarter really. However, the Vega system is experiencing some tariff that it's not material enough to pass on to customers at this point, but we're watching that.

Our next question comes from Subbu Nambi with Guggenheim.

This is Thomas. You made some initial remarks on funding for '26, but just can you talk through what your assumptions are at this point for the instrument environment for next year? Just some more color on funding funnel strength and any updated feedback you've heard from customer channels would be helpful.

Well, I think I said back in September that it does seem like the environment is kind of stabilizing and settling, and we're kind of -- I think what I said was we're bouncing along the bottom a little bit here. I don't think that's really changed since we made those comments in September. And when I talk to customers, I think the funding environment is going to be challenged next year. I think that we're going to continue to see uncertainty in the academic funding environment. Although the longer we're stable, the more purchasing agents will be comfortable releasing purchasing and funding in -- particularly in the United States. One of the things that we're doing is we're really pivoting into clinical and these other areas of our business, and we're seeing great traction there. You saw a lot of my written remarks today about that. The funding is a lot more robust there. We have a very strong product offering there now. And so I think for us, our expectation for '26 is that it will certainly in the first half continue to be challenging and perhaps all year, but we'll give more guidance and color when we get there. And to keep us growing and moving in the right direction, we're really moving a lot of our effort and focus into these clinical applications, these clinical customers and we're seeing great traction in the United States and in Europe. So, I'm excited about that progress we're making. Next question?

Our next question comes from Luke Sergott with Barclays.

I appreciate the update there on Revio. But as you look at the consumables, and I know this is not a normal environment for you guys, but any kind of early look that you have from a Vega pull-through as we kind of think about the pace here and as you guys place a couple -- a few more instruments in 4Q, what that could look like and then -- or what you guys are looking for internally? And then I guess on the SPRQ-Nx, bringing the cost of sequencing down there, can you talk about some of the data fidelity when you're running multiple runs on the same SMRT chip? And then from the beta testers on the SPRQ-Nx, like the -- I know that's starting in November. So, how many beta testers are you guys looking for? And any early feedback or demand that you can call out?

Yes. Great questions. You gave me a mouthful. So, let's start here at the top. When we look at Vega -- we'll start with Vega. We aren't commenting on Vega pull-through yet. I think we want to get a full year under our belt before we start seeing -- start really trying to set what the target will really be. But your expectation for a product like this based on others and my experience in the industry is somewhere between, say, $25,000 and $45,000 a year of pull-through per system. We'll see where we shake out. We haven't commented on it yet, and we're just going to wait and we'll do that next quarter, perhaps to kind of wrap up the year or sometime in 2026. Revio, we had -- we were at the higher end of our pull-through targets that we established this year. We're seeing good utilization, steady utilization across the installed base and the high runner customers are really running their machines. And so I think that's actually very encouraging. What that means is that I would expect as we place more Revio systems that, that will be additive to our consumable revenue because we haven't seen a major drop-off in the end customer being a lower throughput customer for Revio. And so I'm actually quite encouraged by that in the $236,000 that we have this quarter. It's going to bounce around every quarter as it has this year. But I do think customers are utilizing their systems, and I think that bodes well for consumable growth in 2026. When you look at SPRQ-Nx and data fidelity, one of the most exciting parts about this is that we're seeing very consistent levels of throughput from use to use to use and the same high-quality, very comprehensive data. So whether it's the first use or the second use, you get all the methylation, the structural variation, all of the hallmarks of what HiFi brings to the table. With each use, you get very little carryover. So, there's not a lot of carryover from run to run. That's one thing customers have asked me a little bit about and quite frankly, investors, too. And I have to remind people that when we wash -- this is a fully automated protocol on the Revio system. And when we wash the SMRT cell for the -- get prepared for the second run, we're actually -- all we have to do is clean 25 million single molecules, whereas in other environments or other technologies that are amplification-based perhaps, for example, short-read sequencers, you're looking at billions upon billions of molecules. And so it's a very different paradigm. Also, our customers are running indexed samples almost exclusively. So, we feel very confident and comfortable about reuse, both from a throughput perspective, quality of the data and the fidelity. And so we're really excited about that. From a beta testing perspective, in my written remarks, I indicated that there's over 100 customers that have expressed interest. We've signed the first group of customers up already, and they're going to be receiving their materials here very shortly. I don't think I want to describe how many customers because I know there's a lot of customers that really just want to get going. We're going to start with a pretty small group of customers here through year-end and then expand it as we get into early '26 and manage an early access phase. And then throughout '26, we'll expand it so that all customers can get access to this important technology. Next question?

Our next question comes from Tycho Peterson with Jefferies.

This is [ Lauren ] on for Tycho. Just a little bit of more clarity around the SPRQ chemistry rollout. Are you guys expecting to drive kind of incremental revenue there or primarily to improve margins? And kind of what's the near-term target for pull-through for Revio as the SPRQ chemistry rolls out? And then second, around the PureTarget HiFi assays, which can now cover difficult-to-sequence genomes. What are some of the additional clinical or research applications there in addition to carrier screening that you're targeting for expansion?

So with respect to how pull-through will be impacted by the SPRQ-Nx chemistry, we're going to wait and see what that looks like. I'm going to -- I'll probably provide more commentary when we get into January, February after the beta program is completed. So, I'm going to pause on that one. But the point of SPRQ-Nx chemistry is to drive increased adoption of our technology, more samples coming to our platform and driving revenue growth. That is the principal driver of this is revenue growth. We will see a substantial benefit in gross margin as well because the cost of the SMRT Cell is such a large component of the total consumable cost, every time you can use that SMRT Cell over, you amortize a pretty significant cost into the next run. So it really is truly a win-win situation. Customers are going to get better pricing. We're going to get better consumable gross margin, with the entire point being increasing our market penetration by being very competitive with short-read technologies. Because most customers, when you talk to them, they would love to be using long-read sequencers in applications where they're using short reads today, but they've always been hesitant because of cost. This takes that completely off the table, gives them the ability to have a more comprehensive view of the genome, drive deeper insight at much better economics. And so I think that's going to be a really powerful growth driver for the company. But we'll comment on the specifics of what pull-through might look like. We'll do that later next year. With respect to PureTarget, our customers are using the PureTarget in lots of different ways. They're looking at not only -- they're looking at not only carrier screening, but they're also using it for single-gene type tests where you're looking at, say, ataxias, for example, or other neurodegenerative disorders. Anywhere where you have a single-gene disorder or a multi-gene disorder where there's challenges with respect to looking at them with short reads, that's an opportunity for PureTarget. And it's a portfolio of products. It's not just one kit. It's several different kits, targeted kits that enable customers to look specifically at carrier screening or other difficult-to-sequence tandem repeat, et cetera. And so it's a pretty broad portfolio, and it really is helping drive Revio placements into clinical accounts. And it will be an important growth driver for carrier screening, for example, in 2026 revenue and beyond. Next question?

Our next question comes from Mason Carrico with Stephens.

This is Ben on for Mason. Could you talk about how the funnel for your population scale programs has evolved? Just wondering if the multi-use announcement has potentially accelerated any existing conversations you're having or resulted in any new opportunities there? And then just as a quick follow-up on your comment of Revio ASPs reverting higher in Q4. Should we assume that ASP remains stable in 2026?

Yes. Thank you, Jason, for the -- sorry, Ben. Thank you for the questions. Yes, we have -- the excitement around reuse or multi-use and the lower pricing certainly has driven some new conversations just since ASHG on major population scale programs. And so we'll see how that goes. The funnel of programs that we've been working on continues to progress. These take a long time to get done. But I would say the funnel is expanding. And I do feel comfortable to say that some of these are actually going to get across the line here in the near term and really give us an opportunity to grow with these programs because these would be very large sequencing programs that would be completely additive to our growth and generally outside of our guidance because the timing of those are always -- they're highly variable. So it's very difficult to provide them into our guidance. So, we'll keep you posted as we keep moving along. But they are broad in nature. They're global, and there are new opportunities that have come up even since ASHG when we made the announcement. Revio ASPs were down in the third quarter. I do think they will recover in the fourth quarter. And I do think ASPs in the first half of next year would be generally in a stable sort of range. The good news is that we've taken production costs out of the Revio system. So the impact to gross margin perhaps isn't as bad as people might think. But yes, I do think that we're going to see stability in the Revio gross margins -- I mean, in the Revio ASPs for the foreseeable future, and we'll go from there. And the last part of your question, I actually -- I didn't get it written down. It was something else with respect to Revio, if I missed it.

No, I think you got it. It was on the ASPs heading into 2026.

Cool. Yes, I just want to make sure I answered all your questions.

Our next question comes from Dan Brennan with TD Cowen.

This is Tom on for Dan here. Maybe just one on your approach to AI. I think historically, when you've launched something, it's taken a while to get integrated into use just as yield things are ironed out, et cetera, et cetera. Are you taking any precautions or kind of what time line should we be thinking for when this is kind of ready for prime time given this is going to be a much more kind of high-throughput flow cell? And then I've got one more follow-up from there.

Yes. So, I just want to confirm the question was you really trying to understand the thinking around the SPRQ-Nx rollout and when it will truly be ready for prime time. Is that what the question was? Because you kind of cut out for part of it.

Yes. That's right. That's right.

Okay. Great. Well, yes, so I think we are taking a very measured approach to this for lots of reasons. First, we want to make sure our customers have a fantastic experience with this rollout, and we want to give them time to plan their projects so that they can take full advantage of the lower pricing and more samples can come into the market. We also want to see how the customers actually use the technology. And so that will be happening in the beta program and maybe the first part of the early access program. The technology and the -- what we have to do with respect to the instrument? All we have to do is upgrade the software, so the firmware and the system will be upgraded. So, that part is actually really straightforward. And so we will see how the market adopts the technology and roll it into early access. And depending on how fast new samples come into the market, we will eliminate the early access part of this. It's important to note that we will continue to sell the single-use SMRT cells alongside the multi-use SMRT Cells because in some situations, customers may want to use the single-use SMRT Cells as opposed to the multi-use SMRT Cells for certain applications where perhaps they don't have as much throughput. So the customer will have flexibility in that sort of way. We will be monitoring how samples come into the technology with the whole intent of growing our consumable revenue next year.

Our next question comes from Nathan Bolanos with UBS.

We're over a month into the U.S. government shutdown, a lot of agencies have furloughed employees. I'm just curious if this has had any impact on order volumes, how you're sort of framing it for Q4 and beyond? And is there any potential uplift if we get things back up and running?

Thanks, Nathan. That's a good question. When we were thinking about -- so far, we haven't seen a material impact from the shutdown. I do think if the shutdown persists, we could see some impact. But the reality is our U.S. academic NIH-funded business has been challenged all year. So, we've been driving our revenue from lots of other sources. And so, therefore, the impact would be more muted anyways. I would expect, though, the longer it goes, maybe it doesn't have that much of an impact in Q4, but perhaps it has a bigger impact in Q1 or Q2 as just the timing of when things get started again. That said, if the government got back to work and people wanted to catch up, so to speak, you're right, that could have a positive impact. The guidance we gave for Q4 does not contemplate that positive impact, but also doesn't assume the government stays shut down for the rest of the year. But I would say that our revenue isn't as dependent on U.S. government-funded sources today as it has been in the past. So the impact is actually not as big anyway if that makes any sense. Next question?

Our next question comes from David Westenberg with Piper Sandler.

This is Skye on for Dave. First, on revenue growth. Should we start with flat revenue growth for 2026? I know you mentioned Revio ASP kind of recovering in Q4, maybe stable in the first half of 2026. But anything there on revenue growth? And then could you provide some more color on the geographic distribution of Revio placements and consumable sales, maybe where you anticipate placing more Revio and then the primary research applications that are driving the current demand?

So we'll start with -- we aren't going to give any real color on 2026 today. So, we'll stay tuned on that. I do think we're going to see a strong Q4. We're expecting 10% sequential growth. And I think that, that would be a nice strong year end of the year and give us some momentum going into 2026. I do think the fundamental aspects of our business, we've been increasing our instrument placements, which is likely to drive consumable growth next year. We continue to place instruments at a pretty consistent clip. And so if you just take that onto itself, you would expect that we would be growing in 2026 and not flat. But we'll give formal guidance in 2026 when we get to that point. With respect to the geographic distribution of Revios, they're pretty broad. They're pretty balanced across the world right now. And as we kind of look out into Q4 and beyond, I think that most of the Revios are being placed into commercial and clinical type accounts, not so much NIH funded. I believe in Q3, we only had one system placed in a kind of an NIH-type funded environment. So hence, my comments -- my previous comments about government shutdowns and the impact on us. I do think that, that will continue with the -- we will -- I do think we're going to see expanded fleets in '26 as some of our clinical customers continue to scale up, launch their LDTs and start to drive volume. I think that's a real source of opportunity for us. Our funnels have been improving in Europe as well. As I said in my written remarks, Europe has been our bright spot of the year in terms of regional growth, and we had a very strong growth quarter in Q3 despite the missing a few Vega instruments. And so I think that Europe will continue to grow into next year. And as the U.S. funding environment improves, that will certainly help us get back to a more normalized level. So, that's how I see it right now.

Our next question and last question of the call comes from Kyle Mikson with Canaccord.

I want to follow up on the -- that question, just the last question there about the kind of the growth for '26. So, I think what the Street had like mid-teens. I know you're not talking about the actual quantification of it all. But when you think about it like qualitatively, there's a few factors I would just love for your input on. You got the flat -- NIH budget could be flat, could be recession-type actions. You got the impact of POPSEQ project, which you have a bunch of at this point. You have possible market freezing or longer sales cycles due to some competing products coming up soon, then you have -- China has removed the ban for Illumina. So wondering if that gives you any more optimism over there. If you could just comment on these things and how you're looking at it kind of exiting this year, entering next year, it would be good to hear.

Yes, Kyle. It's a nice way you framed it up. I mean the reality is that if you look at 2025, the contribution of our revenue from kind of NIH-funded sources has been really small relative to kind of historical expectation. And so any improvement in NIH is going to help drive growth at all. Even quite frankly, just certainty about keeping things flat is going to help drive growth for us. The POPSEQ programs, I do believe some of them are going to go live in 2026, and that will certainly drive our growth as well. As the funding environment improves a little, I do think the sales cycles will shorten somewhat, not elongate further. And I also think that other sequencers that are coming on to the market are actually not going to have a significant impact on us in '26, principally from the clinical side of the world because we are already expanding rapidly with the power of long-read sequencing, replacing all of these legacy technologies in the workflow. There's no other -- there's really no other technology out there today that can do as good a job as we can of replacing all the legacy technologies in a clinical lab workflow. And what that means is that we're going to be more efficient for the lab. We have great economics already, but the economics of the lab are going to get better, not just from introducing a product, but by eliminating steps in all the other workflows. And I think that's a really big deal. When you look at China, China, we had a very -- we continue to do well in China. I think the launch of the Berry CNDx -- Sequel II CNDx is very indicative of, that's a market that has a great opportunity for us in long-read sequencing on the clinical side, starting with the single-gene tests that Berry is launching, but we also have a very strong HLA testing business with Haorui. We have a very strong -- our service providers in China continue to run very high rates of utilization, which lends itself to expanding their Revio fleets some in 2026. So the outlook for China for us is strong regardless of what happened with Illumina today. I would imagine that probably only helps us in terms of maybe easing the relationship or at least creating a little more certainty around the risk profile associated with doing business in China. So, I think there's a lot of -- we have made a lot of progress this year, and I think it sets us up really well for growth in '26, but we'll certainly provide a lot more detail and color as we get early into '26. Right now, our focus is finishing 2025 really strong, driving significant sequential growth of 10% or so and really preparing to make multi-use and SPRQ-Nx a really impactful launch. And I know the team is ready to do it. So, that's where I'll leave it.