Pacific Biosciences of California, Inc.

went to brand new customers, and one third were to LDT diagnostic or hospital labs, encouraging signs that Hi-Fi is gaining share in these labs, replacing a number of legacy technologies. This is especially true in genetic and rare disease testing. A few recent examples include Variantix, a diagnostics lab based in Boston and a new to PAC Bio customer that is seeking to improve key genetic disease assays by using Revio and PacBio Hi-Fi sequencing in lieu of legacy sequencing technologies. GeneDx also added another Revio to its fleet in the second quarter and plans to incorporate our pure target chemistry to further advance key tests. Additionally, we placed additional Revio systems into hospital systems in northern Europe where Hi-Fi is being used to advance the understanding and improve solve rates for rare disease at scale. Turning to Vega, the PacBio team has built a robust platform. We're extremely pleased with the system's continued momentum and strong performance in the field. In the second quarter, nearly 60% of Vega shipments were to new PacBio customers. And since launching in very late Q4 last year, Vega has brought over 40 new laboratories into the PacBio ecosystem, a number we expect to grow into the future. Importantly, Vega is not just broadening our customer base, it's also expanding the range of applications Hi-Fi can support. We're seeing strong adoption among smaller labs and new market segments. And approximately 70% of Vega customers are using the platform for non-whole genome applications, including small amplicon sequencing, targeted panels, and microbial genomics. That's exactly the kind of accessibility and versatility we designed Vega to deliver, and it's performing exceptionally well. Customer runs consistently exceed our specifications across a range of insert sizes, with Hi-Fi read lengths and yields often surpassing expectations. At the Charles University in Prague, for example, one researcher shared how switching to Vega has significantly improved his lab's scientific output. By eliminating months of troubleshooting associated with incomplete short read data, he's able to double his publication rate while significantly improving data quality, starting projects with complete chromosomes from the outset. With its lower capital cost, compact footprint, and integrated analysis tools, we believe Vega is opening new segments of the genomics market to pack bio, including labs and institutions that were previously out of reach for long read platforms. Miami University in Ohio is another great example. Researchers at the institution shared that the system was intuitive to operate with streamlined informatics capabilities, and they plan to use the platform across a wide range of applications, including single cell, epigenetics, and immunology. They also noted that Vega is more cost effective than the leading low throughput short read next generation sequencing platform, with run costs that align well with the funding models common in many academic and translational research settings. We're also seeing growing momentum in population scale and multiomic initiatives around the world. In July, PacBio HiFi technology powered the first Arab human pan genome, published in Nature Communication. This study uncovered millions of previously undetected variants, reinforcing the importance of long read accuracy when it comes to capturing genetic diversity and improving reference genomes. We believe studies like this demonstrate why highly accurate long read sequencing is foundational to large scale population genomics programs, especially those seeking to expand inclusion across historically underrepresented groups. We also recently announced that PacBio has joined the 1000 Genomes Long Read Project, a major global effort that is expanding beyond its original nanopore only design, to now include HiFi based sequencing. As part of this next phase, PacBio plans to contribute full length isoform RNA data from roughly 1000 samples using our Connex RNA kits and Revio system. The program's leaders specifically selected Connex for its data quality, isoform resolution, and throughput, offering what we believe is a clear advantage over existing short read and long read transcriptomic methods. With simplified PrEP, low RNA input requirements, and scalable output, Connex is uniquely suited for large scale multi-population studies. This collaboration highlights how researchers are increasingly turning to HiFi and Connex to drive deeper insight into gene regulation and transcript diversity at population scale. As previously mentioned, we're also seeing continued progress in clinical sequencing applications as well. Quest Diagnostics, for example, announced that its Athena Diagnostics Division is using PacBio HiFi sequencing to enhance its Ataxia movement disorder panel. Built on Revio and powered by our peer target chemistry, this assay can detect repeat expansions and complex variants that can be frequently missed by conventional short read tests. It's a clear example of how HiFi sequencing is making its way into routine clinical workflows, enabling more comprehensive and accurate testing. We're also expanding our clinical footprint internationally. Recently, we announced a new agreement with Howri Gene, a leading genomics distributor in China, with deep expertise bringing long read sequencing into clinical use. Howri has already played a pivotal role in advancing HiFi-based testing in the region. They launched a HiFi-based HLA typing product in 2022, and they've since deepened collaborations with major blood centers to expand national research efforts in rare blood classification, antigen mapping, and applications that demand the high resolution, allele level accuracy that HiFi uniquely provides. Through this partnership, we expect to further grow our clinical presence in the transfusion medicine and hematology markets in China. In translational research, we were honored to be selected by Target ALS to support the largest global ALS genomic study utilizing HiFi sequencing to date. This project is expected to use Revio to generate whole genome data from thousands of ALS patient samples, aiming to uncover the complex genetic contributors to this devastating disease and generate the largest long read open access database for ALS. ALS presents a challenging genetic landscape marked by structural variance, repeat expansions, and non-coding elements, many of which are invisible to traditional sequencing. We believe HiFi's length and accuracy make it particularly capable of resolving these difficult regions, helping researchers discover new links between genetic variation and disease progression. And because the data from the study will be made broadly available, it has the potential to accelerate discoveries that lead to better diagnostics, new therapeutic targets, and ultimately hope for people living with ALS. And beyond HiFi adoption, we're also helping define the next generation of genomic benchmark. Earlier this week, a study published in Nature Methods introduced the Platinum Pedigree Benchmark, the most comprehensive family-based variant data set ever released. Developed by scientists at PacBio alongside collaborators at the University of Washington, University of Utah, and others, this benchmark characterizes not just simple variants, but also complex and repeat rich regions that have traditionally been excluded from reference data sets. This resource was used to retrain Google's deep variant AI model, resulting in a 34% reduction in erroneous variant calls genome-wide, with even greater improvements in the most difficult regions. It's a powerful validation of how HiFi data is improving the performance of AI-based tools and reinforcing PacBio's position as a leader in sequencing accuracy. Looking ahead, we're also making strong progress in the development of our multi-use smart cell capability, a key innovation that will allow customers to run a Revio smart cell, the most expensive component of our consumable, multiple times. This is a major step towards reducing the cost for genome for our customers, and at the same time, improving our own gross margin. We believe this capability will help unlock larger scale projects, increase flexibility, and create more value for customers doing high throughput research and clinical sequencing. We look forward to sharing more about this innovative technology at a later date. I'll now hand the call over to Jim to discuss financials before I finish with a few closing remarks.

Jim? Thank you, Christian. I'll be discussing non-GAAP results, which include non-cash stock-based compensation expense. I encourage you to review a reconciliation of GAAP to non-GAAP financial measures in our earnings press release. As discussed, we reported $39.8 million in product, service, and other revenue in the second quarter of 2025, served at $36 million in the second quarter of 2024. Instrument revenue in the second quarter was $14.2 million, a decrease of 4% from $14.7 million in the second quarter of 2024 due to lower Revio unit shipments, partially offset by 38 Vega systems as we commenced shipping this platform late last year. We ended the quarter with 297 cumulative Revio system shipments and 73 cumulative Vega system shipments. Turning to consumables, revenue of $18.9 million in the second quarter increased 11% from $17 million in the second quarter of 2024, with annualized Revio pull-through per system of approximately $219,000. Vega consumables continue to grow sequentially with the expansion of the installed base, and we anticipate providing an expected pull-through range at a later date once there is a larger and more established install base. Finally, service and other revenue grew approximately 57%, 6.7 million in the second quarter, paired to 4.3 million in the second quarter of 2024, driven by an increase in Revio service contract revenue and revenue related to a large population sequencing program in Southeast Asia. From a regional perspective, America's revenue of 17.7 million decreased 15% compared to the second quarter of 2024, with the region most affected by government funding headwinds and NIH funding uncertainty. We're pleased to see Vega making progress with this customer base, as over half the systems went to academic or government customers. For Asia Pacific, revenue of 12.6 million increased 53% compared to the second quarter of 2024, driven by increased Revio and Vega placements and increased revenue from a population sequencing project in Southeast Asia. EMEA revenue of 9.5 million increased 35% compared to the second quarter of 2024. Building off momentum in the first quarter, the region continued to see strength in Revio placements in the hospital and clinical researcher customer base and growing demand for the Vega platform. Moving down the P&L, second quarter 2025 non-GAAP gross profit of 15.2 million represented a non-GAAP gross margin of 38%, compared to a non-GAAP gross profit of 13.2 million or 37% in the second quarter of 2024, primarily due to higher consumable margins. Consumable margins improved in the quarter as a result of lower Revio consumable per unit costs. This was partially offset by lower instrument margin as we worked towards shipping our production rate of the Vega systems in the second half of 2025. Non-GAAP operating expenses were 58.1 million in the second quarter of 2025, representing an 18% decrease from non-GAAP operating expenses of 71 million in the second quarter of 2024. Operating expenses in the second quarter of 2025 included non-cash share-based compensation of 11 million compared to 16.1 million in the second quarter of 2024. The decrease in both non-GAAP operating expenses and non-cash stock-based compensation was primarily due to the restructuring initiative we implemented earlier this year. Regarding headcount, we ended the quarter with 491 employees compared to 575 at the end of 2024 and 581 at the end of the second quarter of 2024. Non-GAAP net loss was 40 million, representing 13 cents per share in the second quarter of 2025, compared to a non-GAAP net loss of 55.2 million, representing 20 cents per share in the second quarter of 2024. We ended the second quarter of 2025 with 314.7 million in unrestricted cash and investments compared with 389.9 million at December 31st, 2024 and 343.1 million at March 31st, 2025. Turning to guidance, as discussed earlier, we are maintaining our revenue guidance midpoint but narrowing the range to 155 million to 165 million as we believe the prior downside scenario to China in 2025 has been significantly mitigated while the upside case continues to be pressured by the academic funding environment. Like last quarter, this continues to be an extremely dynamic macro environment, especially with respect to trade policy and uncertainty surrounding future NIH funding. Our guidance midpoint assumes consumable revenue grows in the mid-teens compared to 2024, partially offset by a mid-teens decline in instrument revenue. Consistent with the first half of 2025, we expect annual pull-through per revue system to be in the low to mid 200,000s. In the Americas, our guidance continues to assume significant uncertainty in the broader academic research community, especially in the near term, with accelerating activity in the clinical market anticipated to offset some of the potential headwinds. For Asia Pacific, we continue to anticipate revenue growth in the region in 2025, though we expect a slight sequential decline in Q3 compared to Q2 due to modest tariff-related order acceleration in the first half of the year. We continue to expect EMEA to be the fastest growing region in 2025. As population sequencing programs scale, whole genome sequencing and clinical settings grow, and we expand our customer base with Vega. Looking at Q3 revenue, we expect revenue to be roughly flat on a sequential and -over-year basis, partially due to a sequential decline in APAC after a strong Q2. Moving down the P&L, with the first half of 2025 coming in better than we expected, and per unit cost reductions expected on the revue instrument and consumables, in the big system in the second half, we are raising our 2025 non-GAF gross margin guidance range, and now expect it to be between 37% and 40%, and we continue to expect to exit the year above 40%. As mentioned, we are operating in an environment with trade policy uncertainty, and if the U.S. enacts tariffs on certain countries in our supply chain, we could face incremental pressure to our cost of goods in the second half of this year. As of now, our guidance does not factor in a material increase in COGS related to tariffs. We continue to be focused on our spend, but we now expect non-GAF operating expenses to be in the range of 235 million to 240 million. We expect to continue to realize savings in 2026, and as such, anticipate 2026 non-GAF operating expenses to be lower than in 2025. We now expect interest in other income to be between 6 million and 8 million in 2025, and the weighted average share count for EPS for the full year to be approximately 298 million. We continue to expect our ending cash, balance of cash and investments to be approximately 270 million at the end of 2025. When excluding the 5 million licensing payment in Q1, this implies 115 million cash burn in 2025, or an improvement of 72 million in adjusted cash burn compared to 2024. We remain on track towards our plan to achieve positive cash flow by the end of 2027, and believe our 315 million in cash and investments as of June 30 will fund us through this transition. I will now hand it back to Christian for some final remarks.

Close, I wanna come back to the core of why we believe the company is positioned to deliver long-term value to its stakeholders. I find technology is fundamentally different from anything else in the market. It enables researchers and clinicians to read native single DNA molecules at lengths of up to 25 kilobases with exceptional accuracy while simultaneously detecting epigenetic modifications such as -methyl-C and -methyl-A in the same sequencing run at no additional cost. We believe no other platform matches this level of biological insight at scale. With Spark Chemistry, Connects RNA kits, Pure Target panels, and our upcoming multi-use smart cell capability, we're delivering true -to-end solutions, reducing barriers to adoption through improved cost efficiency, higher throughput, and workflow simplicity. Together, these innovations are setting the stage for broader adoption in clinical and population scale genomics. We believe that we are well on the path to supporting not just tens of thousands of genomes, but ultimately hundreds of thousands to even millions of genomes. And we're doing this with focus and financial discipline. By investing efficiently and narrowing our strategic priorities, we've meaningfully reduced our cash burn and are on track toward our goal of becoming cashflow positive as we exit 2027. That's the opportunity ahead. That's why we've refocused on long read innovation. And that's why we believe PacBio is well positioned to lead the next chapter of genomic medicine. With that, I'd like the operator to begin the Q&A portion of this call.