Pacific Biosciences of California, Inc.

Welcome to the PACBio first quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kayleen Parrish with Investor Relations. Please go ahead.

Good afternoon and welcome to PACBio's first quarter 2026 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 investor section of our website at www.pacb.com or as furnished on Form 8K available on the Securities and Exchange Commission website at www.sdc.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 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 10Q and 10K 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'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 investor 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 will now turn the call over to Christian.

Thank you, and good afternoon, everyone. Our first quarter of 2026 was highlighted by record consumable revenue, greater than 100% year-over-year growth in consumable shipments to clinically focused accounts, and significant progress on our strategic objectives, including entering our first significant AI-related project with Basecamp Research. On the other hand, instrument revenue, particularly Vega, was lower than we had expected. This was driven by continuing pressure on academic funding, particularly in the United States. Additionally, we were unable to deliver some products to the Middle East because of the conflict in the region. I'll start by diving into our consumable performance. Once again, we achieved record consumable revenue, marking our third consecutive record quarter. In Q1, this was highlighted by more than 100% year-over-year growth in shipments to clinically focused accounts. This growth offset the fact that some customers held off consumable shipments to wait for the Spark Next commercial launch. Overall, consumable revenue grew 9% year-over-year, and clinical shipments now represent a mid-teens percentage of total consumable shipments doubling year-over-year. We expect clinical shipments to continue growing as customers transition from testing and validation to full commercialization. Consumable pull-through is within our expected range of 225 to 250K per Revio system. Additionally, there was strong demand to participate in our SPARC Next early access program during the quarter. Turning to instruments, we shipped 15 Revio systems in the first quarter, compared to 12 in the first quarter of 2025. While Revio demand remains constrained by the funding environment in the Americas, we are encouraged by the fact that half of Revio placements went to new customers globally, and we continue to see multi-system orders from clinical accounts building their capacity. We ended the quarter with cumulative Revio shipments of 346 systems. We shipped 27 Vega systems in the first quarter compared to 28 in the first quarter of 2025. The revenue contribution from Vega was impacted by two primary factors, lighter demand in the United States, where academic funding remains under pressure, and promotional pricing geared towards attracting new customers. Specifically, during the quarter, we launched a limited-time Vega promotion to expand our Vega install base and unlock several new accounts. We concluded the promotion at the end of the first quarter, and we expect Vega ASPs to normalize in the second quarter. The good news is that more than 85% of Vega placements went to new customers this quarter, expanding the reach of HiFi sequencing. Cumulative Vega shipments stand at 174 systems. From a regional perspective, EMEA was a highlight in the first quarter, delivering 17% year-over-year growth. We are seeing clinical customers who were in pilot and validation mode now make the transition into sustained production scale sequencing. That shift is creating demand for more REVIO placements and is driving sustained consumable pull through. The EMEA pipeline for REVIO continues to be strong and we believe that instrument sales in EMEA will remain an important driver for our business. As we saw in 2025, we expect that EMEA will be the fastest growing region in our business in 2026. In the Americas, we continue to aggressively shift our strategy to clinical and commercial accounts where the funding dynamics are more favorable. In fact, in Q1, our largest accounts are now commercial service providers and clinical accounts. Revenue in Asia Pacific declined 16% year over year due primarily to our largest customers in China waiting for the commercial launch of our Spark Next kit which are expected to ship later this month. Looking ahead, we remain confident in delivering revenue growth for the year. Although Vega demand remains softer than we anticipated, Revio opportunities are increasing with the imminent launch of SparkNEXT. As I communicated previously, we believe the introduction of SparkNEXT makes HiFi sequencing the most affordable long read sequencing technology. These favorable economics have been enabled by both the multi-use Smart Cell and an increase in Smart Cell yield. We will commercialize Spark next with the ability to use the Smart Cell three times, and our beta customers have seen double-digit improvement in yield. In fact, the beta program has gone so well that we significantly expanded the program in the first quarter. However, as I previously indicated, some of the customers are waiting for the full launch of the new chemistry which will occur later this month. Ultimately, we believe that Spark Next will drive demand for both more Revio systems and more consumables. But Spark Next isn't limited to Revio. Later this summer, we expect to launch the Spark Next chemistry on the Vega platform. On Vega, Spark Next will enable significantly more throughput, and it will unlock some of the key features of the Spark chemistry, including lower DNA input quantities. This will immediately increase the utility of the platform and increase its value, which we believe will accelerate demand for Vega. Now, I'd like to highlight a few significant strategic developments from the first quarter and areas where we have made encouraging progress in support of our long-term goals. First, we completed two significant strategic actions in the quarter. We closed the sale of our high-throughput short-read sequencing assets to Illumina generating approximately $48.1 million in net cash proceeds and meaningfully strengthening our balance sheet. Additionally, we resolved outstanding litigation with Personal Genomics of Taiwan. Taken together, these actions sharpen our focus, strengthen our position, and allow us to concentrate entirely on what we believe to be our true competitive advantage, long-read sequencing. We are also making real progress in our clinical opportunity, which we believe remains the most compelling long-term driver of our business, with shipments to clinical accounts increasing more than 100% year over year. Our goal is clear, lower the barriers of adoption and enable clinicians worldwide to deliver more complete answers to patients and their families. Our core thesis is straightforward. HiFi is the only commercially available sequencing technology that we believe can comprehensively characterize substantially all classes of variants in a single assay. As a comparison, short-reach approaches require multiple tests to achieve a similar result. As demand for comprehensive genomic testing continues to grow, we're focused on expanding the clinical utility of hi-fi sequencing because our system's faster time to answer, comprehensive genomic output, and altogether less expensive total testing costs can provide the insights that meaningfully change outcomes for patients. Specifically, we continue to believe that the rare disease market will be a major driver for clinical adoption of HiFi sequencing. Of the estimated 300 million people living with a rare disease, many remain undiagnosed or misdiagnosed, which we believe to be a reflection of the limitations of historic sequencing technology. What makes the rare disease market particularly compelling from a business perspective is that we believe we are in the early phase of the adoption curve. Patients getting sequenced today represent a small fraction of those who could benefit. It is clear to our team that we are in the early innings of a very large opportunity, and we have the chance to make a big impact with HiFi technology. We've made notable progress across our recently announced collaborations in rare disease. Ambry Genetics is on track to assess 1,000 patients in their ONCE study. With Ambry, we believe we are proving that HiFi has the power to find what other sequencing technologies have missed. Our collaboration with NLORM and EsperRare continues to advance with HiFi sequencing across dozens of ultra-rare diseases. HiFi has the potential to help inform therapy recommendations. another important validation point for clinical utility beyond the initial diagnosis. Additionally, the University of Washington program studying sudden unexplained death in childhood by sequencing across 200 families is well underway, further building our evidence base. As utilization of HiFi to sequence rare disease cases continues to expand, the ability to connect the data across customers and sites becomes a valuable tool for understanding each rare disease. This is why, in late February, we announced a collaboration with DNA Stag to launch the first global federated HiFi whole genome dataset. Through the HiFi Solves Consortium, which includes nearly 30 clinical and research institutions across 15 countries, the collaboration enables secure international research and allows genomic insights to travel across borders. Members have connected or have committed to connect more than 10,000 HiFi whole genome sequences, which would form one of the largest and most diverse federated HiFi datasets dedicated to rare disease research. We expect that collaboration will accelerate discoveries for patients and further drive our strength in the clinical research setting. Beyond rare disease, we're seeing a tremendous opportunity in the carrier and newborn screening markets. For example, in the fourth quarter of 25, we announced the Babies in Focus project led by Eurofins Genomics UK to sequence at least 2,000 samples. This study aims to demonstrate that long-read whole genome sequencing provides clinically meaningful improvements within a newborn screening setting, particularly in detecting complex and structural variants. We believe that this study will generate real-world evidence at population scale that can justify adoption of long-read sequencing in newborns in national healthcare programs and demonstrate the value created by long-read sequencing over short-read approaches. I'm happy to report that this is advancing as planned, and we expect 1,000 samples to be sequenced on the PAC biotechnology between April and September of this year. We believe this work is foundational toward building the evidence base for potential inclusion of long-read sequencing in a national newborn screening program in the United Kingdom. Before I turn the call over to Jim, I want to discuss our recently signed collaboration with Basecamp Research to deeply sequence approximately 100,000 metagenomic samples. This will be the largest project using HIFI technology in the history of PacBio, and the first scaled use of HIFI for the development of a biological foundation model. The team at Basecamp believes that model performance in biology scales disproportionately with data quality and diversity, not just model size. As a result, Basecamp is ambitiously targeting to create a Trillion Gene Atlas, which may end up expanding known genetic diversity by as much as 100-fold by sequencing up to 100-plus million species globally. The Trillion Gene Atlas will be used to train a new class of biological foundation model, Basecamp's EDEN model, which is already demonstrating the ability to move beyond simple prediction into generative biology, designing therapeutics directly from sequence and disease prompts, including gene insertion systems, antimicrobial peptides, and cell therapies with high experimental hit rates. Basecamp selected PacBio for this groundbreaking project because HiFi technology offers the most accurate and comprehensive view of the genome, which will be critical for this new class of biological foundation model. Additionally, with the launch of SPARCnext, we now have the ability to not only sequence at scale, but also offer the economics required to meet the needs of ambitious projects like the Trillium Gene Atlas. I look forward to keeping you updated on this project as we expect sequencing to begin scaling up over the course of 2026. I'll now hand the call over to Jim to detail our financials. Jim?