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01/11 05:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: improvements in gross margins and reduced operating expenses are positives, but declines in Americas and Asia Pacific revenues are concerning. The Q&A highlights temporary challenges in Vega placements and strategic moves towards clinical applications. While there is optimism about future growth, particularly in EMEA and China, the lack of specific guidance and ongoing challenges in academic funding temper expectations. This balance of positive and negative factors suggests a neutral short-term stock price movement.
Revenue $38.4 million in Q3 2025, a decrease from $40 million in Q3 2024 (4% decrease). The decline was due to fewer Vega shipments in Europe and lower ASPs, partially offset by record consumable revenue.
Consumable Revenue $21.3 million in Q3 2025, a 15% increase year-over-year. This growth was driven by broad adoption of SPRQ Chemistry and increased utilization across the installed base.
Non-GAAP Gross Margin 42% in Q3 2025, up from 33% in Q3 2024. The improvement was due to a higher mix of consumables, lower manufacturing costs for Vega systems, and improved Revio SMRT Cell manufacturing yields.
Instrument Revenue $11.3 million in Q3 2025, a 33% decrease year-over-year. The decline was driven by lower Revio unit shipments, partially offset by Vega system shipments.
Service and Other Revenue $5.8 million in Q3 2025, a 25% increase year-over-year. The growth was driven by an increase in Revio service contract revenue.
EMEA Revenue $10.7 million in Q3 2025, an 18% increase year-over-year. The growth was driven by a 50% increase in consumable revenue, partially offset by lower Vega placements.
Americas Revenue $18.1 million in Q3 2025, a 10% decrease year-over-year. The decline was due to reduced academic capital spending and elongated procurement cycles.
Asia Pacific Revenue $9.6 million in Q3 2025, an 11% decrease year-over-year. The decline was due to fewer Revio placements, partially offset by higher consumable revenue.
Non-GAAP Operating Expenses $53.9 million in Q3 2025, a 14% decrease year-over-year. The reduction was due to restructuring initiatives and lower non-cash stock-based compensation.
Non-GAAP Net Loss $36.8 million in Q3 2025, compared to $46 million in Q3 2024 (20% improvement). The improvement was due to reduced operating expenses and higher gross margins.
Cash Burn $16 million in Q3 2025, an improvement from prior quarters. The improvement was attributed to restructuring, gross margin improvements, and expense discipline.
Revio and Vega Systems: Shipped 13 Revio systems and 32 Vega systems in Q3, bringing cumulative shipments to 310 and 105 systems, respectively. Approximately 75% of Revio shipments were to new customers. Vega shipments were below forecast, particularly in Europe, but 60% of placements went to new customers.
SPRQ-Nx Chemistry: Unveiled new SPRQ-Nx chemistry, expected to lower the cost of human genome sequencing to less than $300 per genome at scale. Beta testing to begin in 2026 with over 100 customers interested.
PureTarget Portfolio: Launched enhanced PureTarget portfolio, including panels for carrier screening and neurological diseases. Designed to replace multiple tests with one workflow.
EMEA Growth: EMEA revenue grew 18% year-over-year in Q3, driven by a 50% increase in consumable revenue.
China Market: Sequel II CNDx system received Class III Medical Device Registration approval in China, marking the first clinical-grade long-read sequencer approval globally. Berry Genomics plans to launch the system for thalassemia testing and expand to other assays.
Large-Scale Studies: HiFi technology selected for major projects like the Korean Pangenome Reference Project and the NIH-funded long-life family study, showcasing its utility in population-scale genomics.
Consumable Revenue: Achieved record consumable revenue of $21.3 million in Q3, a 15% year-over-year increase. Revio annualized pull-through was $236,000 per system.
Cash Burn Reduction: Reduced cash burn to $16 million in Q3, with a total expected cash burn of $115 million for 2025, a $70 million improvement from 2024.
Gross Margin Improvement: Non-GAAP gross margin reached 42%, the highest since 2022, driven by improved product mix and manufacturing efficiencies.
Clinical Applications: Focus on expanding HiFi sequencing in clinical settings, including partnerships with Berry Genomics and Children's Mercy Hospital for genetic disease diagnosis.
Cost Reduction Strategy: SPRQ-Nx chemistry and multi-use SMRT Cells aim to reduce sequencing costs and improve gross margins, supporting broader adoption.
Population Genomics: HiFi technology is being integrated into large-scale studies to uncover genetic diversity and improve precision medicine.
Revenue Miss: Revenue for Q3 2025 came in below expectations at $38.4 million, primarily due to fewer Vega shipments in Europe and lower-than-expected ASPs.
Funding Challenges in Americas: The funding environment in the Americas remains challenging, particularly for academic and government research customers dependent on NIH and public budgets, leading to elongated procurement cycles.
Asia Pacific Funding Environment: The funding environment in Asia Pacific continues to be challenging, impacting revenue performance.
Lower ASPs: Revio systems were placed with key institutions at lower prices, resulting in lower ASPs for the quarter.
Vega Shipments in Europe: Several Vega instruments were stuck in procurement processes in Europe, delaying shipments and impacting revenue.
Cash Burn: Despite improvements, the company still reported a cash burn of $16 million in Q3 2025, with a total expected cash burn of $115 million for the year.
Restructuring Costs: The company is undergoing restructuring, which has led to reduced headcount and operating expenses but may pose short-term operational challenges.
Dependence on Consumables: The company’s revenue growth is heavily reliant on consumables, which may pose risks if demand fluctuates.
Regulatory and Market Risks in China: While the company received regulatory approval for the Sequel II CNDx system in China, reliance on this market introduces risks tied to regulatory and market dynamics.
Competitive Pressures: The company faces competitive pressures in the sequencing market, particularly as it works to lower costs and improve technology adoption.
Revenue Guidance for Q4 2025: The company expects total fourth-quarter revenue to grow both year-over-year and quarter-over-quarter, with approximately 10% sequential growth.
Full-Year 2025 Revenue Guidance: Revenue guidance for the full year of 2025 has been narrowed to the low end of the range, now expected to be between $155 million to $160 million.
Cash Burn Guidance for 2025: Total cash burn for 2025 is expected to be approximately $115 million, an improvement of more than $70 million compared to 2024.
Cash Flow Breakeven Target: The company aims to achieve cash flow breakeven by the end of 2027.
New Chemistry Launch (SPRQ-Nx): The SPRQ-Nx chemistry is expected to dramatically lower the cost of human genome sequencing to less than $300 per genome at scale. Beta testing will begin later this month, with early access in 2026 and full rollout planned for 2026.
Revio and Vega Instrument Shipments: The company expects to ship more Revio and Vega instruments in Q4 2025 than in any other quarter this year.
Consumables Revenue Growth: Consumables revenue grew 15% year-over-year in Q3 2025, and the company anticipates continued strength in this segment.
Clinical Market Expansion: The company is focused on penetrating the clinical market and expanding opportunities into large population-scale programs.
New Product Launches: The company plans to launch multi-use SMRT Cells for Revio in 2026, which will reduce sequencing costs and improve gross margins.
The selected topic was not discussed during the call.
The earnings call presents a mixed picture: improvements in gross margins and reduced operating expenses are positives, but declines in Americas and Asia Pacific revenues are concerning. The Q&A highlights temporary challenges in Vega placements and strategic moves towards clinical applications. While there is optimism about future growth, particularly in EMEA and China, the lack of specific guidance and ongoing challenges in academic funding temper expectations. This balance of positive and negative factors suggests a neutral short-term stock price movement.
The earnings call reveals mixed insights: strong international growth and product adoption are positive, but concerns over revenue guidance reduction and flat Revio placements offset these gains. The Q&A highlighted uncertainties, particularly around NIH funding and demand conversion, influencing a neutral outlook. Positive factors like reusable SMRT Cells improving margins are balanced by cautious revenue guidance and unresolved demand issues, leading to a neutral sentiment.
The earnings call reveals several challenges: declining instrument revenue due to academic funding uncertainty, regulatory and supply chain risks, and macroeconomic pressures. Despite cost reductions and improved margins, the lack of share buyback or dividends, coupled with unclear guidance on product placements and monetization, adds to investor concerns. The Q&A further highlights management's avoidance of specifics, which could lead to negative sentiment. The absence of strong catalysts, like partnerships or high revenue growth, alongside the challenges, suggests a likely negative stock price movement.
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