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01/11 04:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $39.8 million, up 10% year-over-year. This increase was driven by strong international growth, particularly in the APAC and EMEA regions, which combined saw a 45% increase compared to Q2 2024.
Non-GAAP Gross Margin 38.3%, up from 37% in Q2 2024. This improvement was driven by a favorable product mix, with a better-than-expected contribution from consumables.
Instrument Revenue $14.2 million, down 4% year-over-year. The decline was attributed to funding constraints, particularly with academic and government customers, which pressured higher CapEx purchases.
Consumables Revenue $18.9 million, up 11% year-over-year. Growth was driven by the adoption of the SPRQ chemistry, which increased throughput, lowered costs, and reduced DNA input requirements.
Service and Other Revenue $6.7 million, up 57% year-over-year. This increase was driven by higher Revio service contract revenue and revenue from a large population sequencing program in Southeast Asia.
Americas Revenue $17.7 million, down 15% year-over-year. The decline was due to government funding headwinds and NIH funding uncertainty.
Asia Pacific Revenue $12.6 million, up 53% year-over-year. Growth was driven by increased Revio and Vega placements and revenue from a population sequencing project in Southeast Asia.
EMEA Revenue $9.5 million, up 35% year-over-year. Growth was driven by strong demand for Revio placements in hospital and clinical research customer bases and growing demand for the Vega platform.
Non-GAAP Operating Expenses $58.1 million, down 18% year-over-year. The decrease was primarily due to a restructuring initiative implemented earlier in the year.
Non-GAAP Net Loss $40.0 million, compared to $55.2 million in Q2 2024. The improvement was due to reduced operating expenses and restructuring efforts.
Cash and Investments $314.7 million, down from $343.1 million in Q1 2025. The decrease reflects ongoing cash burn, though it was better than expected due to cost discipline and lower operating expenses.
SPRQ Chemistry: Increases throughput by up to 33%, lowers cost per genome, and reduces DNA input requirements four-fold. Sequencing gigabase output increased by 66% year-over-year.
Revio and Vega Systems: Shipped 15 Revio and 38 Vega systems in Q2 2025. Revio systems are gaining adoption in diagnostic and hospital labs, while Vega systems are expanding into smaller labs and new market segments.
Kinnex RNA Kits: Used in the 1,000 Genomes Long-Read Project for full-length isoform RNA data, offering high data quality and throughput.
Multi-use SMRT Cell: Under development to allow multiple uses per cell, reducing cost per genome and improving gross margin.
International Growth: Revenue in APAC and EMEA regions grew by 45% compared to Q2 2024. Strong placements in hospital and clinical research in EMEA and population sequencing in APAC.
Clinical Market Expansion: New agreement with Haorui Gene in China to expand HiFi-based testing in transfusion medicine and hematology.
Population Genomics: HiFi technology used in the first Arab human pangenome and the 1,000 Genomes Long-Read Project, expanding inclusion in underrepresented groups.
Revenue Growth: Achieved $39.8 million in revenue, up 10% year-over-year, driven by consumables and international growth.
Cost Discipline: Reduced quarterly cash burn and operating expenses by 18% year-over-year. Ended Q2 with $315 million in cash and investments.
Gross Margin Improvement: Non-GAAP gross margin improved to 38.3%, driven by favorable product mix and lower consumable costs.
Focus on Long-Read Innovation: Refocused on long-read sequencing technology to drive adoption in clinical and population-scale genomics.
Financial Discipline: Tracking towards positive cash flow by 2027 through reduced cash burn and narrowed strategic priorities.
Tariffs in China: The impact of tariffs in China remains uncertain, though it is currently lower than expected. However, predicting the ultimate impact on the business remains difficult, particularly in this region.
Academic and Government Funding Constraints: Capital spending is constrained, especially among U.S. academic institutions, due to government funding headwinds and uncertainty surrounding NIH funding. This is pressuring higher CapEx purchases and impacting instrument revenue.
Macroeconomic Environment: The current macroeconomic environment, including trade policy uncertainty and potential tariffs on supply chain countries, poses risks to cost of goods and overall financial performance.
Instrument Revenue Decline: Instrument revenue is expected to decline in the mid-teens due to the macroeconomic environment, including academic funding uncertainty.
Production Costs and Margins: Lower instrument margins and potential cost pressures from tariffs could impact gross margins, despite efforts to reduce per-unit costs.
Cash Burn and Financial Sustainability: Although cash burn has improved, the company is still operating at a loss and is reliant on its cash reserves to fund operations until it achieves positive cash flow by 2027.
Revenue Guidance: The company is maintaining the midpoint of its full-year revenue guidance, narrowing the range to $155 million to $165 million, representing 1% to 7% growth over 2024. This assumes mid-teen growth in consumables revenue and a mid-teen decline in instrument revenue due to macroeconomic conditions.
Regional Revenue Expectations: EMEA is expected to be the fastest-growing region in 2025, driven by population sequencing programs, clinical whole-genome sequencing, and Vega platform expansion. Asia Pacific is anticipated to grow in 2025, though a slight sequential decline is expected in Q3 due to tariff-related order acceleration earlier in the year. The Americas face significant uncertainty in academic research funding, with clinical market activity expected to offset some headwinds.
Gross Margin Guidance: The company has raised its 2025 non-GAAP gross margin guidance to a range of 37% to 40%, expecting to exit the year above 40%. This improvement is attributed to cost reductions in Revio instrument and consumables and the Vega system.
Operating Expenses: Non-GAAP operating expenses for 2025 are expected to range between $235 million and $240 million, with further reductions anticipated in 2026.
Cash Flow and Financial Position: The company expects to achieve positive cash flow by the end of 2027, with an ending cash and investments balance of approximately $270 million at the end of 2025. Adjusted cash burn for 2025 is projected to improve by $72 million compared to 2024.
Product Development and Innovation: The development of multi-use SMRT Cell capability is underway, aimed at reducing the cost per genome and improving gross margins. This innovation is expected to unlock larger-scale projects and increase flexibility for high-throughput research and clinical sequencing.
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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