Doug Shenko

Doug Shenko inquired about the largest opportunities for PacBio to reduce OpEx spending in 2026 without impeding recovery. Shenko also sought clarification on a reference to 'industrial weakness,' asking if it pertained to agriculture, synthetic biology, or other sectors.

Answer

Christian Henry, President and Chief Executive Officer, clarified that the reference to industrial weakness pertained to the agricultural business, which has not been strong, similar to the academic sector. Regarding OpEx, Henry noted that 2026 would benefit from the full-year impact of 2025's workforce reductions. Future focus areas for cost management include G&A expenses, disciplined R&D spending on critical programs, and reducing non-headcount-related spend. He also mentioned efforts to reduce production costs through insourcing and optimizing marketing ROI. Henry acknowledged that developing next-generation platforms would incur significant expenses for prototypes and betas, and that ongoing litigation from 2019 would add incremental costs. Despite these, he expects OpEx to improve compared to 2025, with a focus on achieving cash flow break-even.

Doug Shenko asked about the biggest opportunities for reducing OpEx spending in the current year without hindering recovery, and sought clarification on any industrial weakness, specifically if it pertained to agriculture or synthetic biology.

Answer

Christian Henry, President and Chief Executive Officer, clarified that the industrial segment, primarily agriculture, has not been strong, consistent with the academic world. He noted that OpEx reductions will continue through the full-year benefit of 2025 workforce reductions, focusing on managing G&A and R&D expenses, while being mindful of new priorities. He also mentioned efforts to reduce production costs through insourcing and optimizing marketing spend.