PACIFIC BIOSCIENCES OF CALIFORNIA, INC. (PACB)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $37.2M, modestly above S&P Global consensus ($36.9M), with a narrower non-GAAP loss per share of $0.15 versus the consensus loss of ~$0.20; GAAP results were heavily impacted by restructuring and accelerated intangible amortization *.
• Record consumables revenue ($20.1M, +26% YoY) and improved non-GAAP gross margin (40% vs. 33% YoY) offset weaker instrument placements (12 Revio; 28 Vega), reflecting funding headwinds at academic customers .
• Guidance: FY25 revenue range lowered to $150–$170M (bottom end cut by $5M) due to tariff risks in China; Q2 revenue expected to be flat vs. Q1; non-GAAP OpEx guided down to $240–$250M (from prior $270–$280M) with exit-year non-GAAP gross margin >40% and year-end cash ~$270M .
• Stock reaction catalysts: mix shift to higher-margin consumables, Vega benchtop traction, restructuring to focus on long-read innovation, and tariff/investigation overhang (independent board probe of employment/cybersecurity allegations; company not expecting impact to reported financials, but 10-Q timing may be affected) .

What Went Well and What Went Wrong

• What Went Well

  • Record consumables revenue ($20.1M; +26% YoY) drove mix improvement and 40% non-GAAP gross margin; management cited “record consumables revenue and improved non-GAAP gross margin” as a highlight .
  • Vega benchtop adoption: 28 units shipped in Q1; approximately 50% of Vega shipments went to new PacBio instrument customers, broadening the customer base and use cases .
  • Strategic focus sharpened: restructuring aims to reduce annualized non-GAAP OpEx by ~$45–$50M by year-end 2025, prioritizing long-read innovation (multi-use SMRT Cells, ultra-high throughput platform) and consumable margin improvements .

• What Went Wrong

  • Instrument headwinds: Revio placements down to 12 (vs. 28 in Q1 2024), with instrument revenue at $11.0M (vs. $19.0M in Q1 2024), driven by academic funding uncertainty in the US .
  • Tariff/macro risks: Lowered FY revenue floor to reflect China tariff uncertainty; Q2 assumes limited instrument sales in China post-April 10, pressuring growth and mix .
  • GAAP results distorted by non-cash charges: GAAP gross loss ($1.4M) and GAAP operating expenses ($427.6M) included $381.8M restructuring charges and $359.3M accelerated intangible amortization, obscuring operational progress .

Financial Results

Segment Breakdown

KPIs

Consensus vs. Actual (S&P Global)

Values marked with * retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are off to a solid start to the year, highlighted by a full quarter of shipments of the Vega platform, record consumables revenue and improved non-GAAP gross margin… we proactively restructured… to reduce cost and sharpen our focus on long-read innovation.” — Christian Henry, CEO .
• “We now expect full-year 2025 revenue to be between $150 million and $170 million… newly implemented tariffs between the U.S. and China… proposed NIH budget reductions… introduced incremental risks.” — Christian Henry, CEO .
• “Non-GAAP operating expenses were $61.7 million… representing a 29% decrease… The decrease… was primarily due to the restructuring initiative… We ended the first quarter with $343.1 million in unrestricted cash and investments.” — Jim Gibson, CFO .
• “We expect Q2 revenue to be flat… 2025 non-GAAP gross margin to be between 35% and 40%, and exit the year above 40%… non-GAAP operating expenses to be $240–$250 million.” — Jim Gibson, CFO .

Q&A Highlights

• Clinical opportunity as offset to academic funding: expanding PureTarget panels; adoption by Quest/Myriad; durable revenue expected over several years; strong rare disease demand in Europe hospitals .
• Placements outlook: Revio units down YoY; Vega expected to grow with margin improvement as manufacturing scales; exploring alternatives to monetize high-throughput short-read assets while supporting Onso .
• Cannibalization: Vega not replacing Revio; customers buy Vega when Revio funding constrained; view platforms as complementary with future transition to Revio as funding improves .
• Visibility and pull-through: Near-term Vega funnel visibility strong; aiming to lift Revio pull-through above $300K via ease-of-use, application expansion (e.g., FFPE), and more high-utilization clinical accounts .
• Tariffs and cost: Minimal near-term COGS impact; may consider surcharges if supply chain inflation materializes; currently supporting customers without price increases .
• EMEA growth and cash flow path: EMEA fastest-growing region on rare disease; achieving FCF breakeven by end of 2027 requires top-line growth, margin expansion, disciplined OpEx, and UH-thru long-read contribution .

Estimates Context

• Q1 2025 beat vs. consensus: Revenue $37.153M vs. $36.900M*; Primary EPS $(0.15) vs. $(0.2007)* — driven by consumables strength and 40% non-GAAP gross margin mix shift; GAAP EPS impacted by restructuring/accelerated amortization *.
• Forward snapshot (context): Street models imply revenue cadence building through H2 with Q3/Q4 2025 revenue estimates $40.25M/$41.65M and Primary EPS of ~$(0.15) per quarter* [multi_tool_use].
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Mix shift to consumables is the core margin lever; non-GAAP gross margin at 40% is ahead of 2024 levels, with exit-year target >40% — watch pull-through trajectory and Spark adoption pace .
• Vega benchtop is expanding the funnel among budget-constrained labs, with ~50% new customers; placements and unit economics should improve as production scales — monitor Q2/Q3 run-rate .
• Instrument demand is constrained by academic funding and China tariffs; expect choppy placements and a heavier consumables mix; Q2 guided flat underscores near-term caution .
• Restructuring materially lowers OpEx (FY25 non-GAAP $240–$250M) and sharpens long-read focus (multi-use SMRT Cells, UH-thru platform); potential optionality to monetize short-read assets .
• Legal/investigation overhang is a timing risk (10-Q filing), but management does not expect impact to reported financials; headline risk remains until resolved .
• EMEA rare disease momentum and clinical translational use are structural supports; track hospital/clinic placements and panel adoption (PureTarget) for more durable revenue .
• Trading lens: near term tied to tariff news flow and instrument order visibility; medium term hinges on consumables growth, Vega scaling, and evidence of progress toward UH-thru long-read cost parity.

Additional Supporting Disclosures

• Q1 2025 press release and 8‑K contain full GAAP/non‑GAAP reconciliations and unaudited statements; GAAP gross margin was impacted by $7.7M restructuring-related inventory charges, $4.3M intangible amortization, and $4.1M loss on purchase commitments .
• Updates since last earnings release include licensing agreement to enhance methylation detection (deep learning models) and DAC selection for Alzheimer’s research; China distribution expansion press release noted during the quarter .