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Pacific Biosciences of California's (PACB) CEO Mike Hunkapiller on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 21, 2016 04:30 PM ET

Executives

Trevin Rard - IR

Mike Hunkapiller - CEO

Susan Barnes - CFO

Ben Gong - VP of Finance and Treasurer

Analysts

Amanda Murphy - William Blair

Joe Munda - First Analysis

Bryan Brokmeier - Cantor Fitzgerald

Bill Quirk - Piper Jaffray

Tycho Peterson - JP Morgan

Operator

Good day, ladies and gentlemen, and welcome to the Pacific Biosciences of California First Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Trevin Rard. Ma’am, you may begin.

Trevin Rard

Thank you. Good afternoon and welcome to the Pacific Biosciences first quarter 2016 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 Investors section of our website at www.pacb.com, or alternatively as furnished on Form 10-K available on the Securities and Exchange Commission website at www.sec.gov.

With me today are Mike Hunkapiller, our Chief Executive Officer; Susan Barnes, our Chief Financial Officer; and Ben Gong, our Vice President of Finance and Treasurer.

Before we begin, I'd like to remind you that on today's call we will be making forward-looking statements, including plans and expectations relating to our financial projections, products and other future events. You should not place undue reliance on forward-looking statements - subject to assumptions, risks and uncertainties, and may differ materially from actual results. These risks and uncertainties are more fully described in our Securities and Exchange Commission filings, including our most recently filed report on Form 10-K. Pacific Biosciences undertakes no obligation to update forward-looking statements.

In addition, please note that today's call is being recorded and will be available for audio replay on the Investors section of our website shortly after the call. Investors electing to use the audio replay are cautioned that forward-looking statements made on today's call may differ or change materially after the completion of the live call.

I'd now like to turn the call over to Mike.

Mike Hunkapiller

Thanks, Trevin. Good afternoon and thank you for joining us today. We are pleased with our first quarter results and our continued progress in driving growth in our business. Highlights of our Q1 financial results are as follows. We received orders for 30 Sequel Systems and three RS II systems during the first quarter. The Sequel System orders came from a broad range of customers and are well distributed across the US, Europe and Asia. About half of the new systems order represent new PacBio customer sites.

We shipped 18 Sequel instruments during the first quarter compared to 10 instruments shipped during Q4. Total revenue for the first quarter was $19.1 million, up 8% from Q1 2015. We're on target for the revenue forecast for this year. With significant and growing backlog, we're well-positioned to deliver sequential revenue growth throughout the year.

Consumable revenue for the first quarter was $4.6 million, up 8% from Q1 2015. System utilization among RS II users has remained steady. Instrument revenue for the first quarter was $7.8 million, up 11% compared with Q1 2015. We installed a mixture of both RS II and Sequel instruments this past quarter. Going forward we expect almost all of our new installs to be Sequel Systems.

Our gross margin improved from approximately 34% during Q1 last year up to 50% this year - this quarter. This largely reflects the higher margin we generate from selling Sequel Systems compared to RS II systems. We are pleased to see that we are tracking toward profitability with improved product margins.