Pacific Biosciences of California, Inc. (NASDAQ:PACB) Q3 2023 Earnings Call Transcript

Pacific Biosciences of California, Inc. (NASDAQ:PACB) Q3 2023 Earnings Call Transcript October 30, 2023

Pacific Biosciences of California, Inc. beats earnings expectations. Reported EPS is $-0.26, expectations were $-0.3.

Operator: Good afternoon, everyone, and welcome to the PacBio Third Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today’s event is being recorded. At this time, I’d like to turn the floor over to Todd Friedman, Senior Director of Investor Relations. Sir, please go ahead.

Todd Friedman: Thank you, Jamie. Good afternoon and welcome to PacBio’s third quarter 2023 earnings conference call. Earlier today, we issued a press release outlining the financial results, we will be discussing on today’s call, a copy of which is available on the Investors section of our website at www.pacb.com or as furnished on Form 8-K available on the Securities and Exchange Commission website at www.sec.gov. With me today are Christian Henry, President and Chief Executive Officer and Susan Kim, Chief Financial Officer. On today’s call, we will be making forward-looking statements, including statements regarding predictions, progress, estimates, plans, intentions, guidance, and others, including expectations with respect to our growth potential, instrument and consumable sales and GAAP and non-GAAP growth guidance.

A scientist working with a microscope in a laboratory, focusing on a cell of a medical experiment.

You should not place undue reliance on forward-looking statements because they are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or discussed. We refer you to our documents that we filed with the SEC, including our most recent forms 10-Q and 10-K, and our recent press release to better understand the risks and uncertainties that could cause actual results to differ. We disclaim any obligation to update or revise these forward-looking statements except as required by law. During the call we will also present certain financial information on a non-GAAP basis. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement in understanding of the company’s operating results as reported under U.S. GAAP.

Management believes that non-GAAP financial measures, combined with U.S. GAAP financial measures, provide useful information to compare our performance relative to forecasts and strategic plans, and benchmark our performance externally against competitors. Reconciliations between historical U.S. GAAP and non-GAAP results are presented in tables within our earnings release. In addition, please note that today’s call is being recorded and will be available for replay on the investor 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. Finally, we will be hosting a question-and-answer session after our prepared remarks.

[Operator Instructions] I will now turn the call over to Christian.

Christian Henry: Thank you everyone for joining the call today. PacBio achieved another milestone in the third quarter as we grew revenue by 72% year-over-year to $55.7 million, exceeding $50 million in quarterly revenue for the first time in PacBio’s history. All three regions, again, posted record quarterly revenue. In the third quarter, we shipped 52 Revio instruments for revenue, which is a record number of instrument shipments in one quarter. This brings our installed base as of September 30th to 129 Revio systems. We also shipped our first Onso units in the third quarter. I’m pleased with our order momentum and broad customer interest in this new platform. We’ve received orders from 10 countries across various customer and application types and expect to continue ramping up shipments in the fourth quarter.

I look forward to sharing the installed base for their Onso system at a later date as the platform matures and we further scale manufacturing. We also recorded consumable revenue of $16.9 million in Q3. In just its second full quarter on the market, Revio consumables of approximately $9.3 million surpassed Sequel II/IIe consumables. This ramp was faster than we had originally expected. We shipped well over 9,000 Revio SMRT cells in the quarter. For context, it took Sequel II/IIe quarters to surpass 9,000 cells, which further underscores customers’ rapid adoption and the elasticity of the new platform. In Q3, Revio utilization increased compared to the second quarter. Our customers use more cells per installed system as they began their ramp into production.

In fact, the total data output for the Revio fleet in the third quarter already surpassed the output from the total 500 plus Sequel II/IIe fleet at its peak. The increased instrument utilization resulted in an annualized consumable pull through of 483,000. Although it is exciting to see our customers generating more data than ever before, I would also say that we are still early in our launch cycle, and we do not know if this level of consumable pull-through will represent the long-term pull-through of the Revio platform. The continued uptake and adoption of Revio is allowing us to increase our 2023 revenue guidance again this year. We now expect full-year revenue to be between $195 million and $200 million, representing 52% to 56% growth over 2022 and above the long-term targets we set out at our investor day last November.

One of the most important metrics we’re tracking for Revio adoption is new customer uptake, as it shows how the platform enables more and more users to migrate from other sequencing technologies onto PacBio. Again, we’re pleased to report that over 40% of our Revio system orders in the third quarter were from new PacBio instrument customers. Additionally, we continue to expect a multi-year opportunity for existing Sequel II customers to migrate over to Revio, as less than 30% of the approximate 300 Sequel II/IIe customers have ordered a Revio to-date. Our new customers include Helix, who ordered a Revio system to strengthen its offering by incorporating native and accurate long reads into its population genomics business, which currently provides an end-to-end sequencing platform for several large-scale programs across the United States.

In addition to new customers purchasing the platform, some of our existing customers are already expanding their Revio capacity, like Children’s Mercy Hospital in Kansas City, which has recently shared how Revio has enabled them to consolidate tests, increase efficiency, and improve solve rates, while accelerating turnaround time. Further, the hospital shared that they can achieve results in just two weeks with five-based HiFi sequencing, compared to months using multiple legacy tests. Similarly, we are also collaborating with GeneDx and the University of Washington to study the capabilities of HiFi long read whole genome sequencing to improve our ability to understand genetic conditions in pediatric patients. We believe that with HiFi and Revio, our customers may be able to consolidate a menu of different tests onto one integrated complete long read genome.

We continue to see strong momentum in the genetic disease segment for HiFi sequencing as other children’s hospitals implemented Revio during the quarter. This includes another leading institution in the Midwest that upgraded from Sequel IIe to scale whole genome sequencing for its rare disease cohorts and to implement Iso-Seq to further its research in pediatric and adolescent cancer patients. In large-scale genomics projects, we were pleased to see initial data from researchers at Mohammed Bin Rashid University Of Medicine and Health Sciences or MBRU, in developing an Arab Pangenome Reference, which uncovered over $100 million base pairs of novel sequence, compared to other recent pangenome references. PacBio HiFi was a key contributor to unlocking this new data, which is why the team decided to ramp on Revio to begin a larger multi-thousand genome sequencing project this year.

One of the hallmarks of PacBio has been our ability to create additional value for our customers by adding new features to our sequencing platforms. With Revio, we are continuing this tradition by improving the performance of our systems in the field and adding valuable new features to the platform later this year. I’d like to spend a few minutes discussing some of these enhancements. In Q3, we rolled out a software update that optimizes the preload feature on Revio. The preload feature enables customers to load their next run onto the instrument, while a sequencing run is underway. This gives Revio the potential to always be running and truly enables production scale long read sequencing. Over the past few months, we learned that some of our highest throughput, most industrialized customers were having some challenges using this feature.

And as a result, we made some changes to improve the preload function, which was included in this recent software release. Now, customers can preload as expected, allowing high volume customers to potentially further increase Revio utilization. In the fourth quarter, we plan to add several new enhancements to the Revio platform. First, we will incorporate the highly anticipated adaptive loading feature popular on our Sequel IIe platform. Adaptive loading tailors the DNA loading to better fit the customer’s sample, providing a backstop to prevent SMRT cell overload. This can enable customers to load more DNA more confidently and ultimately achieve higher and more consistent yields. We will also enable support for libraries that are less than 3 kilobases long, which will position Revio more favorably in applications like AAV, Iso-Seq, and 16S microbial sequencing.

Further, it will enable 12-hour and 30-hour run times so users can optimize their runs for shorter and longer DNA inserts. Finally, the update will also include a run preview feature, allowing users to see their run statistics after the first four hours during the sequencing process and enabling customers to better plan for future sequencing runs. We’re not just focused on enhancing the sequencing platform, but we are also improving the end-to-end workflow. We believe that by improving the workflow from sample preparation through data analysis, we will enable our customers to truly leverage the power of HiFi sequencing. In the sample preparation process, next year we plan to release improvements that leverage the technology acquired from Circulomics to improve size selection on the SMRT cell.

This will improve our customers’ ability to achieve higher sequencing output with each SMRT cell and consistently achieve longer read lengths. Additionally, in order to enable our customers to take full advantage of the throughput of Revio, we have collaborated with leading automation providers, including Hamilton, Integra, Revvity, and Tecan to fully automate sample preparation protocols for both Revio and the Sequel II/IIe systems. On the analysis front, earlier this month, we launched the PacBio Whole Genome Sequencing Variant Pipeline or WGS Variant Pipeline. This standardized computational method consolidates over 10 separate secondary and tertiary analysis tools into a single user-friendly workflow, enabling users with all levels of bioinformatics experience to access Hifi whole genome sequencing.

Over the past few years, I’ve often discussed our goal to make PacBio more multiomic company. This is important as multiomic approaches allow us to better understand the underlying connections from the genome and the epigenome to the transcriptome and the proteome, and ultimately glean greater insights into biology and disease. With the flexibility and increased throughput of Revio, combined with HiFi single molecule detection capabilities, we’re starting to see how Revio can be a multi-omic Swiss Army Knife of sorts. For example, in a preprint last month, researchers from the University of Washington and other institutions showed how Revio could produce data on four separate high quality omes on just one Revio SMRT cell, the genome, the methylome, chromatin epigenome, and the transcriptome.

In analyzing a participant in the undiagnosed disease network, the researchers reported how data from each of the four omes explained one or more of the participants’ phenotypes. This study is yet another example of how a synchronized single long-read multi-ohmic test can more effectively uncover unexplained rare conditions than multiple one-off tests. In another study, scientists at the University of Dresden and Max Planck Institute used PacBio Iso-Seq to look deeper into the transcriptome to understand the impact of alternative splicing on isoform diversity and protein structure and showed that isoforms have a critical role in determining protein structures and biological functions in brain development and concluded that alternative splicing has greater potential to impact protein diversity and function than previously thought independently from changes in gene expression.

To address this growing transcriptomics market, we’re excited to launch our new Kinect kits, enabling scalable cost-effective full-length RNA sequencing on PacBio Revio and Sequel IIe. With the MOS sequencing method introduced late last year, customers can concatenate smaller inserts into one long insert to dramatically increase output in single cell RNA experiments. Now with the expanded and rebranded Kinect kits, we can better address bulk RNA applications, allowing scientists to reveal the role of isoforms for the biology of health and disease, in addition to obtaining the gene expression information. This truly enables this application on Revio, allowing customers to perform large studies, thousands of samples per year on a single Revio system, thereby providing access to projects in neurology, rare disease, and cancer research, as well as other markets.

The Kinect line of kits also includes the 16S kits. The 16S gene is found in bacterial genomes and has long been used to identify, classify, and quantify species and strains in a microbial community sample. At about 1,500 base pairs long, short lead sequencing has difficulty reading the whole gene, while long read sequencing would leave unused capacity on the sequencer. With Kinects, customers can concatenate the 16S gene into long libraries for HiFi sequencing. This puts Revio and Sequel II on par with short-read sequencing regarding cost, positioning Revio to better address the multi-hundred million dollar microbial genomics market. These kits further expand our competitive offerings in human genetics, oncology, and microbiology, and we look forward to discussing them more with researchers at ASHG later this week.

Before I pass the call over to Susan, I’d like to welcome David Meline to our Board of Directors. David brings extensive experience to our board as a finance leader in various life science and healthcare companies, most recently, Moderna Incorporated. And with that, I’ll pass the call to Susan to discuss the financials. Susan?

Susan Kim: Thank you, Christian. As discussed, we are pleased to have reported $55.7 million in product, service, and other revenue in the third quarter of 2023, which represented an increase of 72% from $32.3 million in the third quarter of 2022. Instrument revenue in the third quarter was $34.7 million, an increase of 203% from $11.4 million in the third quarter of 2022. The continued momentum of Revio primarily drove the increase in revenue as we shipped 52 instruments for revenue in the quarter. We ended the quarter with an install base of 129 Revio systems. Turning to consumables, revenue of $16.9 million in the third quarter increased 5% from $16.1 million in the third quarter of last year. It was a record for PacBio with approximately 55% of consumable revenue coming from Revio systems and the remainder from other systems and other consumables.

We expect Sequel II/IIe as a percent of total consumables to continue declining as we ship Revio and customers transition to the new system. Finally, service and other revenue was $4.1 million in the third quarter, compared to $4.8 million in the third quarter of 2022. From a regional perspective, as Christian mentioned earlier, all three regions posted record revenue in the third quarter. America’s revenue of $29.0 million grew 73%, compared to the third quarter of 2022 with sequential and year-over-year growth across instruments and consumables. For Asia Pacific, revenue of $15.7 million grew 64% over the prior year. China recorded year-over-year growth, but was lower from the second quarter as customers in the region slowed their CapEx purchases, though we were encouraged to see sequential consumables as customers ramp up their Revio usage in the country with healthy levels of utilization.

Finally, EMEA revenue of about $11 million grew 83% over the prior year period, driven by both instrument and consumable growth as customers like MBRU ramped up its large-scale genome project and the Welcome Singer Institute reached its milestone of a thousand species sequenced as part of the Darwin Tree of Life project. Moving down the P&L, GAAP gross profit of $17.9 million in the third quarter of 2023 represented a gross margin of 32%, compared to a GAAP gross profit of $13.5 million in the third quarter of 2022, which represented a gross margin of 42%. Third quarter 2023 non-GAAP gross profit of $18.1 million, represented a non-GAAP gross margin of 32%, compared to a non-GAAP gross profit of $13.7 million or 42% in the third quarter of last year.

The year-over-year decrease in gross margin was due to product mix as instrument revenue accounted for a higher proportion of overall revenue in the third quarter of 2023, compared to the third quarter of 2022 and due to instrument mix as Revio instruments sold in the third quarter of 2023 had a lower gross margin than Sequel IIe systems sold in the third quarter of last year. Additionally, we realized inventory scrap and reserve charges as well as additional warranty-related material expenses on the Revio platform in the third quarter of 2023. GAAP operating expenses were $100.4 million in the third quarter of 2023, compared to $88.2 million in the third quarter of 2022. Non-Gap operating expenses were $90.9 million in the third quarter of 2022, representing an 8% increase non-GAAP operating expenses of $83.8 million in the third quarter of 2022 and excluded merger related expenses of approximately $9 million related to our acquisition of Apton in the third quarter of 2023.

The increase in operating expenses primarily reflects expenses related to the Apton acquisition in the third quarter of 2023, and increased sales and marketing expenses primarily related to increased investment in the commercial organization, partially offset by lower engineering and lab-related expenses resulting from the transition of Revio from development to commercialization. Regarding headcount, we ended the quarter with 844 employees, compared to 818 at the end of Q2 2023 and 771 at the end of the third quarter of 2022. Operating expenses in the third quarter included non-cash share-based compensation of $18.6 million, compared to $18.0 million in the third quarter of last year. GAAP net loss in the third quarter of 2023 was $66.9 million or $0.26 per share, compared to GAAP net loss of $77.0 million in the third quarter of 2022 or $0.34 per share.

In Q3, we booked a discrete income tax benefit related to the acquisition of Apton. The acquisition was considered a business combination for tax purposes, and therefore the acquired intangibles are disallowed for book tax purposes, which resulted in a one-time discrete non-cash income tax benefit on the GAAP P&L of $10.7 million in the quarter. Non-GAAP net loss was $67.9 million, representing $0.27 per share in the third quarter of 2023, compared to a non-GAAP net loss of $72.5 million, representing $0.32 per share in the third quarter of 2023, compared to a non-GAAP net loss of $72.5 million, representing $0.32 per share in the third quarter of 2022. Onto our balance sheet, we ended the third quarter with $767.8 million in unrestricted cash and investments, compared with $829.9 million at the end of the second quarter of 2023.

The ending cash balance on September 30 does not reflect the milestone payment to the Omniome shareholders, including approximately $96.2 million in cash and 9.0 million shares of common stock, which was paid and distributed on or about October 4, 2023. Inventory balances increased in the third quarter to $68.3 million, representing 2.2 inventory turns, compared with $67.6 million at the end of the second quarter of 2023, representing 2.0 inventory turns. Accounts receivable increased in the third quarter to $30.5 million, compared with $24.0 million at the end of the second quarter of 2023. To expand a bit on our guidance, as Christian indicated, our strong performance in the third quarter leads us to believe that revenue for the year will be $195 million to $200 million, representing a growth rate of approximately 52% to 56%, compared to 2022.

This represents an increase of $10 million over our guidance last quarter, and we have now raised our guidance every quarter this year. Around the midpoint, our guidance assumes fourth quarter revenue is approximately flat sequentially compared to the third quarter, with the $5 million range reflecting macro factors that are lengthening sales cycles for our customers globally and affecting the timing of customer capex purchases. Moving down the P&L, we expect the 2023 non-GAAP gross margin to be around the low-end of the previously guided 32% to 34% range, due to higher-than-expected inventory scrap and reserves in the third quarter and higher warranty costs associated with the Revio instrument. We continue to expect margin expansion beyond 2023, as Revio placements will help drive a mixed shift toward higher margin consumables and higher volume and optimization drive lower manufacturing unit costs.

Specifically, we’ve made good progress this year in reducing costs by lowering the manufacturing labor time for the Revio system production, which we expect to continue into 2024. And we have now commenced consolidating our San Diego manufacturing operations into Menlo Park, which will give us the benefit of running our manufacturing operations more efficiently. We now also expect non-GAAP operating expenses to grow by 2% to 3%, compared to 2022. This is lower than our previously guided growth rate as PacBio continues to focus on spending discipline. We expect interest income to more than offset interest expense for the remainder of the year and the weighted average share count for EPS for the full-year to be approximately $254 million due to the timing of the issuance of the Omniome milestone share.

I’ll hand it back to Christian for some final remarks. Christian?

Christian Henry: Thank you, Susan. With a couple of months left 2023 is on track to be the most successful year in PacBio’s history. And when looking back, I believe it can mark an inflection point on our strategic journey. For the year, PacBio is on track to ship more systems than any other point in its history. What is perhaps more encouraging is that we now expect to achieve record consumable revenue in spite of the fact that 2023 has been a product transition year. I believe that this is an indication of the fundamental demand for long-rate sequencing in the market and that highly accurate high throughput systems such as Revio are enabling that demand. Our projected revenue growth for this year is well above our 40% to 50% compound annual growth target established at our investor day last year.

When I look back and compare where we are now versus our internal expectations 12-months ago, what really stands out is the pace of Revio adoption as it is well above where we had envisioned it last November. However, as we look toward 2024, we see an economic backdrop that is substantially more challenging than a year ago. On that topic, I wanted to zoom out a bit and provide some high-level commentary on 2024. While we’re not providing specific 2024 guidance today, I wanted to give you a rough framework of how we’re thinking about the years we build out our 2024 budget. First, we continue to focus our R&D efforts on the creation of a multi-product, multi-platform portfolio that includes both leading long and short read sequencing systems.

We are deep into the development of several new sequencing platforms, which we believe will enable us to reach more of the sequencing market and drive long-term revenue growth. But even with this focus in R&D, we still believe that total expenses in 2024 will be within the range of the long-term guidance that we provided at Investor Day. Additionally, our sales funnel for Revio continues to be robust as potential new PacBio customers remain enthusiastic about implementing the power of native long-leads into their research and existing customers are eager to upgrade their Sequel II fleets. However, due to broader global macroeconomic issues, customers have lengthened their capital purchasing timelines, which will likely have some impact on our growth trajectory in 2024.

So while we still expect to achieve significant revenue growth in 2024, the current challenges in the global macroeconomic environment are likely to have an impact on our growth rate. As we complete our 2024 forecast and continue to monitor market conditions, we plan to provide more detailed guidance on our Q4 earnings call in early 2024. As we close the call, I want to reiterate how pleased I am with the team’s execution. Since we announced the Revio and Onso platforms just over one year ago, especially in this environment where we’ve seen prolonged inflation and worsening macroeconomic conditions. Thank you for your time today. Operator, let’s start the Q&A session.

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Q&A Session

Operator: Ladies and gentlemen, at this time, we’ll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Tejas Savant from Morgan Stanley. Please go ahead with your question.

Tejas Savant: Hey guys, good evening and thanks for the time here. Christian, a couple of questions for you here. First, I mean in terms of the backlog growth, has order backlog essentially trended in line with your expectations? And as you think about juxtaposing your placements for next year, I know you mentioned some moderation for the macro impact. But how should we think about sort of backlog, how that’s trended over the last four weeks or so in the context of ‘24 placements? And then my second part of the question was on consumables. Any way for you to parse out how much of the strength that you’re seeing here is related to new customer stocking versus that first cohort of Revio adopters ramping usage. I mean, if you can just break out or circumscribe the trends you see in that early adopter cohort, that would be super helpful. Thank you.

Christian Henry: Sure, I’m just writing down the question. So first of all, I’m not going to comment specifically on backlog, but we are continuing to ship more and more every quarter and we see it’s certainly meeting my expectations. When I think about next year, I do think that we have the technology and capabilities and the enthusiasm in the market to continue growing and growing with respect to Revio. But of course, right now in this near-term window, we are seeing some macroeconomic challenges like others. But as I said in my prepared remarks, we expect to significantly grow our revenue in 2024. I’m not going to be any more specific than that, because quite frankly this isn’t a 2024 guidance call. With respect to consumables, you know, we looked carefully at the Q3 numbers and there really wasn’t a lot of stocking going on relative to what we had in Q2.

And what we’re seeing is our customers are fundamentally starting to really use their Revio systems and that’s why we had such a strong performance in consumables. And I do think that, that was certainly one of the highlights of the quarter. And certainly my expectation going forward is that you’re going to see — you’re going to continue to see very strong consumable performance. You know, we went through more than 9,000 SMRT cells in the third quarter. People are using the systems and they’re generating great data. So that is very, very encouraging for me. We’re still really early in this product cycle. And to see us number one in 2023 have a product transition year and yet still grow total consumables is really a pretty significant milestone for the company.

And number two, now you’re starting to see, you know, Revios completely overtake the Sequel platform. Those are both very encouraging signs that, you know, that I think are going to persist into 2024.

Todd Friedman: Next question, Jamie.

Operator: Our next question comes from Kyle Mikson from Canaccord. Please go ahead with your question.

Kyle Mikson: Hey, guys. Thanks for taking the questions. Congrats on the great quarter. First on the fourth quarter, kind of, I guess, guidance or outlook. So flat sequential revenue due to the macro environment, lengthening sales cycles, timing of cataracts purchases, like not a surprise, but where’s that happening? Is that only China or is that occurring in Western Europe, Russia, North America, et cetera? And since revenue is going to be flat in the fourth quarter, could that happen again in 1Q as well in ‘24. I just want to understand maybe like early ‘24 commentary? And then just quickly on Onso, like Christian you just talked about the sales funnel and backlog how that’s progressing and maybe the composition of customer types and how that rollout could progress next year? You didn’t mention that as like a ‘24 growth driver, but it’s you know it’s all kind of inorganic revenue growth as well as, so that could be good to hear. Thanks.

Christian Henry: Yes, okay we’ll start with you know we’ll start generally with Q4 and you know we did guide we did guide and increase the range of guidance you know which means we’ve actually increased our guidance in every quarter this year, which is great news. We are, you know, having, we do have a reasonably conservative outlook going into the fourth quarter, and that’s really driven by the fact that there are several macroeconomic factors at play, and we’ve heard a lot of our peers reporting that too recently. And so, you know, we’re definitely sitting more on the conservative side of the fence. The other thing is that the fourth quarter is typically it can be a very strong order quarter, but it’s also a short shipping quarter with holidays and other things to think about.

And so those are some of the factors that we just put into our modeling as we kind of think about heading towards year-end and into next year. Now when you think about next year, I’m not going to comment today on Q1 or any thoughts, so I’m going to skip that one, Kyle, for today. But when you think about the economic challenges, it’s interesting. We’re at a point where each region has its own unique challenges. So you have in China several factors that are impacting revenue. And as I said last quarter and I continue to say, we’ve been a little more insulated than our peers in China, because our customer base is small and concentrated. In fact, what’s interesting is we were doing some analysis and believe it or not, our service providers in China have bigger sales forces than our entire sales force.

So even though we’re small and concentrated, our reach has actually been pretty good. And so that’s pretty darn encouraging. But there are some macro and economic issues in China that I’m sure have some impact on our business. The rest of Asia, if you make a comment there, I think the strong dollar and inflation have had some impacts and we think have some impacts. Europe, higher energy costs, as well as the continuing conflicts generally create uncertainty. But we are seeing signs of larger projects being talked about across the continent, not just one project or two, but several. And then the United States, one thing that was interesting is that the third quarter, we really didn’t see a significant end of year money, end of year push, so to speak, end of government year push.

And I think some of that’s probably attributed to the fact that there was a lot of angst about potential government shutdowns and there continues to be that. And so I think that we’re trying to think about, in trying to be thoughtful about how we guide with thinking about those things. If I move to Onso, the sales funnel has been quite strong actually. And we continue to see bundled orders, we continue to see individual orders. We’re not giving specifics because, principally for competitive reasons, to be honest, it is a very competitive market. We are scaling up our manufacturing and that will be, manufacturing scaling is probably more of a rate limiter than demand right now. And I suspect that will work its way through the system in the early part, by the early part of next year.

And so we you know we should end with a decent backlog in going into 2024 of the Onso system. We’ll continue to scale manufacturing And what’s exciting is that our customers are using the product and doing some amazing science already, some of which will likely be discussed at ASHG.

Todd Friedman: Next question, Jamie?