Good day and welcome to the PacBio Third Quarter 2024 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 note this event is being recorded. I would now like to turn the conference over to Todd Friedman, Senior Director of Investor Relations. Please go ahead.

Good afternoon, and welcome to PacBio's third quarter 2024 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. A copy of our earnings presentation is also available on the Investor section of our website. 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 among other statements regarding predictions, estimates, expectations and guidance. You should not place undue reliance on forward-looking statements because they are subject to assumptions, risks, and uncertainties that could cause our actual results to differ materially from those projected or discussed. Please review our SEC filing including our most recent Forms 10-Q and 10-K, and our press release to better understand the risks and uncertainties that could cause results to differ. We disclaim any obligation to update or revise these forward-looking statements except as required by law. We will also present certain financial information on a non-GAAP basis which 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. Reconciliations between historical U.S. GAAP and non-GAAP results are presented our press release which is available on the investors section of our website. For future periods, we are unable to reconcile non-GAAP gross margin and non-GAAP operating expenses without unreasonable efforts due to the uncertainty regarding, among other matters, certain acquisition-related items that may arise during the year. A recording of today's call will be available shortly after the live call in the investor section of our website. Those electing to use the replay are cautioned that forward-looking statements may differ or change materially after the completion of the live call. I'll now hand it over to Christian.

Thank you Todd and thank you for joining us today. We are excited to broadcast to you from Denver, Colorado at the American Society of Human Genetics Annual Meeting. This week we unveiled several new and exciting products to thousands of researchers and scientists in the human genetics community. I look forward to sharing those and other updates on today's call. Our goal is to leave you with the following takeaways. First, PacBio is delivering on its strategy to create a suite of platforms with turnkey end to end solutions enabling our customers to access some of the most advanced sequencing technologies available. Our latest launches significantly expand our addressable market in ways that PacBio has never seen before. Second, although we continue to operate in a difficult macro environment where customer capital expenditure budgets have been challenged and sales cycles prolonged, we have seen several positive signs that our business is returning to growth. Third, Revio continues to drive new customers to long read sequencing and open up new demand. This is evident not only in the continued adoption by new PacBio customers, but also in the diversity of customers implementing PacBio and the adoption of HiFi sequencing by large population scale programs and diagnostic and LDT labs. Finally, we are hyper focused on building a sustainable cash flow positive business and have made meaningful progress this year on driving the production costs of our products down, reducing expenses, lowering our cash burn and strengthening our balance sheet by reducing our total debt while balancing dilution through our recently announced Note exchange with SoftBank. We remain committed to our goal of being cash flow positive by the end of 2026. Now let's discuss our product launches. Last week we announced a significant upgrade to our Revio platform with a…

Thank you, Christian. I'm incredibly proud of what we've accomplished over the past four years and I'm excited for PacBio's future. I am confident that under Christian's leadership, the team will continue to make tremendous strides in its mission to better human health through the promise of genomics. With that, I'll now dive into the quarterly results. I will be discussing non-GAAP results which include non-cash stock based compensation expense. I encourage you to review a reconciliation of GAAP to non-GAAP financial measures in our earnings press release. As discussed, we reported $40.0 million in product, service and other revenue in the third quarter of 2024 compared to $55.7 million in the third quarter of 2023. Insurance revenue in the third quarter was $16.8 million, a decrease of 52% from $34.7 million in the third quarter in 2023 due to lower Revio unit shipments. We ended the quarter with 247 cumulative Revio system shipments. Turning to consumables. Revenue of $18.5 million in the third quarter increased 10% from $16.9 million in the third quarter of last year. Approximately 77% of consumable revenue came from Revio systems and the remainder from other systems and other consumables. Finally, service and other revenue was $4.7 million in the third quarter of 2024 compared to $4.1 million in the third quarter of 2023. We continue to expect modest sequential increases in service and other revenue as the commencement of Revio service contracts is expected to more than offset the decrease in service contract revenue resulting from Sequel II and IIe's commissions. From a regional perspective, America's revenue of $20.1 million decreased 31% compared to the third quarter of 2023, with a decline in Revio systems partially offset by record consumables in the third quarter. For Asia Pacific, revenue of $10.8 million decreased 32% compared…

Thank you, Susan. In closing, I'd like to discuss our progress on the four strategic priorities we outlined earlier this year. The first was to improve our commercial execution to drive the adoption of both Revio and Onso. As I discussed, I believe we're past the trough our business experienced in the first half with several green shoots in our business that support our belief that revenue will grow in 2025. Onso notched a record quarter approximately 45% of Revio placements this year to new customers and clinical customers in large scale research programs continue to adopt long-read sequencing at a pace we've never seen before. Second, was continuing the development of new platforms that are expected to broaden our portfolio and drive revenue growth. As discussed with our launches of SPRQ, and Vega and SMRT Link Cloud, we've strengthened the value proposition of Revio, opening up HiFi sequencing to more customers than ever and developed a cloud environment for any user to scale their PacBio projects. And this is just the beginning. We continue to develop a high throughput short-read platform and an ultra-high throughput long-read platform with the goal of addressing customers with both long and short-read systems across a full spectrum of throughput. Third, we are focused on improving gross margin and driving manufacturing efficiencies. As we discussed, we've lowered our per unit COGS on Revio systems and consumables with the roadmap for further reduction in 2025. Additionally, we developed Vega with gross margin in mind and expect it to be accretive to the company's gross margin as we scale the platform next year. And finally reduce non-GAAP operating expenses. As Susan mentioned, we've lowered our full year non-GAAP operating expense guidance by an additional $10 million to $10 million to $15 million. Our operating cash burn continues to decline each quarter this year and we expect a further decline in non-GAAP operating expenses in 2025. Building a cash flow positive business remains the front and center in our minds and we're committed to our plan of turning cash flow positive by the end of 2026. Further, we signed an agreement with SoftBank to meaningfully reduce and extend the duration of our long-term debt while balancing shareholder dilution and impact on our cash. This exchange underscores our commitment to our shareholders and customers to optimize our capital structure and build a long-term sustainable business around our industry leading technologies. With the earliest debt maturities now due in August of 2029, this strengthens our financial position and gives us even greater flexibility. So with that I'd like to open it up for questions. Operator, why don't we start the Q&A section?

[Operator Instructions] Our first question comes from Tejas Savant with Morgan Stanley. Please go ahead.

Hey guys, good evening and appreciate the time here. Maybe Christian, I'll start with one on the SpaRC side of things. You know it's unlocking that $500 per genome price point for you. That's pretty darn close to the $200 per genome that the short read side of things offers. What has been the feedback from customers on the cost trade off versus the additional resolution that long-read offers? Of course there's a difference. I think it's about an eight fold difference on throughput as well, so just curious as to what the feedback has been from the field since launch. And on that point you made earlier on the lowering of the DNA input requirement, can you just help us dimension how much of an opportunity that unlocks for you?

Yes, Tejas, thank you for the question. I think the feedback on SpaRC has been remarkable, quite frankly, and I think the $500 list price is really a big deal and enables it catalyzes more projects to get started. Quite frankly, you think about this, you only have to run two genomes to get $500 a genome. I can't think of any other technologies that have that that kind of pricing. And when you start to think about if you're running large scale programs, you're likely going to get a discount off the $500. And so in reality you're going to be paying a lot less than the $500 for a large scale project and you're going to get all of the benefits of single molecule native long-read sequencing. And I think that the customers really have reacted positively and are starting to plan. I've had several meetings here at ASHG talking about larger projects that are enabled by the $500 price. But, perhaps just as important is the lowering DNA input at 500 nanograms now we can at 500 nanograms, there hasn't been a single customer that I've spoken to that says, wow, this doesn't unlock a tremendous amount of new demand. And I really do think it could be on the order of potentially millions of samples over time. When you think about what we've heard from our customers historically is that a significant proportion of their samples that they're trying to get onto a Revio. There isn't enough DNA coming through the sample process in order high molecular weight DNA being extracted to get through the sample prep process and get onto the sequencer with 500 nanograms, that completely changes everything. So the combination of the pricing and associated with the increased throughput and the price as well as the lowering of the DNA input amount really does open a lot of doors that perhaps we couldn't reach before.

Got it. That's helpful. And then switching to the Vega launcher, just a couple of quick cleanups actually in terms of just the max theoretical pull through. Christian, we start thinking of it as $1,100 per run into 52 weeks gets you to about approaching about 300k. Is that the right sort of ballpark math? And second, the deeper question here is that, the Revio is already at most large service providers out there. The smaller labs generally outsource to these providers today for their long-read needs. So paint us a picture for the appetite among this decentralized setting to access long-read in house for presumably, a higher price point versus sending the samples to the larger labs.

Yes, what, it's a real interesting dynamic, right, with respect to what does, what does Vega do for some of those service providers? And I think what it will do is first of all, it will likely open up more demand to the service providers over time because more and more people will get their hands on HiFi because Vega exists, which will open up more projects over time. And you'll see that but there will be, initially probably some tension between the service providers and new Vega users because, historically the service providers, they haven't really reduced their prices as fast as we've been able to reduce our prices. And I think that Vega will put some pressure on them to, reduce prices, which will enable more, more samples to hit the service provider. And, and as Vega makes sequencing more ubiquitous, that will also help. So in the long run, I think it will help pretty significantly. Your question on Vega pull through. Vega pull through is probably theoretical Max is more around 250k, give or take. When you think about it. I don't think, I don't think that people should be thinking about 250k pull through. Of course, we are not going to make any comments today with respect to pull through. We want to see what the demand for the system will be first and then see which customers and what projects kind of go onto it. But certainly it will be pull through at high margin, which will be accretive to our total gross margin.

Got it. Appreciate the color, guys. Thank you.

The next question comes from Kyle Nixon with Canaccord. Please go ahead.

Hey guys, thanks for taking the questions. Congrats on the Vega launch. Congrats to this season, good luck to you. Really good work with you the past four years or so. [Indiscernible] to see you go, but I'm sure great things fly ahead. So two questions when asked up front, one about the overlap between Vega and Revio, the other, but the debt, which was good to see. On the overlap any early examples or conversations that have kind of refined your thoughts on potential cannibalization between the two platforms and how long that could take to lapse and how you know the funnel will evolve and will you bundle orders, convert to Vega, things like that. And on the debt, the stock is down over 10% after hours. Seems like investors aren't really appreciating that reply and the maturity extension there. Could you just speak to, like, why now is the right time for you and SoftBank to do this and why that provides you with some cushion and flexibility and just to kind of operate with that freedom, given the healthier balance sheet. Thanks.

Yes, thanks, Kyle. Two very different questions, but I think I can handle both of them. First of all, with respect to the overlap and potential cannibalization, what's been really interesting in the conversations that I've had with customers that have seen Vega now and that are existing Revio users or potential Revio users, people that want to run any scale, quite frankly, don't see really any overlap at all. They do see bundling opportunities because they see Vega as a potential walk up in the lab, kind of for top ups and other, kind of. It's so easy to use that it can just be put in the lab and then people just walk up and use it. But when you think about it, it's 60 gigabases which is basically less than. That's basically one eighth the output of a Revio run. So there's a very large difference in the run in terms of the throughput. The economics for Revio, although the capital is a lot more expensive, the consumables are, are under $500 a genome. Now of course, launching Spark and Vega, it's not a coincidence that we're launching of at the same time because we're demonstrating that we're adding value to Revio and that we'll continue to do that as part of our strategy to build a portfolio of sequencers of benchtop mid-to-high throughput and then ultra-high throughput. And there's enough separation there both in economics and in throughput that I don't expect to see a lot of cannibalization for people that have scaled projects. But what I do see is that customers that are looking to get into HiFi have an easier avenue to get in and over time scale up their sequencing into Revio from Vega. And I think this is a really important story…

I'll just add. So another reason also, Kyle, for why now is it is $259 million of a reduction in our debt, which is almost 30% of the total debt we had outstanding. And we paid the 50 million of cash at closing and then 7% dilution. We believe that we would not have been able to reduce the debt by as much if we waited till later to pay the same amount in terms of cash and equity, we wouldn't have been able to reduce the debt by as much if we waited in the future. Also keep in mind, because of the lower principal, if you look out over the next three years, the interest payments that we are making now, it's about $12 million less than we would have been making if we just kept the debt outstanding.

Great, really helpful answers on both.

Thanks, Kyle.

The next question comes from Mason Carrico with Stephens. Please go ahead.

Hey guys, maybe just a few clarifications here on Vega. You've talked about scaling manufacturing next year. So is the right way to think about the adoption ramp more similar to Onso? Is there any dynamic of pent up demand we should be taking into consideration?

Well, I hope we will have that conversation as we get to quarter end. We just announced the system last night. We have received some purchase orders. So we'll see what the demand, the demand curve will look like with actual orders as we go into year end. But I would actually think about the manufacturing ramp closer to what happened in Revio where we were able to scale manufacturing over time. The product itself is in its very late stages of development and basically verification now. And so we should be able to start shipping it in early in Q1 as opposed to the end of Q1. But that depends on how well the verification goes. And we will, and then we will ramp manufacturing accordingly. And so part of us highlighting that to investors is to say that we believe that we will have a sequential growth in units of Vega over the course of next year as we see what the demand curve looks like and we scale our manufacturing, if that helps.

Got it. No, that's helpful. And then on the comment around building it to be accretive to gross margin, could you just clarify whether that's from launch or once you scale?

That's, it's really over the course of next year. The first units we ship in Q1 and perhaps some in Q2 will be a bit lower gross margin because they are, they will be the units that were manufactured at the very end of the development process and become saleable units. And when you're in the, when you're in the late stages of development, those units actually cost a lot more to produce the full routine production. Routine. Those earlier units are actually made on a different manufacturing line and therefore they're more expensive. When you transfer that to the regular production line, that's when you see the benefits of cost reduction and then the margins will go up. And so when you look out over the course of next year, we do expect them to be accretive to gross margin for the whole year. But it will be, it will, it might be dilutive in the first quarter or so and then, improve from there.

That's exactly right. And then on the consumable side we should, it should be accretive from a consumables perspective.

On day one.

On day one, exactly.

That's right.

Perfect. That's helpful. Thanks guys.

The next question comes from Dan Brennan with TD Cowen. Please go ahead.

Great, thank you. Thanks for the questions. Congrats on all the good momentum here. Maybe just first one just on the fourth quarter outlook and what it portends. I think you said what pulled through the same Christian in the prepared remarks you talked about a lot of good momentum in terms of what you are seeing in the market. So could you just give us a sense on kind of consumables being flat sequentially? Is that conservative kind of from what you're seeing or just maybe put that in the context of kind of your commentary about the demand environment. And then using that as a jumping off point. I know you talked about will grow in 2025. The street right now I think is about 25% top line growth. I know it's early, but maybe you can just characterize a little bit about what grow means.

Yes, well, we'll start with Q4 consumables. We do think Q4 consumables will be sequentially up over Q3. So we are seeing utilization levels particularly in Europe. Europe has a lot of the Estonia project and MBRU. There's a lot of large scale programs where even Sanger these customers are using their instruments at a pretty good clip. So I would expect to see pretty good utilization in Europe in Q4. But I think in totality you're going to see consumables grow sequentially over Q3 levels. When we start to talk about Q4, I promised Todd I wouldn't talk about Q4 guidance yet, or 2025 guidance. Yes, sorry, that's what I meant. But I do think all the signs point to growth. We have a new product cycle with, with both SpaRC and with Vega. We have, we have increasing installed base driving consumables. Even if the consumables stay at the same pull through per unit, that will result in growth year-over-year. And then I do think, although it's difficult to see in the first half how the macro environment really looks, I'm an optimist and I believe that the macro environment will improve somewhat over the course of 2025. And so when you put all those factors together, I do think even if the macro environment kind of stays the same, we're poised for growth. And if we see any improvement in the macro that gives us the ability to grow beyond that. Today I'm not going to talk about what does it mean in terms of percentages or where the street is now, we will. What I want to see is how we do in Q4, what the interest is in Vega. And so that way when we unfold our guidance formally in 2025, we can have a lot of confidence around it.

Got it. Okay. And then maybe just on the path to cash flow, break even both on margins and OpEx. I know you talked about a lot already in terms of the benefits of these new platforms on gross margins, but maybe you can just spell out a little bit, just you're not going to quantify, but just maybe characterize gross margins in terms of the new programs, in terms of the other COGS and issues you have ongoing. And then on the OpEx cut program you have in place, which is making good progress, just kind of how are you managing that in terms of taking those costs out while still being able to invest for growth?

Yes, it's a great question, Dan. And I think with respect to gross margins, I'll start with Revio and I'll actually talk a little bit about Revio Consumables because we see a lot of innovation that's happening inside the company that will continue to drive the production costs or the value of the kits in terms of cost of producing consumable kits down. And that will a combination of increasing throughput of revenue plus driving the production cost down. We'll end up probably passing some of those benefits onto the customer, but starting to keep some of them to expand our gross margin. And so that will give us some real opportunity in 2025 to see consumable gross margin expansion. We also, as we continue now, as smart cell production grows, we'll get more economies of scale with respect to smart cell production and therefore that will help the consumables as well. And so that's just an area in particular where we expect to see gross margins improve in 2025 and likely again in 2026. And I think that that's a real strong opportunity. With respect to OpEx, I think the team has done an amazing job of making the hard decisions and staying focused so that we could do the hard work of reducing the cost this year and we'll get the full year benefit of it next year, of course. But also I see there's more opportunity for us to even stay more focused, focusing on the most important R&D activities that will drive short term growth and drive margin expansion and then continuing to build a more effective commercial organization. I do think that there's opportunities there to get more leverage out of the commercial organization. So although you may not cut expenses there, if you can generate more revenue per dollar of commercial spend, that's quite frankly, that's the best of all worlds. And so I do think that there are opportunities there. And when we start to roll out 2025, I think we'll be able to talk about some of those different kinds of things.

Great. All right, I'll get back in the queue. Thanks a lot.

Thanks, Dan.

The next question comes from Jack Meehan with Nephron Research. Please go ahead.

Hey, thank you. Good afternoon, Christian. I was wondering if you could talk about another announcement you had last night, which was the Revio list price, I guess now $599,000. What was, I guess, the thought process that went behind bringing that down. And I don't know if there's any interplay with Vega launch there, but I'd love to get color on that.

Yes, it's a good question, and it is. I'm glad you highlight 599, because this is a milestone for us to be able to offer the system at 599k. We've taken. We're sharing some of the productivity improvements that we've made with our customers there. But if you look at our actual ASPs, this isn't, this isn't very different than our actual ASPs. And our expectation is that, we'll have a little bit more ASP discipline around the 599. So we don't really expect, dramatic changes in dollars realized for Revio going into next year. But it was apparent to us that customers wouldn't even inquire about going to long REITs because they heard the instrument was $779,000, which, as you guys know, the ASPs have been lower, much lower than that. And so what we wanted to do is establish a new list price, because the reality is we've taken so much cost out of the system that we can afford to do that and drive further demand. So that's the real driver behind the change. We do expect ASPs to remain reasonably consistent with where they are kind of right now over the course of 2025. So from a financial perspective, I don't think it's really going to hurt us from an ASP perspective, but it's a huge opportunity to drive more demand and drive the message that PacBio HiFi sequencing is the most advanced sequencing technology and now it's very affordable with all the advancements we've made.

Excellent. And you give a mouse a cookie you got to ask for milk when it comes to new products. Was wondering if there was any color you could share around just timing for high throughput, short-read. Thank you.

Give an inch, they'll take a mile. I think that, I think today the program continues to go well inside of, inside of our R&D program. It's in, it's in its scale up phase right now and it keeps moving on. We are routinely sequencing with billions of reads and at high quality. There are some technical hurdles that we still have to overcome to get that product to market. Today I'm not going to game out a launch date. I think today we're really focused on driving the spark chemistry and the Vega launch and making that successful. But we still have the resources we need to develop a very high quality, high throughput system. And as that project matures a little bit more, I will share more with everyone. Thanks, Jack.

The next question comes from Ross Osborn with Cantor Fitzgerald. Please go ahead.

Hey guys, this is Matthew Park [ph] on for Ross today. Thanks for squeezing us in. Just one question from us. It was good to see sequential improvement in China. I was wondering if you guys can speak on the general appetite for Revio in China as we move into 2025 and how you foresee the launch of Vega driving incremental adoption in the region. Thanks.

Yes, it's a great question and thanks Matthew for the question. I do think we are seeing, expansion of sample demand in China which will drive Revio demand, particularly with the big service providers that are really the core of our customer base there. What will be interesting to see is we, we've already heard a tremendous amount of excitement around Vega. In fact, we had one of our early access partners in our lab, a Chinese customer in our lab testing Vega. What was that last week, I guess or two weeks ago before the earnings. And they were over the moon such that I suspect they could be a major customer of Vega. And the profile of Vega fits the Chinese market really well at 169k, very high accuracy, great, ability to do epigenetics, structural variation, phase genomes. And I think it's an opportunity for us to penetrate deeper than just the service providers we have. So it'll be interesting to see how our team in China really, drives that opportunity for us. And it has the potential to drive, potentially hundreds of instruments over time and we'll see how we do.

Thanks, guys.

The next question comes from Subbu Nambi with Guggenheim Securities. Please go ahead.

Hey guys, thank you for taking my question, Vega opens up more of the market pyramid for you. That said, as you go deeper into the market pyramid, it gets wider, which typically means going into higher number of accounts. So then how do you balance the desire to go after this opportunity with the typical need to increase commercial investment to go into that new segment of the market?

Boy, that is such a great question. And my field service team has been asking me that question for about a year now. And so you're exactly right. As we widen our customer base, which is fundamental to what we're trying to achieve as a company, by the way, is we have to be thoughtful about the support burden and how do you build a commercial infrastructure to support that. And the way you start is you start by designing a product from the ground up that is as simple to use and is focused on this new customer base. Vega has only two consumables, and they are. And the way Vega is set up, it's set up that it's very difficult to make mistakes as you're loading the system. The cartridges have been completely reimagined, so you have everything you need to sequence right there. One of the, one of the breakthroughs we've had is we've been able to develop capabilities in the system that allow us to almost always deliver 60 gigabases of data, even for new users. And that consistency will give the newer users more and more confidence. And so kind of what you're hearing is that a lot of the innovation was geared towards simplicity, miniaturization, ease of use. And then we then, of course, we added SMRT Link in the Cloud. And SMRT Link in the Cloud gives users, much deeper access into where they put their data so that they could, they could stream their data directly up to the Cloud and then to a secondary or tertiary analysis software program. Because the support burden is actually much more than just thinking about, are the instruments working? It's about helping the customers get the answers they need so that they can continue to run their next experiments. And as we build out our install base with Vega, simplifying the automatics pipelines, we've done a lot of that over the last year to develop these pipelines, continuing to integrate it through the Cloud, these are all steps that we're taking that will help balance the commercial investment with customer success. And with the end game of Vega customers having such a great experience, they want to move up to Revio as their science dictates.

We also see an opportunity for Sequel II customers that are still using their instrument, that haven't yet been ready to upgrade to Revio. That gives us an opportunity to also upgrade them to Vega before they ever upgrade to Revio. And so that's our existing customer base. And then we're trying to be very thoughtful about expanding the commercial organization as we see the momentum with new customers. So that's going to be another aspect. And then, of course, in certain regions, selling through distributors also gives us increased leverage from that perspective.

Thanks, Susan.

Thank you for that, guys.

Our next question comes from Doug Schenkel with Wolfe Research. Please go ahead.

Hi, this is Madeline Mollman on for Doug. I just wanted to touch on Revio placements, which came in, I think, a little bit below our industry expectations. I know last quarter you mentioned some placements that were supposed to close in Q2 got pushed out due to timing and customer funding. Just wondering if those orders did close in Q3, if they've been pushed out again or if you're seeing any cancellations.

Yes, we have not seen any cancellations, which is great. Some of the orders from Q2 did come in in Q3, some did not, and they're still on in the funnel, hopefully to close in Q4 or that's kind of where I need to look at each one to know exactly. But the other thing that happened in Q3 specifically, there were. There were some tenders in Europe that got delayed at the 11th hour, and so, delayed in late September, and therefore they didn't close. We expect some. We expect some of those to close in Q4 and then maybe, and then perhaps another one of them to close in Q1. And so, yes, the instruments were a little short of our expectations, really driven by those, those tenders that I'm talking about. That said, from quarter-to-quarter, you do have things moving in and out. And so, part of our challenge has been really these prolonged sales cycles, really, creating certainty on when the deals will close and also expanding the total funnel. I think SpaRC will draw, you know, the new SpaRC chemistry will drive an expansion of the funnel, which will enable us to get back to more historical order levels as we move in 2025.

Great. Thank you.

Yes, thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Todd Friedman for any closing remarks.

Well, thank you, everybody, for joining us on the call today. We're going to be at several investor events this quarter, so hope to connect with several of you there and have a good one. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.