Hello and welcome to the PacBio fourth quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw from the question queue, please press star then two. I would now like to hand the call to Todd Friedman, Senior Director, Investor Relations. Please go ahead. Good afternoon and welcome to PacBio's fourth 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 investor section of our website at www.pacb.com or is 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 make 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 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 than those projected or discussed. We refer you to the documents that we file 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. 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 an 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 the tables within our earnings release. For future periods, we are unable to reconcile the 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 including future changes and fair value adjustments of contingent consideration and allocation of amortization expense attributable to certain acquired intangible assets. 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 completion of the live call. Finally, we will be hosting a question and answer section after our prepared remarks. We ask the analysts please limit themselves to one question only so that we can accommodate everybody in the queue. I will now turn the call over to Christian. Thank you. Thanks, everyone, for joining our call today. I'll start by recapping our results for the year and the quarter. Then I'll discuss our commercial activity around Revio and Onso. Finally, I'll discuss our latest product launches that we believe will further create value and differentiation around PacBio sequencing. I'll then pass it to Susan to discuss financials and guidance in more detail. 2023 marked PacBio's most transformative and successful year in our history. Our team executed aggressive goals to ramp Revio manufacturing and scale the install base, which enabled PacBio to grow revenue 56% in 2023 to $200.5 million, which was ahead of our expectations. For the quarter, revenue grew 113% year-over-year to $58.4 million, and we shipped 44 Revio instruments in the fourth quarter, bringing our install base as of December 31st, 2023, to 173 Revio systems. We also grew consumable revenue in the fourth quarter to $18.9 million, which included Revio consumables of approximately $12.4 million and represented an annualized consumable pull-through of around $385,000. The demand for long-read data continues to grow as total gigabase output on PacBio sequencers grew 68% in 2023 compared to 2022. We believe this momentum sets us up for another year of growth as we continue to see growing interest in HiFi for larger-scale human genomics and see it becoming more mainstream in genomic testing. The market clearly demonstrates a shift towards long-read sequencing in a growing number of major applications, and I'll share some of the specific examples showing this shift today. With that, our initial view on 2024 is that revenue will be between $230 million and $250 million, representing 15%-25% growth compared to 2023. At the midpoint of this range, we expect Revio system shipments to be roughly flat to slightly up year-over-year. As we have previously communicated, customers have lengthened their capital purchasing timelines, which impacts the timing of instrument orders and the pace of Revio adoption. We do not anticipate these current macro trends to fundamentally impact customers' desire to sequence with HiFi long reads. Susan will touch more on our guidance later. Now, turning back to 2023, Revio, our flagship long-read sequencer launched early last year, is making significant progress in transforming how researchers look at the genome, and we're still in the early adoption curve. We've been especially pleased with the number of new customers adopting Revio, as nearly 30% of Revio systems ordered in the fourth quarter were from new PacBio customers, and almost 40% of Revio systems ordered in 2023 were from new PacBio customers. New customers in the fourth quarter included Karolinska University Hospital in Sweden, a HiFi Solves Consortium member planning to use Revio to address the limitations of short reads on structural variation, tandem repeats, and phasing to find more answers for genetic disease. The HiFi Solves Consortium was just announced last quarter, and by creating this collaboration of 15 leading genomics research institutions across 10 countries, we expect best practices sharing to accelerate the impact HiFi can have on human health. We're also making solid progress on converting existing PacBio customers over to Revio, as about one-third of our Sequel II and IIe customers have now ordered a Revio. We are still in the early product transition cycle and expect most Sequel II or IIe users to migrate over to Revio over time. Additionally, we expect customers who have adopted Revio in 2023 to continue to expand their fleets as they fill their Revios to capacity. We're already starting to see this with some customers ordering their second or third Revios in the fourth quarter, like Radboud University, which took its second Revio, expanding its fleet to ramp up its efforts in rare disease research. Additionally, Children's Mercy Hospital of Kansas City ordered its third Revio to continue its effort to consolidate tests for genetics and epigenetics, increase efficiency, and improve solve rates while accelerating turnaround time. These fleet expansions demonstrate the elasticity and the demand to move samples over to HiFi long-reads. 2023 was also a landmark year for PacBio as we launched Onso, our second major sequencing platform just months after we started shipping Revio, enabling us to address a multibillion-dollar short-read sequencing market. With Onso, we've gradually ramped up manufacturing capacity and grew shipments sequentially in the fourth quarter. We have now received orders from a wide range of customers who plan to use it in applications ranging from oncology, including research into fragmentomics and targeted cell-free DNA panels, to exome sequencing and metagenomics. One Onso customer is TGen, which is taking advantage of the platform's accuracy to detect rare populations associated with disease in a high background of non-diseased material for applications like early cancer detection and infectious disease research. Last month, researchers from the institute presented data that shows Onso is achieving well beyond its Q40 specification on customer liquid biopsy samples, with the majority of bases over Q50 or one error in 100,000 bases of sequencing. Since Onso's launch, peers in the industry have been increasingly discussing the value of accuracy, which we believe underscores accuracy as an unmet need that PacBio is differentially positioned to address with our sequencing by binding chemistry. Moving on, as we do every year, I wanted to share an update on our internal market segmentation from the previous year. Our customers use our products across a diverse set of sequencing applications. In 2023, human genomics was the largest portion of our business, accounting for approximately 40% of our revenue. This includes a wide range of customers like UC Irvine and the GREGoR Consortium looking to run a multi-thousand-sample project in rare disease, or Bioscientia, who is now using HiFi for routine testing for certain sensory disorders. Plant, animal, and agrigenomics again was the second largest part of our customer base, making up approximately 25% of our revenue as long-reads have been well positioned to interrogate these often large and complex genomes. This includes agricultural companies that are adopting Revio to incorporate low-pass genome sequencing to improve their workflows and get better insights into crop development and production. Microbiology and infectious disease makes up about 20% of our business and includes a wide array of customers across public health labs, research institutes, and academic labs across a dynamic range of applications from pathogen surveillance to biology of host-pathogen dynamics, drug resistance, and more. Cancer genomics was roughly 10%, and this is really an application that we believe can be further addressed with Onso's accuracy. For example, McGill University researchers used Onso, and preliminary results presented at the early detection of cancer conference in October indicate that Onso's ability to accurately sequence through homopolymer regions has the potential to increase the detection of microsatellite instability. The remaining approximately 5% of our revenue is from other and emerging markets, including biopharma, and in the fourth quarter, it included a new gene editing customer planning to implement Revio as part of its cardiovascular disease therapeutic development. Turning to product launches, last week at AGBT, we announced new library prep kits that eliminate bottlenecks in the HiFi workflow and make PacBio long-read library prep on par with that of short-read sequencing, making it easier for our customers to make the most of their Revio systems. Our HiFi Prep Ki t and HiFi Plex Prep Kit 96 offers customers the potential for up to a 60% decrease in workflow time and up to a 40% reduction in costs, and further lowers the DNA input requirements. It also allows customers to automate the sometimes tedious library prep process by integrating with the Hamilton NGS STAR system with other automation platform partners to be announced in the future. In the fourth quarter, we launched our Kinnex kits for scalable, cost-effective RNA sequencing. We've been extremely pleased with our customer enthusiasm and uptake for these kits, and we now have orders from over 115 different customers. An early adopter at UCSD's Sanford Consortium commented on how demand for the full-length RNA sequencing is outpacing genomic DNA sequencing, and the customer shared that the Kinnex kit enables competitive pricing, high throughput, ease of use, and automation, and has provided for consistent sequencing yields across various samples. Kinnex can also help researchers glean more insights into RNA across various applications. For example, another early user from a leading pediatric hospital in Columbus, Ohio, used Kinnex to study somatic mosaic diseases like cancer and epilepsy, and with Kinnex was able to pinpoint specific cell types harboring disease-causing genomic variants from single-cell data. The customer explained that Kinnex can help identify cell types harboring the mutation and then understand the mutation's influence on the transcriptome, which could lead to a better basic biological understanding of how the disease occurs but can also give clues into the timing of disease occurrence and the onset in children. These are just a couple of examples, and we believe Kinnex will continue to accelerate long-read sequencing as the preferred method in several RNAseq applications. Lastly, we rolled out our v13 software for Revio last quarter, and 93% of our Revio runs are using the new v13 software. As a result, customers are getting a better user experience. We've seen over a fourfold decline in overloading, and customers are starting to realize increased yields on their SMRT cells. Finally, to wrap it up, last week was the annual Advances in Genome Biology and Technology Conference, or AGBT, and it was encouraging to see the impact that HiFi long-read sequencing had on the research community and the desire for researchers to look deeper and assemble more information from the genome than ever before. Our team walked away from the conference feeling like an inflection point for HiFi sequencing has truly just begun. And with that, I'll pass the call to Susan to discuss our financials. Susan? Thank you, Christian. As discussed, we reported $58.4 million in product, service, and other revenue in the fourth quarter of 2023, which represented an increase of 113% from $27.4 million in the fourth quarter of 2022. Instrument revenue in the fourth quarter was $35.1 million, an increase of 475% from $6.1 million in the fourth quarter of 2022, driven by continued adoption of the Revio platform. We ended the quarter with an installed base of 173 Revio systems. Turning to consumables, revenue of $18.9 million in the fourth quarter increased 13% from $16.7 million in the fourth quarter of last year and was a record for PacBio, with approximately $12.4 million of consumable revenue coming from Revio systems, reflecting an annualized pull-through for the Revio system of $385K, and the remainder from other systems and other consumables. Finally, service and other revenue was $4.4 million in the fourth quarter compared to $4.6 million in the fourth quarter of 2022. From a regional perspective, Americas revenue of $33.9 million grew 182% compared to the fourth quarter of 2022. The region's record quarter was driven by continued growth in instruments and consumables from both new and existing customers. For Asia-Pacific, revenue of $13.4 million grew 31% over the prior year, with consumables in the region growing nearly $2 million quarter-over-quarter, which was in part due to stocking orders and year-end budget spend. Finally, EMEA revenue of $11.1 million grew 114% over the prior year period. Moving down the P&L, a GAAP gross profit of $9.6 million in the fourth quarter of 2023 represented a gross margin of 16% compared to a GAAP gross profit of $5.1 million in the fourth quarter of 2022, which represented a gross margin of 19%. The GAAP gross profit in the fourth quarter of 2023 includes the amortization of acquired intangibles from the acquisition of Omniome as we allocate some of the amortization expense to the cost of goods sold now that we are generating revenue from the Onso product. Fourth quarter 2023 non-GAAP gross profit of $11.1 million represented a non-GAAP gross margin of 19% compared to a non-GAAP gross profit of $5.3 million or 19% in the fourth quarter of last year. Gross profit in the fourth quarter of 2023 and fourth quarter of 2022 included inventory reserves and loss-on-purchase commitments totaling approximately $9.3 million and $7.1 million, respectively, primarily due to the continued decline in Sequel IIe consumable demand in the transition to the Revio platform, as well as the decline in Sequel IIe instrument demand from predominantly one customer in China. GAAP operating expenses were $97.1 million in the fourth quarter of 2023 compared to $92.2 million in the fourth quarter of 2022. Excluding change in fair value of contingent consideration, amortization of acquired intangible assets, and merger-related expenses and restructuring costs, non-GAAP operating expenses were $88.4 million in the fourth quarter of 2023 compared to $87.6 million in the fourth quarter of 2022. Regarding headcount, we ended the quarter with 796 employees compared to 844 at the end of Q3 2023 and 769 at the end of the fourth quarter of 2022. Headcount declined following Q3 2023 due to a reorganization primarily within our R&D organization, which resulted in a reduction of approximately 55 positions in the fourth quarter. Operating expenses in the fourth quarter included non-cash share-based compensation of $15.4 million compared to $16.8 million in the fourth quarter of last year. GAAP net loss in the fourth quarter of 2023 was $82.0 million or $0.31 per share compared to a GAAP net loss of $84.4 million in the fourth quarter of 2022 or $0.37 per share. Non-GAAP net loss was $72.5 million, representing $0.27 per share in the fourth quarter of 2023, compared to a non-GAAP net loss of $79.6 million, representing $0.35 per share in the fourth quarter of 2022. Turning to our balance sheet items, we ended the fourth quarter with $631.4 million in unrestricted cash and investments compared with $767.8 million at the end of the third quarter of 2023. The decline reflects approximately $95.8 million in cash paid to the former Omniome shareholders in connection with the milestone achievement. Inventory balances decreased in the fourth quarter to $56.7 million, representing 2.9 inventory turns compared with $68.3 million at the end of the third quarter of 2023, representing 2.2 inventory turns. Accounts receivable increased in the fourth quarter to $36.6 million compared with $30.5 million at the end of the third quarter of 2023. As of December 31, 2023, our total product backlog was approximately $18.7 million compared to $51.5 million as of December 31, 2022. The decline was primarily related to our record starting backlog in 2023 and the ramp-up of manufacturing to deliver Revio to customers throughout 2023. As we've communicated before, we expect to share this backlog figure on an annual basis in our Form 10-K. Now, to expand a bit on financial guidance. As Christian indicated, we continue to expect Revio to drive growth in 2024 and expect full-year revenue to be between $230 million-$250 million. Compared to 2023, this represents a growth rate of approximately 15%-25%, which we believe will be well above the sequencing market growth rate. At the midpoint of our guidance range, we expect Revio system shipments to be flat to slightly higher compared to the 173 units shipped in 2023. Our growth expectations consider several macro factors that are impacting purchases of capital equipment. For example, the funding environment in China is impacting our ability to further expand our Revio install base in the country, specifically with smaller volume academic labs. Additionally, persistent inflation and high interest rates are lengthening sales cycles globally. In terms of linearity, we expect approximately 45% of revenue in the first half and 55% in the second half. Based off what we've seen quarter to date, we expect the first quarter revenue to be lower compared to the fourth quarter of 2023, with Revio system shipments flat to slightly down sequentially, with lower ASPs, and total consumable revenue approximately flat. As we continue to expect Revio instruments and consumables to make up the majority of revenue, we do not expect to share Sequel IIe or Onso placements or pull-through on a quarterly basis for these platforms this year. Moving down the P&L, we expect the 2024 non-GAAP gross margin to be in the range of 36%-39%. We do believe that gross margins will improve over the course of the year. As a reminder, inventory reserve charges associated with the decline in Sequel IIe demand in place of higher Revio demand represented a headwind of approximately 700 basis points in 2023. Additionally, compared to the 2023 non-GAAP gross margin, we expect improvement driven by a mixed shift toward higher margin consumables and higher consumable manufacturing volumes, as well as instrument manufacturing optimization helping to drive lower manufacturing unit costs. We expect non-GAAP operating expenses to grow less than 5% compared to 2023, which is consistent with our long-term guidance. We expect interest and other income to be between $5 million-$10 million in 2024, and the weighted average share count for EPS for the full year to be approximately 273 million. I'll hand it back to Christian for some final remarks. Christian? Thanks, Susan. As we move forward in 2024, I want to reiterate our strategic priorities that I laid out last month. Our top priority is increasing the adoption of our technology by driving more Revio placements at new customers, converting existing Sequel II and IIe accounts, and expanding Revio fleets at current customers. Additionally, as we expect to complete our scaling of Onso manufacturing this quarter, we will aggressively drive placements of the Onso platform so that our leading SBB chemistry can get into the hands of more customers globally. Another important priority is continuing to build the momentum for sales into the clinical and translational market. Earlier in the call, we discussed a few of our customers who are starting to use their Revios in this setting, including Bioscientia and Children's Mercy Kansas City, and we aim to expand our support in this market in 2024. Additionally, we are progressing the development of our groundbreaking technologies. We launched two transformative platforms in 2023, but our work is far from complete. I previewed three other instruments we're working on that we plan to launch over the coming years, and we expect to make meaningful progress on all of these this year. I look forward to sharing more about these instruments when they near their completion. Finally, we intend to continue building our business with the goal of becoming cash flow positive during 2026. On top of our long-term revenue target of reaching at least $500 million in 2026, we have several gross margin initiatives that are expected to lower production costs, better utilize manufacturing overhead, and improve our supply chain efficiency. These programs, along with a product mix shift towards consumables, are expected to improve our gross margins. Further, we expect to continue to be disciplined on how we deploy our operating expenses and make investments in the future of our business. I continue to be encouraged by our customers' enthusiasm for our products and look forward to updating everyone on our progress as we continue to drive adoption of our technologies this year. With that, let's start the Q&A. Thank you very much. We will now begin the question and answer session. Again, to ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To address your question, please press star then two. Today's first question comes from Dan Brennan with TD Cowen. Please go ahead. Great. Thanks. Thanks for taking the question, guys. And Susan, maybe just on the headwind that you talked about in pushing the guidance, you talked about China and kind of closed rates again. Can you give some more color on China? What did China do in the quarter? What are you kind of baking in for China for 2024 on the funding side? Is that worsening? Is it stable in terms of these closed rates? Have you seen any change there? Yeah, Dan, thank you for that. We won't break the Q4 China out separately. We actually had a decent Q4 in China. We had some of our large service providers go with new multi-system orders, some of which were delivered in Q4. Some will be delivered over the course of the first half here. But what we see in China is we do see funding challenges in China that are making it difficult for the smaller labs to drive into Revio. And as a result, they're sending out their samples to the large service providers and driving the business that way. And so although the consumables will be strong, the instruments are not as strong in China as perhaps we would be hoping for. And as a result, in our guidance, we significantly took down our forecast for China for the year. It's actually one of the biggest areas of challenge for us as we look into 2024. The next question is from Kyle Mikson with Canaccord. Please go ahead. Yeah. Hey, guys. Thanks for the questions. Congrats on the year. Maybe just Susan, could you talk about the gross margin cadence in 2024 as you reduce production costs for the Revio and increase Revio consumables revenue as well, given the expanding install base? And then how does this kind of funnel into cash burn this year as well, just given you have that 26 target? Thanks. Yeah. Thank you for the question, Kyle. You're right in what's implied in our guidance is that our gross margins will improve this year. Our gross margins this year will come from a combination of activities, some of which we've actually already initiated, which is going to help to reduce not only the instrument costs but also the consumable costs. These initiatives include consolidating manufacturing facilities such that we have better overhead allocation across more products, which helps to lower the unit cost. Initiatives such as better balancing of insourcing and outsourcing, which will help to lower the cost on the instrument. Of course, improving manufacturing yields and value engineering to drive down the bill of materials further, especially on the instrument side but also on the consumable side. We're going to start to see some of these cost reductions as early as Q2, and then we'll continue to improve even in the subsequent quarters such that the second half, our gross margins continue to improve relative to the first half. And this is a key part of our path to getting to cash flow positive, as you had alluded to, Kyle. Improving gross margins and also being very disciplined with respect to our OpEx. So as part of our OpEx, we do not expect our OpEx to grow more than 5% this year, which is part of our journey to get to cash flow positive out in 2026, which is what our long-term guidance we had indicated. The next question is from John Sourbeer with UBS. Please go ahead. Hi. Good evening, and thanks for taking the questions. Maybe just digging in a little bit further on maybe some of the assumptions that changed on Revio placements being up versus the midpoint being roughly flat here. Beyond China, any other color you could provide on that and insight that gives you confidence into getting that flat placement for the year? Thanks. Well, I mean, I think John, thanks for the question. One of the things we're seeing is we're seeing a lot of opportunities, particularly for larger-sized projects. And those will drive not only consumable demand but also increased unit placements. And so as those projects get started and get going, we would expect to see those being truly incremental to what we've seen in the past and therefore additive to the Revio placements. Of course, China is challenged. We've talked about that. We've been talking about this for several quarters now. It has gotten a little bit worse, I would say. And so when I think about 2024, can we get back to the placement rate of what we were seeing in 2023? I absolutely think we can. I think at this point, we're very focused on driving adoption and kind of taking a balanced perspective because the macro conditions have been pretty tough. The next question comes from Jack Meehan with Nephron Research. Please go ahead. Thank you. Good afternoon. Christian or Susan, was wondering if you could lay out for us what the assumptions are for consumables in 2024 and just as you kind of the visibility into that as you sort of add up the different projects you see going on. Thanks. Yeah. When I think about the consumables, Jack, thanks for the question. When I think about consumables, we're going to be growing consumables this year pretty significantly. The reason for that, of course, is first of all, we shipped a lot of systems in 2023, and we're going to get the layering impact of those systems as they get up to full utilization or their planned utilization, I should say. Then as we ship new systems in 2024, those as they scale up. That's how you start to see truly the mix shift, the growth in consumables because you're layering on new system placements from one year, and now we're moving towards the second year. By the end of this quarter, we'll have been shipping the Revio system for one year. And so that's how you're going to see that. The other thing is we also are adding consumable kits. So you saw we just recently launched some new kits, and those kits are additive to the consumable revenue line. And we've seen strong uptake on particularly the Kinnex kit, which we've talked about. Over 115 customers have ordered from us at this point. And so that's another positive factor that drives consumables up. And then finally, the large projects. When you start to see some of these larger projects, for example, in Q2, I would expect us to start seeing the Singapore population project that we're part of start to do their sequencing. So you'll see a ramp in consumables there, which would be additive. So there's several factors that are driving the positive side of the consumable growth explicitly in 2024. The next question is from Doug Schenkel with Wolfe Research. Please go ahead. Good afternoon, and thanks for taking the question. So I guess just a couple of loose ends I want to click through. First, a follow-up on the gross margin question from earlier. It seems like you're assuming an exit rate in the mid-40s% for gross margins, just doing some math there, which is obviously important in the context of building confidence in the trajectory to your long-term targets. And then also doing some math recognizing the placement numbers you gave out for Revio. It's not clear to me that your guidance embeds an assumption for a big jump in consumable growth per box consumable, I'm sorry, consumable revenue per box. I just want to make sure that's the case because typically, there's a toggle, right? If you're placing a lot more instruments and going deeper into the customer pyramid, the pacing of that and the types of customers are probably going to spend less, at least initially. But if you're placing fewer boxes year-over-year, I'd assume the consumables per box to go up. So I'd just love to understand the logic behind that just to make sure we're looking at this as a potential source of upside for the year. Thank you. Yeah, sure. Thank you, Doug. Okay. So first, with gross margins, I do expect over the course of the year, we are going to see gross margins improving, and therefore, you get into exit rates. We gave our guidance at 36%-39%, which means we're certainly moving towards the 40s. Whether we get there or not this year, we'll see. But we certainly see the opportunity to keep moving up on gross margins for all the reasons that Susan outlined. One thing she kind of mentioned, but I also wanted to really point out, we're actually innovating a lot, and that innovation is getting translated into reducing costs by, in particular, decreasing the compute costs associated with Revio. And that's a big source of opportunity that's $10,000s per system kind of opportunity for gross margin improvement. So you couple those things along with factory consolidation and consumable mix changes, that's how you start to move towards those 40s and beyond. And of course, our objective is to get up to 55%-60%, as we said, for 2026. And I do believe we still see a pathway to get there. With respect to the placement numbers and the relationship between that and consumable pull-through, as you know, it's a compound problem. There's lots of variables. On one hand, you are right. As you place more systems, you think you're placing them deeper into the market and therefore to lower utilization customers. However, we're still early in the adoption of Revio, particularly with respect to the larger projects, right? Projects anywhere from 1,000-10,000 sample projects. And quite frankly, what we've seen from the conferences, from ASHG and recently from AGBT, has been there is more interest in large-scale projects than ever in the history of the company. And so as those projects it takes a long time for these projects to get funded and then won and then started. But as those projects get going, we fully expect to see people utilizing their systems at a very high clip in those projects because they're usually scaled laboratories, and they're used to operating at high sample volumes. So they're kind of competing those two factors are competing at some level. As I said last week at AGBT, we still believe we don't really know where consumable pull-through is going to shake itself out here. We've said that we think it's kind of in the 300,000-400,000 range where it fits. I think we still don't know that answer. I think it'll be several quarters yet before you really know that answer definitively. But there's lots of different competing forces here. So it is a compound problem, a compound puzzle we're trying to unravel just like you guys are. But what I do know is the number of samples coming onto this system is accelerating, and it's more than ever in the history of the company. And I think that's at a fundamental level. That bodes well for driving revenue growth, driving adoption, driving gross margin expansion, and then driving really ubiquity in the market, which is really our core objective in this phase of our strategic plan, right? Driving adoption, building the confidence in the data type, and demonstrating why HiFi is really the way to go with respect to germline genomics. The next question is from Sung Ji Nam with Scotiabank. Please go ahead. Hi. Thanks for taking my question. So Christian, you mentioned your outlook for this year. Obviously, it's much higher than kind of the overall sequencing market growth. Just kind of curious. I don't know if it's too early to tell, but just how much of that growth do you think for you guys this year is coming from potentially taking share from the short-read sequencing market versus kind of expanding into new territories with long-read sequencing? Given the new library prep launch recently, the HiFi Solves Consortium you talked about, and all these large-scale studies that you were saying that there is more interest than ever. So I'm just kind of curious. Do you have kind of a sense at a high level kind of how much carry might be taken from the short-read versus creating new markets? Yeah. I think it's a great question. I think that most of our new customers are already doing short-read sequencing. And so you can imagine that they're generally allocating dollars from short-read sequencing to long-read sequencing most of the time. But sometimes, for example, in rare disease, short-read approaches have been used to some success, but long-read sequencing gives you so much more information, dramatically increases the solve rates, decreases cost. As a result, the question is, are you building a new market there, or are you just are you replacing and being additive to short-read? I think it's a bit of a bit of in the eyes of the beholder. But I also think that what we see is that at a high level, we are winning projects that were slated for short-read. What's happening is exactly kind of how we outlined it would happen. At first, it would be we'd win a portion of a project, and long-read would do the long-read would do a portion, and short-read would do the remaining. But now we're actually seeing accounts believe that with Revio, now that there's enough experience in the market of the scale, we've launched the automation with these new kits. We're seeing customers that say, "Hey, it's totally plausible. I can do a 10,000-sample project entirely on Revio or even more." And so as a result, we're actually starting to see customers saying, "Hey, if you can fit within this economic envelope, we are transferring our entire project to long-read." And I think that's really, really exciting. And I'm looking forward as we get deeper into the year and some of these projects get going to sharing that with you guys. The next question is from Eve Burstein with Bernstein Research. Please go ahead. Hi there. Thanks for the question. We've talked about gross margins in 2024, but one clarifying question on the gross margin for this quarter. If I'm doing the math right, even if we account for the charges on inventory reserve and the loss on purchase commitments and the amortization, we still get to about 35%. And we know that ASP was unusually high for Revio. So if you normalize for that, it looks like a normalized gross margin this quarter of about 32%. So why is this flat from last quarter if the consumables went up as a percent of revenue? And then is there any color you can give on gross margin for consumables versus instruments or for Revio versus Sequel? Yeah. So just to kind of try to clarify the question, trying to, if you will, distrust your math. I didn't redo your math. But in the fourth quarter, we have had some yield challenges on the consumables, which have impacted us a little bit. That wouldn't be factored into your calculation. So even with consumables being higher, we did have some yield challenges in the fourth quarter. Nothing that significant, but probably had some sort of impact there. Those things have been largely resolved. So as you look into Q1 and beyond here, I fully expect us to start moving the gross margins up on a quarterly basis. The next question comes from Ross Osborn with Cantor Fitzgerald. Please go ahead. Hi. Thanks for taking our questions. On the call, you mentioned consumables stocking in APAC. Did stocking occur in other geographies, and is this a normal phenomenon? And if not, could you provide some more color here? I think that with respect to consumable stocking, fourth quarter, we didn't have that much stocking. There's always a little bit in the fourth quarter. APAC, for example, because they have because they have holidays in Q1, they may be ordering some of their some of their consumables earlier so they get a good head start before they go on the holidays. There was nothing really major. We had some of our large customers put in large blanket POs that will ship over the course of 2024. They did take some of those POs in Q4 as well. So I think on balance, it wasn't a super heavy stocking quarter for the company. I think we're ready for the next question. Thank you. The next question comes from Matt Sykes with Goldman Sachs. Please go ahead. Hi. This is Evianne from Matt. Thanks for taking my question. So I know you said your sales cycles are extended with general weakness in the funding environment, but is there recovery baked into your guide for 2024, and are you expecting a continuation of the current trends throughout the year? I think we've taken a pretty moderate view towards sales cycles. I suspect we're hopeful by year-end that we're seeing sales cycles kind of shrink back down to kind of more normal levels. But the reality is that we are prepared to manage through longer sales cycles throughout 2024. And we tried to give guidance that would contemplate. Things outside of our control are just that. They're outside of our control and that we should be able to try to execute accordingly. Now, if things get a lot worse, of course, things could change. If things get better, could we do better inside of our guidance range? Of course. But where we sit today, we tried to kind of create a balanced set of guidance based on it's a tough funding environment across the board. Even if you take, for example, the United States, we're still operating under continuing resolutions, and we still don't really have a budget. There's all kinds of noise about where the NIH budget will end up, which obviously, NIH funding is an important part of our business. So I'm sure that creates some friction in the selling process. We've talked about outside the United States. We talked about China a lot already today, and we've emphasized that. But also even in Europe, interest rates and the funding environment still continue to be challenged. Europe had a great year last year for us, and we expect to have a good year in Europe and continue growing. But there is that friction in the system. The good news, as I said in my prepared remarks, is there is no shortage of interest for Revio and for HiFi sequencing in general. In fact, at AGBT last week, our social teams track social impressions. I was told we had 2.3 million social impressions, and the next highest person was almost 10 times lower than where we were. So what does that mean, and how does that translate into sales? Well, I think what it does mean is there's a lot of interest, which is helping build our funnels, which gives us opportunities to execute, which we're going to be focused on this year. The next question is from Tejas Savant with Morgan Stanley. Please go ahead. H ey, guys. Good evening. Christian, I want to follow up a little bit on that question taking a slightly different tack. So as you think about the low end of the guide, right, I think it probably bakes in around 160-odd sort of Revios at the low end. Can you just walk us through what you see? You've talked in the past of backlog not being the best leading indicator, but perhaps you can talk about the qualified lead pipeline or some other metrics that drive your confidence at the low end of the range. And then on the Onso, my question there is really related to the value proposition and the product-market fit, given some of the emerging sequencing vendors bumping up their Phred scores as well on the benchtops. And you've got the XLEAP coming out on the NextSeq. So is the benchtop market essentially in a little bit of a frozen state at the moment? Yeah. That's a good question. Thank you, Tejas. So thinking about obviously, when we put the guide together at $2.30-$2.50 where we're talking today, we considered we certainly considered the quality and strength of our sales funnel for Revio and for Onso and for consumables, for all of our products. And at the low end and even at the high end, we have coverage in our sales funnels. The explanation for kind of the range of possible outcomes really comes down to timing of orders, timing of when funding comes for projects, of course, our own sales execution and the ability our own execution in terms of the ability to manufacture the products and get them out to customers on a timely basis. So when you put the guidance together, you really try to think through all of those different things and give a responsible range where you think you might end up for the year. Now, if the funnels and the excitement is enough such that you could actually exceed the top end of the range, but of course, there could be risks that are out there, perhaps outside of your control, that make it so you end up towards the lower end of the range. And so we consider all of those different factors. We certainly have a pipeline that is encouraging for us, which is how we came up with the range. Quite frankly, you start there, and you work backwards to all the other areas of execution. The value proposition with respect to Onso, I would argue that the first thing I'd want to say is that the reality is most of the bases that come off of Sequel, off of the Onso, are actually over Q50. Now, we expected at 90% of the bases over Q40. I would submit to you that our competitors have not put a formal specification in to say they get 90% of their bases over Q40 or Q50. I think what they've done is perhaps they've demonstrated a run or some runs. I will let each of those competitors kind of describe themselves, how they define their quality. But what we are seeing in actual fact is that in customers' hands, for example, like TJ and I talked about today, they see a lot of data that's well over Q50. And that data is allowing them to see parts of the genome and see variants that no one else could see. And I think that's where the value proposition starts. And so I don't think the opportunity is frozen. On the other hand, I do see the market for those mid-throughput sequencers is a huge market. Every year, there's many, many, many sequencers sold. So I think for us to capture our appropriate share according to our strategy if you remember our strategy, we're trying to make Onso a sequencer that fits into very specific needle-in-a-haystack applications and not necessarily every application. We think that the opportunity is very strong. What's been interesting to us as we see the funnel for Onso grow and as we see customers using Onso is that they're using it in ways that we didn't quite anticipate. So for example, one of our customers is using it for wastewater testing, which makes total sense because that's where the earlier you detect a variant that identifies a pathogen, the sooner that obviously has benefits for the community. So that makes perfect sense. We're seeing other customers focus on oncology research. Whether it's MRD or it's actually oncology screening, there's a lot of research going on and an opportunity there. The combination for Onso is we have a lot of market opportunity. I feel like our quality is still the best in the market, and so much so that we specify it in our specifications. I'm not sure the other customers or other competitors are doing that yet. But I do think at the end of the day, the market is significant, and we enjoy competing in it. The next question is from Subbu Nambi with Guggenheim. Please go ahead. Hi. Thank you for taking my question. Following up on Doug's question on consumable revenue for Revio, your guidance seems to imply that you're assuming $300,000 per box in a full-year guidance. Is that right? If so, keeping in mind what you described on this call and in AGBT last week, are you expecting this will build momentum in the second half of the year and heading into 2025? And then I have a follow-up. Okay. So with respect to the pull-through, there's lots of ways to get to the guidance. And so we won't comment on whether our model says $300K, $350K, $400K. What we've said is that we don't know where our pull-through is going to end up. But for example, last week at AGBT, I did say I believe it's going to be in the $300K-$400K range. And there's lots of factors, of course, that would influence it one way or another that I've already kind of been through on this call. But I won't explicitly comment on whether our model to get to the guidance was $300K a box or not. A more general comment I'll make about the business in general is that we do see more of the revenue coming in the second half of the year as opposed to the first half. Now, this is not an uncommon phenomenon. And we don't expect, as Susan pointed out, 45-55 is the split, which isn't really uncommon in life sciences business. But we do see the business strengthening throughout the year because of these large projects, because of the growth in consumables, because of the actual opportunity set we see for Revio and Onso over the course of the year. And so we're excited about our ability to grow faster than the market. We do think our competitive positioning is extremely strong right now, and we just have to go execute. Makes perfect sense. And Christian, like you said, there was lots of enthusiasm even in our checks at AGBT last week. That said, the need for lower cost and more streamlined solution adjacent to sequencing cost came up, and even the sequencing process. And you, of course, launched the HiFi kits, the new kits that you launched last week to address that same exact friction. What else should we think about is in the pipeline to address the same issue? And how big an opportunity is this reduction of friction both in terms of reducing activation energy but also capturing more revenue? Yeah. That's a great question. Thank you for it. You're right. The new kits, we've been really focusing on automation and reducing the friction and costs of the upfront workflow. We continue to lower the DNA input requirements, which gives you more access to more kinds of samples, more samples. All those things are critical. Other things that we're doing to decrease friction and enable revenue growth is on the bioinformatics side. And so we continue to build out more applications that really highlight the benefits of HiFi sequencing and using long reads. And the more of those applications that are out there, the more we can reach more and more customers. We're also doing things on the market development side. So we created the HiFi Solves Consortium so that customers can work together to solve rare diseases, to show how they can benefit from seeing some particular variant in a particular sample because by definition, rare disease, each single one of them is rare. And so enabling the community is an important thing. And then finally, of course, we have a benchtop sequencer, long-read sequencer in development now. And once that product comes to market, that will change the capital barriers, of course, of the system and enable us to even broaden our customer base further. And we haven't given specific timing on that, but we will certainly share updates as they are warranted. So thank you for the question. The next question comes from Rachel Vatnsdal with JPMorgan. Please go ahead. Perfect. Good afternoon, and thanks for squeezing in. So I wanted to ask, at AGBT, you talked about some of this cautious capital spending that you're seeing at customers. And so you noted that you were starting to explore giving discounts to customers on Revio but then requiring higher minimum spend on consumables to kind of alleviate some of that capital purchasing dollars. It's almost more of a reagent rental model. So can you spend a minute talking about that for us? Have you started to use that go-to-market strategy this year? And then if so, how should we think about that impacting ASP as we model Revio for this year as well? Thank you. Rachel, it's a great question. Thank you. Yeah. We are exploring alternative business models or economic arrangements that still get us to the same place with respect to Revio, but perhaps a customer pays more for consumables and less for their instrument. Last year, we implemented a new leasing partner. That new leasing partner gives us the ability to do more creative financing arrangements where the leasing partner takes some of the financial exposure, but we obviously get the benefit to our customers, and we still get healthy revenue from that. So we're managing through this period by starting to think about how we experiment with different models to see how we catalyze how we continue to catalyze and grow the market. The vast majority of our sales are still going to be traditional sales as we've kind of historically done. I don't think anyone should be thinking that we're fundamentally altering how we think about generating revenue and the geography of revenue on the P&L. But I do think at the margins, some customers might benefit from more reagent rental type programs. The implication of that would be that you would likely have higher consumable revenues. Effectively, what the street would see is lower instrument ASP maybe a little bit. I think that when you think about 2024, the real impact to ASPs and consumable revenue probably isn't that significant, really. I think at the end of the day, it ends up being much more of a marketing tool and a way to get into customers, and then they will decide how to deploy whatever opportunity that we provide them. So we'll see how it goes, and we'll keep you guys posted. The next question is from Mason Carrico with Stephens. Please go ahead. Hey, guys. Sorry if this has been asked already. I hopped on a little bit late here. But you guys have talked about these larger sequencing projects coming online in the back half of the year. Is there any way to frame up the magnitude of these projects in terms of the growth implied in the guide? I mean, ultimately, I think the question is, how de-risked is the revenue baked into the guide related to these projects? How much visibility do you have into the timing and ramp of these customers scaling them up in the back half? Thank you, Mason, for the question. It's a good question. And the reality is anytime you have a large project large projects are highly variable with respect to when they start, but once they start, they crank. And so watching when they actually start, of course, we're doing everything we can to accelerate them. Some of these projects that we're seeing certainly already have samples banked and ready to go, and those are most likely to get going sooner than others. That might be prospective kinds of studies. When you think about, "Okay, what's the magnitude of any particular project?" probably the best way to think about it is to apply a cost per genome, for example, and then multiply it by the number of samples that the particular project is. So if you have a 5,000-sample project at a $750 price per genome or whatever price you want to use, you can do the math and figure out what that looks like. And then you have to assume they have to buy capital along to run. So that can kind of give you a sense of what the magnitude of any particular project with respect to our guide. We were actually pretty conservative because the volatility or the variability of when any particular project starts. We took a pretty conservative view as we're baking in those projects into our guide because we really want to make sure that we put out responsible guidance, and we're not so dependent on one project or one-off as make or break for the year, so to speak. But I do think in 2024, you're really going to start to see the turning point here where several of these projects start to get kicked off. We already are seeing some, right? Onso is moving along. We talked about the GREGoR Consortium project. And so we talked about Singapore starting later this year. And so we're really seeing it. It's super exciting because every time we go to one of these conferences, more samples get added to the funnel and significantly more samples. So now it's a question of timing and execution. And you can be assured we're ready to go. Thank you. This concludes our question-and-answer session. I'd like to turn back to management for any closing remarks. All right. Well, we want to thank everyone for hanging in with us. I know we're a few minutes over time today. We expect 2024 to be an exciting year for the company, and we appreciate everyone's support. We look forward to seeing you at the various conferences over the course of the quarter and on our next earnings call. With that, we will end this call. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.