10x Genomics, Inc.

hello good afternoon and welcome to the 10x genomics fourth quarter 2021 earnings call my name is jemma and i'll be the operator for today if you'd like to ask a question for the q a session it's star followed by one in your telephone keypad and if you change your mind it's star followed by two i'll now hand over to our host eric jeski please go ahead thank you thank you earlier today

10X Genomics released financial results for the full year and fourth quarter ended December 31st, 2021. If you've not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investors at 10xgenomics.com. An archived webcast of this call will be available on the investor tab of the company's website, 10xgenomics.com for at least 45 days following this call. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the press release 10X Genomics issued today. and in the documents and reports filed by 10X Genomics from time to time with the Securities and Exchange Commission. 10X Genomics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Joining the call today are Serge Saxinov, our CEO and co-founder, and Justin McInerney, our Chief Financial Officer. In addition, Brad Crutchfield, our Chief Commercial Officer, will be available for Q&A. With that, I'll now turn the call over to Serge. Serge?

Thanks, Eric. Good afternoon, and thank you for joining our call. During today's call, I will provide a summary of our fourth quarter and 2021 strategic progress, operational highlights, and financial performance. I also want to spend some time on our plans and expectations for 2022. and why we believe the actions and investments we make this year will set us up to accelerate and sustain growth into 2023 and beyond. I will then turn the call over to Justin for a more detailed look at our financials and guidance. We made significant progress on the key objectives we outlined at the beginning of the year. During 2021, we launched five new products, including ChromiumX and Vizium FSP. They sold 1,100 instruments settled our worldwide litigation with BIRAD and drove upwards of 300 new patents and patent applications. So our technologies contribute to more than 1300 new peer reviewed papers and added nearly 400 employees as we continue to scale our organization. These investments and innovations feel growth of 64% over the prior year, bringing 2021 revenue to $490 million. This was driven in part by continued growth in instrument placements. Cumulative instruments sold increased 46% year-over-year to more than 3,500. In addition, consumables revenue increased 66% in 2021, as single-cell and spatial approaches continue to be in adoption as essential tools for discovery research. Our conviction and our opportunity remains as strong as ever, and we're continuing to invest and build a company to drive sustained high growth in the future. And while we're bullish about the opportunity ahead, we anticipate some headwinds that will temporarily impact our growth in 2022, most notably in the first half of the year. For 2022, we expect revenues to be in the range of $600 million to $630 million, representing 22% to 28% annual growth. This range reflects solid growth with new and existing customers, offset by the following near-term headlines. First, the ongoing impact of Omicron into the first quarter, particularly with academic customers. Second, on average, recent customer cohorts have been rafting consumable utilization somewhat more slowly than our earlier cohorts. And third, we accelerated product development of our Xenium platform, which has delayed the timing of other product launches. We firmly believe this is transitory and we look forward to building momentum throughout this year into 2023 and beyond. Before we provide more detail on our 2022 priorities, let me go through our fourth quarter results. Revenue for the fourth quarter totaled $144 million, up 28% year-over-year and 15% sequentially, driven by strong demand for our products despite Omicron-related headwinds that emerged near the end of the quarter. Once again, we saw solid demand for Chromium instruments, driven by continued enthusiasm for the recently introduced Chromium X series. Since launch, it's become clear that this platform has broad appeal that goes beyond early adopters. The flexibility to scale experiments and access high throughput capabilities resonates with both new customers and across our existing user base. This year, we plan to drive broader placement of our Chromium X series using this platform to onboard new customers and upgrade existing users. We want to ensure our customers have the most powerful tools available for single-cell analysis, which is why we will focus on encouraging upgrades to Chromium X or IX this year and beyond. Turning to consumables, our high throughput kits have significantly exceeded our expectations so far, and we are encouraged by the growth we're seeing in high throughput applications. Since launch, our customers have been using HT kits to analyze more samples and more cells to scale up their existing studies and to enable previously impractical or cost-prohibitive experiments. We also saw continued growth across our portfolio of standard throughput single-cell consumables this quarter. The breadth of our offerings, covering gene expression, immune profiling, epigenetics, proteins, and multiomics, is unique and continues to resonate well with our growing customer base. Researchers have made 10X the leader in single-cell analysis because of our breadth of applications, excellent product performance, and great customer experience, all of which drives sustained leadership and helps fuel new interests. I'd like to touch on what we are observing with recent customer cohorts. We have previously discussed two types of customers, those that own an instrument and those that do not, which we have referred to as Halo users. Haley users have an increasing percentage of our customer base, and on average use fewer consumables than our instrument owners. While this means that on average, recent cohorts are ramping consumable utilization slower than earlier cohorts, it's a great sign for the long-term trajectory of the business because it points to an expanding universe of customers entering the single-cell ecosystem. I want to emphasize that recent customers who do purchase instruments are ramping similarly to our earlier adopters. They start with a consistent level of utilization and grow their consumable usage in line with previous cohorts. This, too, is a great sign for the trajectory of the business because it points to sustainable long-term growth within our Chromium franchise. Turning now to Visium, Q4 was a strong quarter for both Fresh Frozen and FFPE. Visium is the only platform that delivers unbiased spatial analysis at high resolution across the entire tissue sample. And while it remains very early in its lifecycle, we saw increasing customer enthusiasm and commercial progress. Visium revenue doubled in 2021. In addition, the number of peer-reviewed publications using Visium more than doubled during the year, while the number of preprints nearly quadrupled. Both of these are important leading indicators of market adoption. Notably, these papers are driven almost entirely by our customers, with limited 10x inputs. demonstrating the success researchers are having with Visium. All these measures are clear signs that the benefits of Visium are resonating with customers. And finally, we made significant investments to scale the company in anticipation of future growth. In 2021, we added nearly 400 employees to the team, with the majority of these hires in our R&D and commercial organizations, including our new dedicated team of two support specialists. We also grew our global footprint scaling our R&D sites in California, Sweden, and Singapore, and kicking off the expansion of sophisticated manufacturing facilities at our headquarters in Pleasanton, which we expect to open by year end. We have always said that one of the best measures of our impact is the discoveries our customers make with our technologies. This year, our customers published more than 1,300 new peer-reviewed papers, bringing the total to over 3,300 since the first publication in 2016. As more research moves beyond exploratory studies to translational and disease-oriented studies featuring our products, these breakthroughs increasingly gain mainstream attention. Just recently, CNN showcased research on CAR Ts curing patients with leukemia. The New York Times featured a study on long COVID, and Axios highlighted the cell census of the human motor cortex, a foundational step to revolutionize our understanding of neurodegenerative disease. As we look ahead, our conviction and our opportunity is unwavering, and we're continuing to build a company to drive high growth in the future. This starts with continued significant investment in our three complementary platforms, Chromium, Visium, and Xenium. We will also continue to invest in our commercial team and operations capabilities to support the success of these platforms in the future. Starting with R&D and product development, we're very excited about this year's product pipeline, which we have prioritized around two key areas. First, new products that enable increased adoption of chromium and visium. And second, the acceleration of risinium in tissue platform. First, in chromium. While this platform is now a well-established leader in single-cell analysis, we're still very early with this opportunity and very optimistic about the long-term trajectory. Our goal is to make single-cell analysis accessible to every biology lab in the world and make it the standard for most biological research. We will continue to invest to drive broad adoption, remove bottlenecks, and create more value for researchers around the world. With this in mind, we are really excited to launch our new fixed RNA profiling kit later this year. This product addresses a critical need for many of our customers. Today, single-celled researchers must intricately plan their experiments to maintain cell viability from sample collection through to processing on our chromium instrument. This imposes a significant burden on our customers and is particularly difficult when working with human samples, which are essential in translational workflows. With our fixed RNA profiling kit, our customers will now be able to fix their tissue at the time of collection, store it, and proceed into their single-cell workflow at a time and place of their choosing. We believe this product has the potential to be transformative to our single-cell franchise over the long term. In addition to workflow benefits, the fixed RNA profiling kit also delivers improved sensitivity and more efficient sequencing built in sample multiplexing capabilities and efficient targeting to enable customers to focus on the genes most relevant to their research. We intend to launch this product exclusively on the Chromium X series in mid-2022. We also look forward to the planned launch of our new barcode-enabled antigen mapping, or BEAM, product in the back half of the year. The solution is built on top of our new profile and product. It will allow researchers to analyze up to millions of B or T cells to determine their antigen binding at high-flex and high-resolution. By virtue of its scale and resolution, BEAM has the potential to exponentially transform the process of antibody and T cell discovery. Now, on to Vizioom. We continue to invest aggressively to advance our leadership in spatial discovery research. We believe the breadth of our vision roadmap is unrivaled in spatial analysis, and we anticipate a robust series of launches starting in mid-2022. focused on enabling more analytes, more samples, and more resolution. First, we'll enable simultaneous gene expression and high-flex protein analysis on the same tissue. We will also add support for larger capture areas and an improved customer workflow for additional flexibility and access to more tissues. We believe these capabilities will create significant value for our customers and expect them to ship in mid-2022. Second, we plan to ship our site-assist instrument in the back half of the year which will really simplify the vision workflow and significantly expand the number of tissue samples accessible to the platform. And finally, we're looking forward to giving customers the ability to go to much higher resolution with Vision HD. Vision HD will access the entire transcriptome across the entire tissue sample at single cell scale. We believe this product will represent the single best platform for spatial discovery research, and we expect to launch it near the end of 2022. Lastly, turning to our Xenium platform for in-fissure analysis. Xenium will help customers analyze their tissues at an incredible level of detail once they know what genes they're looking for. It will provide the ability to measure specific targets directly in tissue at high flex and high resolution with a fully integrated workflow. Xenium is naturally complementary to both Chromium and Visium. It helps build on the insights from these platforms by providing the means for following up, validating, and deeply characterizing customer samples. We're focused on building a robust platform that works across tissues, sample types, and at high throughput. As we have done previously, our goal is to make Xenium the industry standard by pursuing rapid innovation, application expansion, and excellent customer experience. We anticipate that the integration of the customer experience across our three platforms will be particularly valuable to researchers. We have long believed that in-situ analysis represents a tremendous opportunity potential to transform life science research and ultimately clinical practice since we announced our plans to enter the space with acquisitions of carton and record there's been tremendous interest from our customers over the course of 2021 we intentionally prioritized and shifted resources to xenium we've made significant progress building on technology intellectual property we acquired with our own together with our own innovations at the same time the in-situ opportunity has materialized faster than we initially anticipated Based on our progress and the robust interest from our customers, we believe we can access this opportunity earlier than we previously planned. We have invested additional resources to prioritize in situ and accelerate our timelines. As a result, we plan to ship Xenium instruments by the end of this year. While this means that some of our new products will launch somewhat later than we initially planned, we're confident in our strategy. Here, as in all our decisions, we are prioritizing the long-term view. That's been our philosophy since the earliest days of 10X, and it will continue to guide us moving forward. Before I turn the call over to Justin, I want to be clear. Our conviction on the best opportunity ahead is as strong as ever, and we're well-positioned to achieve it. While the path ahead may not be linear, we know what the end point is. In the future, the vast majority of tissue samples will need to be analyzed using the technologies we're building. That vision drives our strategy as we continue to make investments in our foundation and innovate across our three platforms. That's how we will fulfill our mission, make the biggest impact, and transform the future of health and medicine. With that, I will now turn the call over to Justin for more detail on our financials.