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spk01: 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
spk06: 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?
spk12: 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.
spk07: Thank you, Serge. Before addressing our outlook for 2022, I'll first walk through our fourth quarter and four-year results. Total revenue for the three months ended December 31st, 2021, was $143.5 million compared to $112.2 million for the prior year period, representing 28% increase year over year and a 15% increase quarter over quarter. Consumables revenue was $122.4 million, which increased 27% over the prior year period. Instrument revenue was $19.4 million, which increased 38% over the prior year period. Service revenue was $1.8 million, which increased 6% over the prior year period. During the fourth quarter, we saw increasing headwinds related to the rise of the Omicron variant as sales opportunities for labs in the more impacted areas were not realized due to staffing capacity, slowdowns, and generally increased uncertainty around near-term operations. Some customers in Europe closed their labs early ahead of the holiday season. These impacts were particularly relevant for academic customers make up a large majority of our revenue while overall this resulted in our revenue coming in at the lower end of our guidance range the particular dynamics were evident in our q4 regional results revenue for the americas for the fourth quarter was 77.2 million dollars representing 35 growth over the prior year period emea revenue for the fourth quarter was 34.7 million dollars representing six percent growth over the prior year period APAC revenue for the fourth quarter was $31.6 million, representing 41% growth over the prior year period. Turning to the rest of the income statement, gross profit for the fourth quarter of 2021 was $115.9 million compared to a gross profit of $93.3 million for the prior year period. Gross margin for the fourth quarter was 81% compared to 83% for the fourth quarter of 2020. The gross margin decrease was driven primarily by the impact of shifting product mix partially offset by decreased costs related to ramping our second manufacturing facility. Total operating expenses for the fourth quarter of 2021 were $131.8 million compared to $502.9 million for the fourth quarter of 2020. The decrease in operating expenses was primarily driven by lower in-process research and development as compared to the fourth quarter of 2020, which included a $406.9 million charge related to the acquisition of Reed Corp. The decrease was partially offset by increased operating expenses related to higher personnel expenses, including stock-based compensation, increased expenses related to equipment, facilities, and technology, and increased marketing expenses. R&D expenses for the fourth quarter of 2021 were $61.9 million compared to $39.7 million for the fourth quarter of 2020, excluding in-process R&D expenses related to acquisitions. SG&A expenses for the fourth quarter were $69.9 million compared to $56 million for the fourth quarter of 2020. The increases in our R&D and SG&A expenses during the quarter were primarily due to increased personnel-related costs as we continue to scale the organization. operating loss for the fourth quarter was $15.8 million, compared to a loss of $409.6 million for the fourth quarter of 2020, due primarily to the impact of lower in-process research and development expenses. This included $26.9 million of stock-based compensation for the fourth quarter of 2021, compared to $14.3 million for the fourth quarter of 2020. Net loss for the period was $18.4 million compared to a net loss of $415.6 million for the fourth quarter of 2020. Turning to our full year results, total revenue for the full year ended December 31st, 2021 was $490.5 million compared to $298.8 million for 2020, representing a 64% increase. Consumables revenue was $418.7 million, an increase of 66% over the prior year. Instrument revenue was $64.5 million, an increase of 61% over the prior year. Service revenue was $7.3 million, an increase of 21% over the prior year. As of year end, we have sold a cumulative total of 3,511 chromium instruments, up 1,099 instruments from 2,412 instruments at the end of 2020, which represents a 46% increase in the cumulative instruments sold. Pull-through per instrument for 2021 was $142,000, increasing from $124,000 in 2020. The increase was primarily driven by a lessening impact from COVID in 2021 as compared to 2020, which more than offset the diluted impact of our rapid increase in cumulative instruments sold during the year. I should point out that with the emerging complexity of our product offerings, pull-through per instrument is less relevant for us today than it was in the past given the expanding breadth of our portfolio and is not necessarily representative of trends in our business. For example, a number of our customers are purchasing Chromium X series instruments as a replacement for our Chromium controller and other of our solutions do not require a chromium instrument, both indicators of ways in which the reliability of the pull-through metric has been reduced. Also, as we have said in the past, our consumables pull-through is impacted by additional factors, including expanding utilization by our existing customers, the rate of new customer acquisition, and the ramp of new customers' utilization. It is further impacted by the overall mix of Halo users and their ordering patterns. As our business, product lines, and customer composition have become more complex, we believe this metric represents an oversimplification of these different drivers and can obscure underlying trends in the business. Our focus is to increase the utilization of our products and drive growth in overall consumables revenue. To assess our performance in these goals, in addition to revenue, we also track the number of reactions sold in a given period. During 2021, our customers bought over 310,000 reactions worth of consumables products. This was up from approximately 200,000 reactions in 2020 and represents an increase of 56% year over year. Moving next to regional results for 2021, revenue for the Americas for the full year was $265 million, representing 66% growth over the prior year. EMEA revenue for the full year was $108.5 million, representing 48% growth over the prior year. APAC revenue for the full year was $117 million, representing 77% growth over the prior year. Gross profit for 2021 was $416.4 million compared to a gross profit of $240.4 million for 2020. Gross margin for 2021 was 85% compared to 80% for 2020. The increase in gross margin was primarily due to lower accrued royalties related to the BI-RAD agreement, including a one-time reversal of $14.7 million of previously accrued royalties and decreased costs related to ramping our second manufacturing facility, partially offset by the impact of shifting product mix. Total operating expenses for 2021 were $468.7 million compared to $774.5 million for 2020, which included $447.5 million of in-process R&D expenses related to the acquisitions of Cartana and ReCore. R&D expenses for 2021 were $211.8 million compared to $123.4 million for 2020, excluding $447.5 million of in-process R&D expenses related to the acquisitions of Gartana and Reed Corp. The increase was primarily attributable to increased personnel and stock-based compensation expenses, laboratory materials, supplies, expensed equipment, and facilities costs. SG&A expenses for 2021 were $257.6 million compared to $202.3 million for the prior year. The increase was primarily due to increased personnel and stock-based compensation expenses and marketing expenses partially offset by decreased litigation expense. Operating loss for 2021 was $52.3 million compared to a loss of $534.1 million for 2020. Net loss for 2021 was $58.2 million compared to a net loss of $542.7 million for 2020. We ended 2021 with $587 million in cash and cash equivalents. Turning to our outlook for 2022, we expect four-year revenue to be in the range of $600 million to $630 million, representing growth at 22% to 28% over four-year 2021. This range incorporates our latest views on our 2022 product launch timelines, customer utilization trends, and finally, the continuing impact of Omicron on our customers' operations and the resulting slowness we have seen thus far to start the year. As Serge noted, we have made the decision to reposition some of our product launches in 2022. Most notably, we have focused internal resources to pull the Xenium launch forward, and this has caused modest delays in some launches planned in 2022. When combined with the impact from Omicron in the first quarter, these changes result in an expected slower rate of growth this year particularly in the first half. These product launch decisions are made from a perspective that extends well into the future, and from that perspective, we believe these changes will drive more revenue overall and set us up to accelerate growth into 2023 and beyond. Looking at Q1 trends, we have seen a very slow start to the year given continuing Omicron headwinds, and we believe it is unlikely that the decreased order activity thus far into Q1 be made up in the future as such we expect to see q1 to be a lower percentage of our annual revenue than in the past with our best estimate in the high teens range compared to low 20s in 2019 and 2021. this has been reflected in our 2022 annual guidance range there also remains continued supply chain and logistics risks that we have called out previously and remain unpredictable Looking past Q1, we are optimistic about the remainder of the year. As COVID impacts began to abate and our newer product launches have an increasing impact on revenue, we expect to see an acceleration of growth in the back half of the year. So given the weakness we have seen so far this year, we expect 2022 to be more heavily, even more heavily weighted towards the back half than our historical trends would suggest, particularly towards Q4. In the past, we've seen about a 45%, 55% split between the first half and second half annual revenue. And this year, we expect about a 40%, 60% split. Moving to gross margin, we expect that our gross margin will trend slightly lower from where we exited the year as our newly introduced products expand to become a large percentage of our overall revenue. We plan to continue to invest across the business to support our growth. Within commercial, we plan to expand the organization to nearly 500 commercial employees, including adding additional headcount dedicated to increasing adoption of Visium and preparing for the launch of our Xenium in-situ platform. We also plan to invest in our R&D organization to maintain our rapid pace of innovation. Finally, we are continuing to invest in the expansion of our manufacturing facility located at our headquarters in Pleasanton to ensure that we are able to deliver our market leading products to our customers. With $587 million in cash and cash equivalents as of year end, we are exiting the year with a strong cash position. Given our strong balance sheet, we are confident in our ability to execute on our current roadmap without raising additional capital. At this point, I'll turn it back to Serge.
spk12: Thanks, Justin. Before we open it up to questions, let me reemphasize three key beliefs that I have about our business. First, we're very confident we will accelerate growth into 2023 and beyond. There are some temporary near-term headwinds reflected in our growth expectations for 2022, but our long-term story is fully intact. Second, the Chromium opportunity is huge. We're the clear leader in single-cell analysis, and yet it's still early days. We're continuing to invest significantly to deliver on the full promise and potential of single cell biology. And third, we now expect to ship Xenium this year. Our intent is for Xenium to become the industry standard for in-situ analysis, just like Chromium is for single cell. We believe the combination of our three platforms, Chromium, Visium, and Xenium, is a real differentiator that will create meaningful value for customers. We're looking forward to sharing more about Xenium and our robust single-cell and spatial pipeline at next week's experience event. We've got the track record, the scale, and the team to deliver. I'm very proud of what we have built so far and believe the strength of our innovation engine, commercial breadth, and operational capabilities position us incredibly well for the long term. It's our employees who make all this possible, and I can't thank them enough for their tireless pursuit of our mission. We're still just getting started. With that, we will now open it up for questions. Operator.
spk01: Thank you very much. And as a reminder, if you would like to ask a question, please press star followed by one in the telephone keypad. And if you change your mind, it's star followed by two. We do also kindly ask that participants ask only one question once their line is open. And then if they wish to ask a follow-up question, they will register for this.
spk00: Thank you. Our first question today comes from Tycho Peterson of JP Morgan.
spk01: Please go ahead with your question. Thank you.
spk15: Hey, thanks. I'm going to start out with one on the guide. You know, you called out some headwinds here. You know, the one QM5 guidance, certainly worse than the sequential decline, even from some of the peers that have called out Omicron and some of the academic softness. So can you maybe just help us think about how much of this is Omicron, how much is supply chain, how much is the reprioritization around the product launches?
spk07: This is Justin. I'll take that. So the guidance range that we're putting out right now is $600 million to $630 million, with a midpoint of $615 million. And keep in mind, this is an annual number, but there is a decent impact to Q1 that we've highlighted with January being very slow and some slowness coming out of January as well. And so that's shifting the overall mix for the year, in particular shifting more towards the back half than the first half. But I would say that the impacts are the first There are three main impacts. The impact of Omicron, the impact of recent cohorts ramping more slowly, and that's being driven by the increase in Halo users. And then also the acceleration in Xenium, basically pushing out some of the other launches. And I would say that impacts to 2022 are spread pretty evenly across those three. But, you know, the Omicron impact, we definitely expect that to impact the first part of the year much more than the second half.
spk15: A follow-up just on pipeline. You know, you previously guided for ZDM early access this year. So, can you clarify what's changed on the timing? You talked about commercial launch earlier, and then you know, separately on Chromium X and IX, you know, how are you incentivizing customers to upgrade? And, you know, what percentage you think would actually upgrade on the question this year?
spk12: Yeah, so I'll take that first one. So, yeah, to clarify, we are shipping as commercial ship this year for Xenium. And in terms of incentivization for IX and X, well, the customers have actually been coming to us and they've been naturally upgrading their instruments to a greater extent than we expected so far. Going forward, the fact that our fixed RNA profiling kit will only be available on the IAC series is going to be a big motivator we expect to drive the replacement cycle.
spk15: Okay. But you're not able to give us any sense of, you know, what percentage in the install base you think would upgrade and also implications around pull through?
spk12: Well, you know, so our goal, ultimately, I think that the vast majority of our installed base will upgrade to the X series over time. You know, to start with, I think we've got a large pool to, you know, to go after. So you can think of, you know, in New York City, probably half of the installed base is pretty readily available. Of course, it'll take somewhat of time to upgrade, to line up funding, to, you know, get comfortable with the new workflows and so on. But yeah, we feel pretty confident in terms of those, you know, the upgrade cycle. It's way too early to talk about pull through on the stage.
spk01: OK, thank you. Our second question today comes from Derek De Bruin of Bank of America. Derek, your line is open. Please go ahead.
spk08: Hey, great. Thank you and good afternoon. So I'm going to try to squeeze in three here. So I think the first one is, you know, I appreciate that you don't think throughput or pull through, I'm sorry, is a viable measure anymore. And I can appreciate that, just give them a change. But can you just give us some sense then on reactions then on how the older users, you know, the earlier cohorts ramped and then the newer cohorts. And I guess, what are you doing or what do you think it's going to take to get the newer cohorts, you know, to accelerate like that? Is that, yeah, I guess I'll start there, stop there initially.
spk07: Hey, Derek, this is Justin. I'll take that one. You know, as far as comparing the newer cohorts to the older cohorts and the differences in usage between them. You know, the first thing to understand is that just at a high level on average, the newer cohorts are ramping slower than the earlier cohorts. But also, the newer cohorts are having an increasing percent of their overall users be Halo users. And then when we look at Halo users and instrument users separately, we found that even in the newer cohorts, the instrument users are ramping more similar to the earlier users. And it's really that increasing percentage of Halo users whose purchasing is more sporadic that is the difference between those cohorts. So we're looking to convert, focus on converting Halo users into instrument owners. We've seen that when a customer becomes an instrument owner, Their growth is predictable and comparable to the past cohorts. And there's definitely a stickiness there in owning an instrument. And so, you know, in the near term, when you look at it on average, it doesn't look as good because the overall average usage is coming down. But the good thing is, is that you can predict how those instrument owners behave. And then also, you've got an increasing amount of new customers that are coming in to basically single sell at an increasing rate. And so you've got a larger pool of potential instrument owners that are coming in each quarter.
spk08: So just to follow up on that, I mean, you had an impressive instrument placement number in 2021. How should we think about instruments for 22. And does Xenium potentially cannibalize any of those, you know, purchases of chromium in those products? I mean, just a little bit of discussion on the user, the end user for that. I don't think it does, but we'd just like some clarity. Yeah.
spk07: So overall, we don't give guidance on the number of instrument placements. Let me just point out a few things to think about for 2021. I think there was two important factors in 2021 that that drove the explosive instrument growth. I mean, we increased our install base over 45% from the previous year, from the 2412 to over 3,500. But there's two important factors that drove that. One was the strategic price decrease on the chromium controller down to $35,000, and then the launch of the Chromium X and the IX series instruments. And so with close to 1,100 placements, last year compared to about 700 compared to 746 the year before it was a huge step up in in annual placements and so when you're thinking about placements this year i think you've got to adjust for the spike that those two factors uh drove in 2021 but then i still think it's reasonable uh to assume some kind of growth uh on on top of that in terms of the universe
spk12: So there is no, yeah, we don't see any cannibalization. In fact, it's just the opposite because the two platforms are incredibly complementary and the use cases tend to be very complementary where people use, kind of generate single cell data sets using Chromium and then follow up, characterize their samples within C2 using Xenium. So we actually see it more of a kind of a synergistic than anything else.
spk08: Great. And then just one quick one. You mentioned that Visium was up, grew twice, 2x over it was the prior year. Can you give us a number of what the base was, just so we have some sense of where that number is as far as consumable?
spk07: Derek, we don't break out Visium sales separately, but I can tell you that it's an increasing percentage of our overall revenue.
spk11: Great. Thank you.
spk01: Dan Brennan of Cohen, you have the next question. Please go ahead.
spk03: Great. Thank you. I just wanted to start off with a regional question. I know EMEA looks like it was, in a quarter, it was certainly very weak, up 6% versus Americas and APAC. So can you give a little color? on maybe how EMEA trended in the quarter and if it's possible to give an update on the geographic kind of trends as we've got into 1Q.
spk07: Dan, this is Justin. I'll take that one. So, you know, going along with some comments that we made earlier on just the impact of Omicron in Q4, you know, we felt that the hardest in EMEA And Q3 is typically seasonally slow in EMEA, and Q4 is typically the best quarter of the year for EMEA. And in areas where Omicron was raging in the hot spots is where we saw the biggest impact, particularly with the academic customers. If EMEA had grown 30% year over year like the other regions, Probably would have saw another $8 million-plus worth of revenue in EMEA. And then I think, as you saw, AMR and APAC were particularly strong in Q4. We did see some impact in AMR on the East Coast due to Omicron. The West Coast was basically untouched during Q4, actually came in a little bit over what we had expected. You know, saw the impact in Europe, saw the impact on the East Coast of the U.S. But then, you know, even as Omicron has continued on within AMR, you know, Q1 thus far has been, you know, has been slow, you know, basically in both AMR and EMEA. Was there a second part to that?
spk03: Got it. Okay. Thank you. Yeah, no, I was looking for some update on Intracorder, but I think you kind of answered it there. They continue to be slow. Maybe one just back to Halo. Is it possible to give us a sense of what the mix is for Halo versus instrument orders, excuse me, instrument owners? And is there any reason to think that the fact that you've got this increasing mix of Halo, does that signify maybe the TAM isn't as big because you've got customers who don't want to buy the box, but they'd rather just kind of generate single cell office service? And then I'm just wondering what's the plan to reverse that trend?
spk07: Yes, maybe I'll start with some general commentary on Halo users. So, you know, basically the Halo users, when you look at them as a percent of the business, they're now, they've been growing steadily. And so they're now over half of our customers, but they're less than half of our revenues. And so when you think about, you know, just when you think about the opportunity that this presents to convert those Halo users over into instrument owners, it's an ever-growing opportunity, the more Halo users that come in. And it's something that we focus on right now as well.
spk12: Yeah, and in terms of the sound question, I think we actually take the opposite view based on our experience from actually the early days of the company. They tend to come into the single-cell ecosystem kind of initially sporadically, and then over time, kind of as they get grants, as they get up to speed on the workflow, convert it to more consistent users, and then they, at that point, tend to buy instruments. So we actually don't anticipate that that dynamic is going to change, which is part of the reason why we see this actually more of a validation of the time expansion and bullishness on the long term. One thing I would point out, there's sort of the trend of how quickly halos ramp and convert to instruments has slowed down significantly over the last two years, specifically since the beginning of the pandemic, which is why, again, that's another sign that once you, and that's the reason, right? These are the customers who have the greatest challenges of working through the logistics of actually accessing instruments to ramp up and to get trained, oftentimes to get trained by other customers. So yeah, we see that those trends will naturally reverse. And in fact, just kind of based on the ramp up of our existing instrument cohorts, right, instrument owning cohorts, we expect very robust growth going forward.
spk03: Got it. If it's possible, one more, just on Xenium, the fact that you're pulling it forward, could you provide more color on like what you're seeing or what you're hearing and the decision to pull it forward. I don't know if you've sized the opportunity and or discussed the competitive profile, but any color on kind of what you're seeing and why and how you think it's going to play out. Thank you.
spk12: I mean, so like our view of in situ sort of space was very bullish from the very beginning, right? That's why we made those acquisitions. That's why we started making those investments back in the day. What has changed recently and kind of almost exponential is just the intensity of customer interest and intensity of customer demand. We've been and, you know, we pride ourselves on partnering with our customers and working with them as much as we can to satisfy what their needs. And so that has been the primary driver. You know, we've been making a lot of significant progress on the development side throughout 2021, and kind of recently we saw a path to a faster launch, and we decided to take it.
spk16: Great. Thanks, Serge.
spk01: The next question comes from Tejas Savant of Morgan Stanley. Please go ahead with your question.
spk10: Hey, guys. Good evening. So just to kick things off, maybe I'll follow up on Dan's last question there. In terms of the pull forward of Xenium Surge, how much of that was just driven by the realities of the evolving competitive landscape? given competitor launches expected here in the near term and potentially some of these customers getting locked into their hardware decisions? And, you know, did that play a role at all?
spk12: Well, we'd like to focus on customers, right? Less so competitors. And that has been the driver for the decision, again, for our internal development and the customer input. That's what we pay attention to more than anything else.
spk10: Okay. And then, Justin, going back to your install base comments there around Halo users, et cetera, is there any way to just look at this install base of yours, which is an impressive 3,500 units, And parse out how many of those are sort of active Chromium units here in that 3,500-unit install base versus perhaps those that are being underutilized because customers purchased them taking advantage of the lower price and haven't really ramped up, as well as some of these X and IX units, which you've noted in the past will take up to 12 months to really start driving pull-through.
spk07: Yes. So Tejas, we look at instrument owners by cohort. And we can track their usage over time. And it's still really early for the customers that bought instruments last year. But from the initial indications that we have in these first few data points that we're looking at, it's encouraging. It looks like they are tracking along the same path of previous instrument owners. But again, there's relatively few data points there. And so, you know, it is still, it is still pretty early.
spk15: Got it.
spk10: And then one final one for me. Justin, can you just remind us of the split between academic and biopharma customers? And are you seeing any softness at all among your you know earlier stage biopharma customers in terms of capex purchase intentions and whatnot given the market volatility here that's been a concern on investors radars of late given uh you know data points from some of the tools group here yeah so the the the split that we see between academic and biopharma is about um 75 to 80 percent academic and about 20 to 25 percent biopharma
spk07: It can vary from quarter to quarter, but generally that's the overall split. And no, we haven't seen any of those notable differences that you're mentioning.
spk16: Got it. Thank you.
spk00: The line is now open for Patrick Donnelly of Citi.
spk01: Please go ahead.
spk05: Hey, thanks for taking the questions. Maybe one on the academic customers, the impact of Omicron here. Can you just talk about, are you seeing things just being delayed and pushed out? Are you seeing orders kind of not coming through, being canceled? I'm just curious, you know, if customers are starting to come back and you're starting to see orders pick back up. I mean, again, we've heard February has been a bit better. It doesn't sound that way for you guys. I'm just curious what the customer conversations are on the academic side, you know, Not that there's going to be a bolus of orders at the end of this, but are you seeing this push out and expectations that these come through in the next couple quarters?
spk07: Hey, Patrick. I think you want to look at this with instruments and consumables differently. And so for instruments, those opportunities for instrument orders, those aren't lost. Those are still in our funnel. Our salespeople are engaged with those customers. And so for instrument orders, we think that those are merely pushed out. For consumable orders, you know, if the customer is not in the lab or if it's in the lab for a reduced period of time, they're either not doing experiments or they're doing less experiments. And when they come back in the lab or when they come back full time, they're not going to speed up their projects or duplicate their projects to make up for the lost time. So that consumable spend is lost.
spk14: Yeah. Maybe I'll just add, Patrick, to what's kind of going on now. You know, typically, and we unfortunately had two years to learn how this kind of stuff works. We saw our accounts in EMEA and eventually all the US were completely shut down to even us getting on site, even support people. What we're seeing now is we're seeing customer engagements, we're getting back on site, and then we start to see the opportunities. At the same time, these customers getting their biology set samples ready and then we'll see more of the order so that's that's kind of the trend but right now we're definitely starting to see that engagement which is the early indicator which ultimately um is a sign of recovery yeah it's helpful thanks um and then justin maybe one on the margin side obviously talking about them trending a little lower in 22 here can you just talk through the levers i know you called out new products
spk05: you know, being a bit dilutive. What are you seeing on supplier pricing? I know that was, you know, a bit of a headwind coming in kind of end of 21. Are you changing pricing at all to combat it? You know, pass that along to customers. Maybe just talk through the levers on the margin side in 22.
spk07: Yeah, so just maybe to tackle the price increase first. So we've already executed a price increase previously. 5% increase on consumables. Instrumentless prices were unchanged. And as far as the cost pressures that we're seeing, you know, we are seeing those primarily on instruments, on components, chips, also seeing it on plastics as well. And so, you know, our procurement teams have been working through that. We've been doing spot buys. We've been buying ahead and carrying more inventory in areas that we normally have, locking in POs earlier with suppliers. But we're not going to be able to mitigate everything. So I do expect that as the year continues, if the overall macro environment doesn't improve, we're going to see increased costs there. And then just the overall supply chain risks overall. Shipping capacity, our products ship by cold chain. with dry ice, and there's a service level that has to be met to deliver the product in a viable state. And so, you know, as there's pressures on just the logistics environment overall, you know, we're feeling that too.
spk16: All right. Thank you.
spk01: Our next question comes from Dan Arias of Stifo. Please go ahead with your question, Dan.
spk02: Good afternoon, guys. Thanks. Serge, can you just comment on new products? If I go back to your January 2021 presentation, you talked about targeted gene expression, CellPlex, the low throughput kit, fixed RNA profiling, the X, obviously, and then the cloud. Can you just talk about which one of these are underperforming, which ones are outperforming, and then what you're kind of doing what you thought and then where the launch or adoption timing has been pushed out because, you know, the new product angle was kind of a significant part of the thesis in 21. I just want to make sure I have it squared away as we enter 22.
spk12: Yeah. So, yeah, there's a number of products that we talked about in 21. So in terms of performance, I would say the products that have been somewhat more restricted, I guess, in their adoption. Certainly the low throughput kit, while it's nice to get people kind of ramped into the single cell ecosystem and ramped up, it's had a very limited traction. Cellplex has been doing reasonably well with certain segments of customers, but not all across the board. I would say the X has been doing better, as we've commented before, and I would say the high throughput kit has also been doing better compared to expectations. And as far as your shifts in the launch timeline, so fixed RNA profiling, that's probably one of the significant ones for sure that got pushed out relative to earlier timelines. And also on the BISM side, when we talk about site assist or BISM-HD, those also got pushed out further, as did the BEAM product we talked about when we first started talking about it.
spk02: Yep, okay. Okay, and then Justin, just to go back to the guide, you know, at the low end of the range, you're basically at the growth that you saw during 2020 when folks just were not at the lab for a big chunk of time. So, you know, I guess at the risk of sounding incredulous, what could possibly make that happen, just given that the year-over-year comp is essentially the same?
spk07: Yeah, so you've got to keep in mind that, This is an annual number and it incorporates what we've already seen thus far in Q1. And so, like I said, Q1 has started off very slow. If that, you know, we're starting to see, you know, increased signs of activity with customers now, but, you know, if the situation doesn't meaningfully improve, I think that we're looking down towards the, you know, the lower end of that range. And then also just if, You know, new customers are ramping more slowly than they have in the past. There's an increased slowdown there. And then also, just with some of the new product launches that we have, if there are newer products, if their growth rates decrease, or some of the ones that we have planned for a mid-year push out haul.
spk16: Okay. Thank you, guys.
spk00: Our next question comes from Matt Larue of William Blair.
spk01: Please go ahead.
spk13: Hi, good afternoon. I'm curious if the willingness to push Visium HD says anything about where you think you're at with your current product offerings relative to others in the space. I know before you'd mentioned that some customers had held off buying Visium until the HD launched. So does this mean maybe you don't see as much of a risk in terms of those customers picking up something else in the interim. We'd be curious for feedback on that.
spk12: So the decision to pull forward Xenium is sort of independent of, I would say, what we're seeing on Visium's side of the world. So I just want to make that clear. As far as sort of the patterns of Visium purchases and respect to Visium HD, there's definitely a significant amount of you know like number of customers who are expecting and really looking forward to hd we see a lot of demand there and that is to some extent uh you know putting some pressure on the current vision demand uh there's definitely customers who are fine using visium at the current resolution um but because it does provide a lot of a lot of valuable information
spk13: but the hd is looming out there as well and for a lot of customers it is the thing that they want and we're very very excited about it okay and it's following up on on your comment about uh the number of x purchases being replacements for 15 instruments how many or maybe what percent of x purchases have or ix have been replacements um And our customers moving tech exclusively, or maybe still using both. I guess just trying to get a sense for how much this is expanding the market versus upgrading your install base.
spk12: So as far as the actual, out of all the access, the majority of those are actually going to new customers, which again, was not our expectation going in. And then, yes. but also a fair amount of our existing customers are upgrading at the same time.
spk14: Or buying an incremental instrument and making it an X. Yeah, and we don't see examples of people not following instruments because the Chromium controller, if you bought an X, it would probably still be used, maybe given in the lab next door or something like that. Okay, thanks.
spk01: Our final question this afternoon comes from Matt Sykes of Goldman Sachs. Matt, your line is open. Please go ahead.
spk04: Great. Thanks for squeezing me in. Just two quick questions. I'll ask them both up front. But you had mentioned that the increase in halo users is in part due to market expansion. So as you guys think about priorities going forward, how do you balance the desire to expand the market but also manage that cohort mix to help drive higher utilization? And then specifically on those Halo users, I know you mentioned a little bit, but just any more color on how you incentivize those customers to own instruments and drive utilization higher?
spk12: Yeah, so kind of on the second question, I think a lot of it is just kind of ramping their usage, being there, you know, reaching out what we've been doing kind of since the beginning of the company. But the biggest thing is for them to start to ramp up and to get trained, whether it's from from, you know, by us specifically or by their sort of, by other customers who are already proficient in single-cell. Again, this has been a challenge in the, like, in the current environment for the last two years, and we, you know, we're seeing that in the data. So just to the extent that this environment kind of recedes and gets better, I think that will improve. We're also, you know, releasing products. So for example, the fixed RNA profiling kit is something that should be particularly helpful to customers who don't have instruments. And generally, all the products and protocols we're releasing to help the customer experience, I think, will help drive the ramp up for people who are less proficient at using single-cell. And that's mostly Halo users. So a lot of these things that we've been doing, we're going to continue to do. And we do anticipate that that's going to accelerate the conversion from the lower rate that we've seen more recently As far as kind of the prioritization between driving like kind of existing adoption versus expansion of the market, I mean, you know, obviously we're doing both. I think the fact, you know, right now we're going to be focused on upgrading our installed fleet with the X series. To some extent, we do think that the customers who have the X present lower lifetime value to us, and it's a more advanced technology. They'll be better users. And so we do have this, you know, focus at this stage. But, you know, it's always kind of both, right, expansion and doing more for our current customers.
spk16: Thank you.
spk00: Thank you.
spk01: That concludes the questions on today's call, and that concludes today's call. Thank you very much for joining us all today, ladies and gentlemen. I hope you have a wonderful evening. You may now disconnect your lines. Thank you.
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