10x Genomics, Inc.

Hello and welcome to the 10X Genomics First Quarter 2022 Earnings Conference Call. My name is Katie and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I'll now hand over to your host, Cathy Corneau, Investor Relations and Strategic Finance to begin. Cathy, please go ahead.

Thank you and good afternoon, everyone. Earlier today, 10X Genomics released financial results for the first quarter ended March 31, 2022. If you have not received this news release or if you would 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. With that, I will now turn the call over to Serge.

Thanks, Cassie. Good afternoon, and thank you for joining us. On today's call, I will start with an overview of our performance during the first quarter. Next, I will discuss our progress and momentum with customers and share an update on our upcoming product launches, including more detail on Xenium and the exciting opportunities we have ahead across all three platforms. Then, I will hand the call over to Justin for a more detailed look at our financials business trends, and outlook for the rest of the year. Revenue for the first quarter totaled $114 million, up 8% year over year. These results reflect the slow start we experienced in January and February, largely driven by the impact of the Omicron surge, and played out as we described during our year-end call in mid-February. As we moved into March, the effects of Omicron had largely abated outside of China. and customer productivity started to resume. We're now back on site with our customers, and the excitement for Chromium and Vision portfolio and pipeline is palpable. In recent weeks, I've personally had the opportunity to visit a number of our customers in person, which has further reinforced my conviction in the long-term growth trajectory for each of our three platforms. So while we'll continue to navigate some near-term headwinds, I have more confidence than ever in our enormous opportunity ahead. Every day, we're seeing more customers and more studies that all point to the same thing. 10X is replacing the legacy toolkit of biological research and transforming how we understand and ultimately master biology. During the quarter, we continue to see solid demand for chromium instruments led by the sustained enthusiasm and broadening appeal of the Chromium X series. We're actively working to upgrade our current customers to ensure they have access to the most powerful tools available for single cell analysis. The upcoming launch of our fixed RNA profiling kit, which will be exclusively available in Chromium X series, help drive instrument demand with new customers and accelerate the replacement cycle among existing customers as expected. Turning to consumables, our high throughput kits deliver strong growth. Increasingly, customers are adopting HT kits to scale existing studies with more samples or more cells. We're also excited to see our customers designing new experiments specifically for HT. at a size and scale previously considered unattainable. We believe the strong adoption of our HD kits, robust reorder rates, and the growing number of new labs conducting pilot studies or applying for grants demonstrates the value researchers gain from high-throughput single-cell analysis and is a great indicator of future growth. We also saw solid demand across our broad portfolio of standard throughput single-cell consumables this quarter. The performance and breadth of our offerings covering gene expression, immune profiling, epigenetics, proteins, and multi-omics is unrivaled and helps drive growth with both our most seasoned labs and our newest adopters. Multi-Om in particular continues to be among the fastest growing products in our history, experiencing broad adoption across a diverse set of applications. We believe the combination of our product performance, easy workflow, and diversity of applications creates real value for researchers that no other company can match. Moving on to Visium. In Q1, we continue to see solid demand for both fresh frozen and FSP. While it remains early in its lifecycle, we're encouraged by the wide adoption of Visium as the ideal spatial discovery tool. In fact, according to the Museum of Spatial Transcriptomics paper published in March 2022 edition of Nature Methods, Visium has been cited in more publications than any other spatial biology tool. and has been used to generate nearly 125 public datasets. No other method has even half as many. The Nature Methods paper also noted that more institutions have published using Visium than using the next three other spatial methods combined, demonstrating the breadth of Visium adoption. This confirms our view that Visium is the leader in spatial biology. Overall, we executed as planned in Q1 and look forward to building momentum as we move through the year. Our team is focused on three key areas to deliver in 2022 and to accelerate growth into 2023 and beyond. First, driving our extensive new product pipeline. Second, scaling our commercial organization. And third, strengthening our operational capabilities. Let me share more on each area, beginning with R&D. where we're continuing to drive our strong cadence of technological advancement and product development. As we showcase at our second annual experience event in February, we have a very exciting and ambitious pipeline in each of our three platforms. Starting with Chromium. Chromium has long been the leader in single cell analysis, yet we continue to see a massive opportunity ahead. It's evident by the rapid growth and diversity of experiments, applications, and publications that single cell methods are replacing are replacing the conventional toolkit for measuring biology. To make chromium accessible to every biology lab in the world, this year's pipeline is focused on new products that drive broad adoption, remove bottlenecks, and give researchers a more flexible and streamlined workflow. In the near term, we're particularly excited about two new kits that we believe will help realize the expanding potential of single-cell analysis, remove obstacles to larger-scale multi-site studies, and open up more single-cell applications in translational research. This includes our fixed RNA profiling kit, which has the potential to be transformative to the single-cell franchise over the long term. This product resolves a common challenge our customers currently face working with live cells. With this kit, researchers can fix their tissue at the time of collection and store it until they're ready to begin their single-cell workload. In addition, researchers can batch and multiply samples, as well as analyze gene expression of surface proteins from the same cell for multi-omics analysis. This product also offers significant performance advantages, including higher gene sensitivity than any of our flagship assays, and is the most sequencing-efficient assay in our chromium portfolio. Our upcoming nuclear isolation kit is another example of how we're easing the chromium workflow for our customers to help them run more samples and more kinds of samples. Many samples present a challenge for single-cell analysis due to the difficulty of dissociation or encapsulation of individual cells. This can be because some tissues are particularly difficult to work with or because researchers would like to freeze their samples at collection to be processed for single-cell analysis later. To address this challenge, many researchers have turned to nuclei, which can provide single-cell information from such samples, but at the cost of much more difficult and unpredictable sample prep workflows. Despite these difficulties and the need for highly specialized expertise, nuclei analysis has been rapidly growing in popularity. And now, our nuclei isolation kit will greatly simplify this workflow so more researchers can access single-cell data from frozen samples and challenged tissues. We believe this kit will help accelerate the adoption of multiple chromium assays, including Multium and ATT&CK, which require single nuclei as input. We're now taking pre-orders for both products, which we expect to begin shipping over the coming weeks. Turning now to Visium. We expect to round out a core set of the capabilities on the Visium platform with several new products focused on enabling more analytes through the introduction of Visium Plus Protein, more samples with the launch of our Visium site-assist instrument, and more resolution with Visium HD. Our Visium Plus Protein product enables simultaneous gene expression and high-flex protein analysis on the same tissue. It also offers larger capture areas and an improved workflow to give our customers more flexibility and confidence. We're looking forward to launching this product mid-year. In addition, we're excited for the upcoming launch of the Visium site assist instrument, which will simplify the logistics around the Visium workflow by bridging the gap between histology and molecular biology. Site assist will also open up the archives of tissue samples already stored on preexisting slides, significantly expanding the number of samples that can be run on Visium. We expect to ship site assist next quarter. And finally, Xenium. As we announced in February, we plan to ship the first instruments by the end of the year. We have already received extremely strong interest in the platform from many customers eager to be among the first to receive a Xenium, and we feel great about the large funnel of opportunities we're building. We're very excited about the competitiveness and differentiation of our initial launch, as well as our plans to unlock the full capabilities of the platform through our extensive product roadmap in the years ahead. Through our close partnership with customers and our Cortana access program, we have unique insights into the capabilities and features researchers are looking for. Customers have told us they need a HyPlex easy-to-use and scalable platform that can differentiate cell types and states in the tissues of interest and measure the right genes and pathways. To enable this, we're developing Xenium to have great performance across all key metrics, including multiplex levels, sensitivity, specificity, and throughput. And in particular, we know from customers that high throughput is critical because it determines whether the instrument is practical for routine use. We've designed our Xenium analyzer to have the highest throughput of any in-situ instrument in its class. We believe Xenium will enable researchers to analyze the most tissue area at single molecule resolution in the least amount of time. We also believe having all three methods, single-cell, spatial, and in-situ together will be a real advantage for the research community and a real differentiator for us. Most in-situ experiments currently make use of Chromium or Visium data. We are in the best position to deliver seamless experience to customers across all three platforms, and this will be reinforced by our support team, who consistently receive rave reviews from customers. Because this is an emerging field, researchers know their needs will evolve over time, so they want to trust a partner that will innovate and grow with them. Our track record here is unparalleled. Much like we've done with our chromium roadmap, we'll enable more allies, new classes of measurements, and truly transformational capabilities on the Xenium instrument as we move forward post-launch. We're committed to delivering rapid product advancements to ultimately establish Xenium as the unequivocal leader in in-situ analysis. We're able to develop world-class platforms through the strength of our internal product development and intellectual property. We already have over 200 patents issued and pending in the in-situ field, including the key patents that will enable features that we believe will be extremely valuable to researchers, including high throughput and high sensitivity. With respect to our overall patent portfolio, we recently passed the extraordinary milestone of having more than 500 patents issued and almost 1400 patents issued and pending. As we have said before, it is our policy not to license our patents, but to differentiate ourselves from our competitors by protecting our sole right to own and practice our intellectual property. With our robust pipeline across all three platforms, we're on track to make 2022 the most exciting year of product launches in our history. Now, turning to commercial. Throughout the company, we're thrilled to be back in person with our customers. For the past two years, the inability to connect in person in their labs and at conferences has challenged the proliferation and adoption of new technologies, including single cell tools, especially among mainstream biologists who are new to the 10X levels of scale and resolution. Yet we know the number of researchers interested in single cell is rapidly increasing, as evidenced by the growing number of new customers entering the 10X ecosystem. either as instrument owners or as Halo users. We believe the pandemic has made it more challenging for many of our Halo customers to scale and become routine users of single-cell analysis in their research. There can be many reasons for this, whether it's the challenges of working with live tissues or second-order COVID-related impact, like supply chain constraints or labor shortages, the reduced staffing levels, and limited opportunities for training, collaboration, or best practice sharing. A core part of our strategy is to enable as many researchers as possible to become routine users of single-cell. We have found that customers who own instruments consistently grow their usage over time. We're focused on driving instrument placements with both new customers and with Halo users. We also want to ensure our existing customers have the best technologies for single-cell analysis, which is why we're focused on upgrading researchers with Chromium controllers to our Chromium X series. We have now established a broad base of installed instruments representing a great foundation for future growth. And while we've made good strides within academic labs, we see a large opportunity ahead both with our existing customers increasing their usage and with new customers entering the ecosystem. We're gaining traction throughout pharma and seeing strong growth among biotechs who are increasingly adopting single-cell and spatial methods. And as we look ahead, we're also continuing to expand the breadth and depth of our commercial team. We're on track to add nearly 100 new roles and to finish the year with a commercial team of more than 500 employees worldwide. We're continuing to gain traction with a dedicated tissue specialist who onboarded last year. And as we prepare to launch Xenium, we've deployed a separate specialized market development team dedicated to spatial and in situ. This should ensure the rest of our commercial organization maintains focused momentum on growing adoption of our current on-market portfolio. Before we move on, I want to acknowledge Brad Cratchfield, our Chief Commercial Officer, who we previously announced will be leaving the company by the end of the year. Under Brad's leadership, we have built and scaled a global commercial organization that is a real differentiator for 10X and an excellent foundation for future growth. While he's not joining us on today's call, Brad continues to lead the commercial team through this transition period. We have initiated the search for our next CCO and have proactively made several changes to the commercial team in advance, including realigning regional leadership and welcoming a new head of commercial operations. I want to thank Brad and the entire commercial team for their focus on execution and unwavering commitment to our customers. And finally, turning to operations and the work we have underway to expand and strengthen our manufacturing capabilities. We're continuing to make substantial investments in our global operations network, by adding production capacity and new capabilities to differentiate products and support the long-term growth trajectory of the business. Since opening our manufacturing center in Singapore, we have continued to ramp production at the site. We're also building out our new Pleasanton facility and look forward to co-locating more of our R&D and operations teams to enable tight collaboration and fuel our rapid pace of innovation. In addition, our team is working hard to proactively manage our global supply chain in what remains a very dynamic and challenging environment. We're working closely with our partners and are continually evaluating our ability to source key components. We're also expanding our distribution network and carry options to help alleviate global logistics constraints. We believe our efforts and investments to scale and fortify our operations and supply chain are essential to supporting our growth and enabling a product roadmap. Our team is fully focused on driving our innovation engine, scaling our commercial organization, and advancing our operational capabilities in 2022. We're bringing the whole company effort to delivering this year and building momentum for 2023 and beyond. I want to thank the entire Tenex team for their hard work, focus, and dedication to our customers and to our mission. Now, let me turn it over to Justin for more detail on our financials.