10x Genomics, Inc.

Thank you for attending today's 10X Genomics fourth quarter and full year 2022 earnings conference call. My name is Bethany, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Cassie Curnow,

With 10x Genomics, please go ahead. Thank you, and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the fourth quarter and full year ended December 31st, 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. During today's call, I'll start with an overview of our performance during the fourth quarter. Next, I will highlight our progress and momentum across our business and the exciting opportunities we have ahead in each of our three platforms. I'll then turn the call over to Justin for a more detailed look at our financial results, as well as our revenue guidance for 2023. While 2022 had its challenges, we ended the year strong with revenue of $156 million in the fourth quarter, up 9% year over year. This represents quarter over quarter growth of 19%, demonstrating our momentum and focus on execution as we closed out the year. Total revenue for the year was approximately $516 million, up 5% over 2021. In 2022, we sold more than 1,100 instruments, surpassed 4,500 peer-reviewed publications using our products, and expanded our intellectual property portfolio to more than 1,750 patents and patent applications. Yet, the clear highlight of the year was the continued strength and velocity of our innovation engines. 2022 was the biggest and most exciting year of new products in our history, as our team delivered catalytic launches in all three platforms. In Chromium, our new products further expanded our broad menu of high-performing assays. We released Chromium Flux, the new gold standard for single-cell gene expression, which we believe has the potential to be transformative to the Chromium franchise. In addition, we introduced our first sample pair product, the Nuclei Isolation Kit, and opened up new applications with the launch of Beam. In Visium, we launched Cytosys, our first spatial instrument. We see Cytosys as the foundation of the Visium platform going forward, transforming the Visium workflow and outperforming manual methods. And finally, we launched our Xenium platform, which we believe is the most advanced in-situ platform on the market. The platform includes a versatile and easy-to-use instrument a diverse menu of curated, customizable, and high-quality panels, and Xenium Explorer, intuitive software for interactive data visualization. We're incredibly proud of what our innovation engine delivered in 2022, and we're confident we'll have the commercial scale and operations infrastructure in place to get everything out of the opportunity ahead. On the commercial front, we're building from a solid foundation with broad reach and a talented team obsessed with customer success. Last year, we started implementing better commercial processes, systems, and tools as we prepare for our next phase of growth. On the operations side, we've made tremendous progress building our new R&D and manufacturing center here in Pleasanton, which is on track to be completed soon. This is one of our initiatives to build our global manufacturing network for scale and significant capacity for future growth. Now, let me share more about our recent progress in pipeline, starting with Chromium, the definitive platform for single-cell analysis. Throughout the year, we've seen ongoing demand for Chromium X-Series instruments, as both new and existing customers chose the X-Series for its high performance, expanded capabilities, and series-specific assays. In fact, after several consecutive quarters of customers overwhelmingly opting for X-series instruments, we made the decision during Q4 to discontinue future sales of our legacy Chromium controller. On the consumable side, our comprehensive portfolio of high-performance assays, which are easy to use and scale, delivered deep biological insights across a wide range of applications and analytes. The performance, differentiation, and scalability of our consumables portfolio should position us well to drive growth with existing customers, welcome new researchers into the 10X ecosystem, and accelerate translational and biopharma opportunities. In Q4, we saw particular strength with our multi-owned product as researchers continued the trend toward measuring multiple analytes per cell. We also saw increased adoption of our high throughput assays as customers embark on larger-scale projects. We're pleased with the customer response to Chromium Flex, which we believe will become the new flagship assay for single-cell gene expression. After completing their initial evaluation cycles, customers are reordering consistently and starting to adopt larger kits for more scale and lower cost per sample. We're still very early in this launch, particularly with the FFP opportunity. Flex is the first and only assay to open up the vast volumes of archival FFP samples for single-cell analysis, which should enable much more research, particularly in translational settings. We have now rigorously validated Flex across a broad range of different FFP samples and have published demonstrated protocols to better enable our customers to access this groundbreaking capability. Also, in Q4, we began shipping Beans, Beam's proprietary screening approach enables researchers to quickly analyze up to millions of B or T cells to determine their antigen binding at high plex and high resolution. We believe the scale, resolution, and throughput of Beam can revolutionize therapeutic discovery, making it of particular interest to our pharma and biotech customers. Beam is a great example of how innovation opens new applications for single-cell analysis. As the unambiguous leader in single-cell, we continue to invest in new product development to unlock more sample types, enable larger scale, lower the cost of experiments, and engage a broader base of researchers. At the HGBT conference last week, we shared proof-of-concept data demonstrating how chromium flux can easily scale to up to 10 million cells and hundreds of samples in a single experimental run. We believe that data illustrates the power and long-term potential of Chromium Flex to deliver scale at levels that were inconceivable just a few years ago. In addition, this shows how 10X continues to raise the bar on scalability and ease of use, and how our product innovation can drive down the cost of single-cell experiments. Now, I'd like to share more about our spatial platforms. Through our internal investments and our acquisitions of Spatial Transcriptomics, ReadCore, and Cartana, 10X has been leading the way in spatial for a decade. We have built incredibly powerful technologies, developed foundational intellectual property, and have deep experience and customer insights that have been instrumental to our Visium and Xenium platforms. Visium is the leader in unbiased spatial discovery. It has been adopted in thousands of labs around the world, used in more than 440 publications and preprints, and has generated by far the largest number of public datasets than any other spatial platform. And we're still just getting started. We made big strides last year with the launch of Cytosys, which we believe will be a great catalyst to accelerate the platform. We're pleased with the sustained customer interest and demand for Cytosys in its second full quarter since launch. We're hearing very positive feedback from customers as they complete their initial rounds of Cytosys along with its companion assay, Visium FFP version 2. FFP is increasingly the sample type of choice for Visium users, as demand nearly doubled that of fresh frozen in Q4. We designed SiteAssist to help solve the key challenges our customers have faced with the Visium workflow. Beyond its ease of use, the instrument outperforms manual methods, ensuring customers not only have a better experience, but also receive better insights. With SiteAssist, Researchers can access more samples and more sample types, including tissue sections previously stored on standard glass slides. In addition, we recently released a new protocol enabling customers to use fresh frozen tissues on cytosine. This new protocol, along with the performance advantages inherent in our V2 chemistry, results in much higher sensitivity than our standard manual fresh frozen assay. We're continuing to invest in Visium new product development with Cytosys as the foundation of our pipeline moving forward. At AGBT, we shared more about the future products and capabilities that will be exclusively available in Cytosys. We will continue to expand Cytosys to be compatible with more sample types, including tissue microarrays. We're also working to bring multi-omics to the platform with a planned launch of gene plus protein expression in the first half of 2023. and we're fully committed to delivering higher resolution. Our team is making tons of exciting progress on Visium HD, which will be offered only on Cytosys. As you may have seen at AGBT, the HD data looks exquisite, showing its power to deliver unbiased whole transcriptome discovery across entire tissue sections at single-cell-scale resolution. We've come a long way with this ambitious project, and we'll share more when we get closer to launch. Turning to Xenium, our newly launched platform for in-situ analysis and what we believe is the best performing system on the market. As we shared on investor day, we delivered our accelerated timeline and officially began global commercial shipments in December. Both instrument shipments and order exceeded our internal expectations in Q4, reflecting the strong customer enthusiasm for Xenium. For our team, there's really no better feeling than seeing new products in the hands of researchers. It was especially rewarding to have a customer share data from his own Xenium runs at AGBT just weeks after we started shipments. With feedback from our initial customers, we're now more confident than ever in Xenium's differentiation and performance advantages across a number of fronts. First, Xenium offers excellent sensitivity and specificity. Because of the unique features of our chemistry, Xenium delivers high sensitivity even on difficult tissues, ensuring that customers can reliably measure the genes they are interested in. At the same time, our chemistry ensures high specificity, giving customers confidence that they are not seeing phantom genes or cells in their samples. Second, Xenium offers the best workflow from instrument to insert. We've worked hard to design easy and straightforward sample preparation assay protocols, and we have brought our world-class software capabilities to Xenium, which is the only platform to feature comprehensive onboard analysis in parallel with the instrument run, including cell segmentation and clustering results. Directly after the run, without additional processing, results can be easily transferred off instrument for interpretation using Xenium Explorer. or a wide variety of open source tools. Our differentiated approach is both flexible and fast and significantly reduces the computational burden on customers. Third, our gene panel strategy developed in collaboration with leading researchers best enables customers to answer their specific research questions. Our approach combines targeted gene panels optimized by tissue type with the flexibility to add in large numbers of custom genes. This year, we plan to add several tissue-specific and multi-tissue panels to our lineup, as well as fully custom panels for maximum flexibility. And finally, Xenium delivers best-in-class throughput, enabled through advances across the full technology stack in chemistry, hardware, and software. With Xenium, researchers can analyze the most tissue area at single molecule resolution in the least amount of time. We built Xenium to have key performance advantages for launch and for the long term. Xenium is backed by a comprehensive multi-year roadmap and 10X track record of innovation, giving customers even more confidence in their investment. At HGBT, we put some of these future capabilities on full display, unveiling new proof of concept data to demonstrate just how powerful Xenium is already and how much more it can enable in the future. This data showcased some of our key development directions, including multimodal cell boundary stains and trained cell segmentation algorithms, multiplex RNA and protein on the same tissue section, and isoform mapping SMB detection. In addition, we shared R&D data from a 5,000-plex multi-tissue gene panel on seven human FFPA tissues, demonstrating the platform's capability to scale to many thousands of genes. Also, at AGBT, we announced the Xenium Catalyst Program. Through this service, prospective customers can see proof-of-concept data on their own samples to support their grant applications and funding requests. While many researchers are able to use our provided datasets for this purpose, we believe the Xenium Catalyst Program will be a great resource for select customers who require sample-specific data. We can't wait for even more customers to see firsthand why we strongly believe Xenium is the most advanced in-situ platform on the market. Coming over this record-setting year of catalyzing launches across all three platforms, we're fully focused on driving new product adoption, ensuring our customer success, and getting the most out of the tremendous opportunities ahead. At our investor day, we shared our view of the large opportunities in life science research and beyond. When you look at all the ways our platforms are being used, the diversity of applications, diversity of analytes, and number of customers, we see that our technologies are replacing much of the conventional toolkit in the lab sciences. Our tools are revolutionizing how researchers address biological questions. By analyzing how much scientists currently spend pursuing the answers, we can estimate the magnitude of our opportunity. At a high level, there are four broad categories of research questions where single cell and spatial methods are particularly useful. The first category, atlasing, is the initial home court for single-cell analysis, yet we're less than 20% penetrated. The second category, which entails the investigations of genetics mechanisms, also sees a meaningful use of our tools, but is less than 10% penetrated. It's the same in the third category, which encompasses a larger opportunity and broader diversity of mainstream biology, and similarly, We're barely scratching the surface with our fourth category, translational and biopharma applications. We have established strong beachheads, but it's still very early relative to the large potential. Now turning to 2023, while it's still a dynamic environment, most geographies have stabilized with the exception of China. We have so much to look forward to and deliver on this year. 2023 will be the first full year on market for several key products, including Chromium Flex, Visium Cytosys, and Xenium. Our commercial team is fully focused on driving adoption and increased use with new and existing customers alike. While we're coming off the biggest year of product launches in our history, we're not slowing down. Our innovation engine is focused on extending our product leadership with new capabilities on all three platforms. capabilities that will open up our tools for more samples, more research, and more customers. From a commercial operations perspective, we're continuing to put the pieces in place to get back to our track record of execution and scale to the next phase of growth. At our core, 10X is fundamentally about growth and impact. It's why, since the earliest days of the company, we have invested to build foundations and scale for the long term. This next phase of growth will be complemented by increased focus on operational excellence and efficient scaling. We'll be disciplined, yet remain bold and ambitious in pursuit of our mission to accelerate the mastery of biology and advance human health. With that, let me turn it over to Justin for more detail on our financials.