10x Genomics, Inc.

Hello everyone and welcome to the 10x Genomics first quarter 2023 earnings conference call. My name is Bruno and I'll be the operator of today. During this presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. I will now hand over to your host, Cassie Cournot. Cassie, please go ahead.

Thank you and good afternoon everyone. Earlier today, 10X Genomics released financial results for the first quarter ended March 31, 2023. 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. We will host a question and answer session after our prepared remarks. We ask analysts to please keep to one question and one follow up so that we may accommodate everyone in the queue. With that, I will now turn the call over to Serge.

Thanks, Cassie. And good afternoon, everyone. On today's call, I will start with an overview of our first quarter performance across our leading portfolio of single cell and spatial technologies. Next, I will discuss our progress, momentum, and the exciting opportunities we have ahead in each of our three platforms. And I'll share why, based on early yet overwhelmingly positive feedback we've heard from our customers, we firmly believe Xenium is the best system for in-situ analysis. Then I'll turn the call over to Justin for a more detailed look at our financials, business trends, and outlook for the rest of the year. 2023 is off to a solid start with first quarter revenue growing 17% year over year to $134 million. These results reflect the momentum we're seeing across our spatial portfolio fueled by recent launches in both Visium and Xenium and the strength in Chromium consumables. Regionally, the Americas and EMEA teams saw improvement after a slowdown in the prior year period, while APAC came in below our expectations. As we look to the year ahead, It's all about execution and impact. We're coming over the biggest and the most exciting year of product launches in our history. And our team is fully focused on driving adoption and ensuring our customer success. We're continuing to push our innovation engine with new capabilities in all three platforms. And we're working to improve scale, efficiency, and operational excellence throughout the company. All this so we can maximize and deliver on the incredible opportunity we have ahead. Now, let me share more about each platform, starting with Chromium, the unambiguous leader in single-cell analysis. In Q1, Chromium consumables continued their solid trajectory and returned to double-digit growth. This was driven by strong performance in Americas and EMEA, as nearly every assay in our entire broad single-cell portfolio grew year over year in both regions. The performance, ease of use, and tremendous scalability of our consumables portfolio across a wide range of applications and analytes is an important differentiator for 10X that creates real value for our customers and their research. This quarter in particular, we continue to see increasing traction and customer enthusiasm for Chromium Flex, the new gold standard for single-cell gene expression. With its robust fixation, superior performance, built-in multiplexing, cost advantages, and broad sample compatibility, we believe Flex will be transformative to the Chromium platform over the long term. It's very early in this launch, yet it's clear that momentum is building. We're hearing multiple examples of customers who achieved amazing results in their initial evaluations and are now planning larger studies that leverage the assays built in multiplexing to run more samples at lower per sample costs. One customer shared how Flex, the first and only single cell assay to work with archival FFP samples, revealed new signatures in bladder cancer blocks some 15 years old that are eye-opening to pathologists. The palpable enthusiasm we're seeing reinforces our belief that FLEX has the potential to become our new flagship assay for single-cell gene expression. It's drawing more researchers into the 10X ecosystem as new customers increasingly choose FLEX as their first 10X assay of choice. Just like we've always done, we're continuing to invest to broaden the menu of applications available in the FLEX portfolio to enable more samples, more scale, and more analyze. Later this year, we expect to expand our feature barcode application to FLEX to simultaneously profile gene expression and cell surface proteins on a cell-by-cell basis across multiplex samples and millions of cells. We believe the additional plug-and-play multiomics capabilities on FLEX will open up more opportunities within disease research and translational settings. FLEX is exclusively available in Chromium X series instruments. And as such, we expect placements to accelerate as more customers appreciate the power and performance of this assay. The Chromium X series is by far the most powerful tool available for single cell analysis. And we believe there's a long runway ahead with both new and existing customers. Altogether, this is why I firmly believe, despite all the progress we've made, single-cell is still just getting started. Now, turning to spatial, where both our Visium and Xenium platforms exceeded our expectations during Q1. We launched Visium only a few years ago, and since then, Visium has emerged as the clear leader in NGS-based spatial technology, used in thousands of labs and having generated the largest number of public datasets by far. Last year's launches of SiteAssist and FFPEv2 have a further accelerated adoption of the Visium platform. These new products help solve the key challenges our customers have historically faced with the Visium workflow. SiteAssist also opens up more samples and more sample types for Visium research, providing customers with a better experience and better data. This quarter, we launched protocols for both fresh frozen and fig samples, now enabling all major sample types to run on Cytosys. Demand for Cytosys remains solid in Q1. It's been particularly exciting to see these placements drive increased Visium utilization. Cytosys-based consumables became the preferred method in Q1, surpassing our instrument-free assays, a trajectory we expect to continue. And it's not just our existing power users who are adopting Cytosys. This instrument is bringing new labs into the 10X ecosystem. A large fraction of replacements in Q1 went to labs that were either new to the Visium platform or new to 10x entirely, a promising indicator of potential future growth. These trends demonstrate why we're confident SiteAssist is the future of the Visium platform. We're continuing to invest and innovate in the Visium franchise, developing new capabilities that will be exclusively available on SiteAssist. This quarter, we plan to launch Visium Gene Plus Protein Expression, empowering researchers with three analytes in one, HisPlex protein, whole transcriptome RNA, and H&E staining, all on the same tissue section. This will be the first and only assay of its kind to offer a morphology-first workflow, preserving pristine H&E staining patterns conducted upfront. Linking an information-rich image with its complementary molecular analytes on the same tissue section enables researchers to both cross-validate their findings and obtain a new level of understanding. Now, turning to Xenium, which we believe is the best performing platform for in-situ analysis. It's exciting to see the incredible momentum and traction we've built since we first started shipping Xenium in December, and we couldn't be more pleased with the initial feedback we're hearing from our customers. We set out to build Xenium so it just works in the hands of researchers, the same as our other products. To have our customers tell us this and show us through their routine use is a testament to the strength of our innovation engine and the talent and dedication of our team. Our customers have not only praised Xenium's performance and ease of use, but also the entire experience engaging with the platform. They've given rave reviews to our field teams for their support during installation and training, which shows the real impact of the commercial breadth, depth, and scale we've built over the years. It is awesome to have the key design specs we intended and marketed for launch now developed, delivered, and in regular use in the field. Researchers are seeing that it's the system's on-market features, not on-paper features, that deliver real value and lead to exciting new discoveries. To see our initial customers generate powerful results and stunning images on Xenium run after run has been deeply rewarding and motivating for our team. In fact, since the end of January, our customers have completed dozens of successful Xenium runs with their own pressure samples, ranging from mouse brain to more complex human samples across various tissues, including breast, kidneys, skin, lung, and various sample types, including fresh frozen FFP and tissue microarrays. The feedback they've shared after independently completing the entire workflow from sample prep to data analysis validates Xenium's differentiation and performance advantages across a number of fronts. To start, thanks to unique features inherent in our chemistry, Xenium delivers excellent sensitivity and specificity, which are the necessary foundations of any high-quality, trustworthy in-situ system. We compare the information and the competitors' marketing materials to our own data sets and found Xenium is currently up to six times more sensitive. Xenium also delivers much higher specificity, giving customers confidence that each transcript detected is the intended one and that there is no false or phantom genes or cells in their samples. In another comparison using a competitor's marketing data, we found Xenium delivers up to 42 times better specificity than the other platform, where six to 25% of the transcripts in each cell can be misleading. Beyond performance, Xenium's ease of use, efficient workflow, and best-in-class throughput are also resonating very well with our early customers. Researchers can use our entire slide area, enabling maximum flexibility to run single large sections, multiple smaller sections, or even tissue microarrays. With Xenium, researchers can analyze the most tissue area in the least amount of time using the fewest number of slides. In addition, Our gene panel strategy, designed to help customers answer their specific research questions, is also resonating well. Our approach combines a growing menu of targeted gene panels optimized by tissue type with the flexibility to add in large numbers of custom genes. This quarter, we will continue to expand our content menu with the planned launch of new tissue-specific panels and a multi-tissue panel optimized for cancer research. With each of these offerings, researchers can also spike in their own custom genes to ensure they aren't limited in any way by gene selection. In addition, we recently launched a fully custom gene panel for maximum flexibility. Our unique combination of pre-designed and fully custom panels is increasingly validated in the field, giving researchers the ability to measure the genes they need at high performance and high throughput. This all comes together with our differentiated approach to software and data analysis, which is the best demonstration of the caliber and performance of an in situ platform and essential to ensuring a positive customer experience and to enabling routine use. Everyone in the field has talked about how challenging it can be for researchers to handle the large amounts of data produced by in situ instruments. However, challenges like these play exactly to one of our key strengths. We have invested and built world-class software data analysis expertise since the earliest days of the company, in contrast to others who outsource this critical function. We have brought our team's proven software prowess to Xenium, and the result is yet another area where the 10X approach is a big differentiator that's making a big impact with our customers. Xenium is the only platform to feature comprehensive primary and secondary onboard analysis in parallel with the instrument run. including cell segmentation and clustering results. This enables researchers to directly access their data on the Xenium instrument immediately after the run is done without the need for on-risk post-instrument analysis or massive uploads, downloads, or data transfers. Customers who want more off-instrument interpretation can easily do so using Xenium Explorer or a wide variety of open source tools. we're confident that our differentiated approach is flexible, fast, and significantly reduces the computational burden on customers. We've built Xenium to be the best performing in-situ platform, both now and for the future. Xenium is backed by an ambitious and exciting multi-year roadmap. We've already demonstrated a number of these future capabilities, including the ability to scale to many thousands of genes. In addition, Xenium's chemistry uniquely enables isoform mapping and SNV detection real game-changers that simply aren't possible on other platforms. The real-world feedback we've received from our early Xenium users is giving us better insights faster and helping us to prioritize our roadmap so we can deliver researchers precisely what they want. Overall, we feel really good about our early progress and momentum. There is tremendous potential ahead with Xenium, and we're bringing in the whole of company effort to capture it. We've already made significant improvements in our installation and training times, and we're increasingly confident in our scaling as we move through the year. The kinds of projects our customers are already running indicate that Xenium may be one of the, if not the most transformative technologies in our industry in decades. We believe our platforms, each on their own, are by far the best in class in their respective fields. Each provides a different lens on biology and can be used together to provide even more value and reveal the deepest biological insights. Our progress across each of our platforms continues to reinforce my conviction that one day, just about all tissue samples, whether for research, clinical, or therapeutic applications, will need to be analyzed at single cell resolution, large scale, and in the right context. We firmly believe our technologies are critical to accelerating the mastery of biology and advancing human health. With that, let me turn it over to Justin for more detail on our financials.