10x Genomics, Inc.

Thank you for standing by. My name is Aaron and I will be your conference operator for today. At this time, I would like to welcome everyone to the 10X Genomics third quarter 2023 earnings conference call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn our call over to Cassie Corno, Director of Investor Relations and Strategic Finance. Please go ahead.

Thank you, and good afternoon, everyone. Earlier today, 10X Genomics released financial results for the third quarter ended September 30, 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 begin with a brief overview of our third quarter performance and update you on our progress across each platform. Then, Justin will provide a more detailed look at our financials, business trends, and updated outlook for the remainder of the year. After that, we'll open it up for your questions. Revenue increased 17% year over year to $154 million in the third quarter. Our results were once again driven by Xenium as we continue to ramp operations and drive exceptional demand with researchers worldwide. We achieved strong growth despite continued headwinds in China. And excluding China, our growth exceeded 20% during the quarter. Just like 10X catalyzed the single-cell revolution, we're now ushering in a new era of genomic analysis with Xenium. Our mission is bigger than any one technology or any one platform. Our goal has always been to provide scientists with new generations of tools to measure biology at the right resolution and scale. That is why we have invested in our three platforms. That is why we have invested in foundations, our innovation engine, commercial breadth, and manufacturing scale. And that is why we firmly believe we're still just getting started. Now, let me share more about each platform. I'd intentionally like to start today with Xenium, which we believe is the best performing platform for in situ analysis. In the third quarter, revenue from our spatial products exceeded $36 million, largely driven by the accelerated adoption and operational ramp of our Xenium platform. It's worth pausing here for a moment. Very few platforms ever achieve the type of success that our team has accomplished with Xenium in just the first three quarters of launch. Its steep adoption curve has put it on a truly special trajectory, likely among the best in life sciences tools history. We have always believed that Xenium has the potential to be one of the most transformative technologies in our industry in decades. which is why we deliberately brought the whole of company effort and focus to its development and commercialization. Our R&D teams worked incredibly hard to build a high-performance system that just works in researchers' hands. Our operations teams put in incredible efforts to enable the manufacturing ramp. And we made the Xenium launch our top commercial priority this year. Now that we have awesome traction with our customers, it's clear those efforts are paying off. It's been extremely energizing to see results start pouring out from our customers, showing how they are using Xenium in their own labs. For example, a team from Duke University recently published a study fueled by Xenium that sheds light on the resistance mechanisms in a model of lethal pediatric brain tumors. We're thrilled to see how quickly researchers can go from initial install to groundbreaking results with Xenium, demonstrating the utility and ease of use of the platform. In addition, researchers at the University of Adelaide recently published the first side-by-side comparison of Xenium and another platform. This is the first public study to compare data run by a customer on adjacent tissue sections in their own lab with commercially available instruments. Across the board, the results are striking. validating Xenium superiority and supporting our own analysis. This is the first real-world evidence generated by customers for customers that shows Xenium delivers better sensitivity, the best specificity, the highest throughput, the best workflow, the best data analysis, and much more. Most importantly, Xenium shines in biological comparisons, delivering better cell typing, better spatiality, and better expression marker identification. This data is strongly consistent with the resounding feedback we hear from Xenium customers around the world and gives researchers confidence that Xenium is clearly the right choice for in-situ analysis. Q3 demonstrated the continued progress we're making with Xenium across all fronts. Commercially, Xenium's differentiated features, great workflow, and superior performance drove strong instrument demand among researchers worldwide. It's especially rewarding to have customers who are already running Xenium in their own labs order more instruments. We're also pleased to see customers make the switch from other usage platforms to take advantage of Xenium's performance. On the operations side, we've continued to quickly ramp production to meet growing customer demand. As we previously announced, we surpassed 100 cumulative Xenium shipments in August, only eight months after launch. We've continued to deliver on the R&D front too. In Q3, we introduced three new targeted gene panels, launched a 480-plex fully custom gene panel, and deployed new on- and off-board software to unlock our highest sensitivity and throughput yet. With well over half of our panel orders containing some level of customization, we also launched the Xenium Panel Designer, a self-service website that makes it easier for researchers to design custom panels to answer their specific research questions. We engineered Xenium to optimize performance not only at launch, but also for the long term. We are already executing on an extensive multi-year product development roadmap designed to enable powerful research applications and build on Xenium's class leading performance. In early 2024, we expect to launch a powerful new cell segmentation capability that's multimodal and includes interior and membrane stains. Mid-next year, we plan to launch 5,000 Plex gene panels for mouse and human tissues that run in days, not weeks, and deliver high levels of specificity, sensitivity, and throughput. We're also developing an inline HyPlex protein assay to combine with the RNA assays on the exact same tissue section, which we also intend to introduce next year. This will extend existing protein capabilities on Xenium beyond immunofluorescence-based measurements. All in, Q3 was a remarkable quarter for Xenium. Strong demand and resounding enthusiasm from researchers reinforce our conviction that the spatial biology opportunity is at least as large as anything in the history of the industry. Our current position and our roadmap going forward give us confidence that we will realize the full potential of this opportunity. Now turning to Visium, which we see as the leading NGS-based spatial technology. SiteAssist continues to resonate well with customers who benefit from a better Visium workflow and better data. While demand for SiteAssist moderated in Q3 relative to a strong launch quarter in the prior year period, we see a long runway for placements. There are thousands of customers who have tried Visium and haven't upgraded to Cytosys yet. In addition, we believe there are many thousands more who are well-positioned to adopt Visium and Cytosys in the future. With Cytosys as the foundation, we continue to invest and innovate in the Visium franchise. Last quarter, we launched our Visium Cytosys gene and protein expression assay. which enables researchers to combine whole transcriptome spatial analysis with high-plex protein detection and H&E staining, all on the same tissue section. In addition, we're excited about all of the progress we're making on VisMHD, which will bring single-cell scale resolution to unbiased spatial discovery. We've said before, this is one of the hardest and most ambitious projects we've ever taken on. Our teams have been working hard to deliver a fantastic product, and that recent momentum has been driven in part by an acquisition we made earlier this year to accelerate the scaling manufacturing of Visium HD. We see this investment as an important enabler for delivering a superior quality product with superior economics at scale. Our team is generating absolutely breathtaking Visium HD data across various human and mouse tissues. We've shared some of these stunning images with customers during our Spatial World Tour events, which is fueling even more excitement for this highly anticipated new offering. We look forward to sharing more updates as we get closer to launch. With the products and pipeline we have in both our Visium and Xenium platforms, it's easy to see why we're so bullish about the opportunity ahead in Spatial. It's also exciting when researchers combine our single-cell and Spatial portfolios in their work. We recently partnered with a biotech company that selected the Chromium and Visium platforms for a large-scale translational study involving many thousands of tumor samples. We believe this collaboration will result in clinically significant discoveries that should transform how we diagnose, treat, and ultimately cure cancer. This is just one of a number of examples that show how our customers are leveraging the power and potential of the full 10X portfolio to advance human health. Now, I'd like to share more about Chromium, a clear leader in single-cell analysis. In the third quarter, Chromium largely remained a regional story as we continue to navigate headwinds in China that pressure our global growth rates. As a result, worldwide Chromium revenue was flat during the quarter. In the Americas and EMEA, year-to-date Chromium growth was in the lower teens. However, we still believe Chromium has the potential for far more. There are three key points to make related to Chromium's performance. First, we strongly believe in the tremendous potential of the Chromium franchise and intend to fully capture the significant untapped opportunity that's still ahead. The cell is the fundamental unit of biology. The vast majority of biological research that could benefit from single cell measurements doesn't yet. We see this as we talk to new prospective customers intrigued about the potential of single cell. We see this when we talk to long-term users who are keen to scale up their studies. We see this when we talk to translational customers who are looking to unlock the biology hidden in their biobank samples. We have an incredible roadmap of upcoming product launches that will take the entire Chromium franchise to the next level, raising the bar on performance and with the economics to drive broader adoption. Second, we intentionally prioritize the Xenium product launch this year. The entire company has been intensely focused on ensuring the success of our customers with this game-changing product, and the results speak for themselves. We knew this decision potentially carried some risk, as less of our focus was on driving Chromium growth. We're confident it was the right decision to make, particularly as we look long term. We expect more balance moving forward, which will help us deliver on Chromium's full potential. Finally, as excited and confident as we are about the chromium opportunity ahead, our strategy has always been about the power of a full portfolio, offering a comprehensive suite of products that will enable researchers and eventually clinicians to interrogate biology in a way that's best for their work. In the near term, this may mean there's some trade-offs in lab resources, mindshare, and even budgets among the most cutting-edge researchers. In the long term, We see the opportunity for tremendous growth across the combination of our platforms, driven by the vast unmet needs in addressing the complexity of biology. Our goal is to enable more researchers to do more single-cell work and to use more samples in the process. Our exciting and robust new product roadmap is built around this imperative, with several planned launches intended to open up larger studies and make single-cell analysis more routine. Two recent announcements highlight additional capabilities we're bringing to the Chromium platform. In September, we launched our new high throughput feature barcode multi-omic profiling kit on the FLEX platform. This offering enables researchers to gain more insights from a single experiment by detecting simultaneous gene and protein expression with the ability to run multi-omic million cell experiments at a significantly lower price point. This launch is part of our long-term plan to broaden the menu of applications available on the FLEX portfolio. In addition, we recently partnered with Beckman Coulter Life Sciences to expand our automation solutions for single-cell assay workflows. As part of this agreement, we'll develop dedicated kits for using Beckman Coulter's broad installed base of automated liquid handlers. Not only are we working to enable more samples for single-cell analysis, we're also working to enable more applications. We have established strong beachheads in translational and biopharma, but it's still very early relative to the expected large potential. We've seen a number of recent customer publications that demonstrate the promise of single-cell tools on the future of drug development and clinical care. On our blog, we recently highlighted a Phase II clinical trial that leveraged single-cell analysis to study the efficacy of a combination therapy in a group of patients with a mutated metastatic colon cancer. Single-cell data and correlative patient outcomes suggested the therapy was effective to extend progression-free survival in some patients, likely as a result of upregulating immune-related genes in tumor cells. In September, MIT researchers published several papers using 10x products to reveal the transcriptomic and epigenomic changes that occur as Alzheimer's disease progresses. In one study, Researchers used chromium to analyze more than 2 million nuclei isolated from more than 400 patients with varying degrees in clinical stages of Alzheimer's, producing the most detailed single-cell atlas of Alzheimer's disease and uncovering cell subtypes and pathways associated with cognitive resilience. And also this quarter, researchers at UCLA published the work in the Journal of Clinical Investigation to explain why immunotherapy is more effective for certain brain cancers than others. This study highlighted how chromium and visium are being used in parallel to make new discoveries that can transform the future of cancer care. Examples like these energize and inspire our team as we push toward our mission and work to bring the future forward. I'm so proud of our team's continued execution and dedication. We like to say we're obsessed with customer success. That's evident in everything we do, from our innovation engine to our manufacturing ramp to our field and commercial teams working tirelessly to support our customers and their groundbreaking research. As we look ahead to 2024, I'm very excited about the robust pipeline of new product launches we have planned in all three platforms. We can't wait to see how researchers use these new tools with even higher levels of scale and resolution to fill their next scientific discoveries. And we'll continue our focus on operating with ever higher levels of rigor, discipline, and clock speed, dialing up both our efficiency and effectiveness to be in the best possible position for all of the incredible opportunities ahead. We believe single cell and spatial are the future, and we have every intent to be the company that delivers on that future. With that, let me turn it over to Justin for more detail on our financials.