10x Genomics, Inc.

If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Cassie Corno. You may begin your conference.

Thank you and good afternoon, everyone. Earlier today, 10X Genomics released financial results for the fourth quarter and full year ended December 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 so that we may accommodate everyone in the queue. Last week, we were a silver sponsor of the 2024 Advances in Genome Biology and Technology General Meeting, known as AGBT. During our workshop, our team presented exciting science and details of our upcoming product launches. While Serge will highlight some of these today, We encourage you to check out the presentation replay on our website if you didn't see the news or if you would like more information. With that, I will now turn the call over to Serge.

Thanks, Kathy, and good afternoon, everyone. During today's call, I'll start with a brief overview of our progress in 2023 and why we have a great setup as we kick off the year. Next, I will highlight the strength of our innovation engine and our key priorities and focus areas in 2024. Then, Justin will provide a more detailed look at our financial results, business trends, and revenue guidance for the year. 2023 was another strong year for 10X Genomics, with total revenue growing 20% to $619 million, as previously announced. We catalyzed the field of single-cell analysis. And in 2023, we came into our own in spatial biology as well, with spatial revenue exceeding $135 million for the year. The big driver for this and the big story of 2023 was the launch of Xenium. It was an extraordinary launch year for the Xenium platform. We've driven remarkable adoption, selling more than 250 instruments in the first year of launch. Even more importantly, customers have been incredibly enthusiastic about the platform as they rapidly moved from install to inside, from instrument delivery to powerful discoveries. To date, there have been more than 20 published papers or preprints using Xenium. Among them are multiple independent benchmarking studies that validate Xenium as the best performing system for in-situ analysis. These rigorous studies compare customer-generated data from their own instruments in their own labs. The results demonstrate Xenium delivers the best sensitivity, the best specificity, the best throughput, and the best biological insights. Of course, none of it was accidental. We carefully engineered Xenium to be a premium instrument that delivers premium performance with an extremely easy-to-use workload. We leveraged our operations and manufacturing scale to ramp capacity faster than anticipated. And we relied on the dedication and drive of our commercial team to ensure our customer success every step of the way. Xenium's exceptional launch here reinforces our belief in the enormous long-term potential for the platform, which we believe will usher in a new era of genomic analysis. Xenium is just one of several accomplishments in 2023 validating our strategy to drive growth through innovation and reinforcing we're well-positioned for long-term success. In 2023, we reached nearly 6,000 cumulative instruments sold around the world, a 29% increase year-over-year. We also opened our new R&D and manufacturing hub in Pleasanton to support new product development and production, including for BZMHD and Xenium. This cutting-edge facility adds operational scale and capacity to enable multiples of growth. In addition, we achieved our goal of positive free cash flow in Q4, And excluding acquisitions delivered positive operating cash flow for the year, reflecting our commitment to maintaining cash discipline as we scale. Lastly, it was especially rewarding to see a massive increase in customer publications, which were up 58% year-over-year. We have now surpassed 7,000 peer-reviewed papers citing 10x technologies. Seeing how our customers use our tools to push science forward is a huge source of inspiration, motivation, and pride for our mission-driven team. This is what 10x is all about. Before I discuss the very exciting developments leading into 2024, I want to emphasize the key principles that anchor our approach. First, our fundamental thesis is unchanged. Biology needs to be understood and analyzed at single-cell level with spatial contexts. Following this principle, we believe there are large opportunities ahead and our commitment to ongoing product innovation will allow us to capture those opportunities. Second, we have always built a company for scale and we will continue to do so. We have made significant investments over the past several years, building out a world-class operations facility and scaling our research and development and commercial teams. At this point, We have additional capacities, and as we grow our revenue, we expect to realize operating leverage as we drive toward profitability while we continue to deliver breakthrough innovations. And third, we're committed to maintaining cash discipline and driving a strong financial profile. We have already made investments to operate at scale. We have also put in place rigorous operational and cultural frameworks to prioritize incremental spending on highly targeted areas necessary to drive growth. It's been a busy and exciting start to the year. We kicked off 2024 with the launches of two catalytic new products, which demonstrate the enduring strength and velocity of our innovation engine and its impact and value for customers around the world. This year, we're planning to introduce franchise-defining new products and capabilities that will extend our technology leadership raise the bar for researchers, and continue to set the standard for high-performance single-cell and spatial tools. Let me highlight a few of the game changers we're expecting to launch this year, starting with VisimHD. VisimHD is a prime example of how we listen to our customers and take on the hardest development challenges that will have the biggest impact on scientific research. It has been the most requested product in our history. VisiumHG increases the resolution of the Visium platform by over three orders of magnitude. Its development has entailed monumental technological leaps. And what this means is that researchers will be able to extract large-scale molecular information from their tissues at single-cell scale resolution. VisiumHG will run on existing site-assist instruments with the same robust and easy-to-use workflow as standard Visium. Ahead of launch, We have sold more than 500 SiteAssist instruments to customer labs around the world. We expect more researchers will adopt SiteAssist to gain access to HD and take advantage of Visium's expanding spatial discovery capabilities. Since we opened Visium HD pre-orders in January, we've been encouraged with initial response and early demand from customers. This product has been a long time coming, but we're confident customers will soon see the Visium HD was well worth the wait. Our ambition is to establish VisimHD as the platform for translational discovery. If one has a cohort of samples with phenotype information that needs to be correlated with molecular information for biomarker discovery or for anything else, we believe there's no better tool in existence than VisimHD. At AGBT, we also unveiled GemX, a transformative new technology for our Chromium franchise. the first major overhaul to our chromium architecture since 2019, GemEx features a completely re-engineered microfluidic chip design with optimized reagents to enable superior performance at larger scale and lower cost. Later this quarter, we plan to launch the first two products on GemEx, our highest volume assays, chromium single-cell gene expression V4 and chromium single-cell immune profiling V3. These products, which are exclusively available on the Chromium X series instruments, deliver high performance across the board, and give customers important performance advantages that will immediately benefit their single-cell research. Let me highlight a few. First, we designed GemX to be even more robust than previous generations of Chromium products, delivering more consistent performance, even with more challenging samples. GemX both substantially increased sensitivity, detecting up to two times more genes compared to on-market chromium assays. The new architecture greatly improves capture efficiency, recovering up to 80% of cells. GemX is also built to scale, enabling a two-fold increase in cells captured per channel, with improved assay robustness for faster and more efficient cell partitioning. And finally, and this is quite important, Even with all of these performance advantages, the GEM-X assays are also more cost-effective than ever before, reducing per-reaction costs and delivering a more than two-fold reduction in cost per cell. We believe there is significant price elasticity in single-cell research, particularly as more researchers are exposed to these methods and existing users move towards larger and larger experiments. In fact, we're seeing more customers use flex multiplexing to scale their experiments as chromium reaction growth outpaced revenue growth in 2023. We want to lean into this elasticity and make single-cell analysis even more routine and accessible. That's why our long-term goal is to deliver high-performance single-cell research for $100 per sample. GEM-X is one of multiple planned steps in those directions. drive prices lower to support researchers and expand opportunity for single-cell analysis. We have a robust GEMEX roadmap ahead, including a comprehensive menu of high-performance assets and applications designed to deliver superior economics and drive broad adoption at large scale. In addition to GEMEX, we announced a number of new capabilities on the Chromium platform in response to our customers' most frequent requests. We're adding more workflow flexibility, including protocols for both upstream fixation and whole blood processing. And we're opening up new applications of Chromium Flex, including CRISPR screening and intracellular protein profiling. The investments we're making in the Chromium franchise to raise the bar and set a new standard for single-cell analysis underscore our confidence in growth opportunity ahead. We believe the momentum of our new products, along with a renewed commercial focus on Chromium, will help invigorate the franchise and drive more robust performance in 2024 and beyond. While VisimHD and GemX have been the big news to start the year, we're also executing on an extensive multi-year product roadmap for Xenium, including multi-model cell segmentation, a new add-on kit compatible with existing Xenium assays to improve the determination of cell boundaries, which is expected to launch this quarter. We're planning to launch our 5,000-plex gene panel mid-year, scaling up Plex by an order of magnitude while delivering the really high-quality sensitivity, specificity, and throughput customers have come to expect from Xenium. And later in the year, We expect to launch our integrated HyPlex Xenium protein profiling capability, enabling researchers to get a large-scale RNA readout and up to 20 proteins on the exact same tissue section in a single run. These new products will continue to push the boundaries of science, yet this is only the beginning. What is really exciting about Xenium is the amount of technological headroom that this platform has ahead. with tremendous runway for more applications, higher throughput, and lower costs over the years. We can't wait to bring some of these capabilities to our customers. In each of our three platforms this year, we're introducing new franchise-defining products that will take our portfolio to the next level. We're confident that these are the right offerings to solidify our core platforms and drive growth for the long term. But we also recognize There may be near-term headwinds while customers take time to trial and later transition to these new tools. This warrants some conservatism around the pace of new product adoption. Our commercial team is excited and engaged to help customers navigate these product launches and deliver on the full promise of single-cell and spatial biology. And while we're transitioning commercial leadership, I couldn't be more proud of how our team has stepped up and leaned into the opportunity that comes with this change. We recently held our annual global commercial meeting, and the team's energy and enthusiasm was palpable, probably the highest I've ever seen at 10X. It's clear our team is ready to deliver on our priorities and evolve their organization for greater scale and impact. They understand we have work to do to get there, and they're fully rallied around our vision of creating a premier commercial organization that delivers superior execution and superior results. With incredible new products in every franchise, the commercial team is primed to bring more balanced attention and focus across our portfolio as we continue to drive our mission and obsess over customer success. And part of our commitment to customer success is to ensure as many researchers as possible are aware of and have access to our leading portfolio of single-cell and spatial tools. Our goal is to drive broader adoption by reducing prices and making our technologies more accessible. we strongly believe in elasticity of demand for our products. And that means driving down costs along multiple vectors, lower cost per cell, per tissue area, per sample, per experiment, per project. GemX is one step in this direction, with more to come across all of our platforms as part of our long-term product roadmap. Let me wrap up by summarizing our priorities for 2024. First, we're laser-focused on ensuring the success of these new product launches. We believe we have set that bar high for their performance and capabilities, and we want to make sure all researchers are aware and understand the potential of these launches. Second, we plan to drive Chromium to higher rates of growth. We believe single-cell analysis is nowhere near fully penetrated, and that there are significant opportunities ahead, which our new products will help us capture. And finally, as I mentioned, we intend to maintain a strong focus on cash discipline. And before I turn it over to Justin, I'd like to say that while we're excited about our new innovations and what's in front of us in 2024, there are considerations related to year-over-year comparisons and product introductions that will affect this year's financial growth, as Justin will address in his section. We're focused on delivering in 2024 and are steadfast in maintaining a long-term orientation that has served us well since the earliest days of the company. The scope of ambitions requires us to take the long view. That's how we make decisions. That's how we innovate. That's how we think about value creation. And with that, let me turn it over to Justin.