10x Genomics, Inc.

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, again, press the star and one. I would now like to turn the call over to Kathy Corneau, Director of Investor Relations and Strategic Finance. You may begin. Thank you, and good afternoon, everyone.

Earlier today, 10X Genomics released financial results for the second quarter ended June 30, 2024. 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. With that, I will now turn the call over to Serge.

Thanks, Cassie, and good afternoon, everyone. During today's call, I'll start with an overview of our second quarter performance across our portfolio of single-cell and spatial technologies. 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. For the second quarter, Total revenue grew 4% year-over-year and 9% quarter-over-quarter to $153 million, and we were three cash flow positive in the quarter. We saw a strong demand for spatial consumables this quarter and a solid sequential increase in single-cell consumables. We continue to hear overwhelmingly positive feedback on GemEx and its performance. and our customers are further along in the transition from our next-gen assays than we expected. Within Spatial, we saw continued consumable growth driven by Visium HD in strong early demand for our Xenium Prime 5K product, which we launched in June. Despite the strong demand for consumables, we're increasingly experiencing headwinds from the challenging macro environment, similar to many of our peers. Our customers are under budget pressure, which has most acutely resulted in cuts to CapEx budgets and elongated purchase cycles, impacting our instrument revenue this quarter. We believe these macro factors and cautious customer spending patterns are likely to persist, putting particular pressure on instrument sales, especially Xenium. As we look to the rest of 2024, we're lowering our revenue guidance, which we now expect to be in the range of $640 million to $660 million. Justin will discuss this in greater detail. Despite these near-term headwinds, we remain confident in our strength, differentiation, and long-term potential. Biology needs to be analyzed at the single-cell level in a spatial context. We have built leading platforms for both single-cell and spatial biology. These are still nascent fields which are drawing growing interest from competitors. As we have always said, we operate in attractive spaces. There has always been competition and there has been more recently. We planned our strategy anticipating this increase with the intent to both grow the field and stay ahead of new entrants. We firmly believe we are well positioned for the opportunity ahead. We believe that 10X is differentiated by a significant technology built over many years of multidisciplinary advances across microfluidics, chemistry, molecular biology, hardware and software. We believe our solutions are several years ahead of our competitors, and our innovation engine is poised to ensure it stays that way. We have also built an extensive commercial and sales channel, highly skilled at tailoring solutions specific to customer needs. We're proud of our talented and passionate customer support teams who provide researchers with the bespoke assistance often required to run complex experiments. And our product roadmap has been intentionally designed to drive costs lower for researchers, especially those who are targeting large-scale projects or those new to 10X. We expect our product roadmap will remain a meaningful competitive advantage as we continue to execute against our plans to remove cost barriers and greatly lower cost per sample and cost per cell. Now, let me share some more detail on recent developments across each of our platforms, beginning with Xenium, which is well-recognized as the in-situ performance leader. This quarter, we launched Xenium Prime 5K, increasing Plex capability by an order of magnitude while continuing to deliver our industry-leading performance. This new product, which measures 5,000 genes, features an enhanced chemistry to deliver excellent per-gene sensitivity, improved specificity and spatial fidelity, and integrated multimodal cell segmentation. We're highly encouraged by the initial order rate and early customer feedback. As I mentioned earlier, microeconomic pressures are having a meaningful impact on Xenium instrument sales. Despite the near-term headwinds, our view of the huge expected long-term potential for the Xenium platform is unchanged. We continue to receive outstanding feedback from customers. We're seeing encouraging trends in utilization across the instrument fleet. We receive a lot of interest from potential new customers, many of whom are new to 10X. And we're excited to see the emergence of numerous large-scale cohort studies that are aligning around Xenium. We also believe there is more we can do to deliver on this opportunity and to drive near-term performance, which is why we're expanding our dedicated Xenium instrument sales team as part of our broader commercial strategy. With extensive range of offerings on both Xenium and Visium, we have multiple ways to support customers in their spatial biology research. Our complimentary yet distinct platforms support a broad spectrum of customers' use cases and accommodate the ways the research and research questions may evolve over time. Turning to Visium, the leading platform for unbiased spatial analysis. Building on last quarter's Visium HD launch, Visium consumables exceeded our expectations in Q2. As a reminder, Visium HD enables whole transcriptome spatial analysis at single cell scale resolution. and it has continued to drive momentum for the platform. We're pleased with the positive feedback that we're receiving for Visium HD based on its performance in the field. It is attracting both new and existing customers to spatial analysis. High customer interest for HD also contributed to the sustained demand for site-assist placements during the second quarter, despite CapEx pressures on instruments. Our experience over the years has made it clear that an instrument like SiteAssist is key to delivering a complete solution for customers. SiteAssist is critical for enabling a robust and straightforward workflow, one that allows customers to use standard histology slides. Additionally, by ensuring consistency, precision, and preservation of spatiality, SiteAssist is integral to high-quality data and more accurate scientific results for customers' experiments. Customers continued to discover the power of Visium and were enthusiastic about its trajectory and its ability to broaden exploratory capabilities within spatial biology. Now, turning to single-cell. During the quarter, we saw solid sequential growth in consumables revenue. We also delivered year-over-year growth in reactions sold. While there's still work to do to return chromium to robust growth over the long term, this quarter's results reflect the underlying progress we're making in single-cell and the good momentum we have with the GemX transition. More customers are now aware of and are impressed with GemX and its superior sensitivity, throughput, data quality, and cell recovery, all delivered at a lower cost per sample and per cell compared to our Next-Gen architecture. In the first two quarters since launch, the GEM-X transition has progressed faster than we initially anticipated, with more early adopters seeking out GEM-X for its performance and cost advantages. Our FLEX assay also continues to gain traction with customers. In a recent independent benchmarking study from Genentech that compared 10 commercially available single-cell technologies, FLEX exhibited the highest rank performance Researchers also called out FLEX for its unique ability to process FFP tissues, which they wrote, greatly expands the reach of single-cell RNA-seq to access the vast catalogs of preserved clinical specimens. The opportunity in translational is one of many reasons why we believe there is still a long runway ahead for single-cell. Large-scale projects also hold tremendous potential. As we remove cost barriers, we expect to open up more possibilities for large-scale studies with more samples and more cells. A great example of this is the Garvin Institute's new 10K10K project, which we announced earlier this week. 10K10K intends to use GEM-X to map 50 million human cells from 10,000 people to identify unique genomic fingerprints of autoimmune diseases, heart diseases, and cancer. In addition, we see the emergence of powerful new applications based on high-throughput single-cell approaches, from analyzing organoids, scaling CRISPR extremes, to building out foundation models that enable AI-based modeling of biology. And as we've said all along, there's a large opportunity to democratize single-cell analysis by making it more accessible for new customers and more routine for existing customers. We know price is an important consideration, both for new researchers taking on their first single-cell experiment and current customers looking to scale towards larger and larger projects. As we've said before, our goal is to drive broader adoption and enable routine use by reducing customer costs and making our technologies more accessible. As part of our strategy, we have been working to drive down costs along multiple vectors per cell, per sample, per experiment, per project. We strongly believe in the elasticity of demand for our products, and we will continue to execute on our product roadmap to take advantage of this elasticity. To truly deliver on the next phase of 10X growth and impact, we need to evolve our commercial organization. We're taking steps to improve our commercial execution, address recent challenges brought on by the increasing breadth and complexity of our business, and set us up to scale into the future. That starts with the leadership. Earlier today, we officially announced Minna Mustafa as our new chief commercial officer following an extensive search. Minna joined 10X in 2022 to lead commercial operations and has done an exceptional job as our interim CCO. She has a clear vision for our commercial strategy and has been rapidly implementing foundational processes to better enable the success of our customers and our company. Under Mena's leadership, we rigorously validated our sales structure to assess what's working well and what's needed for the future. We are now implementing a new organization structure, which we architected from the ground up to drive our next phase of growth and scale. Our new structure re-engineers how we go to market with distinct teams explicitly focused on driving Xenium instrument placements expanding consumables utilization with existing customers and accelerating adoption with biopharma and new and emerging academic researchers. This specialization also helps us to focus and deploy the right resources across our platforms. I'm confident these commercial changes will, over time, help us drive growth across the portfolio, open up opportunities with new customers and segments, and maximize our scale and impact. I couldn't be more excited to have Mina at the helm as we continue our work to build a premier commercial organization that delivers superior execution and superior results. Now, before I turn the call over to Justin, I want to take a moment to acknowledge the CFO transition we announced earlier this afternoon. After nearly six years with 10X, Justin is moving on to another opportunity. Justin has been an incredible leader during his tenure at 10X. He took us public, helped to scale the company, and built a strong financial profile that has generated tremendous revenue growth and positive cash flow. His assembled, talented team has contributed greatly to the fantastic culture we have today. On behalf of the board and everyone at 10X, I want to thank Justin for his immeasurable contributions and wish him the best of luck in his new role. Adam Take will be joining 10X as our new chief financial officer. Adam is a seasoned executive and strategic finance leader with more than two decades of experience in the life sciences tools industry. Most recently, he served as the interim chief executive officer at SummerLogic. and has also held a number of senior roles at Thermo Fisher, including vice president and general manager of the molecular biology business. He brings a unique skillset across finance, strategy, business development, and general management, which will be immensely valuable to take 10X to the next scale. I'm very excited to welcome him to 10X. With that, let me turn it over to Justin.