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spk07: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press the star and 1. 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
spk09: afternoon, everyone. Earlier today, 10X Genomics released financial results for the second quarter and did June 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 Saxonoff, our CEO and co-founder, and Justin McIner, our Chief Financial Officer. We will host a question and answer session after
spk06: our prepared remarks.
spk09: We ask analysts to please keep to one question so that we may accommodate everyone in the call. With that, I will now turn the call over to Serge.
spk12: 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-casual 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 Genomics 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 and 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 a range of $640 million to $660 million. Justin will discuss this in greater detail. Despite these near-term headwinds, we remain confident in our strengths, differentiation, and long-term potential. Biology needs to be analyzed at the single-cell level and in spatial contexts. 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 leadership built over many years of multidisciplinary advances across microfluidics, chemistry, molecular biology, hardware, and software. We believe our solution is 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 are proud of our talented and passionate customer support teams who provide researchers with 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'll launch 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 protein sensitivity, improved specificity and spatial fidelity, and integrated multimodal cell segmentation. We are 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 them 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 the extensive range of offerings on both Xenium and Visium, we have multiple ways to support customers in their spatial biology research. Our complementary, yet distinct platforms support a broad spectrum of customer-oriented use cases and accommodate the ways their 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 from 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 side-assist placements during the second quarter, despite capex pressures on instruments. Our experience over the years has made it clear that an instrument like side-assist is key to delivering a complete solution for customers. Side-assist 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, side-assist is integral to high-quality data and more accurate scientific results for customer-oriented experiments. Customers continue 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, with a solid sequential growth in consumables revenue, we also delivered -over-year growth in reactions sold. While there is still work to do to return chromium to robust growth over the long term, this quarter's results reflect the underlying progress we are making in single cell and the good momentum we have with the GEMEX transition. More customers are now aware of and are impressed with GEMEX 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 GEM architecture. In the first two quarters since launch, the GEMEX transition has progressed faster than we initially anticipated, with more early adopters seeking out GEMEX 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 ranked 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 10K 10K project, which we announced earlier this week. 10K 10K intends to use GEMEX 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 screens, 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. WinO 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 Mina Mustafa as our new Chief Commercial Officer following an extensive search. Mina 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 Mina's leadership, we've rigorously elevated 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 zinium instrument placements, expanding consumables utilization with existing customers, and accelerating adoption with BioFarma 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 the 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 Tick 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 Sommologic 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 skill set 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.
spk02: Thank you, Serge. It's been an honor to be part of the 10x team over the past six years. I'm extremely proud of how much we've accomplished and how much we have grown. From a single product company to a scaled organization with three leading platforms across single cell and spatial biology, this was not an easy decision to make. I continue to have deep conviction in Serge, the team, and the opportunity to accelerate the mastery of biology and advance human health. I firmly believe 10x will continue to lead and has a very bright future ahead. I'll now turn to the quarterly results. I'll start by reviewing our financial results for the three months ended June 30, 2024, and will then provide further details on our updated outlook for 2024. All growth rates provided will be on a -over-year basis unless otherwise noted. Total revenue for the quarter was $153.1 million, up 4% driven by stronger contributions from consumables partially offset by lower instrument contributions. Looking at our revenue breakout, total consumables revenue was $123.4 million, up 10%. Spatial consumables revenue was $29.3 million, up 150%. This growth was driven primarily by continued enthusiasm for Visium HD as well as contributions from Zenium Prime 5K, which we started shipping at the end of Q2. Chromium consumables revenue was $94.1 million, down 7% -over-year, driven by continued customer transition to our new GEMex products and prioritization of spatial experiments. We saw positive momentum in our Chromium consumables results this quarter. Sequentially, revenue was up 12% as customers worked through the stalling and trialing due to the GEMex introduction in Q1. This transition is ongoing, and near term we still expect the lower price of GEMex to continue to drive some revenue pressure, but over time we believe there is elasticity that will more than offset the lower price. Moving on to instruments, total instrument revenue decreased 23% to $23.9 million. Chromium instrument revenue was $8.8 million, down 32% -over-year, driven by fewer units sold, but up 12% sequentially. Spatial instrument revenue was down 17% to $15.1 million, primarily driven by lower number of Zenium instruments sold. Services revenue was $5.9 million, up 74% primarily due to increased Chromium service plan contracts. Looking at our revenue by geography, America's revenue grew 2% to $93.1 million, EMEA revenue grew 20% to $37.4 million, and revenue in APAC decreased 6% to $22.7 million. Turning to the rest of the income spate, growth profit for the second quarter was $104.2 million, compared to $99.6 million for the prior year period. Growth margin remained flat at 68% compared to the second quarter of 2023. Total operating expenses for the second quarter decreased to $146 million, compared to $163 million for the prior year period. This decrease was primarily driven by lower personnel expenses, including stock-based compensation expense, and a decrease in laboratory materials and supplies. R&D expenses decreased to $62.9 million, compared to $71.5 million for the prior year period, primarily driven by lower laboratory materials and supplies. SG&A expenses decreased to $83 million, compared to $91.5 million for the prior year period, primarily driven by lower personnel expenses, including stock-based compensation. Operating loss for the second quarter was $41.7 million, compared to a loss of $63.4 million in the second quarter last year. This includes $38.5 million of stock-based compensation, as compared to $45.7 million of stock-based compensation for the corresponding prior year period. Net loss for the period was $37.9 million, compared to a net loss of $62.4 million for the second quarter of 2023. We ended the quarter with $380.1 million in cash and cash equivalents and marketable securities, generating $8.3 million of cash in the quarter. Turning to our outlook for the rest of the year, as Serge mentioned at the beginning of the call, we now expect full-year revenue to be in the range of $640 million to $660 million, representing 5% growth over full year 2023 at the midpoint. Our updated guidance reflects impacts from macro-level factors and the commercial restructuring. I'll start with the macro-level factors. In this environment, we've seen many customers experience budgetary pressures and uncertainties. This has mostly been on the capex side, with spending constraints and elongated sales cycles. We expect these headwinds to continue for the remainder of the year. Additionally, under MENA's leadership, we are executing on a new sales model that improves how we support our customers. We believe these new functions, roles, and territories may cause some near-term disruption while laying the foundation for long-term growth. While these factors may have near-term impacts on revenue, we continue to have full confidence in the strength of our platforms to deliver strong long-term growth. When looking out over the next 12 months, we continue to anticipate about $15 million to $20 million of total capital expenditures. We also continue to maintain cash discipline in 2024 and in our 2025 planning. Our goal is to self-fund our innovation and scale by investing cash generated back into our business. We still believe we have a great setup to drive positive cash flow for the year and into next year as well. At this point, I'll turn it back to Serge.
spk12: Thanks, Justin. I'd like to wrap up by reaffirming my conviction in the strength of 10x and our leadership in single cell and spatial biology. As we navigate near-term macro pressures, deliver on our strategy and product roadmap, and optimize our commercial structure, we're steadfast in our goal of driving more balanced focus execution and growth across all three platforms. Of course, none of this would be possible without our amazing team at 10x. Thank you for your commitment to drive, especially in times of change. I truly appreciate how you all rallied together and stay focused on delivering for our customers and advancing our mission. With that, we will now open it up for questions. Operator?
spk07: And at this time, I'd like to remind everyone in order to ask a question, press the star and the number one on your telephone keypad. Your first question comes from the line of Dan Arias with Stifle. Your line is open.
spk16: Good afternoon, guys. Thanks for the questions. Serge or Justin, can you maybe just add some color to the forecast in the second half of the year? I don't think people are surprised by the guide coming in, but you beat our number on chromium. So is the new range entirely due to zinium and chromium instrumentation? And then what's the new outlook for single cell and spatial that's implied here? And if I could sneak a second one in, Serge, where do you think the breakdown is coming in the forecasting? I know you don't have all the full answers here, but you've made changes internally when it comes to leadership. You've given the Salesforce better tools to work with. So where do you think you're getting tripped up by what's taking place when it comes to projecting what customers are going to do here?
spk02: Hey, Dan, thanks for the question. I'll start with your first part around the range. So when looking at our updated guidance range, 650 at the midpoint, as we mentioned on the call, the updates coming from two buckets. So macroeconomic factors and the commercial restructuring. And when you're looking at macroeconomic factors, the majority of that impact is on capital expenditures instruments, and in this case, most of it on zinium with a smaller impact on chromium. And so that's the majority of the update. The remainder of that update is due to less consumables. And so with a lower amount of instruments sold, there's going to be a smaller amount of consumables that go out with those initial orders. And then also, we're giving ourselves some room for the commercial restructuring as the team settles into their new roles and responsibilities.
spk12: Yeah, and maybe to touch on your second question, Dan, just like Justin said, the changes in guide is mostly attributed to the changes in the macro environment, especially specifically focused on the instruments. And then in addition to that, the changes that we're making on the commercial side, which are going to create some temporary potential for disruption.
spk02: And just one thing that I'll add before we go to the next question is just when we look back at how we said Q2 would end up on the last earnings call, we expected sequentially to grow mid to high single digits, which we grew high single digits. We expected most of that growth to be due to chromium. Chromium grew 12% sequentially. When we look at the second half of this year, the split between first half and second half at the midpoint of our range is about 45% of revenue in the first half, about 55% in the second half. And just to your question around what's embedded in that guidance, when we look at how much of that to allocate to Q3 versus Q4, we're expecting the same seasonality that we saw last year in 2023. And we're expecting Q3 and Q4 each to have roughly the same growth rate over their corresponding period in the prior year at the top level.
spk07: And your next question comes from the line of Dahaz Savant with Morgan Stanley. Your line is open.
spk11: Hey guys, good evening and thanks for the question here. One on the ZENIUM side of things and then one on the leadership changes, guys. So first on ZENIUM, can you share some color and just ASP trends in the quarter, any sense that you need to do deeper discounting in light of the customer capex sensitivities you've had here or has there been any change in competitor pricing models? And then in terms of the leadership changes here, Justin, it's been good working with you over the years, but Serge, the question for you really is do you see any evolution in your guidance philosophy under Adam? Share some color on the degree of input he's had, if any, in terms of the new guide. I guess where I'm coming from is, you know, a new CFO always likes to preserve the right to impair the guide he or she inherits. So just any color around that would be great. Thank you.
spk02: Hey, Josh, I'll start with the first part of your question on the ASP trends on instruments. I know you asked about the ZENIUM in particular. You know, over time, from the very beginning, we saw the ASP in, you know, the mid to low 200s and we hit the low 200s in mid part of last year and that has been steadily coming up into the first part of this year. And so it has been relatively stable as of the last couple of quarters and no major changes in the ASP. When you're looking at Chromium, you know, no major changes in the ASP between, you know, at the X level or the IX level, but we have seen a shift where there's more waiting towards the IX where, as before, it was roughly 50-50. But in this half-X constrained environment, more customers are opting for the IX. And so that does impact basically the weighted ASP between those two
spk12: instruments. And maybe to touch on your question around ZENIUM, the sort of competitive environment around ZENIUM, there's not really been, I would say, a material change relative to the previous quarter on that front. We, the big changes really around the budget, the constraints over our customers and their decision-making there and certainly something that we're looking at to make sure we're able to work with them on, in this sort of new environment. As far as the guide is concerned, look, our philosophy is largely the same. We look at sort of the balance of different factors, the upsides and the downsides, and we give the best view we currently have on the rest of the year.
spk07: And your next question comes from the line of Doug Schenkel with Wolf Research. Your line is open. Hi, this is Madeline Moulman on
spk05: for Doug. I just wanted to ask if you could sort of quantify the impact of the GEM-X transition in the quarter. I think you mentioned chromium consumables are pretty strong. And then what are you thinking about GEM-X for the rest of the year and into 2025? How should we be thinking about sort of the continued impact there?
spk02: Thanks for the question. As far as the GEM-X impact in Q2, I would say that Q2 played out relatively like we had laid out on our last call. When we talked about how we thought Q2 would end up, we included the impacts of the trialing and installing due to the GEM-X transition. Now, a few things. We are a little bit further ahead on the GEM-X transition than we expected to be at this point, and we're also appreciating that there is a little bit of a longer tail towards this transition as well. And so one thing that we're contemplating is those customers who plan to continue using NextGEM, how we can help them transition to GEM-X sooner.
spk07: And your next question comes from the line of Rachel Vatstool with JPMorgan. Your line is open.
spk01: Hello. This is Martha Zorambo on for Rachel. Thank you for taking the question. I just wanted to double-click on the zinium placement expectations for the rest of the year. You mentioned that's part of the reason for the guide cut. So how should we think about the zinium placement for the rest of the year? And then how are you thinking in terms of whether or not the impact is mostly due to macro or perhaps more on the competition? Thank you.
spk02: Yeah, so zinium instrument placements are being impacted by macro right now. We're seeing customers, CapEx budgets getting cut. We're seeing more scrutiny on CapEx purchases. And this is resulting in, like I said, opportunities moving out due to elongated sales cycles or some opportunities dropping out with budget cuts. I'd say it's more of an elongated sales cycle. You know, one thing when we look at the funnel for Q3 and Q4, you know, we are still seeing a large amount of opportunities in the funnel for the second part of the year. On our last call when we talked about the range that we would expect for each quarter this year, we expected it to be between 50 to 75. Right now when we look at, you know, Q2 came up, you know, a little bit short of that. And when we talk about how we're thinking about Q3 and Q4, assumed at the midpoint of our guidance range is an average of about 50 instruments a quarter between those two quarters with a little bit less in Q3 and more in Q4.
spk12: And maybe just a comment again on the zinium competition part of the question. No, we're not seeing a change in dynamic. The reduction in the zinium number is purely, should be purely ascribed to the changing macroeconomic environment. We track the opportunities in the fall pretty closely.
spk07: The next question comes from the line of Dan Brennan with TD Cohen. Your line is open.
spk15: Hey, good afternoon, guys. This is Kyle on for Dan. I had a quick one on zinium HD. You talked about zinium HD being pretty strong and the uptake from customers being strong. Can you speak to any impact zinium HD has had on customer usage of zinium or even zinium? Thank you.
spk12: So, yeah, good question. In terms of the impact on standard zinium, the impact has actually been somewhat less than we expected. The standard zinium is still continuing to garner demand from customers, I mean, both for existing projects, for ongoing projects and some extending projects as well. So we're pleased with that dynamic. So HD has been to a large extent incremental. And then, yeah, we also have the great performance in zinium consumables and 5K especially. Despite the fact that there's definitely some dynamic where customers are trying to choose between those products and evaluating kind of which way to go. So overall has been a good quarter for spatial consumables kind of across the board, I would say.
spk07: And your next question comes from the line of Patrick Donnelly with Citi. Your line is open.
spk03: Hi, this is Brendan on for Patrick. I was wondering if you can give an update on like the path towards profitability and cash flow positivity, especially with this new commercial restructuring.
spk02: Yeah, great question. So when we look back at Q2, we were cash flow positive this quarter, we were free cash flow positive this quarter. Going back to Q1, if you exclude the one time or the payment that we made for the technology acquisition related to vizium HD would have been both cash flow or would have been free cash flow positive as well. So there's been a great trend here over the last few quarters. When we talk about the rest of the year, we say that we've got a great set up to drive cash flow positivity for the rest of the year. So what that implies is that there's some optionality in there. I know we do reserve the right to make the targeted investments that we need to do that we think is best for the longer term health of the business. And just understand too that at this stage, our goal is not to accumulate cash, but it's to reinvest the cash that we generate back into the business. So there could be swings from quarter to quarter as you're really trying to stay roughly even to slightly positive and invest all that you can back in. But the most important thing to realize is that we do have full optionality for how we control this and how we think about this longer term.
spk12: Yeah, and on the point around commercial restructuring, so to a large extent, this restructuring constitutes a redeployment of resources where in many cases before we had kind of overlay functions and now where we are redeploying those functions to have explicit ownership of accounts and customers. We are setting it up so that we're going to be making more incremental investments in the commercial organization, but it's to a large extent again it's more about the redeployment rather than increase. But it does, the new structure does set us up to scale really efficiently going forward and drive growth while maintaining a good cost structure.
spk07: And our next question comes from the line of Kyle Mykson with Conocore. Your line is open.
spk13: Yeah, hey guys, thanks for the questions. I'll just start by saying like, you know, good luck Justin for working with you this past few years and good to see Adam come on board. We know him well. It's a good addition to the team. Two questions. First is on VENUM. Why is that one being impacted so much by the macro environment relative, you know, just compared to Chromium? I guess is that just due to the higher price point? And last quarter you guys mentioned single-stow mine shares being taken over by Spatial. Is that still happening? Second question is on commercial organization. Why such a dramatic change here, I guess? Does that mean you weren't able to correct the factors that were hindering growth in recent years and then after a few changes like since 2022, you know, why are you confident that this change is now going to make you ready to finally kind of re-accelerate the company?
spk02: Hey Kyle, this is Justin. I'll start. So first off, thank you. It's been great working with you as well. As far as your question around VENUM, yes, it's the highest price instrument. It's quite a bit more than the other instruments that we sell and it's a big investment for customers. And so that has been the one that has been most impacted. But Vizium and Chromium on the side assist and the Chromium AX and IX, you know, some impact there, but not to the degree that we're seeing with VENUM.
spk12: Yeah. And then the question, Kyle, of the commercial restructuring and why now. What's important to appreciate is that we have gained a lot of learnings over the past two plus years in terms of trying different approaches and kind of adjusting our center structure, creating some amount of specialization. And one of the things that became clear to us is that without a holistic restructuring, you're always going to be dealing with trade-offs and with compromises as you're trying to optimize for one thing or another. And so we step back, kind of re-evaluating from both in light of all those learnings and from first principles, given where our portfolio is, given where our imperatives are for strategic growth going forward, and re-architected kind of the sales organization with those principles and those learnings in mind. And we feel really good about where things are landing and kind of a much cleaner now sort of roles and responsibilities that we'll have in our sales team and also much more manageable territories and much more clear sort of specialization and expertise that we can now deploy and set us up really well for scaling growth forward.
spk07: And the next question comes from the line of Dan Leonard with UBS. Your line is open.
spk08: Great. Thank you for taking the question. This is Luan from Dan. I think we want to touch a little bit on the instrument witnesses that you mentioned. Can you describe the trends within the ecogov, like economic markets and then a farmer market? Do you see any differences? And then also with all the commercial changes right now, any specific strategies that can help to convert the funnel opportunities to orders? Thank you.
spk12: Yes, I mean, as far as sort of the end markets, academia versus biopharma, we have actually seen sort of challenges in both, especially when you look within AMR and America's, but it's really widely across the globe as well. Different dynamics for sure, but both happen to be challenged right now. There's definitely a lot of sort of news and pressure on academic budgets with NIH and so on. So we're following that, but yes, across kind of across the board. As far as the question around sort of conversion of opportunities and kind of moving those to the funnel. Yeah, I mean, that's a big part of what we're doing here is creating a specialized sales board specifically for Zinium Instruments with its own management structure and specialized capex sales executives. And we do think that that's going to help both in terms of opportunity creation and converting opportunities into sales.
spk07: And your next question comes from the line of Michael Reiskin with Bank of America. Your line is open.
spk14: Great. Thanks for taking the question, guys. Just one for me. About a month ago, there was a deal announced in the space of a small private single cell vendor by a major global sequencing company. A lot of speculation debate on where that's going to go over time, but there's some expectation of possibly some sort of combination offering or maybe just a more streamlined go to market strategy. I realize it's still early, but just curious if you're hearing anything from your customers about what that could do for the competitive landscape and how you think Chromium is positioned if that was to happen. Any response you might take? Thanks.
spk12: Yeah. So like we always know them. We've got strong convictions. We operate in very attractive spaces, very attractive markets. And to some extent, the entry by a large sequencing company into the space demonstrates and validates that conviction. Our strategy has always contemplated. So the entry of new companies into this space and what we have put together as far as product strategy, as far as commercialization strategy is meant to both drive growth in these markets and also prevent or counter the entry by new companies. Fundamentally, I think it's well acknowledged that we have the best products, great performance, great workflows, the widest breadth of applications. We also have a really strong roadmap going forward to both lower the cost and drive greater access, which again is the dual purposes of driving increasing market adoption and also countering any potential new entrants. And it's also important to appreciate that we have a great commercial team in terms of customer support and sales that really understands these applications and customers. These are oftentimes fairly intricate experiments that our team helps our customers with. And so you take all of these factors together, we feel good about our position. And again, I want to reemphasize we've always contemplated in our strategy the entry of new players into the space and we're fully prepared to answer as much of the questions as we can. So it's not necessarily but ultimately drive market expansion and greater customer success.
spk07: And your next question comes from the line of Sabunambi with Guggenheim Securities. Your line is open.
spk06: Hi, this is Ricky Aung for SUBU at Guggenheim. Thanks for taking our questions. You reported China revenue that looks like it grew about .7% year over year, whereas a lot of peers reported struggling in China this quarter. Could you provide some color on what you saw in China for the quarter and what drove the strength? Was it all consumables or was it some instruments? And then similarly in EMEA, the revenue there also looks like it grew almost 20%. Could you speak to what drove the strength there as well and if not sustainable growth for the rest of the year? Thank you.
spk12: Yeah, I mean, so maybe to touch on China first. Certainly China was a big, big problem for us in the past several years. It was a very challenging environment there. It was very hard to have any visibility. And certainly the market dynamics were very hard to understand and to address. We have been doing a lot of work since last year really to get closer to our customers to restructure some of our distributor relationships, our service provider relationships, so getting much better visibility. And some of that is, I think, is improving performance. Some of it there's also just underlying demand dynamics that have been going somewhat more in our favor recently.
spk07: And your next question comes from the line of Matt Sykes with Goldman Sachs. Your line is open.
spk10: Good afternoon. Thanks for my questions. And Justin, congrats on the new opportunity. It's been great working with you. Just two quick ones for me. What is your level of confidence in sort of the rebasing of chromium consumable growth given the sequential improvement you saw this quarter? How much of an offset will the GEMEX pricing, I think Justin you mentioned that, will be to this growth over the course of this year and into next? And then secondly, just the reduction in xenium placement growth. How should we think about xenium consumable growth as a result of that? And can increase utilization of the existing install base offset the lower growth in the install base over the course of this year? Thanks.
spk02: Thanks, Matt. All great questions. I think when we're looking at chromium, you know, when we went back to the dynamics in basically going back to the end of the year when we initiated guidance and we talked about how what we expected for the impacts of the transition. I think those drivers largely played out like we had expected, although probably bigger in magnitude when we talked about Q2 on the last call, if Q2 played out. I think, again, it's the same drivers on the chromium consumables. Like we saw a great sequential rebound on chromium, both on instruments and consumables growing 12% sequentially from Q1 to Q2, obviously 12% overall. And so then when you look on the year on year compares for chromium, you know, we were down quite a bit in Q1 year over year and Q2 that was halved, embedded into our guidance range when we get into Q3. We expect to get pretty close to flat year over year, if not roughly flat. And we do expect an increase for chromium in Q4 year over year. And so obviously when you put all that together and you look at the full year, year over year compare, just because of the downside that we had in the decreases that we had in Q1 and Q2, still going to have a decrease for the year. But this is going to hit instruments harder than consumables. And I do think that, you know, the instruments, there's other factors that play there in the macro environment as well. But I think what gives us confidence is we're seeing the dynamics play out at the customer level like we had expected. And, you know, that update is, that is incorporated into our guidance update. For xenium, great question on the xenium pull through. You know, we have been seeing decent growth in spatial consumables. With lower xenium placements, you know, that would mean lower consumables in the future. But as we get past these transitory factors right now impacting us and start playing, start placing more instruments, you know, obviously we would expect that to pick up. When we look at our earliest cohorts, earliest purchasers of the xenium instrument, they're still increasing their utilization. We are seeing overall that there's a decent ramping period for customers from when they buy the instrument, go through the installation training and start using it more reliably. That's about probably a two quarter ramp up period. So we are seeing the difference between, you know, customers that have had the instrument for a quarter or two quarters versus those that have had it longer. But I think the important thing to take away is that there is this trend towards, you know, the increasing utilization over time. And then, you know, we just introduced Xenium Prime 5K. There's a lot of excitement around that and that can have some impact on the pull through and how customers use the instrument. And so, you know, it'll be interesting to see how that plays out as well. But there's been a ton of excitement around that too. And I do think that, you know, overall this is an instrument that could, you know, have an overall high rate of pull through, you know, for an instrument itself that is a low margin instrument. You know, we have to believe that longer term that customers that are investing in that and we ourselves investing in those placements believe that there's going to be, you know, decent pull through in the future. And so, feel good about where things are trending but not ready to share more detail than that at this point.
spk07: And your next question comes from the line of Matt LaRue with William Blair. Your line is open.
spk04: Hi, good afternoon. You know, last quarter you obviously was in the context of pricing for Chromium, talked about, you know, longer term goal of $100 per sample. So, you've talked about GEMEX, you know, being one step on that journey and the belief that when you reach an appropriate pricing level there would be significant elasticity and demand there. So, just kind of curious where you view the progress that you've made over the last few months, how much of the continued journey is one reliant on additional technology advancements and product enhancements versus perhaps commercial or strategic decisions on your part?
spk12: Yeah, so, we do believe strongly, as I mentioned earlier, in my prepared imagine, I've been saying for a while that there's strong elasticity of demand in the marketplace. With GEMEX, we actually reduced the price per sample by about 10% relative to previous next GEM architecture and also decreased the price per cell by a significant amount because it has twice as much throughput, so the price per cell went down by more than a factor of two. We are seeing customers appreciating that for sure and quite a few running kind of larger numbers of cells as a result of that. The first order effect on these tends to be more they either spend, just spend the same budget as they would have otherwise, just kind of running more or to some extent some of them also just taking the lower price and running the same number of those samples or cells. But in the long run, we do believe and we see some evidence of that from our flex products that the lower prices will ultimately drive to much more demand and market expansion. Again, GEMEX and our flex launches are sort of steps along that journey. Again, the initial times are still too early to be, you know, to be pointing to kind of passive changes, but we're feeling good about where things are headed and going forward, we do expect product configurations that will lean further into the elasticity of demand here. We have plans to address the different cost bottlenecks that our customers are facing, whether it's on a, you know, per experiment basis, per sample basis, per cell basis, and we'll be rolling those out in due time. And we also do, are cognizant of putting more commercial focus on these efforts too as we go forward and part of the goal of our restructuring is to enable that as well.
spk07: And your next question comes from the line of Luke Sergot with Barclays. Your line is open.
spk17: Great. Thanks, guys. I just kind of want to go back to the Xenium conversation about the consumables and pull through. So, you know, talk about what happened in the quarter from a pull-through perspective. You know, are you seeing any air pocket there waiting for the 5K? You know, with the strength in the visium in the quarter, does that mean that, you know, the Xenium pull-through has really stepped down just kind of as we're thinking about going forward here? What that progression will look like?
spk12: Well, so, yeah, Luke, as I mentioned before, I think we actually had strong demand from kind of both sides of the spatial business, both in the Xenium and Xenium. There was definitely anticipation of the 5K that, you know, that was causing some amount of pausing with customers earlier, but like we said, the actual ultimate orders were really once we started shipping the product in June. So, yeah, so I think the underlying dynamics are strong on both sides, across the both
spk03: franchises.
spk02: Yeah, Luke, and just to add to that, like when you're talking instruments looking at side assist versus Xenium, like side assist, although there has been a slight impact of that, it's been pretty solid quarter to quarter, and so, you know, bigger impact on Xenium instruments. But I do think in this environment with capex pressures, you know, some customers looks like are opting to try out side assist in visium before jumping to Xenium because, you know, that's a good example of that anecdotally as well.
spk07: And that is all of our questions for today, and this does conclude today's conference call. You may now disconnect.
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