10x Genomics, Inc.

Ladies and gentlemen, thank you so much for standing by and welcome to 10X JNMX first quarter 2025 earnings conference call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Cassie Corne, Senior Director, Investor Relations. You may now begin.

Thank you, and good afternoon, everyone. Earlier today, 10X Genomics released financial results for the first quarter ended March 31st, 2025. If you have not received this news release or 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 Saxinoff, our CEO and co-founder, and Adam Tate, 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. Today, I'll cover Q1 performance and share updates on how we're navigating the rapidly evolving macro environment. I'll also walk through recent business developments before handing it over to Adam for the financial review and outlook. Total revenue for the first quarter was $155 million. During the quarter, we settled our worldwide patent litigation with VizGen on various favorable terms. As one component of the settlement, we received an up of $26 million that we allocated in part to operating expenses related to gain on settlement and in part to license and royalty revenue. Excluding the portion allocated to license and royalty revenue, our first quarter revenue was $138 million, down 2% year over year, primarily driven by a significant decrease in instrument revenue offset by continued strength in consumables, a sign of solid core demand and growing usage across our platforms. Our Q1 results demonstrated clear signals that customer demand for our products is robust and reinforced our conviction in the long-term growth potential ahead, which I will discuss more later. But first, I'd like to take a moment to reflect on the significant changes in the macro environment since the beginning of the year. changes that went far beyond what any of us expected. Signs of risk and uncertainty across academic research funding and the macro landscape began with a cap on indirect funding from the NIH, and since then, the research funding environment has continued to deteriorate, particularly across U.S. academic and government labs. Within U.S. academic and government research funding, we're seeing two distinct but interconnected dynamics. First, there are real-time effects impacting our customers today, including delays, reductions, and outright cancellations of grants. Second, there is a growing threat of future changes, such as proposed budget cuts, implementation of indirect NIH funding gaps, and widespread concern over further grant review delays or project cancellations. Taken together, these pressures are creating a climate of deep uncertainty. We're increasingly hearing from customers that the combination of actual cuts and looming risks is making them hesitant to initiate new projects or invest in capital purchases. The uncertainty for our customers is driving increasingly unpredictable customer purchasing behavior and reduced visibility on our outlook for the year. Approximately 40 to 50% of our revenue is supported by U.S. academic and government research funding. As a result, we announced earlier today that we're withdrawing our full year revenue guidance and implementing quarterly guidance beginning with Q2. Adam will share additional context on our outlook. While the current environment is undeniably difficult and unpredictable, I am confident that we're well equipped to navigate through this period and emerge stronger. We're seeing increased usage of our products driven by price elasticity and the emergence of new applications, both of which support the long-term expansion of our opportunity. Our recent slate of product launches continues to resonate with customers and further extends our technology leadership that, together with our roadmap, positions us extremely well for the future. We have completed our sales reorganization, giving us the structure, coverage, and focus we need to take on today's challenges. And we have a strong cash position that we're actively protecting through this turbulence. We have implemented a reduction in both headcount and non-headcount related expenses across the company. This week, we reduced our global workforce by approximately 8%. While these changes are never easy, they will allow us to be a more efficient organization. better positioned to navigate today's environment while continuing to invest in our highest priorities. We recognize that the strength of our balance sheet is an asset. We have the resolve to protect it and the leverage to further adjust expenses if necessary. Importantly, our fundamentals remain strong and we continue to have full confidence in our ability to capture the large opportunities ahead. To that end, We saw multiple positive developments in Q1 that underscored the strength of our platforms and reinforced our conviction in our mission. First, we saw solid signs of single-cell elasticity, demonstrated by robust year-over-year growth in chromium reaction volumes. This growth was supported by strong adoption of Reflex and universal on-chip multiplexing products. both of which are specifically designed to boost volumes through lower cost per cell and per sample. Second, we're continuing to see increased Xenium usage, demonstrated by strong growth in Xenium consumable revenue and volume. Our Xenium platform keeps gaining traction among new customers, while our earliest and largest users continue to grow their utilization. Researchers are drawn to Xenium for its ability to elucidate biology that was previously inaccessible at the resolution and scale that were inconceivable until recently. And as researchers use the platform, they increasingly recognize Xenium's robustness, accuracy, superior data quality, and ease of use. Third, our recent and upcoming product launches are resonating with customers and continue to advance our leadership in single-cell and spatial biology. Our GemEx technology has been delivering great advances to single-cell analysis. VizimHD has become a leading approach for unbiased spatial discovery, and Xenium 5K assays have gained rapid adoption across our customer base. At the AGBT conference in late February, we unveiled innovations across all three platforms, including a new plate-based chromium flex product to massively expand scale and the number of samples per run. expanded cloud-based capabilities to support large project analysis, continued expansion of our Visium platform with Visium HD 3 Prime, Visium Cell Segmentation, and Visium HD XL, and Xenium RNA protein to enable multi-omic analysis on the same tissue section. Together, these launches strengthen our roadmap and deepen our ability to serve all of our customers, including biopharma and translational researchers, as well as those working on consortium-scale studies. Finally, we're seeing a trend of exciting new use cases driven by the imperative for larger-scale analysis and the promise of single-cell and spatial in opening up new clinical research applications. Let's talk about some of the notable examples from the last few months. A powerful and accelerating wave across research is the use of AI with massive single-cell data sets to uncover patterns, generate insights, and accelerate discovery in ways that simply weren't possible before. Building on the collaboration we announced in February with the Chan Zuckerberg Initiative to launch the Billion Cell Project, we have several other initiatives underway. We recently announced a partnership with ARC Institute to accelerate the development of the ARC Virtual Cell Atlas, an ongoing effort to create large-scale high-quality virtual cell models. Leveraging our Chromium Flex assays, ARC researchers will be able to generate perturbational data at unprecedented scale and quality. We're excited to enable the creation of increasingly powerful AI models in biology to support AI-driven insights into human health and disease and help accelerate drug discovery. In addition, Immune AI and the Park Institute for Cancer Immunotherapy are using our GEM-X technology to accelerate the creation of one of the largest single-cell immunooncology datasets. This effort aims to support the identification of immune response and resistance patterns, ultimately helping researchers uncover clinically relevant mechanisms that could inform the next generation of cancer therapy. With increasing recognition of the power of single-cell and spatial technologies in translational research, there have been more and more publications focused on uncovering spatial biomarkers of disease progression and drug response. For example, investigators from the Spanish National Cancer Research Center used Xenium and Visium to retrospectively analyze samples from the recent Dutrinum trial of patients with bladder cancer. The study uncovered spatial relationships and cell-to-cell interactions associated with treatment responses. Another study in cancer cells used Xenium to analyze samples from the FASCINATE-M Phase II trial of a novel antibody drug conjugate in HER2-positive breast cancer. The researchers characterized key immune cell subtypes, spatial niches, and specific interactions between immune cells and tumor cells. They identified spatial biomarker signatures that were predictive of treatment response highlighting the promise of spatial biology to help guide patient stratification strategies and therapy selection. Also, in a recent study in Nature, researchers used Bigeum and other tools to uncover spatial biomarkers associated with liver cancer recurrence. They used these biomarkers to construct a tumor-immune microenvironment spatial predictive score that performed substantially better than standard patient risk stratification methods. pointing the way to more personalized disease management of this and other cancers. We have deep conviction grounded in growing evidence that our tools represent the future of biological research, drug development, and diagnostics. We're committed to realizing that future despite the challenges in front of us, and we're focused on serving our customers through these tumultuous times. I'd like to thank our team for keeping that goal front and center, for their continued dedication, and for their resilience through this period. It is because of their efforts I feel so confident we're well positioned to execute and lead this next chapter. With that, I'll turn the call over to Adam.