txg-20240331
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
_____________________
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2024
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___________ to ___________
Commission File Number: 001-39035
10x Genomics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
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45-5614458
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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6230 Stoneridge Mall Road
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Pleasanton, California
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94588
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(Address of principle executive offices)
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(Zip Code)
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(925) 401-7300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_____________________
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol
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Name of each exchange
on which registered
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Class A common stock, par value $0.00001 per share
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TXG
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The Nasdaq Stock Market LLC
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
|
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Emerging growth company
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☐
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 15, 2024, the registrant had 105,651,593 shares of Class A common stock, $0.00001 par value per share, outstanding and 14,056,833 shares of Class B common stock, $0.00001 par value per share, outstanding.
Table of Contents
10x Genomics, Inc.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to those sections' "safe harbor." All statements, other than historical facts, may be forward-looking statements. Forward-looking terminology such as "may," "might," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "see," "estimate," "predict," "potential," "would," "likely," "seek" or "continue" or variations of these terms or similar terminology generally can identify forward-looking statements, but the absence of these words is not determinative. These forward-looking statements include statements regarding 10x Genomics, Inc.'s expectations regarding our plans, objectives, goals, beliefs, business strategies, results of operations, financial position, sufficiency of our capital resources, business outlook, future events, business conditions, key business metrics and key factors affecting our performance, gross margin trends, expected future investments including anticipated capital expenditures, anticipated size of market opportunities and our ability to capture them, expected uses, performance and benefits of our products and services, business trends and other information. These statements are based on management's expectations, forecasts, beliefs, opinions, assumptions and information available at the time of filing and should not be relied upon as 10x Genomics, Inc.'s views as of any subsequent date. Actual outcomes and results could differ materially from these statements due to several factors. 10x Genomics, Inc. disclaims any obligation to update any published forward-looking statements except as required by law.
The material risks, uncertainties and other factors that could affect 10x Genomics, Inc.'s financial and operating results and cause actual results to differ from those indicated by the forward-looking statements made include those described in the section titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. Our periodic filings are accessible on the U.S. Securities and Exchange Commission's website at www.sec.gov. Although we believe the expectations reflected in the forward-looking statements are reasonable, new risks and uncertainties may emerge, and it is not possible for us to predict their impact on the forward-looking statements contained in this Quarterly Report. Moreover, the information the forward-looking statements are based upon may be limited or incomplete, and may not be based upon all potentially relevant information. We cannot guarantee future events, circumstances, results, performance or achievements. In light of the foregoing, investors are urged not to place undue reliance on any forward-looking statement or third-party data in reaching any conclusion or making any investment decision about any securities of the Company.
Unless otherwise stated or the context otherwise indicates, references to "we," "us," "our," "the Company," "10x" and similar references refer to 10x Genomics, Inc. and its subsidiaries.
1
Channels for Disclosure of Information
Investors and others should note that we may announce material information to the public through filings with the SEC, our website (https://www.10xGenomics.com), press releases, public conference calls, public webcasts and our social media accounts, (https://X.com/10xGenomics, https://www.facebook.com/10xGenomics and
https://www.linkedin.com/company/10xgenomics). We use these channels to communicate with our customers and the public about the Company, our products, our services, our financial results, business developments and other matters. We encourage our investors, the media and others to review the information disclosed through such channels as such information could be deemed to be material information. The information on such channels, including on our website and our social media accounts, is not incorporated by reference in this Quarterly Report and shall not be deemed to be incorporated by reference into any other filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing. Please note that this list of disclosure channels may be updated from time to time.
2
10x Genomics, Inc.
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
10x Genomics, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
March 31,
2024
|
December 31,
2023
|
(Unaudited)
|
(Note 1)
|
Assets
|
Current assets:
|
Cash and cash equivalents
|
$
|
355,781
|
$
|
359,284
|
Marketable securities
|
16,033
|
29,411
|
Accounts receivable, net
|
91,305
|
114,832
|
Inventory
|
83,189
|
73,706
|
Prepaid expenses and other current assets
|
20,785
|
18,789
|
Total current assets
|
567,093
|
596,022
|
Property and equipment, net
|
269,486
|
279,571
|
Operating lease right-of-use assets
|
62,850
|
65,361
|
Goodwill
|
4,511
|
4,511
|
Intangible assets, net
|
16,129
|
16,616
|
Other noncurrent assets
|
2,844
|
3,062
|
Total assets
|
$
|
922,913
|
$
|
965,143
|
Liabilities and stockholders' equity
|
Current liabilities:
|
Accounts payable
|
$
|
20,216
|
$
|
15,738
|
Accrued compensation and related benefits
|
20,670
|
30,105
|
Accrued expenses and other current liabilities
|
42,424
|
56,648
|
Deferred revenue
|
14,296
|
13,150
|
Operating lease liabilities
|
11,127
|
11,521
|
Total current liabilities
|
108,733
|
127,162
|
Operating lease liabilities, noncurrent
|
81,049
|
83,849
|
Deferred revenue, noncurrent
|
9,787
|
8,814
|
Other noncurrent liabilities
|
4,510
|
4,275
|
Total liabilities
|
204,079
|
224,100
|
Commitments and contingencies (Note 4)
|
|
|
Stockholders' equity:
|
Preferred stock
|
-
|
-
|
Common stock
|
2
|
2
|
Additional paid-in capital
|
2,063,657
|
2,025,890
|
Accumulated deficit
|
(1,344,369)
|
(1,284,420)
|
Accumulated other comprehensive loss
|
(456)
|
(429)
|
Total stockholders' equity
|
718,834
|
741,043
|
Total liabilities and stockholders' equity
|
$
|
922,913
|
$
|
965,143
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
10x Genomics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
|
Three Months Ended
March 31,
|
2024
|
2023
|
Revenue
|
$
|
141,006
|
$
|
134,285
|
Cost of revenue
|
48,092
|
35,895
|
Gross profit
|
92,914
|
98,390
|
Operating expenses:
|
Research and development
|
68,638
|
67,098
|
Selling, general and administrative
|
85,774
|
83,280
|
Total operating expenses
|
154,412
|
150,378
|
Loss from operations
|
(61,498)
|
(51,988)
|
Other income (expense):
|
Interest income
|
4,736
|
3,869
|
Interest expense
|
(1)
|
(19)
|
Other expense, net
|
(1,040)
|
(1,516)
|
Total other income
|
3,695
|
2,334
|
Loss before provision for income taxes
|
(57,803)
|
(49,654)
|
Provision for income taxes
|
2,146
|
1,093
|
Net loss
|
$
|
(59,949)
|
$
|
(50,747)
|
|
Net loss per share, basic and diluted
|
$
|
(0.50)
|
$
|
(0.44)
|
Weighted-average shares of common stock used in computing net loss per share, basic and diluted
|
119,394,180
|
115,619,869
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
10x Genomics, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
|
Three Months Ended
March 31,
|
2024
|
2023
|
Net loss
|
$
|
(59,949)
|
$
|
(50,747)
|
Other comprehensive income, net of tax:
|
Unrealized gains on available-for-sale marketable securities
|
136
|
1,117
|
Realized loss on available-for-sale marketable securities reclassified into net loss
|
-
|
1,715
|
Foreign currency translation adjustment
|
(163)
|
24
|
Other comprehensive income (loss), net of tax
|
(27)
|
2,856
|
Comprehensive loss
|
$
|
(59,976)
|
$
|
(47,891)
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
10x Genomics, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands, except share data)
|
Common Stock
|
Additional Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive
Loss
|
Total
Stockholders'
Equity
|
Shares
|
Amount
|
Balance as of December 31, 2023
|
119,095,362
|
$
|
2
|
$
|
2,025,890
|
$
|
(1,284,420)
|
$
|
(429)
|
$
|
741,043
|
Issuance of Class A common stock related to equity awards
|
605,487
|
-
|
1,638
|
-
|
-
|
1,638
|
Stock-based compensation
|
-
|
-
|
36,129
|
-
|
-
|
36,129
|
Net loss
|
-
|
-
|
-
|
(59,949)
|
-
|
(59,949)
|
Other comprehensive loss
|
-
|
-
|
-
|
-
|
(27)
|
(27)
|
Balance as of March 31, 2024
|
119,700,849
|
$
|
2
|
$
|
2,063,657
|
$
|
(1,344,369)
|
$
|
(456)
|
$
|
718,834
|
|
Common Stock
|
Additional Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive
Income (Loss)
|
Total
Stockholders'
Equity
|
Shares
|
Amount
|
Balance as of December 31, 2022
|
115,195,009
|
$
|
2
|
$
|
1,839,397
|
$
|
(1,029,321)
|
$
|
(4,335)
|
$
|
805,743
|
Issuance of Class A common stock related to equity awards
|
978,333
|
-
|
2,400
|
-
|
-
|
2,400
|
Stock-based compensation
|
-
|
-
|
42,133
|
-
|
-
|
42,133
|
Net loss
|
-
|
-
|
-
|
(50,747)
|
-
|
(50,747)
|
Other comprehensive income
|
-
|
-
|
-
|
-
|
2,856
|
2,856
|
Balance as of March 31, 2023
|
116,173,342
|
$
|
2
|
$
|
1,883,930
|
$
|
(1,080,068)
|
$
|
(1,479)
|
$
|
802,385
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
10x Genomics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
Three Months Ended March 31,
|
2024
|
2023
|
Operating activities:
|
Net loss
|
$
|
(59,949)
|
$
|
(50,747)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
Stock-based compensation expense
|
36,129
|
42,101
|
Depreciation and amortization
|
9,194
|
6,482
|
Amortization of right-of-use assets
|
2,300
|
2,134
|
Lease and asset impairment charges
|
2,454
|
-
|
Realized loss on marketable securities
|
-
|
1,715
|
Other
|
444
|
150
|
Changes in operating assets and liabilities:
|
Accounts receivable
|
23,516
|
26,279
|
Inventory
|
(9,937)
|
(449)
|
Prepaid expenses and other current assets
|
(2,029)
|
(4,253)
|
Other noncurrent assets
|
216
|
(10,470)
|
Accounts payable
|
4,583
|
(781)
|
Accrued compensation and other related benefits
|
(9,380)
|
(15,129)
|
Deferred revenue
|
2,120
|
1,051
|
Accrued expenses and other current liabilities
|
(12,674)
|
(161)
|
Operating lease liability
|
(2,961)
|
(2,308)
|
Other noncurrent liabilities
|
249
|
261
|
Net cash used in operating activities
|
(15,725)
|
(4,125)
|
Investing activities:
|
Purchases of property and equipment
|
(2,910)
|
(4,559)
|
Purchases of intangible assets
|
-
|
(723)
|
Proceeds from sales of marketable securities
|
568
|
93,342
|
Proceeds from maturities of marketable securities
|
12,974
|
31,896
|
Net cash provided by investing activities
|
10,632
|
119,956
|
Financing activities:
|
Payments on financing arrangement
|
-
|
(5,814)
|
Issuance of common stock from exercise of stock options
|
1,638
|
2,400
|
Net cash provided by (used in) financing activities
|
1,638
|
(3,414)
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(48)
|
24
|
Net increase (decrease) in cash and cash equivalents
|
(3,503)
|
112,441
|
Cash and cash equivalents at beginning of period
|
359,284
|
227,353
|
Cash and cash equivalents at end of period
|
$
|
355,781
|
$
|
339,794
|
|
Supplemental disclosures of cash flow information:
|
Cash paid for interest
|
$
|
-
|
$
|
436
|
Cash paid for taxes
|
$
|
961
|
$
|
2,547
|
Noncash investing and financing activities:
|
Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities
|
$
|
1,899
|
$
|
30,668
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
-
|
$
|
6,893
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
o
1. Description of Business and Basis of Presentation
Organization and Description of Business
10x Genomics, Inc. (the "Company") is a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biological systems at resolution and scale that matches the complexity of biology. The Company's integrated solutions include the Company's Chromium X Series and Chromium Connect instruments, which the Company refers to as "Chromium instruments," the Company's Visium CytAssist and Xenium Analyzer instruments, which the Company refers to as "Spatial instruments," and the Company's proprietary microfluidic chips, slides, reagents and other consumables for the Company's Chromium, Visium and Xenium solutions, which the Company refers to as "consumables." The Company bundles its software with these products to guide customers through the workflow, from sample preparation through analysis and visualization. The Company was incorporated in the state of Delaware in July 2012 and began commercial and manufacturing operations and selling its instruments and consumables in 2015. The Company is headquartered in Pleasanton, California and has wholly-owned subsidiaries in Asia, Europe, Oceania and North America.
Basis of Presentation
The accompanying condensed consolidated financial statements, which include the Company's accounts and the accounts of its wholly-owned subsidiaries, are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The condensed consolidated balance sheets at December 31, 2023 have been derived from the audited consolidated financial statements of the Company at that date. Certain information and footnote disclosures typically included in the Company's audited consolidated financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company's financial position, results of operations, comprehensive loss and cash flows for the periods presented, but are not necessarily indicative of the results of operations to be anticipated for any future annual or interim period. All intercompany transactions and balances have been eliminated. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2023 included in the Company's Annual Report on Form 10-K filed with the SEC on February 15, 2024 (our "Annual Report").
2. Summary of Significant Accounting Policies
There were no material changes in the Company's significant accounting policies during the three months ended March 31, 2024. See Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements included in the Company's Annual Report for information regarding the Company's significant accounting policies.
Revenue Recognition
The Company generates revenue from sales of products and services, and its products consist of instruments and consumables. Revenue from product sales is recognized when control of the product is transferred, which is generally upon shipment to the customer. Instrument service agreements, which relate to extended warranties, are typically entered into for one-year terms, following the expiration of the standard one-year warranty period. Revenue for extended warranties is recognized ratably over the term of the extended warranty period as a stand ready performance obligation. Revenue is recorded net of discounts, distributor commissions and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 30 days. Cash received from customers in advance of product shipment or providing services is recorded as a contract liability. The Company's contracts with its customers generally do not include rights of return or a significant financing component.
The Company regularly enters into contracts that include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. The transaction price is allocated to each performance obligation in proportion to its standalone selling price. The Company determines standalone selling price using average selling
8
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
prices with consideration of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, the Company relies upon prices set by management, adjusted for applicable discounts.
Net Loss Per Share
Net loss per share is computed using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase.
For the calculation of diluted net loss per share, basic net loss per share is adjusted by the effect of dilutive securities including awards under the Company's equity compensation plans. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. For periods in which the Company reports net losses, diluted net loss per share is the same as basic net loss per share because potentially dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive.
Recently Issued Accounting Pronouncement and Disclosure Rules
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid, and modifies other income tax-related disclosure requirements. The updated standard is effective beginning with the Company's fiscal year 2025 annual reporting period. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on its related disclosures.
In March 2024, the Securities and Exchange Commission (SEC) issued Final Rule No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. If effected as issued, the rule would require registrants to provide certain climate related disclosures in their annual reports. While in April 2024 the SEC stayed Final Rule No. 33-11275 in connection with legal challenges to the rule, the Company is in the process of analyzing the impact of the rule on its related disclosures.
3. Other Financial Statement Information
Available-for-sale Securities
Available-for-sale securities consisted of the following (in thousands):
|
March 31, 2024
|
December 31, 2023
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Fair Value Measurement
|
Cash equivalents:
|
Money market funds
|
$
|
345,662
|
$
|
-
|
$
|
-
|
$
|
345,662
|
$
|
348,539
|
$
|
-
|
$
|
-
|
$
|
348,539
|
Level 1
|
Marketable securities:
|
Corporate debt securities
|
5,862
|
-
|
(14)
|
5,848
|
10,022
|
-
|
(51)
|
9,971
|
Level 2
|
Government debt securities
|
9,382
|
-
|
(31)
|
9,351
|
18,152
|
-
|
(125)
|
18,027
|
Level 2
|
Asset-backed securities
|
841
|
-
|
(7)
|
834
|
1,425
|
-
|
(12)
|
1,413
|
Level 2
|
Total available-for-sale securities
|
$
|
361,747
|
$
|
-
|
$
|
(52)
|
$
|
361,695
|
$
|
378,138
|
$
|
-
|
$
|
(188)
|
$
|
377,950
|
9
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The contractual maturities of marketable securities as of March 31, 2024 were as follows (in thousands):
|
Fair Value
|
Due in one year or less
|
$
|
15,199
|
Due after one year to five years
|
834
|
Total marketable securities
|
$
|
16,033
|
The Company incurred no material gross realized gains or losses from available-for-sales debt securities during the three months ended March 31, 2024. The Company incurred gross realized losses of $1.7 million and no gross realized gains from the sale of available-for-sales debt securities during the three months ended March 31, 2023. Realized gains (losses) on the sale of marketable securities are recorded in "Other expense, net" in the condensed consolidated statements of operations.
The available-for-sale debt securities are subject to a periodic impairment review. For investments in an unrealized loss position, the Company determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions and reasonable and supportable forecasts of economic conditions. The Company recognizes an allowance for credit losses, up to the amount of the unrealized loss when appropriate, and writes down the amortized cost basis of the investment if it is more likely than not that the Company will be required or will intend to sell the investment before recovery of its amortized cost basis. Allowances for credit losses and write-downs are recognized in "Other expense, net," and unrealized losses not related to credit losses are recognized in "Accumulated other comprehensive loss." There are no allowances for credit losses for the periods presented. As of March 31, 2024, the gross unrealized losses on available-for-sale securities are related to market interest rate changes and not attributable to credit.
Inventory
Inventory was comprised of the following (in thousands):
|
March 31,
2024
|
December 31,
2023
|
Purchased materials
|
$
|
39,159
|
$
|
34,484
|
Work in progress
|
20,552
|
21,975
|
Finished goods
|
23,478
|
17,247
|
Inventory
|
$
|
83,189
|
$
|
73,706
|
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
|
March 31,
2024
|
December 31,
2023
|
Land
|
$
|
36,765
|
$
|
36,765
|
Building
|
146,346
|
146,044
|
Laboratory equipment and machinery
|
68,608
|
69,238
|
Computer equipment and software
|
15,897
|
16,379
|
Furniture and fixtures
|
10,644
|
10,979
|
Leasehold improvements
|
96,373
|
96,405
|
Construction in progress
|
5,247
|
7,252
|
Total property and equipment
|
379,880
|
383,062
|
Less: accumulated depreciation and amortization
|
(110,394)
|
(103,491)
|
Property and equipment, net
|
$
|
269,486
|
$
|
279,571
|
During the three months ended March 31, 2024, the Company recorded impairment charges of $2.1 million related to computer equipment and software of which $0.3 million, $0.7 million and $1.1 million was classified in cost of revenue, research
10
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
and development, and selling, general and administrative expenses, respectively, in the condensed consolidated statement of operations. The impairment charge was triggered by a decision to discontinue a productivity engineering project.
Accrued Compensation and Related Benefits
Accrued compensation and related benefits were comprised of the following as of the dates indicated (in thousands):
|
March 31,
2024
|
December 31,
2023
|
Accrued payroll and related costs
|
$
|
6,356
|
$
|
2,262
|
Accrued bonus
|
6,510
|
18,254
|
Accrued commissions
|
2,701
|
6,410
|
Other
|
5,103
|
3,179
|
Accrued compensation and related benefits
|
$
|
20,670
|
$
|
30,105
|
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities were comprised of the following as of the dates indicated (in thousands):
|
March 31,
2024
|
December 31,
2023
|
Accrued purchase consideration
|
$
|
-
|
$
|
20,000
|
Accrued legal and related costs
|
9,223
|
3,839
|
Accrued royalties for licensed technologies
|
5,847
|
5,455
|
Accrued property and equipment
|
1,899
|
3,199
|
Accrued professional services
|
4,596
|
6,577
|
Product warranties
|
9,707
|
8,116
|
Taxes payable
|
5,777
|
5,049
|
Other
|
5,375
|
4,413
|
Accrued expenses and other current liabilities
|
$
|
42,424
|
$
|
56,648
|
Product Warranties
Changes in the reserve for product warranties were as follows for the periods indicated (in thousands):
|
Three Months Ended
March 31,
|
2024
|
2023
|
Beginning of period
|
$
|
8,116
|
$
|
3,023
|
Amounts charged to cost of revenue
|
2,355
|
1,630
|
Repairs and replacements
|
(764)
|
(1,447)
|
End of period
|
$
|
9,707
|
$
|
3,206
|
Revenue and Deferred Revenue
As of March 31, 2024, the aggregate amount of remaining performance obligations related to separately sold extended warranty service agreements or allocated amounts for extended warranty service agreements bundled with sales of instruments was $24.1 million, of which approximately $14.3 million is expected to be recognized to revenue in the next 12 months, with the
11
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
remainder thereafter. The contract liabilities of $24.1 million and $22.0 million as of March 31, 2024 and December 31, 2023, respectively, consisted of deferred revenue related to extended warranty service agreements.
The following revenue recognized for the periods were included in contract liabilities as of December 31, 2023 and December 31, 2022, respectively (in thousands):
|
Three Months Ended
March 31,
|
2024
|
2023
|
Deferred revenue recognized
|
$
|
6,928
|
$
|
2,107
|
The following table represents revenue by source for the periods indicated (in thousands). Spatial products include the Company's Visium and Xenium products:
|
Three Months Ended
March 31,
|
2024
|
2023
|
Instruments
|
Chromium
|
$
|
7,850
|
$
|
11,626
|
Spatial
|
17,603
|
7,550
|
Total instruments revenue
|
25,453
|
19,176
|
Consumables
|
Chromium
|
83,927
|
101,096
|
Spatial
|
26,408
|
11,282
|
Total consumables revenue
|
110,335
|
112,378
|
Services
|
5,218
|
2,731
|
Total revenue
|
$
|
141,006
|
$
|
134,285
|
The following table presents revenue by geography based on the location of the customer for the periods indicated (in thousands):
|
Three Months Ended
March 31,
|
2024
|
2023
|
Americas
|
United States
|
$
|
75,637
|
$
|
76,281
|
Americas (excluding United States)
|
3,993
|
2,515
|
Total Americas
|
79,630
|
78,796
|
Europe, Middle East and Africa
|
34,721
|
28,422
|
Asia-Pacific
|
China
|
13,924
|
14,031
|
Asia-Pacific (excluding China)
|
12,731
|
13,036
|
Total Asia-Pacific
|
26,655
|
27,067
|
Total Revenue
|
$
|
141,006
|
$
|
134,285
|
4. Commitments and Contingencies
Lease Agreements
The Company leases office, laboratory, manufacturing, distribution and server space in various locations worldwide.
12
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Future net lease payments related to the Company's operating lease liabilities as of March 31, 2024 is as follows (in thousands):
|
Operating Leases
|
2024 (excluding the three months ended March 31, 2024)
|
$
|
12,385
|
2025
|
14,828
|
2026
|
15,377
|
2027
|
15,584
|
2028
|
15,747
|
Thereafter
|
40,655
|
Total lease payments
|
$
|
114,576
|
Less: imputed interest
|
(22,400)
|
Present value of operating lease liabilities
|
$
|
92,176
|
Operating lease liabilities, current
|
$
|
11,127
|
Operating lease liabilities, noncurrent
|
81,049
|
Total operating lease liabilities
|
$
|
92,176
|
The following table summarizes additional information related to operating leases as of March 31, 2024:
|
March 31,
2024
|
December 31, 2023
|
Weighted-average remaining lease term
|
7.3 years
|
7.5 years
|
Weighted-average discount rate
|
5.9
|
%
|
5.9
|
%
|
Litigation
The Company is regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings involving intellectual property disputes, commercial disputes, competition and other matters, and the Company may become subject to additional types of lawsuits, claims, arbitration proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future.
NanoString
On May 6, 2021, the Company filed suit against NanoString Technologies, Inc. ("NanoString") in the U.S. District Court for the District of Delaware alleging that NanoString's GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S. Patent Nos. 10,472,669, 10,662,467, 10,961,566, 10,983,113 and 10,996,219 (the "GeoMx Action"). On May 19, 2021, the Company filed an amended complaint additionally alleging that the GeoMx products infringe U.S. Patent Nos. 11,001,878 and 11,008,607. On May 4, 2022, the Company filed an amended complaint in the GeoMx Action additionally alleging that the GeoMx products infringe U.S. Patent No. 11,293,917 and withdrawing the Company's claims of infringement of U.S. Patent No. 10,662,467. The Company is seeking, among other relief, injunctive relief and unspecified damages (including attorneys' fees) in relation to NanoString's making, using, selling, offering to sell, exporting and/or importing in the United States the GeoMx Digital Spatial Profiler and associated instruments and reagents. NanoString filed its answer to the GeoMx Action on May 18, 2022. A Markman hearing was held on February 17, 2023 and the Court issued its claim construction order on February 28, 2023. On September 7, 2023, the Court issued an order granting the Company's motion for summary judgment that the asserted patents are not invalid for indefiniteness and denying NanoString's motion for summary judgment that the asserted patents are invalid for indefiniteness and lack of written description. On November 17, 2023, a jury found that NanoString willfully infringed the asserted patents and that the asserted patents are valid. The jury awarded the Company more than $31 million in damages, consisting of approximately $25 million in lost profits and approximately $6 million in royalties. Post-trial motions, including the Company's motions for a permanent injunction, ongoing royalties, enhanced damages, attorneys' fees and pre- and post-judgment interest, are pending. NanoString filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the U.S. bankruptcy court in Delaware on February 4, 2024, and the Court's consideration of these post-trial motions is currently stayed due to the bankruptcy filing. Due to the uncertainties in collecting the jury award, the Company has not recorded a receivable from NanoString as of March 31, 2024.
13
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
On February 28, 2022, the Company filed a second suit against NanoString in the U.S. District Court for the District of Delaware alleging that NanoString's CosMx Spatial Molecular Imager and associated instruments, reagents and services infringe U.S. Patent Nos. 10,227,639 and 11,021,737 (the "CosMx Action"). On May 12, 2022, the Company filed an amended complaint in the CosMx Action additionally alleging that the CosMx products additionally infringe U.S. Patent Nos. 11,293,051, 11,293,052 and 11,293,054. NanoString filed its answer to the CosMx Action on May 26, 2022. On March 1, 2023, the Company filed a second amended complaint additionally alleging that the CosMx products infringe U.S. Patent No. 11,542,554. The Company is seeking, among other relief, injunctive relief and unspecified damages (including attorneys' fees) in relation to NanoString's making, using, selling, offering to sell, exporting and/or importing in the United States the CosMx Spatial Molecular Imager and associated instruments, reagents and services. NanoString filed its answer to the second amended complaint on March 22, 2023. Discovery is in progress. A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.
On August 16, 2022, NanoString filed a counterclaim in the CosMx Action alleging that the Company's Visium products infringe U.S. Patent No. 11,377,689 (the "689 patent"). The Company filed its answer to NanoString's counterclaim in the CosMx Action on August 30, 2022. On November 23, 2022, the Company moved to sever claims relating to NanoString's assertion of the 689 patent and consolidate those claims with the patent case NanoString filed against the Company on October 20, 2022 (discussed below). On January 24, 2023, the Court granted the Company's motion.
On May 1, 2023, NanoString filed a motion in the CosMx Action to add antitrust, unfair competition, tort and contract counterclaims. NanoString seeks, among other relief, injunction relief (including that the Company grant NanoString a license to the patents that the Company asserted against NanoString in the CosMx Action) and unspecified damages (including attorneys' fees). On July 10, 2023, the Court denied NanoString's motion for leave to add a contract counterclaim but otherwise granted the motion for leave to amend. On May 24, 2023, NanoString filed a motion to bifurcate its amended counterclaims and a motion for expedited discovery. On June 6, 2023, the Court denied NanoString's motion to bifurcate and granted its motion for expedited discovery. The Company believes NanoString's claims are meritless and intends to vigorously defend itself.
On October 20, 2022, NanoString filed suit against the Company in the U.S. District Court for the District of Delaware alleging that the Company's Visium products infringe U.S. Patent No. 11,473,142 (the "142 patent"), a continuation of the 689 patent (the "NanoString Action"). NanoString seeks, among other relief, injunctive relief and unspecified damages (including attorneys' fees) in relation to the Company's making, using, selling, offering to sell, exporting and/or importing in the United States Visium products and associated instruments, reagents and services. On January 24, 2023, the Court severed NanoString's claims with respect to the 689 patent from the CosMx Action and consolidated those claims with this action. NanoString filed an amended complaint on January 27, 2023. The Company filed an answer to the NanoString Action on February 10, 2023. Discovery is in progress. A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024. The Company believes NanoString's claims in the NanoString Action are meritless and intends to vigorously defend itself.
On August 16 and September 25, 2023, the Company filed petitions for inter partes review ("IPR") of the 689 patent and the 142 patent, respectively. On February 1, 2024, IPR was instituted for the 689 patent. An institution decision for the IPR against the 142 patent is pending.
On March 9, 2022, the Company filed suit in the Munich Regional Court in Germany alleging that NanoString's CosMx Spatial Molecular Imager and associated instruments, reagents and services infringe EP Patent No. 2794928B1 (the "EP928 patent") (the "Germany CosMx Action"). A hearing on infringement was held on March 23, 2023. On May 17, 2023, the Munich Regional Court found that the CosMx products infringe the EP928 patent and issued a permanent injunction requiring NanoString to stop selling and supplying CosMx instruments and reagents for RNA detection in Germany. The injunction took effect on June 1, 2023. On May 25, 2023, NanoString filed an appeal of the Germany CosMx Action in the Munich Higher Regional Court. A hearing date has not yet been set for this appeal. On October 30, 2023, NanoString requested that the Higher Regional Court temporarily stay enforcement of the injunction pending the appeal. On December 20, 2023, the Higher Regional Court granted NanoString's request conditioned upon NanoString posting a 2.3 million Euro security deposit. To date, NanoString has not posted this security deposit.
On July 29, 2022, NanoString filed a nullity action with the German Federal Patent Court challenging the validity of the EP 928 patent. On February 10, 2023, the Federal Patent Court issued a preliminary opinion upholding the validity of certain claims of the EP 928 patent directed to in situ analysis. A hearing on validity is scheduled before the Federal Patent Court in May 2024.
14
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
On June 1, 2023, the Company filed requests for preliminary injunctions in the Munich Local Division of the Unified Patent Court ("UPC") alleging that NanoString's CosMx Spatial Molecular Imager and associated instruments, reagents and services for RNA detection infringe the EP928 patent and EP Patent No. 4108782 (the "EP782 patent"). Hearings were held for the EP 782 and EP 928 patents on September 5 and September 19, respectively. On September 19, 2023, the UPC granted the Company's request for the EP782 patent and issued a preliminary injunction requiring NanoString to stop selling and supplying CosMx instruments and reagents for RNA detection in all 17 UPC member states. On October 10, 2023, the UPC denied the Company's preliminary injunction request for the EP928 patent. On October 2, 2023, NanoString filed an appeal of the preliminary injunction for the EP782 patent in the UPC Court of Appeals. A hearing was held before the UPC Court of Appeals on December 18, 2023. The UPC Court of Appeals overturned the preliminary injunction on February 26, 2024.
On August 31 and September 18, 2023 the Company filed main requests in the Munich Local Division of the UPC alleging that NanoString's CosMx Spatial Molecular Imager and associated instruments, reagents and services for RNA detection infringe the EP 782 and EP 928 patents, respectively. No hearings have yet been set for these main requests.
On July 18, 2023, NanoString filed an opposition in the European Patent Office challenging the validity of the EP782 patent. No schedule has yet been set for this opposition. On July 27, 2023, NanoString filed a revocation action in the Munich Central Division of the UPC challenging the validity of the EP928 patent.
On January 30, 2024, NanoString filed a petition for IPR of U.S. Patent No. 11,542,554, which is asserted by the Company against NanoString in the CosMx Action.
The impact of NanoString's bankruptcy filing on the Company's actions against NanoString outside of the U.S. District Court for the District of Delaware is not yet fully resolved.
Vizgen
On May 3, 2022, the Company filed suit against Vizgen, Inc. ("Vizgen") in the U.S. District Court for the District of Delaware alleging that Vizgen's MERSCOPE Platform and workflow and/or Vizgen's Lab Services program, including associated instruments and reagents, infringe U.S. Patent Nos. 11,021,737, 11,293,051, 11,293,052, 11,293,054 and 11,299,767. The Company seeks, among other relief, injunction relief and unspecified damages (including attorneys' fees) in relation to Vizgen's making, using, selling, offering to sell, exporting and/or importing in the United States the MERSCOPE Platform and workflow and/or Vizgen's Lab Services program, including associated instruments and reagents. On July 25, 2022, Vizgen filed a motion to dismiss the Company's claims for willful and indirect infringement, which the Court denied on September 19, 2022. Discovery is in progress. A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.
On August 30, 2022, Vizgen filed its answer and counterclaims alleging that the Company's Xenium product infringes U.S. Patent No. 11,098,303 (the "303 patent"). Vizgen seeks, among other relief, injunction relief and unspecified damages (including attorneys' fees) in relation to the Company's making, using, selling, offering to sell, exporting and/or importing in the United States Xenium products, including associated instruments and reagents. Vizgen also filed counterclaims alleging that the Company tortiously interfered with Vizgen's contractual and business relationship with Harvard and that the Company engaged in unfair practices under Massachusetts state law. On October 27, 2022, the Company filed a partial answer and motion to dismiss the infringement counterclaim and the tort counterclaims. On February 2, 2023, the Company's motion to dismiss was denied. The Company believes Vizgen's claims are meritless and intends to vigorously defend itself.
On March 15, 2023, the Company filed an amended complaint additionally alleging that the MERSCOPE Platform and workflow and Vizgen's Lab Services program infringe U.S. Patent No. 11,549,136 and withdrawing its claim of infringement of U.S. Patent No. 11,293,054. On April 17, 2023, Vizgen filed its answer adding amended counterclaims including antitrust, unfair competition, tort and contract counterclaims. Vizgen seeks, among other relief, injunctive relief (including that the Company grant Vizgen a license to the patents that the Company asserted against Vizgen) and unspecified damages (including attorneys' fees). On May 18, 2023, the Company filed a motion to dismiss Vizgen's amended counterclaims. On July 10, 2023, the Court granted the Company's motion to dismiss Vizgen's contract counterclaim but otherwise denied the Company's motion to dismiss. The Company believes Vizgen's claims are meritless and intends to vigorously defend itself.
15
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
On June 1, 2023, the Company filed suit in the Hamburg Local Division of the Unified Patent Court alleging that Vizgen's MERSCOPE products infringe the EP782 patent. The Company seeks, among other relief, injunction relief and unspecified damages (including attorneys' fees) in relation to Vizgen's MERSCOPE products in all 17 UPC member states. A hearing has not yet been set.
On August 30, 2023, the Company filed a petition for IPR of the 303 patent. Institution was denied on March 7, 2024.
On April 17, 2024, Vizgen filed a motion for leave to amend its counterclaims to add additional antitrust counterclaims alleging bundling and predatory pricing. The Court granted Vizgen's motion for leave to amend on April 26, 2024. The Company believes Vizgen's claims are meritless and intends to vigorously defend itself.
Trial on the Company's claims and on Vizgen's counterclaims is scheduled for February 2025.
Parse
On August 24, 2022, the Company filed suit against Parse Biosciences, Inc. ("Parse") in the U.S. District Court for the District of Delaware alleging that Parse's Evercode Whole Transcriptomics products and ATAC-seq products infringe U.S. Patent Nos. 10,155,981 (the "981 patent"), 10,697,013 (the "013 patent"), 10,240,197 (the "197 patent"), 10,150,995, 10,619,207 and 10,738,357. The Company seeks, among other relief, injunction relief and unspecified damages (including attorneys' fees) in relation to Parse's making, using, selling, offering to sell, exporting and/or importing in the United States Parse's Evercode Whole Transcriptomics products and ATAC-seq products. On October 17, 2022, Parse filed a motion to dismiss alleging that the asserted claims are directed to patent ineligible subject matter. The Court held a hearing on the motion to dismiss on November 22, 2022, and supplemental briefing was submitted on December 15, 2022. On September 14, 2023, the Court denied the motion. Parse filed its answer on October 6, 2023. Discovery is in progress. A Markman hearing is scheduled for February 2024, and trial is scheduled for December 2024.
Between April 20 and June 21, 2023, Parse filed petitions for IPR of all of the patents asserted. On October 13, 2023, IPR was instituted on the 981 patent. The PTAB denied institution of Parse's petitions for IPR on the other five asserted patents. On January 2 and 5, 2024, Parse filed rehearing requests with the PTAB for the 197 and 013 patents, respectively. On February 5, 2024, the PTAB instituted IPRs for the 197 and 013 patents on Parse's requests for rehearing.
On November 6, 2023, Parse filed a motion to stay the Delaware action pending the IPRs. On December 21, 2023, the court denied Parse's motion to stay. On February 8, 2024, Parse filed a renewed motion to stay. On February 20, 2024, the court denied Parse's renewed motion to stay.
Curio
On December 1, 2023, the Company filed suit against Curio Bioscience, Inc. ("Curio") in the U.S. District Court for the District of Delaware alleging that the Curio Seeker Spatial Mapping Kit and associated products and services infringe U.S. Patent Nos. 10,480,022, 10,662,468, 11,001,879, 11,549,138, and 11,761,030. On February 1, 2024, Curio filed a motion to dismiss alleging that the asserted claims are directed to patent ineligible subject matter. Trial is scheduled for May 2026.
On December 4, 2023, the Company filed a request for a preliminary injunction in the Dusseldorf Local Division of the UPC alleging that the Curio Seeker Spatial Mapping Kit and associated products and services infringe EP Patent No. 2697391 (the "EP 391 patent"). A hearing was held on March 26, 2024. On April 30, 2024, the UPC granted the Company's request and issued a preliminary injunction requiring Curio to stop offering, marketing, using or possessing these Curio Seeker products and services in Germany, France and Sweden. The preliminary injunction is enforceable upon provision of a 2.0 million Euro security by the Company.
5. Capital Stock
As of March 31, 2024, the number of shares of Class A common stock and Class B common stock issued and outstanding were 105,644,016 and 14,056,833, respectively.
16
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table represents the number of shares of Class B common stock converted to shares of Class A common stock upon the election of the holders of such shares during the periods:
|
Three Months Ended
March 31,
|
2024
|
2023
|
Class B common stock converted to Class A common stock
|
-
|
600,000
|
6. Equity Incentive Plans
Stock-based Compensation
The Company recorded stock-based compensation expense in the condensed consolidated statement of operations for the periods presented as follows (in thousands):
|
Three Months Ended
March 31,
|
2024
|
2023
|
Cost of revenue
|
$
|
2,033
|
$
|
1,461
|
Research and development
|
16,888
|
17,780
|
Selling, general and administrative
|
17,208
|
22,860
|
Total stock-based compensation expense
|
$
|
36,129
|
$
|
42,101
|
Restricted Stock Units
Restricted stock unit activity for the three months ended March 31, 2024 is as follows:
|
Restricted Stock
Units
|
Weighted-Average
Grant Date Fair Value
(per share)
|
Outstanding as of December 31, 2023
|
5,334,134
|
$
|
48.26
|
Granted
|
992,112
|
41.74
|
Vested
|
(445,112)
|
59.12
|
Cancelled
|
(302,316)
|
46.32
|
Outstanding as of March 31, 2024
|
5,578,818
|
$
|
46.34
|
Stock Options
Stock option activity for the three months ended March 31, 2024 is as follows:
|
Stock Options
|
Weighted-Average
Exercise Price
|
Outstanding as of December 31, 2023
|
5,946,786
|
$
|
42.17
|
Exercised
|
(160,375)
|
10.21
|
Cancelled and forfeited
|
(182,251)
|
41.53
|
Outstanding as of March 31, 2024
|
5,604,160
|
$
|
43.11
|
Performance Stock Awards
In March 2024, the Company granted 219,168 performance stock units (PSUs) under the 2019 Plan to certain members of management which are subject to the achievement of certain performance conditions established by the Company's Compensation Committee of the Board of Directors as described below:
17
10x Genomics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
i.50% of target PSUs earned will be based on the Company's compound annual growth rate (CAGR) of the Company's Revenue over a two-year performance period from January 1, 2024 to December 31, 2025. Holders may earn from 0% to 175% of the target amount of shares and earned PSUs will then be subject to service-based vesting; and
ii.50% of target PSUs earned will be based on the relative Total Shareholder Return (TSR) of the Company's common stock as compared to the TSR of the members of the Russell 3000 Medical Equipment and Services Sector Index over a three-year performance period from January 1, 2024 to December 31, 2026. Depending on the results relative to the TSR market condition, the holders may earn from 0% to 200% of the target amount of shares which will vest at the end of the performance period.
The PSUs will be forfeited if the performance conditions are not achieved at the end of the relative performance periods as described above. The vesting of the PSUs can also be triggered upon certain change in control events or in the event of death or disability.
The weighted-average grant date fair values of the PSUs relating to CAGR and TSR components were $37.43 and $44.80 per share respectively. Stock-based compensation expense recognized for these awards was approximately $0.1 million for the three months ended March 31, 2024.
The Company estimates the fair values of shares granted under the market-based TSR PSUs using a Monte Carlo simulation model with the following assumptions:
|
Expected volatility
|
66%
|
Risk-free interest rate
|
4.5%
|
Expected dividend yield
|
-%
|
In March 2023, the Company granted 172,842 PSUs under the 2019 Plan to certain members of management, which are subject to the achievement of certain stock price thresholds established by the Company's Compensation Committee of the Board of Directors.
As of March 31, 2024, the performance periods for the 2024 PSUs were not completed and none of the stock price thresholds for the 2023 PSUs had been met resulting in no shares vesting or becoming exercisable.
2019 Employee Stock Purchase Plan
A total of 3,686,671 shares of Class A common stock were reserved for issuance under the 2019 Employee Stock Purchase Plan ("ESPP"). The price at which Class A common stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower.
During the three months ended March 31, 2024 and 2023, no shares of Class A common stock were issued under the ESPP. As of March 31, 2024, there were 3,091,063 shares available for issuance under the ESPP.
7. Net Loss Per Share
The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:
|
Three Months Ended
March 31,
|
2024
|
2023
|
Stock options to purchase common stock
|
5,604,160
|
7,556,361
|
Restricted stock units
|
5,578,818
|
5,871,150
|
Shares committed under ESPP
|
116,883
|
100,253
|
Total
|
11,299,861
|
13,527,764
|
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and our audited consolidated financial statements and notes thereto and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 15, 2024 (our "Annual Report"). As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion and analysis, in addition to historical financial information, contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" in this Quarterly Report and Part I, Item 1A of our Annual Report.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology. Our integrated solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of biology. We have launched multiple products that enable researchers to understand and interrogate biological analytes in their full biological context. Our commercial product portfolio leverages our Chromium X Series and Chromium Connect instruments, which we refer to as "Chromium instruments," our Visium CytAssist, an instrument designed to simplify the Visium solution workflow by facilitating the transfer of transcriptomic probes from standard glass slides to Visium slides, and our Xenium Analyzer, an instrument designed for fully automated high-throughput analysis of cells in their tissue environment, which we refer to as "Spatial instruments," and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium solutions, which we refer to as "consumables." We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization.
Our products cover a wide variety of applications and allow researchers to analyze biological systems at fundamental resolutions and on massive scale, such as at the single cell level for millions of cells. Customers purchase instruments and consumables from us for use in their experiments. In addition to instrument and consumable sales, we derive revenue from post-warranty service contracts for our instruments.
Since our inception in 2012, we have incurred net losses in each year. Our net losses were $59.9 million and $50.7 million for the three months ended March 31, 2024 and March 31, 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $1.3 billion and cash, cash equivalents and marketable securities totaling $371.8 million. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term. We expect our expenses will increase in connection with our ongoing activities, as we:
•attract, hire and retain qualified personnel;
•scale our technology platforms and introduce new products and services;
•protect and defend our intellectual property;
•acquire businesses or technologies; and
•invest in processes, tools and infrastructure to support the growth of our business.
19
Comparison of the Three Months Ended March 31, 2024 and 2023
Revenue
|
Three Months Ended
March 31,
|
Change
|
(dollars in thousands)
|
2024
|
2023
|
$
|
%
|
Instruments
|
Chromium
|
$
|
7,850
|
$
|
11,626
|
$
|
(3,776)
|
(32)
|
%
|
Spatial
|
17,603
|
7,550
|
10,053
|
133
|
Total instruments revenue
|
25,453
|
19,176
|
6,277
|
33
|
Consumables
|
Chromium
|
83,927
|
101,096
|
(17,169)
|
(17)
|
Spatial
|
26,408
|
11,282
|
15,126
|
134
|
Total consumables revenue
|
110,335
|
112,378
|
(2,043)
|
(2)
|
Services
|
5,218
|
2,731
|
2,487
|
91
|
Total revenue
|
$
|
141,006
|
$
|
134,285
|
$
|
6,721
|
5
|
%
|
Revenue increased $6.7 million, or 5%, to $141.0 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. Instruments revenue increased $6.3 million, or 33%, to $25.5 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to higher volume of Spatial instruments sold. Chromium instruments revenue decreased $3.8 million, or 32%, to $7.9 million primarily due to lower volume of Chromium instruments sold. Consumables revenue decreased $2.0 million, or 2%, to $110.3 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily driven by lower Chromium consumables sales.
Cost of revenue, gross profit and gross margin
|
Three Months Ended
March 31,
|
Change
|
(dollars in thousands)
|
2024
|
2023
|
$
|
%
|
Cost of revenue
|
$
|
48,092
|
$
|
35,895
|
$
|
12,197
|
34
|
%
|
Gross profit
|
$
|
92,914
|
$
|
98,390
|
$
|
(5,476)
|
(6)
|
%
|
Gross margin
|
66
|
%
|
73
|
%
|
Cost of revenue increased $12.2 million, or 34%, to $48.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily driven by higher manufacturing costs of $10.5 million due to increased sales and higher costs associated with newly introduced products and $2.0 million of higher warranty charges. Gross margin decreased by 7% percentage points to 66% primarily due to change in product mix driven by Xenium instruments.
We expect our gross margin to trend lower due in part to product mix and the impact of royalty obligations which vary by product. In particular, the Xenium instrument currently carries a significantly lower margin than our other instruments. We believe that potential increases for average selling price, as well as potential opportunities for cost reductions due to economies of scale, will improve instrument margin over the long term.
Operating expenses
|
Three Months Ended
March 31,
|
Change
|
(dollars in thousands)
|
2024
|
2023
|
$
|
%
|
Research and development
|
$
|
68,638
|
$
|
67,098
|
$
|
1,540
|
2
|
%
|
Selling, general and administrative
|
85,774
|
83,280
|
2,494
|
3
|
Total operating expenses
|
$
|
154,412
|
$
|
150,378
|
$
|
4,034
|
3
|
%
|
Research and development expenses increased $1.5 million, or 2%, to $68.6 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily driven by $0.6 million of higher
20
personnel expenses and $0.7 million of higher costs for facilities and information technology to support operational expansion. During the three months ended March 31, 2024, we recorded impairment charges of $2.1 million related to computer equipment and software of which $0.7 million was classified as research and development expense in our condensed consolidated statement of operations. The impairment charge was triggered by a decision to discontinue a productivity engineering project.
Selling, general and administrative expenses increased $2.5 million, or 3%, to $85.8 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily driven by $5.9 million of increased outside legal expenses and $2.0 million of higher costs for facilities and information technology to support operational expansion, partially offset by a decrease in personnel expenses of $5.6 million including a decrease of $5.7 million in stock-based compensation expense. During the three months ended March 31, 2024, we recorded impairment charges of $2.1 million related to computer equipment and software of which $1.1 million was classified as selling, general and administrative expenses in our condensed consolidated statement of operations.
Excluding acquisitions, we expect our operating expenditures to continue to increase in 2024 and beyond as we increase our investment in new and existing research and development projects, commercial efforts to support revenue growth and incentives to retain key talent. In addition, we expect increased legal costs in remaining quarters of 2024 to support the protection of our intellectual property portfolio.
Other income (expense), net
|
Three Months Ended
March 31,
|
Change
|
(dollars in thousands)
|
2024
|
2023
|
$
|
%
|
Interest income
|
$
|
4,736
|
$
|
3,869
|
$
|
867
|
22
|
%
|
Interest expense
|
(1)
|
(19)
|
18
|
(95)
|
Other expense, net
|
(1,040)
|
(1,516)
|
476
|
(31)
|
Total other income
|
$
|
3,695
|
$
|
2,334
|
$
|
1,361
|
58
|
%
|
Interest income increased by $0.9 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily due to interest income generated from our cash equivalents and marketable securities during the three months ended March 31, 2024 reflecting an increase in interest rates.
Other expense, net decreased by $0.5 million, or 31% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease was driven by lower net realized and unrealized losses from foreign currency rate measurement fluctuations.
Provision for Income Taxes
The Company's provision for income taxes was $2.1 million and $1.1 million, respectively, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase in the provision for income taxes was primarily due to higher foreign income. Deferred tax assets related to our domestic operations are fully offset by a valuation allowance.
Liquidity and Capital Resources
As of March 31, 2024, we had $371.8 million in cash and cash equivalents and marketable securities. We have generated negative cumulative cash flows from operations since inception through March 31, 2024, and we have generated losses from operations since inception as reflected in our accumulated deficit of $1.3 billion.
We currently anticipate making aggregate capital expenditures of between approximately $15 million and $20 million during the next 12 months, which we expect to include, among other expenditures, equipment to be used for manufacturing and research and development.
Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, investments in or acquisitions of complementary or enhancing technologies or businesses, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and international activities, legal costs associated with defending and enforcing intellectual property rights and the introduction of new products.
21
We take a long-term view in growing and scaling our business and we regularly review acquisition and investment opportunities, and we may in the future enter into arrangements to acquire or invest in businesses, real estate, services and technologies, including intellectual property rights, and any such acquisitions or investments could significantly increase our capital needs. We regularly review opportunities that meet our long-term growth objectives.
We expect to continue to incur operating losses for the foreseeable future. We believe that our existing cash and cash equivalents and cash generated from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
We intend to continue to evaluate market conditions and may in the future pursue additional sources of funding, such as mortgage or other financing, to further enhance our financial position and to execute our business strategy. In addition, should prevailing economic, financial, business or other factors adversely affect our ability to meet our operating cash requirements, we could be required to obtain funding though traditional or alternative sources of financing. We cannot be certain that additional funds would be available to us on favorable terms when required, or at all.
Sources of liquidity
Since our inception, we have financed our operations and capital expenditures primarily through sales of convertible preferred stock and common stock, revenue from sales of our products and the incurrence of indebtedness.
The following table summarizes our cash flows for the periods indicated:
|
Three Months Ended March 31,
|
(in thousands)
|
2024
|
2023
|
Net cash provided by (used in):
|
Operating activities
|
$
|
(15,725)
|
$
|
(4,125)
|
Investing activities
|
10,632
|
119,956
|
Financing activities
|
1,638
|
(3,414)
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(48)
|
24
|
Net increase (decrease) in cash and cash equivalents
|
$
|
(3,503)
|
$
|
112,441
|
Operating activities
The net cash used in operating activities of $15.7 million for the three months ended March 31, 2024 was primarily due to a net loss of $59.9 million, net cash outflow from changes in operating assets and liabilities of $6.3 million, primarily offset by stock-based compensation expense of $36.1 million, depreciation and amortization of $9.2 million, lease and asset impairment charges of $2.5 million, amortization of leased right-of-use assets of $2.3 million, and other non-cash expenses of $0.4 million. The net cash outflow from operating assets and liabilities was primarily due to a decrease in accrued expenses and other current liabilities of $12.7 million primarily driven by a payment of $20.0 million related to purchase consideration, an increase in inventory of $9.9 million, a decrease in accrued compensation and other related benefits of $9.4 million related to the prior year annual bonus payments and a decrease in operating lease liability of $3.0 million. The net cash outflow from operating assets and liabilities was partially offset by an increase in accounts receivable of $23.5 million due to timing of collections, an increase in accounts payable of $4.6 million and an increase in deferred revenue of $2.1 million.
The net cash used in operating activities of $4.1 million for the three months ended March 31, 2023 was primarily due to a net loss of $50.7 million, net cash outflow from changes in operating assets and liabilities of $6.0 million, primarily offset by stock-based compensation expense of $42.1 million, depreciation and amortization of $6.5 million, amortization of leased right-of-use assets of $2.1 million, realized losses on sale of marketable securities of $1.7 million, and other non-cash expenses of $0.2 million. The net cash outflow from operating assets and liabilities was primarily due to a decrease in accrued compensation and other related benefits of $15.1 million related to the prior year annual bonus payments, an increase in other noncurrent assets of $10.5 million primarily due to an upfront payment for an intellectual property license of $10.0 million, an increase in prepaid
22
expenses and other current assets of $4.3 million, and a decrease in operating lease liability of $2.3 million. The net cash outflow from operating assets and liabilities was partially offset by a decrease of accounts receivable of $26.3 million due to timing of collections and an increase in deferred revenue of $1.1 million.
Investing activities
The net cash provided by investing activities of $10.6 million in the three months ended March 31, 2024 was due to proceeds from sales and maturities of marketable securities of $0.6 million and $13.0 million, respectively, partially offset by purchases of property and equipment of $2.9 million.
The net cash provided by investing activities of $120.0 million in the three months ended March 31, 2023 was due to proceeds from sales and maturities of marketable securities of $93.3 million and $31.9 million, respectively, partially offset by purchases of property and equipment and intangible assets of $4.6 million and $0.7 million, respectively.
Financing activities
The net cash provided by financing activities of $1.6 million in the three months ended March 31, 2024 was primarily from proceeds related to the issuance of common stock from the exercise of stock options.
The net cash used in financing activities of $3.4 million in the three months ended March 31, 2023 was primarily from proceeds of $2.4 million from the issuance of common stock from the exercise of stock options, partially offset by payments on financing arrangements of $5.8 million.
Critical Accounting Estimates
Our condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the applicable rules and regulations of the SEC. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2024 as compared to the critical accounting policies and estimates disclosed in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our most recent Annual Report on Form 10-K filed with the SEC on February 15, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to Item 7A "Quantitative and Qualitative Disclosures about Market Risk" contained in Part II of our Annual Report. Our exposure to market risk has not changed materially since December 31, 2023.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
23
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2024.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
24
10x Genomics, Inc.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
We are regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings involving intellectual property disputes, commercial disputes, competition and other matters, and we may become subject to additional types of lawsuits, claims, arbitration proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future and as our business grows, including proceedings related to product liability or our acquisitions, securities issuances or our business practices, including public disclosures about our business. Our success depends in part on our non-infringement of the patents or proprietary rights of third parties. In the past, third parties have asserted and may in the future assert that we are employing their proprietary technology without authorization. We have been involved in multiple patent litigation matters and other proceedings in the past and we expect that given the litigious history of our industry and the high profile of operating as a public company, third parties may claim that our products infringe their intellectual property rights. We have also initiated litigation to defend our technology including technology developed through our significant investments in research and development. It is our general policy not to out-license our patents but to protect our sole right to own and practice them. There are inherent uncertainties in these legal matters, some of which are beyond management's control, making the ultimate outcomes difficult to predict.
Refer to Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Item 1A. Risk Factors.
There have been no material changes to our risk factors that we believe are material to our business, results of operations and financial condition from the risk factors previously disclosed in our Annual Report, and any documents incorporated by reference therein, which is accessible on the SEC's website at www.sec.gov.
Item 5. Other Information
None of our directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2024, as such terms are defined under Item 408(a) of Regulation S-K, except as follows:
On December 13, 2023, James L. Wilbur, our former Chief Commercial Officer, adopted a Rule 10b5-1 trading arrangement that was intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 147,095 shares of the Company's common stock. The expiration date of the trading arrangement was December 31, 2024. On February 21, 2024, the trading arrangement was terminated at the election of Dr. Wilbur.
On March 10, 2024, Shehnaaz Suliman, a member of our Board of Directors, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 20,016 shares of the Company's common stock. The expiration date of the trading arrangement is June 14, 2024.
On March 11, 2024, Benjamin J. Hindson, Chief Scientific Officer and President, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 22,496 shares of the Company's common stock plus up to 190,845 carryover shares from a prior 10b5-1 plan that will expire on June 14, 2024, subject to certain conditions. The expiration date of the trading arrangement is June 13, 2025.
25
Item 6. Exhibits.
|
Exhibit
Number
|
Incorporated by Reference
|
Exhibit Title
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
Filed Herewith
|
3.1
|
|
8-K
|
001-39035
|
3.1
|
9/16/2019
|
3.2
|
|
10-Q
|
001-39035
|
3.2
|
11/3/2022
|
4.1
|
|
S-1
|
333-233361
|
4.2
|
8/19/2019
|
31.1
|
|
X
|
31.2
|
|
X
|
32.1*
|
|
X
|
32.2*
|
|
X
|
101.INS
|
Inline XBRL Instance Document.
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
104
|
Cover Page Interactive Data File (the Cover Page Interactive Data File does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
|
* This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
26
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
10x Genomics, Inc.
|
|
Date: April 30, 2024
|
By:
|
/s/ Serge Saxonov
|
Serge Saxonov
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
Date: April 30, 2024
|
By:
|
/s/ Justin J. McAnear
|
Justin J. McAnear
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
27