Hello, good afternoon, and welcome to the 10x Genomics Fourth Quarter 2021 Earnings Call. My name is Gemma, and I will be the operator for today. I'll now hand over to our host, Eric Jaschke. Please go ahead. Thank you.

Thank you. Earlier today, 10x Genomics released financial results for the full year and fourth quarter ended December 31, 2021. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an e-mail to [email protected]. 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 Saxonov, our CEO and Co-Founder; and Justin McAnear, our Chief Financial Officer. In addition, Brad Crutchfield, our Chief Commercial Officer, will be available for Q&A. With that, I'll now turn the call over to Serge. Serge?

Thanks, Eric. Good afternoon, and thank you for joining our call. During today's call, I will provide a summary of our fourth quarter and 2021 strategic progress, operational highlights and financial performance. I also want to spend some time on our plans and expectations for 2022 and while we believe the actions and investments we make this year will set us up to accelerate and sustain growth into 2023 and beyond. I will then turn the call over to Justin for a more detailed look at our financials and guidance. We made significant progress on the key objectives we outlined at the beginning of the year. During 2021, we launched five new products, including Chromium X and Visium FFPE. We sold 1,100 instruments, settled our worldwide litigation with Bio-Rad and drove upwards of 300 new net studies applications. Our technologies contributed to more than 1,300 new peer-reviewed papers and added nearly 400 employees as we continued to scale our organization. These investments and innovations fueled growth of 64% over the prior year, bringing 2021 revenue to $490 million. This was driven as part of the continued growth in instrument placements. Cumulative instruments sold increased 46% year-over-year to more than 3,500. In addition, consumables revenue increased 66% in 2021. Single cell and spatial approaches continue to gain adoption as essential tools for discovery research. Our conviction and our opportunity remain as strong as ever, and we're continuing to invest and build the company to drive sustained high growth in the future. And while we're bullish about the opportunity ahead, we anticipate some headwinds that will temporarily impact our growth in 2022, most notably in the first half of the year. For 2022, we expect revenues to be in the range of $600 million to $630 million, representing 22% to 28% annual growth. This range reflects solid growth with new and existing customers, offset by the following near-term headwinds. First, the ongoing impact of Omicron into the first quarter, particularly with academic customers. Second, on average, recent customer cohorts have been ramping consumable utilization somewhat more slowly than our earlier cohorts. And third, we're accelerating the product development of our Xenium platform, which has delayed the timing of other product launches. We firmly believe this is transitory and we look forward to building momentum throughout this year into 2023 and beyond. Before we provide more detail on our 2022 priorities, let me go through our fourth quarter results. Revenue for the fourth quarter totaled $144 million, up 28% year-over-year and 15% sequentially, driven by strong demand for our products despite Omicron-related headwinds that emerged near the end of the quarter. Once again, we saw solid demand for Chromium instruments, driven by continued enthusiasm for the recently introduced Chromium X Series. Since launched, it has become clear that this platform has broad appeal that goes beyond early adopters. The flexibility to scale experiments and access high throughput capabilities resonates with both new customers and across our existing user base. This year, we plan to drive broader placement of our Chromium X Series instrument using this platform to onboard new customers and upgrade existing users. We want to ensure our customers have the most powerful tools available for single-cell analysis, which is why we will focus on encouraging upgrades to Chromium X and/or iX this year and beyond. Turning to consumables. Our high throughput kits have significantly exceeded our expectations so far, and we are encouraged by the growth we're seeing in high throughput applications. Since launch, our customers have been using HT kits to analyze more samples and more cells to scale up their existing studies and to enable previously impractical or cost-prohibitive experiments. We also saw continued growth across our portfolio of standard throughput single-cell consumables this quarter. The breadth of our offerings covering gene expression, immune profiling, epigenetics, proteins and multi-omics is unique and continues to resonate well with our growing customer base. Researchers have made 10x the leader in single-cell analysis because of our breadth of applications, excellent product performance and great customer experience, all of which drive sustained leadership and help fuel new interest. I'd like to touch on what we are observing with recent customer cohorts. We have previously discussed two types of customers, those that own instruments and those that do not, which we have referred to as halo users. Halo users have been an increasing percentage of our customer base and on average, use fewer consumables than instrument owners. While this means that on average, recent cohorts are ramping consumable utilization slower than earlier cohorts, it's a great sign for the long-term trajectory of the business because it points to an expanding universe of customers entering the single-cell ecosystem. I want to emphasize that recent customers who do purchase instruments are ramping similarly to our earlier adopters. They start with a consistent level of utilization and grow their consumable usage in line with previous cohorts. This still is a great sign for the trajectory of the business because it points to sustainable long-term growth within our Chromium franchise. Turning now to Visium. Q4 was a strong quarter for both fresh frozen and FFPE. Visium is the only platform that delivers unbiased spatial analysis at high resolution across the entire tissue sample. And while it remains very early in its life cycle, we saw increasing customer enthusiasm and commercial progress. Visium revenue doubled in 2021. In addition, the number of peer-reviewed publications using Visium more than doubled during the year, while the number of preprints nearly quadrupled. Both of these are important leading indicators of market adoption. Notably, these papers are driven almost entirely by our customers, with limited 10x input, demonstrating the success researchers are having with Visium. All these measures are clear signs that the benefits of Visium are resonating with customers. And finally, we made significant investments to scale the company in anticipation of future growth. In 2021, we added nearly 400 employees to the team, with the majority of these hires in our R&D and commercial organizations including our new dedicated team of tissue support specialists. We also grew our global footprint, scaling our R&D sites in California, Sweden and Singapore and kicking off the expansion of sophisticated manufacturing facilities at our headquarters in Pleasanton, which we expect to open by year-end. We have always said that one of the best measures of our impact is the discoveries that customers make with our technologies. This year, our customers published more than 1,300 new peer-reviewed papers, bringing the total to over 3,300 since the first publication in 2016. As more research moved beyond exploratory studies to translational and disease-oriented studies featuring our products, these breakthroughs increasingly gained mainstream attention. Just recently, CNN showcased research on CAR-Ts curing patients with leukemia. The New York Times featured a cycle on long COVID and highlighted the cell centers of the human motor cortex, a foundational step to revolutionize our understanding of neurodegenerative disease. As we look ahead, our conviction about our opportunity is unwavering, and we're continuing to build a company to drive high growth in the future. This starts with continued significant investments in our three complementary platforms: Chromium, Visium and Xenium. We will also continue to invest in our commercial team and operations capabilities to support the success of these platforms in the future. Starting with R&D and product development. We are very excited about this year's product pipeline, which we have prioritized around two key areas: First, new products that enable increased adoption of Chromium and Visium; and second, the acceleration of our Xenium in situ platform. First in Chromium, while this platform is now a well-established leader in single-cell analysis, we're still very early with this opportunity and very optimistic about the long-term trajectory. Our goal is to make single-cell analysis accessible to every biology lab in the world to make it the standard for most biological research. We will continue to invest to drive broad adoption, remove bottlenecks and create more value for researchers around the world. With this in mind, we are really excited to launch our new fixed RNA profiling kit later this year. This product addresses a critical need for many of our customers. Today, single-cell researchers must intricately plan their experiments to maintain cell viability from sample collection through to processing on our Chromium instrument. This imposes a significant burden on our customers, and it's particularly difficult when working with human samples, which are essential in translational workflows. With our fixed RNA profiling kit, our customers will now be able to fix their tissue at the time of collection, store it and proceed to their single-cell workflow at a time and place of their choosing. We believe this product has the potential to be transformative to our single-cell franchise over the long term. In addition to workflow benefits, the fixed RNA profiling kit also delivers improved sensitivity and more efficient sequencing, built-in sample multiplexing capabilities and efficient targeting to enable customers to focus on the genes most relevant to their research. We intend to launch this product exclusively on the Chromium X Series in mid-2022. We also look forward to the planned launch of our new Barcode Enabled Antigen Mapping or BEAM product in the back half of the year. The solution is built on top of our new profiling product and will allow researchers to analyze up to millions of B or T cells to determine their antigen binding at high plex and high resolution. By virtue of scale and resolution, BEAM has the potential to exponentially transform the process of antibody and T cell discovery. Now on to Visium. We continue to invest aggressively to advance our leadership in spatial discovery research. We believe the breadth of our business roadmap is unrivaled in spatial analysis, and we anticipate a robust series of launches starting in mid-2022, focused on enabling more analytics, more samples and more resolution. First, we'll enable simultaneous gene expression and high-plex protein analysis on the same tissue. We will also add support for larger catching areas and an improved customer workflow for additional flexibility and access to more tissues. We believe these capabilities will create significant value for our customers and expect them to ship in mid-2022. Second, we plan to ship our CytAssist instrument in the back half of the year, which will really simplify the Visium workflow and significantly expand the number of tissue samples accessible to the platform. And finally, we're looking forward to giving customers the ability to go to much higher resolution with Visium HD. Visium HD will access the entire transcriptome across the entire tissue sample at single-cell scale. We believe this product will represent the single best platform for spatial discovery research, and we expect to launch it near the end of 2022. Lastly, turning to our Xenium platform for in situ analysis. Xenium will help customers analyze their issues at an incredible level of detail once they know what genes they're looking for. It will provide the ability to measure specific targets directly in tissue at high plex and high resolution with a fully integrated workflow. Xenium is naturally complementary to both Chromium and Visium. It helps build on the insight from these platforms by providing the means for following up, validating and deeply characterizing customers' samples. We're focused on building a robust platform that works across tissues, sample pads and the high throughput. As we have done previously, our goal is to make Xenium the industry standard by pursuing rapid innovation, application expansion and excellent customer experience. We anticipate that the integration of the customer experience across our three platforms will be particularly valuable to researchers. We have long believed that in situ analysis represents a tremendous opportunity with potential to transform life science research and ultimately, clinical practice. Since we announced our plans to enter the space with acquisitions of CartaNA and ReadCoor, there's been tremendous interest from our customers. Over the course of 2021, we intentionally prioritized and shifted resources to Xenium, and we've made significant progress building on technology and intellectual property we acquired with our own - together with our own innovations. At the same time, the in situ opportunity has materialized faster than we initially anticipated. Based on our progress and the robust interest from our customers, we believe we can access this opportunity earlier than we previously planned. We have invested additional resources to prioritize in situ and accelerate our timelines. As a result, we plan to ship Xenium instruments by the end of this year. While this means that some of our new products will launch somewhat later than we initially planned, we're confident in our strategy. Here, as in all our decisions, we are prioritizing the long-term view. That has been our philosophy since the earlier days of 10x, and will continue to guide us moving forward. Before I turn the call over to Justin, I want to be clear, our conviction on the vast opportunity ahead is as strong as ever, and we're well positioned to achieve it. While the path ahead may not be linear, we know what the endpoint is. In the future, the vast majority of tissue samples will need to be analyzed using the technologies we're building. That vision drives our strategy as we continue to make investments in our foundation and innovate across our three platforms. That's how we will fulfill our mission, make the biggest impact and transform the future of health and medicine.

Thank you, Serge. Before addressing our outlook for 2022, I'll first walk through our fourth quarter and full year results. Total revenue for the three months ended December 31, 2021, was $143.5 million compared to $112.2 million for the prior year period, representing a 28% increase year-over-year and a 15% increase quarter-over-quarter. Consumables revenue was $122.4 million, which increased 27% over the prior year period. Instrument revenue was $19.4 million, which increased 38% over the prior year period. Service revenue was $1.8 million, which increased 6% over the prior year period. During the fourth quarter, we saw increasing headwinds related to the rise of the Omicron variant as sales opportunities for labs in the more impacted areas were not realized due to staffing capacity, slowdown and generally increased uncertainty around near-term operations. Some customers in Europe closed their labs early ahead of the holiday season. These impacts were particularly relevant for academic customers who make up a large majority of our revenue. While overall, this resulted in our revenue coming in at the lower end of our guidance range, the particular dynamics were evident in our Q4 regional results. Revenue for the Americas for the fourth quarter was $77.2 million, representing 35% growth over the prior year period. EMEA revenue for the fourth quarter was $34.7 million, representing 6% growth over the prior year period. APAC revenue for the fourth quarter was $31.6 million, representing 41% growth over the prior year period. Turning to the rest of the income statement. Gross profit for the fourth quarter of 2021 was $115.9 million compared to a gross profit of $93.3 million for the prior year period. Gross margin for the fourth quarter was 81% compared to 83% for the fourth quarter of 2020. The gross margin decrease was driven primarily by the impact of shifting product mix, partially offset by decreased costs related to ramping our second manufacturing facility. Total operating expenses for the fourth quarter of 2021 were $131.8 million compared to $502.9 million for the fourth quarter of 2020. The decrease in operating expenses was primarily driven by lower in-process research and development expenses compared to the fourth quarter of 2020, which included a $406.9 million charge related to the acquisition of ReadCoor. The decrease was partially offset by increased operating expenses related to higher personnel expenses, including stock-based compensation, increased expenses related to equipment facilities and technology, and increased marketing expenses. R&D expenses for the fourth quarter of 2021 were $61.9 million compared to $39.7 million for the fourth quarter of 2020, excluding in-process R&D expenses related to acquisitions. SG&A expenses for the fourth quarter were $69.9 million compared to $56 million for the fourth quarter of 2020. The increases in our R&D and SG&A expenses during the quarter were primarily due to increased personnel-related costs as we continue to scale the organization. Operating loss for the fourth quarter was $15.8 million compared to a loss of $409.6 million for the fourth quarter of 2020 due primarily to the impact of lower in-process research and development expenses. This included $26.9 million of stock-based compensation for the fourth quarter of 2021 compared to $14.3 million for the fourth quarter of 2020. Net loss for the period was $18.4 million compared to a net loss of $415.6 million for the fourth quarter of 2020. Turning to our full year results. Total revenue for the full year ended December 31, 2021, was $490.5 million compared to $298.8 million for 2020, representing a 64% increase. Consumables revenue was $418.7 million, an increase of 66% over the prior year. Instrument revenue was $64.5 million, an increase of 61% over the prior year. Service revenue was $7.3 million, an increase of 21% over the prior year. As of year-end, we have sold a cumulative total of 3,511 Chromium instruments, up 1,099 instruments from 2,412 instruments at the end of 2020, which represents a 46% increase in the cumulative instruments sold. Pull-through per instrument for 2021 was $142,000, increasing from $124,000 in 2020. The increase was primarily driven by a lessening impact from COVID in 2021 as compared to 2020, which more than offset the dilutive impact of our rapid increase in cumulative instruments sold during the year. I should point out that with the emerging complexity of our product offerings, pull-through per instrument is less relevant for us today than it was in the past given the expanding breadth of our portfolio and is not necessarily representative of trends in our business. For example, a number of our customers are purchasing Chromium X series instruments as a replacement for our Chromium Controller, and other of our solutions do not require a Chromium instrument, both indicators of ways in which the reliability of the pull-through metric has been reduced. Also, as we have said in the past, our consumables pull-through was impacted by additional factors, including expanding utilization by our existing customers, the rate of new customer acquisition and the ramp of new customers' utilization. It is further impacted by the overall mix of halo users and their ordering patterns. As our business product lines and customer composition have become more complex, we believe this metric represents an oversimplification of these different drivers and can obscure underlying trends in the business. Our focus is to increase the utilization of our products and drive growth in overall consumables revenue. To assess our performance in these goals, in addition to revenue, we also track a number of reactions sold in a given period. During 2021, our customers bought over 310,000 reactions worth of consumables products; this was up from approximately 200,000 reactions in 2020 and represents an increase of 56% year-over-year. Moving next to regional results for 2021. Revenue from the Americas for the full year was $265 million, representing 66% growth over the prior year. EMEA revenue for the full year was $108.5 million, representing 48% growth over the prior year. APAC revenue for the full year was $117 million, representing 77% growth over the prior year. Gross profit for 2021 was $416.4 million compared to a gross profit of $240.4 million for 2020. Gross margin for 2021 was 85% compared to 80% for 2020. The increase in gross margin was primarily due to lower accrued royalties related to the Bio-Rad agreement, including a one-time reversal of $14.7 million of previously accrued royalties and decreased costs related to ramping our second manufacturing facility, partially offset by the impact of shifting product mix. Total operating expenses for 2021 were $468.7 million compared to $774.5 million for 2020, which included $447.5 million of in-process R&D expenses related to the acquisitions of CartaNA and ReadCoor. R&D expenses for 2021 were $211.8 million compared to $123.4 million for 2020, excluding $447.5 million of in-process R&D expenses related to the acquisitions of CartaNA and ReadCoor. The increase was primarily attributable to increased personnel and stock-based compensation expenses, laboratory materials, supplies, expensed equipment and facilities costs. SG&A Expenses for 2021 were $257.6 million compared to $202.3 million for the prior year. The increase was primarily due to increased personnel and stock-based compensation expenses and marketing expenses, partially offset by decreased litigation expenses. Operating loss for 2021 was $52.3 million compared to a loss of $534.1 million for 2020. Net loss for 2021 was $58.2 million compared to a net loss of $542.7 million for 2020. We ended 2021 with $587 million in cash and cash equivalents. Turning to our outlook for 2022. We expect full year revenue to be in the range of $600 million to $630 million, representing growth of 22% to 28% over full year 2021. This range incorporates our latest views on our 2022 product launch timelines, customer utilization trends and finally, the continuing impact of Omicron on our customers' operations and the resulting slowness we have seen thus far to start the year. As Serge noted, we have made the decision to reposition some of our product launches in 2022. Most notably, we have focused internal resources to pull the Xenium launch forward, and this has caused modest delays in some launches planned for 2022. When combined with the impact from Omicron in the first quarter, these changes result in an expected slower rate of growth this year, particularly in the first half. These product launch decisions are made from a perspective that extends well into the future. And from that perspective, we believe these changes will drive more revenue overall and set us up to accelerate growth into 2023 and beyond. Looking at Q1 trends, we have seen a very slow start to the year, given continuing Omicron headwinds, and we believe it is unlikely that the decreased order activity thus far in Q1 will be made up in the future. As such, we expect to see Q1 to be a lower percentage of our annual revenue than in the past, with our best estimate in the high teens range compared to low 20s in 2019 and 2021. This has been reflected in our 2022 annual guidance range. There also remain continued supply chain and logistics risks that we have called out previously and remain unpredictable. Looking past Q1, we are optimistic about the remainder of the year. As COVID impacts begin to abate, and our newer product launches have an increasing impact on revenue, we expect to see an acceleration of growth in the back half of the year. So given the weakness we have seen so far this year, we expect 2022 to be even more heavily weighted towards the back half than our historical trends would suggest, particularly towards Q4. In the past, we've seen about a 45% to 55% split between the first half and second half annual revenue. And this year, we expect about a 40% to 60% split. Moving to gross margin. We expect that our gross margin will trend slightly lower from where we exited the year as our newly introduced products expand to become a larger percentage of our overall revenue. We plan to continue to invest across the business to support our growth. Within commercial, we plan to expand the organization to nearly 500 commercial employees, including adding additional headcount dedicated to increasing adoption of Visium and preparing for the launch of our Xenium in situ platform. We also plan to invest in our R&D organization to maintain our rapid pace of innovation. Finally, we are continuing to invest in the expansion of our manufacturing facility located at our headquarters in Pleasanton to ensure that we are able to deliver our market-leading products to our customers. With $587 million in cash and cash equivalents as of year-end, we are exiting the year with a strong cash position. Given our strong balance sheet, we are confident in our ability to execute on our current roadmap without raising additional capital.

Thanks, Justin. Before we open it up to questions, let me reemphasize three key beliefs that I have about our business: first, we're very confident we will accelerate growth into 2023 and beyond. There are some temporary near-term headwinds reflected in our growth expectations for 2022, but our long-term story is fully intact. Second, the Chromium opportunity is huge. We are the clear leader in single-cell analysis and are still in the early days. We're continuing to invest significantly to deliver on the full promise and potential of single-cell biology. And third, we now expect to ship Xenium this year. Our intent is for Xenium to become the industry standard for in situ analysis, just like Chromium is for single-cell. And we believe the combination of our three platforms: Chromium, Visium and Xenium is a real differentiator that will create meaningful value for customers. We are looking forward to sharing more about Xenium and our robust single-cell and spatial pipeline at the next week's Xperience event. We've got the track record, the scale and the team to deliver. I'm very proud of what we have built so far and believe the strength of our innovation engine, commercial breadth and operational capabilities positions us incredibly well for the long term. It's our employees who make all this possible, and I can't thank them enough for their tireless pursuit of our mission. We're still just getting started. With that, we'll now open it up for questions.

Our first question today comes from Tycho Peterson of JPMorgan. Please go ahead with your question.

I'm going to start out with one on the guide. You called out some headwinds here. The Q1 implied guidance certainly worse than the sequential decline even from some of the peers that have called out Omicron and some of the academic softness. So can you maybe just help us think about how much of this is Omicron? How much is supply chain? How much is this reprioritization around the product launches?

Tycho, this is Justin. I'll take that. So the guidance range that we're putting out right now is $600 million to $630 million with the midpoint of $615 million. And keep in mind, this is an annual number, but there is a decent impact to Q1 that we've highlighted, with January being very slow and some slowness coming out of January as well. And so that's shifting the overall mix for the year, particularly shifting more towards the back half than the first half. But I would say that the impacts are the first - there are three main impacts. The impact of Omicron, the impact of recent cohorts ramping more slowly, and that's being driven by the increase in halo users and then also the acceleration in Xenium, basically pushing out some of the other launches. And I would say the impacts to 2022 are spread pretty evenly across those three. But the Omicron impact, we definitely expect that to impact the first part of the year much more than the second half.

Okay. And then a follow-up just on pipeline. You previously guided for Xenium will be accessed this year. So I'm just - can you clarify what's changed on the timing? Are you talking full commercial launch earlier? And then separately on Chromium X and iX, how are you incentivizing customers to upgrade? And what percentage do you think would actually upgrade over the course of this year?

Yes. So I'll take the first one, Tycho. Yes, to clarify, we are shipping, we will commercially ship this year for Xenium. And in terms of incentivization for iX and X, while the customers have actually been coming to us, and they've been naturally upgrading their instruments to a greater extent than we expected so far. Going forward, the fact that our fixed RNA profiling kit will only be available on the iX, Chromium X Series is going to be a big motivator we expect to drive the replacement cycle.

Okay. But you're not able to give us any sense of what percentage of the installed base you think would upgrade and also implications around pull-through?

Well, so our goal ultimately, I think that the vast majority of our installed base will upgrade to the X Series. But it will take some amount of time to upgrade to kind of line up funding to get comfortable with the new workloads and so on. But yes, we feel pretty confident in terms of the upgrade cycle. It's way too early to talk about pull-through on iX at this stage.

Our second question today comes from Derik De Bruin of Bank of America. Your line is open. Please go ahead.

So I'm going to try to squeeze in three here. So I think the first one is, I appreciate that you don't think throughput or pull-through, I'm sorry, is a viable measure anymore, and I can appreciate that just given the change. But can you just give us some sense then on reactions then on how the older users, the earlier cohorts ramped and then the newer cohorts? And I guess what are you doing? Or what do you think it's going to take to get the newer cohorts to accelerate like that? Is that - yes, I guess I'll start there - stop there initially.

Derik, this is Justin. I'll take that one. As far as comparing the newer cohorts to the older cohorts and the differences in usage between them, the first thing to understand is that just at a high level, on average, the newer cohorts are ramping slower than the earlier cohorts. But also the newer cohorts are having an increasing percent of their overall users be halo users. And then when we look at halo users and instrument users separately, we found that even in the newer cohorts, the instrument users are ramping more similar to the earlier users. And it's really that increasing percentage of halo users who's purchasing is more sporadic that is the difference between those cohorts. So we're looking to convert - focus on converting halo users into instrument owners. We've seen that when a customer becomes an instrument owner, their growth is predictable and comparable to the past cohorts.

So just to follow up on that. I mean you had an impressive instrument placement number in 2021, how should we think about instruments for '22? And the Xenium potentially cannibalize any of those purchases of chromium in those products? I mean just a little bit of discussion on the user, the end user for that. I don't think it does, but would just like some clarity.

Yes. So overall, we don't give guidance on a number of instrument placements, but let me just point out a few things to think about for 2021. I think there were two important factors in 2021 that drove the explosive instrument growth and we increased our installed base over 45% from the previous year, from the 2,412 to over 3,500. But there are two important factors that drove that. One was the strategic price decrease on the Chromium Controller down to $35,000. And then the launch of the Chromium X and the iX series instruments. And so with close to 1,100 placements last year compared to about 700 - compared to 746 the year before, it was a huge step-up in annual placements. And so when you think about placements this year, I think you've got to adjust for the spike that those two factors drove in 2021. But then I still think it's reasonable to assume some kind of growth on top of that.

Yes, we don't see any cannibalization. In fact, it's just the opposite because the two platforms are incredibly complementary and the use cases tend to be very complementary to what people use - kind of generate single cell data sets using Chromium and then follow-up, characterize their samples with in situ given in Xenium. So we actually see more of a synergistic than anything else.

Great. And then just one quick one. You mentioned that Visium was up - grew twice the 2x over - it was the prior year. Can you give us a number of what the base flow just so we have some sense of where that number is as far as consumables?

Derik, we don't break out Visium sales separately, but I can tell you that it's an increasing percentage of our overall revenue.

Dan Brennan of Cowen, you have the next question. Please go ahead.

I just wanted to start off with a regional question. I know EMEA looks like it was - in the quarter, it was certainly very weak, up 6% versus Americas and APAC. So can you give a little color maybe how EMEA trended in the quarter and what - if it's possible to give an update on the geographic kind of trends as we've got into 1Q?

Dan, this is Justin. I'll take that one. So going along with some comments that we made earlier on just the impact of Omicron in Q4. We felt that the hardest in EMEA. And Q3 is typically seasonally slow in EMEA and Q4 is typically the best quarter of the year for EMEA. And in areas where Omicron was raging in the hot spots, just where we saw the biggest impact, particularly with the academic customers. If EMEA has grown 30% year-over-year like the other regions, probably would have seen another $8 million-plus worth of revenue in EMEA. And then I think as you saw AMR and APAC were particularly strong in Q4. We did see some impact in the AMR on the East Coast due to Omicron. The West Coast was basically untouched during Q4, and actually came in a little bit over what we had expected. So we saw the impact in Europe, saw the impact on the East Coast of the U.S. But then even as Omicron has continued on within AMR, Q1 thus far has been slow basically in both AMR and EMEA. Was there a second part to that?

Got it. Okay. Yes. No, I was just - I was looking for some update on intra-quarter, but I think you kind of answered it there, that continued to be slow. Maybe one, just back to halo, just is it possible to give us a sense of what the mix is for halo versus instrument orders, excuse instrument owners? And is there any reason to think that the fact that you've got this increasing mix of halo, does that signify maybe the TAM isn't big because you've got customers who don't want to buy the box, but they'd rather just kind of generate single-cell off service? And then I'm just wondering what's the plan to reverse that trend?

It's Justin. I'll start with some general commentary on halo users. So basically halo users when you look at them as a percent of the business, they are now - they've been growing steadily and so they are now over half of our customers, but they're less than half of our revenue. And so when you think about just when you think about the opportunity that this presents to convert those halo users produces over into instrument owners, it's an ever-growing opportunity the more halo users that come in, and it's something that we focus on right now as well.

Yes. And in terms of the TAM question, I think we actually take the opposite view based on our experience from actually the early days of the company, people, they tend to come into the single-cell ecosystem kind of initially sporadically. And then over time, kind of as they get grants, as they get up to speed on the workflow, converted to more consistent users and then they at that point attempt to buy instruments. So we actually don't anticipate that dynamic is going to change which is part of the reason why we see those actually more of a validation of the TAM expansion and bullishness on the long term. One thing I would point out is sort of the trend of instruments has slowed down significantly over the last two years, specifically since the beginning of the pandemic. Which is why again, it's another sign that once you sense the reason, right? These are the customers who have the greatest challenges of working through the logistics of actually accessing instruments to ramp up and to get trained by other customers. So yes, we see that those trends will naturally reverse and in fact, just based on the ramp-up of our existing instrument cohorts, right, instrumental-owning cohorts, we expect very robust growth going forward.

Got it. If it's possible, one more, just on Xenium, the fact that you're pulling it forward. Could you provide more color on like what you're seeing or what you're hearing and the decision to pull it forward? I don't know if you've sized the opportunity and/or discussed the competitive profile, but any color on kind of what you're seeing and why and how you think it's going to play out?

So look, in the in situ space, it was very bullish from the very beginning, right? That's why we made those acquisitions. That's why we started making those investments back in the day. What has changed recently, almost exponentially, is just the intensive customer interest and intensive customer demand. We've been - and we pride ourselves on partnering with our customers and working with them as much as we can to satisfy what their needs. And so that has been the primary driver. We've been making a lot of significant progress on the development side throughout 2021. And kind of recently, we saw that to a faster launch, and we decided to take it.

The next question comes from Tejas Savant of Morgan Stanley. Please go ahead with your question.

So just to kick things off, maybe I'll follow up on Dan's last question there. In terms of the pull forward of Xenium, Serge, how much of that was just driven by the realities of the evolving competitive landscape, given competitor launches expected here in the near term and potentially some of these customers getting locked into the hardware decisions? And did that play a role at all?

Well, we'd like to focus on customers, less so competitors. And that has been the driver for decision again. So our internal development and the customer input, that is what we pay attention to more than anything else.

Okay. And Justin, going back to your installed base comments, halo users, etc. Is there any way to just look at this installed base of yours, which is an impressive 3,500 units, and parse how many of those are sort of active Chromium units here in that 3,500-unit installed base versus perhaps those that are being underutilized because customers purchase them taking advantage of the lower price and haven't really ramped up as well as some of these X and iX units, which you've noted in the past, will take up to 12 months to really start driving pull-through.

Yes. Tejas, we look at instrument owners by cohort, and we can track their usage over time. And it's still really early for the customers who bought instruments last year. But from the initial indications that we have and these first few data points that we're looking at, it's encouraging. It looks like they are tracking along the same path of previous instrument owners. But again, there's relatively few data points there. And so it is still pretty early.

Got it. And then one final one for me. Justin, can you just remind us of the split between academic and biopharma customers? And are you seeing any softness at all among your earlier-stage biopharma customers in terms of CapEx purchase intentions and whatnot given the market volatility here, that's been a concern on investors' radars of late, given data points from some of the tools group here.

Yes. So the split that we see between academic and biopharma is about 75% to 80% academic and about 20% to 25% biopharma. It can vary from quarter-to-quarter. But generally, that's the overall split. And no, we haven't seen any of those notable differences that you're mentioning.

The line is now open from Patrick Donnelly of Citi. Please go ahead.

Maybe one on the academic customers, the impact of Omicron here. Can you just talk about, are you seeing things just being delayed and pushed out? Are you seeing orders kind of not coming through being canceled? I'm just curious if customers are starting to come back and you're starting to see orders pick back up. I mean, again, we've heard February has been a bit better sound way for you guys. Just curious what the customer conversations are on the academic side, not that there's going to be a bolus of orders at the end of this, but are you seeing just pushouts and expectations that these come through in the next couple of quarters?

Patrick, I think you want to look at this with instruments and consumables differently. And so for instruments, those opportunities for instrument orders, those aren't lost. Those are still in our funnel, our salespeople are engaged with those customers. And so for instrument orders, we think that those are merely pushed out. For consumable orders, if the customer is not in the lab or is in the lab for a reduced period of time, they're either not doing experiments or they're doing less experiments. And when they come back in the lab or when they come back full time, they're not going to speed up their projects or duplicate their projects to make up for the lost time. So that consumable spend is lost.

Yes. Maybe I'll just add, Patrick, to what's kind of going on now. Typically, and we've unfortunately had two years to learn how this kind of stuff works. We saw our accounts in EMEA, and eventually all the U.S. were completely shut down to even us getting on-site even support people. What we're seeing now is we're seeing customer engagements. We're getting back on-site, and then we start to see the opportunities. At the same time, these customers are getting their biology samples ready, and then we'll see more of the orders. So that's kind of the trend. But right now, we're definitely starting to see that engagement, which is the early indicator, which ultimately is a sign of recovery.

Yes, that's helpful. And then, Justin, maybe one on the margin side. Obviously, you're talking about them trending a little lower in '22 here. Can you just talk through the levers? I know you called out new products being a bit dilutive. What are you seeing on supplier pricing? I know that was a bit of a headwind coming in kind of end of '21? Are you changing pricing at all to combat it, pass that along with customers? Maybe just talk through the levers on the margin side in '22?

Yes. So just maybe to tackle the price increase first. So we've already executed a price increase previously, 5% increase on consumables, instrument list prices were unchanged. And as far as the cost pressures that we're seeing, we are seeing those primarily on instruments, on components, chips, also seeing it on plastics as well. And so our procurement teams have been working through that. We've been doing spot buys. We've been buying ahead and carrying more inventory in areas that we normally have, locking in POs earlier with suppliers. But we're not going to be able to mitigate everything. So I do expect that as the year continues, if the overall macro environment doesn't improve, we're going to see increased costs there. And then just the overall supply chain risks overall. Shipping capacity, our products shipped by cold chain with dry ice, and there's a service level that has to be met to deliver the product in a viable state. And so as there's pressures on just the logistics environment overall, we're feeling that too.

Our next question comes from Dan Arias of Stifel. Please go ahead with your question, Dan.

Serge, can you just comment on new products? If I go back to your January 2021 presentation, you talked about targeted gene expression, CellPlex, the low throughput kit, fixed RNA profiling, the X, obviously, and then the cloud. Can you just talk about which one of these are underperforming, which ones are outperforming? And then what you're kind of doing what you thought? And then where the launch or adoption timing has been pushed out? Because the new product angle is kind of a significant part of the thesis in '21. I just want to make sure I have it squared away as we enter '22.

Yes. So yes, there's a number of product services that we talked about in '21. So in terms of performance, I would say, the products that have been somewhat more restricted, I guess, in their adoption. Certainly, the low throughput kit. While it's nice to get people kind of ramped into the single-cell ecosystem and ramped up, it's been like - it's kind of had very limited traction. CellPlex has been doing reasonably well with certain segments of customers, but not all across the board. I would say the X has been doing better like we've commented before, and I would say the high throughput kit has also been doing better compared to expectations. And as far as shifts in launch timeline. So fixed RNA profiling kit, that's probably one of the significant ones for sure that got pushed out relative to earlier timelines. And also on the Visium side, when we talk about CytAssist or Visium HD, those also got pushed out further as did the BEAM product we talked about when we first started talking about it.

Yes. Okay. And then just to go back to the guide, at the low end of the range, you're basically at the growth that you saw during 2020 when folks just were not at the lab for a big chunk of time. So I guess at the risk of sounding incredulous, what could possibly make that happen just given that the year-over-year comp is essentially the same?

Yes. So for - you got to keep in mind that this is an annual number, and it incorporates what we've already seen thus far in Q1. And so like I said, Q1 has started off very slow. If that - we're starting to see increased signs of activity with customers now. But if the situation doesn't meaningfully improve, I think that we're looking down towards the lower end of that range. And then also just if new customers are ramping more slowly than they have in the past, if there's an increased slowdown there. And then also just with some of the new product launches that we have there, our newer products at their growth rates decrease or some of the ones that we have planned for midyear to push on.

Our next question comes from Matt Larew of William Blair. Please go ahead.

Curious if the willingness to push Visium HD says anything about where you think you're at with your current product offerings relative to others in the space. Serge, I know before you mentioned that some customers have held off buying Visium until the HD launch. So does this mean maybe you don't see as much of a risk in terms of those customers picking up something else in the interim? Would be curious for feedback on that.

So the decision to pull forward Xenium is sort of independent of, I would say, what we're seeing on the Visium side of the world. So I just - I want to make that clear. As far as the sort of the patterns of Visium purchase and with respect to Visium HD, there's definitely a significant amount of - like number of customers who are expecting and really looking forward to HD. We see a lot of demand there, and that is, to some extent, putting some pressure on the current Visium demand. There's definitely customers who are fine using Visium at the current resolution, but - because it does provide a lot of valuable information. But the HD is looming out there as well. I mean for a lot of customers, it is the thing that they want. And we're very, very excited about it.

Okay. And then following up on your comment about the number of X purchases being replacements for 15 instruments, how many or maybe what percent of X purchases have or iX have been replacements? And are customers moving tech exclusively or maybe still using both? I guess just trying to get a sense for how much is it expanding the market versus upgrading your installed base.

So as far as like the actual liquidity, I will hold the access, the majority of those are actually going to new customers, which again was not our expectation going in. And then - yes, but also a fair amount of our existing customers are upgrading at the same time.

Or purchasing an additional instrument we are making.

Yes. We don't see examples of people not following instruments because that - the Chromium Controller, if you bought an X, it would probably still be used maybe given the lab next orders or something like that.

Our final question this afternoon comes from Matt Sykes of Goldman Sachs. Matt, your line is open.

Just two quick questions. I'll ask them both upfront. But you had mentioned that the increase in Halo users is in part due to market expansion. So as you guys think about priorities going forward, how do you balance the desire to expand the market but also manage that cohort mix to help drive higher utilization. And then specifically on those halo users, I know you mentioned a little bit, but just any more color on how you incentivize those customers to own instruments and drive utilization higher?

Yes. So kind of on the second question, I think a lot of it is just kind of ramping their usage. Being there - reaching out what we've been doing kind of since the beginning of the company. But the biggest thing is for them to start to ramp up and to get trained, whether it's from us specifically or by their sort of by other customers who are already proficient on single cell. Again, this has been a challenge in - like in the current environment for the last two years, and we're seeing that in the data. So just to the extent this environment kind of recedes and gets better, I think that will improve. We're also releasing products, for example, the fixed RNA profiling kit is something that should be particularly helpful to customers who don't have instruments. And generally, all the products and protocols we're releasing to help the customer experience, I think, will help drive the ramp-up for people who are less proficient at using single cell, and that's mostly halo users. So like a lot of these things that we've been doing, we're going to continue to do, and we do anticipate that, that's going to accelerate the conversion from sort of lower rate that we've seen more recently. As far as kind of the prioritization between driving like kind of existing adoption versus expansion of the market, I mean obviously, we're doing both. I think the fact - right now, we're going to be focused on upgrading our installed fleet with the X Series to some extent, we do think that the customers who have the X present lower lifetime value to us, and it's a more advanced technology, there will be better users. And so we do have this focus on this stage, but it's always kind of both, right, expansion and doing more for our current customers.

That concludes the questions on today's call, and that concludes today's call. Thank you very much for joining us all today, ladies and gentlemen. I hope you have a wonderful evening. You may now disconnect your lines. Thank you.