Thank you and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the first quarter ended March 31, 2024. If you have not received this news release or if you would like to be added to the company's distribution list, please send an email to [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. We will host a question-and-answer session after our prepared remarks.

Thanks, Cassie, and good afternoon, everyone. During today's call, I'll start with an overview of our first quarter progress and performance, highlighted by the launch of four major new products that we believe set a new standard for single-cell and spatial biology. Next, I will discuss the exciting opportunities we have ahead across our three platforms and the steps we are taking to deliver on the future. Then I'll turn the call over to Justin for a more detailed look at our financials, business trends and outlook for the rest of the year. For the first quarter, total revenue grew 5% to $141 million. We continue to drive strong growth in spatial, led by our Visium franchise and the highly anticipated launch of Visium HD. We also saw strong interest in our new Chromium GEM-X technology, which delivers substantially higher performance at a lower price. A significant number of customers trialed the new architecture, contributing to lower-than-expected quarter-end orders for Chromium overall. Despite the near-term sales impact, we believe GEM-X will invigorate Chromium growth over the long term and ultimately enable wider single-cell adoption. And while we're working to deliver on the vast opportunity ahead in Chromium, our strategy has always been focused on the strength of the entire portfolio and on providing the full breadth of our capabilities to customers. With our three complementary platforms in single-cell and spatial, we're committed to innovation that enables the scale and resolution necessary for researchers to better understand biology and disease. We believe that we're still early in this opportunity and in the adoption of these tools. This year, we're introducing franchise-defining products in each platform to enhance our performance, leadership and accelerate long-term growth. These products are a testament to the enduring strength and velocity of our innovation engine and its value for customers around the world. These launches also reflect how we listen closely to customer feedback and build products that are most responsive to their needs. Let me highlight a few of our latest advances and how we expect them to extend our technology leadership. First, we are thrilled to officially start shipping Visium HD at the end of March. For our team, there's really no better feeling than seeing new products in the hands of researchers. That's especially true here. Visium HD has not only been the most requested product in our history but also one of the most ambitious development projects we've ever taken on. It is precisely the kind of challenge 10x was built for. It is yet another example of our ability to tackle hard problems and arrive at the best solution possible for our customers and their research. Visium HD enables whole transcriptome spatial analysis at single-cell scale resolution. It runs on existing CytAssist instruments, leverages the same robust and easy-to-use workflow as standard Visium and brings the field of spatial discovery to a whole new level. While it's still very early, we're really pleased with the strong initial demand and tremendous enthusiasm we're seeing from our customers. The positive momentum further fuels our ambition to establish Visium HD as the platform for translational discovery. This quarter, we also continued to deliver on our robust Xenium R&D pipeline. We began shipping both our multi-model cell segmentation product and our new immuno-oncology gene panel in March. Cell segmentation includes an add-on kit compatible with existing Xenium assays. It leverages advances of assay chemistry and sophisticated machine learning algorithms to significantly improve the determination of cell boundaries using multiple morphological features and modalities. While Xenium launched with a robust nuclear-based segmentation approach, many researchers have been waiting for this new solution to enable the most accurate biological interpretation for their Xenium brands. Xenium is already well recognized as being a feature performance leader, and there is still much more to come. We're planning to launch our 5,000 Flex capability midyear, scaling up Flex by an order of magnitude while still delivering high-quality sensitivity, specificity and throughput. We're also developing panels of 1,000 to 2,000 genes to give customers even more options and flexibility. We're moving forward with integrated protein profiling, which will significantly expand Xenium's existing protein capabilities. And longer term, we have architected Xenium to allow for tremendous technological headroom, enabling more applications, higher throughput and lower cost. With the long-awaited launch of Visium HD, the performance of Visium in the field and the interest and buzz around the Xenium pipeline, it's clear we're at the forefront of the spatial biology revolution. We're seeing some cutting-edge researchers and technologists start to reprioritize their team's resources and pivot from single-cell approaches to explore how spatial methods can push their research forward. We're also seeing spatial resonate with new researchers who have never done single-cell or other genomics work before. Take this year's Annual Meeting of the American Association of Cancer Research, or AACR, for example. There was resounding energy and conviction on spatial, which emerged as a huge theme of the conference. In fact, the majority of the plenary sessions featured or referenced 10x spatial data. This burgeoning interest in spatial is drawing the attention of both new and existing customers. And we have work to do to ensure we can satisfy that interest and drive growth across the portfolio. Turning to single-cell and the launch of our new GEM-X technology, the first major overhaul to our Chromium architecture since 2019. With this completely reengineered market-leading chip design, GEM-X delivers superior performance at larger scale and lower costs. In March, we began shipping the first two products on GEM-X, our highest-volume Chromium assays, 3 prime gene expression and 5 prime immune profiling. These assays take single-cell analysis to the next level. Human researchers are experiencing performance advantages across the board, from increased sensitivity and capture efficiency to improved robustness and scalability, all at a lower cost. In fact, the new technology provides researchers a more than twofold reduction in cost per cell. We believe GEM-X raises the bar for the field and sets a new standard for single-cell analysis. Our customers have been eager to see and validate this for themselves. In Q1, more customers than expected trialed GEM-X to see firsthand the power of this technology on their own samples. And more recently, customers, including the Fred Hutch Innovation Lab, have started to share their own independent comparisons of GEM-X with their Next GEM technology, verifying our performance claims. We're encouraged by the early enthusiasm, adoption and feedback on GEM-X despite the near-term headwinds as we help customers navigate this product transition. GEM-X delivers great value to customers now. It opens up meaningful possibilities to expand the field long-term. As we have said before, we believe there is significant price elasticity in single-cell, which presents a substantial long-term opportunity for broader adoption. GEM-X is one of several steps we have planned to take advantage of the elasticity. By delivering superior performance at superior economics, we believe GEM-X will help us enable larger projects, reach new customers and encourage more routine use among existing researchers. We fully intend to expand the single-cell opportunity through our robust product roadmap and other efforts to drive better awareness and broader adoption at a large scale. Put simply, our goal is to make single-cell analysis the standard for most biological researchers. While we believe there's huge untapped potential for single-cell, our conviction is not just in Chromium. It's the combined performance, leadership and differentiation of all three platforms together. Our strategy has always been about the power of the full portfolio and the choice it enables for customers. Our goal is to ensure that researchers, and ultimately clinicians, have access to a comprehensive suite of the best-performing products to explore biology in the way that's best for their work. We intentionally design distinct, yet complementary platforms to support the broad spectrum of customers' use cases and how their research and research questions may evolve over time. The strength of our execution in R&D and operations has enabled us to deliver a full portfolio of groundbreaking products. As we continue to evolve our commercial execution, it will better position us to maximize and deliver on the incredible potential ahead. We believe there are clear opportunities to drive growth, utilization and scale with existing customers to bring new researchers into the 10x ecosystem and to accelerate translational and biopharma opportunities. Our large-scale project, first announced in November, is a powerful example of the progress we're making in translational applications. This project is on track to complete spatial profiles on thousands of tumor samples across seven different cancer indications by the end of the year. The team is looking to discover biomarkers and to build predictive models that could transform how we diagnose, treat and ultimately cure cancer. In addition, we firmly believe there's a long runway ahead for single-cell methods in biopharma. Importantly, we're not the only ones who share this conviction. Some of our pharma customers recently published on the value and the impact of our products in therapeutic development. Sanofi reported that 90% of the company's disease targets are credentialed using single-cell genomics. A recent preprint helped shed light on why. The study analyzed single-cell data across 30 diseases and 13 tissues to examine associations between genes, cell types and diseases. They found that support from single-cell analysis significantly increased the odds of clinical success for a given gene to be a viable drug target. In fact, the authors estimate that their approach could potentially triple the chances of a drug target reaching a Phase III clinical trial. So while we have established strong beachheads in translational and biopharma, it's still very early relative to the expected large potential. With all of the advances in our portfolio, we're in a better position than we've ever been to deliver. As one customer at AACR told me, "FFPE changes everything." Our FFPE capabilities available in all three platforms open up vast archives of biobank samples along with exciting possibilities for new biological discoveries. These capabilities reflect yet again how we listen to our customers, think deeply about their research and build innovative products to accelerate and advance their work. We believe the long-term potential for single-cell and spatial is boundless. While we're focused on delivering in 2024, we will remain steadfast in maintaining the long-term orientation that has always guided us. I have every confidence when I say we're still just getting started.

Thank you, Serge. I'll start by reviewing our financial results for the three months ended March 31, 2024, and will then provide an update on our outlook for 2024. All growth rates provided will be on a year-over-year basis unless otherwise noted. Total revenue for the quarter was $141 million, up 5%. At a high level, the quarter played out largely in line with total revenue expectations with stronger contributions from spatial, partially offsetting lower Chromium contributions. Looking at our revenue breakout. Total consumables revenue was $110.3 million, down 2%. Spatial consumables revenue was $26.4 million, up 134%. This growth was driven primarily by our Xenium platform along with strong adoption of Visium HD, which started shipping at the end of Q1. Chromium consumables revenue was $83.9 million, down 17%. Some of this year-over-year decline was expected. As discussed on our year-end earnings call in mid-February, we anticipated headwinds for Chromium revenue in the first quarter while customers began their transition to the new GEM-X products. As part of this transition, we anticipated that customers would trial GEM-X and would not stock up on either the legacy or newly introduced products at quarter-end. While we believe this increased trialing created stronger headwinds for Chromium consumables in Q1, we are nonetheless encouraged by the initial adoption and enthusiastic feedback from customers thus far. The lower price of GEM-X will continue to drive some near-term revenue pressure, but over time, we believe there is elasticity that will more than offset the lower price. We also believe that the stronger-than-anticipated spatial demand took some customer mind and wallet share away from Chromium this quarter. As Serge shared, we are seeing both new and existing customers prioritize spatial studies given the burgeoning interest in the space. How this plays out over time remains to be seen. But we continue to believe in the power of our full portfolio and offering customers a comprehensive suite of products to fit various needs. Moving on to instruments. Total instrument revenue increased 33% to $25.5 million. Spatial instrument revenue was up 133% to $17.6 million, primarily driven by Xenium instrument placements. We also saw sustained demand for our CytAssist instruments as customers purchase the instrument along with Visium HD consumables. Chromium instrument revenue was $7.9 million, down 32%, driven by fewer units sold. Services revenue was $5.2 million, up 91%, driven by increased service contracts revenue and increased Xenium instrument training and installation revenue. Looking at our revenue by geography, Americas' revenue grew 1% to $79.6 million. EMEA revenue grew 22% to $34.7 million, and revenue in APAC decreased 2% to $26.7 million. Turning to the rest of the income statement. Gross profit for the first quarter was $92.9 million compared to $98.4 million for the prior year period. Gross margin declined to 66% compared to 73% in the first quarter of 2023, primarily due to a change in product mix driven by Xenium instruments. Total operating expenses for the first quarter increased to $154.4 million compared to $150.4 million for the prior year period, driven by higher legal expenses and costs for facilities and IT, partially offset by lower personnel expenses. R&D expenses increased slightly to $68.6 million compared to $67.1 million for the prior year period, primarily driven by higher facilities and IT costs and increased personnel-related expenses. SG&A expenses increased to $85.8 million compared to $83.3 million for the prior year period, primarily driven by increased outside legal expenses and higher facilities and IT costs, offset by a decrease in personnel-related expenses. Operating loss for the first quarter was $61.5 million compared to a loss of $52 million in the first quarter last year. This includes $36.1 million of stock-based compensation compared to $42.1 million of stock-based compensation for the corresponding prior year period. Net loss for the period was $59.9 million compared to a net loss of $50.7 million for the first quarter of 2023. We ended the quarter with $371.8 million in cash and cash equivalents and marketable securities. We burned $17 million of cash over the course of Q1 while making a $20 million payment in January related to the asset acquisition that we recognized in Q4 2023. Turning to our outlook for 2024. We continue to expect full-year revenue to be in the range of $670 million to $690 million, representing growth of 8% to 12% over full-year 2023. We believe this range represents a balanced view for the year. It incorporates both the upside we've seen in spatial and the headwinds we are experiencing now in Chromium, which we expect to continue into Q2 as additional customers trial and transition to GEM-X. When looking out over the next 12 months, we are anticipating about $15 million to $20 million of total capital expenditures. We are maintaining cash discipline in 2024. Overall, we believe we have a great set-up to drive positive cash flow for the year while making targeted investments to continue driving growth. Ultimately, our goal is to self-fund our innovation and scale by investing cash generated back into our business. At 10x, we continue to be laser-focused on execution to drive growth and impact. We are excited about the strong enthusiasm for the products we launched in Q1 and look forward to providing more updates on our progress throughout the year.

Congratulations on the quarter, especially given the challenging macro environment. Could you provide more insight into the adoption trends and early feedback on HD and GEM-X? How many of your CytAssist customers have purchased HD so far? How do you see that contributing to sustained demand for CytAssist this year, as well as adoption rates among existing customers on GEM-X? Has the initial interest made you more optimistic about the opportunity for Chromium in the latter part of this year and into next year?

Mason, this is Justin. I'll take the first part of that, and then Serge can add some more color. So as far as Visium goes in looking at the SD versus HD split, I'd say roughly half and half. And when we're looking on the Chromium side around the GEM-X adoption, if you're looking over the last month, as in Q2 to date, we’re seeing roughly about one-third of the Chromium consumables on GEM-X. And back to the Visium side, with the launch of HD, we have seen that driving sustained demand for the CytAssist. We do think that anticipation of the Visium HD launch helped us play CytAssist, in particular in the back half of last year. And we are expecting that to be a catalyst for CytAssist placements going forward in 2024. Same thing with GEM-X. That is a product that you need a Chromium iX in order to run. And we do think that that's also going to be driving Chromium iX placements throughout 2024 as well.

Yes. So as far as the feedback on products is concerned, it has been very positive. So HD, obviously, has been perhaps our most anticipated product to date. A lot of customers were excited and a lot of customers were excited to get their hands on the product. And the early sentiment coming back from seeing the data coming from their samples is very, very positive. So all the investments we made along the way, towards improving the chemistries, the workflows, importantly, CytAssist and now putting HD on top of it, has really seemed to be bearing fruit and resulting in great feedback from customers. On the GEM-X side, the sentiment is also very, very positive. We're just now kind of going through the cycle with the initial customers who got their GEM-X products and are actually getting the data back and now talking about their results. I mentioned it in my prepared remarks, this testimonial from Fred Hutch Innovation Lab. We're hearing from other customers. Very pleased with the fact that there's a substantial boost to performance, great improvements, along with a number of access and also a lower price. So the feedback has been really positive. People were really excited when we first revealed GEM-X in the middle of February. And a lot of customers have been ordering it now to trial it, to test it against the Next GEM products that are out there. And the feedback that's coming back has been very positive.

Want to focus on single cell just given the result there like in terms of what we are looking for. Justin, I know you talked about maybe this weakness or softness lingers into Q2 if people kick the tires on some of the new products and trials and things. Can you just give us some sense of visibility into what that growth trajectory looks like? How are you thinking about that piece, let's call it, single-cell Chromium for the year? Just want to try to think about, again, the cadence this year and the overall expectations for this year on single-cell would be appreciated.

Yes. Patrick, thanks for the question. When we think about single-cell for the year, I'd go back to the three factors that we're seeing impact single-cell right now. And so the first is the GEM-X transition. We're talking about a limited time frame in Q1. That launched in the last month of the quarter. And so there's a limited amount of data that we're going off for that. But we did see a higher adoption rate than we were originally planning. And then looking at the customer ordering patterns, we were able to see impacts with customers that ordered GEM-X, ordering smaller kit sizes, smaller number of reactions and just smaller number of orders overall. And as we can tell, too, some customers are still waiting to get the results from that. And so this trial is something that doesn't happen right away, it's over somewhat extended periods of time. And so as I just said earlier, for Q2, roughly to date, about one-third has been on GEM-X, and so a higher uptick than we initially expected. But then we would expect a more linear transition for the rest of the year to be substantially cut over by the end of the year. And the other impact that we're seeing is that of spatial. And that's a product, it's drawing more mind and wallet share on the customer side towards spatial from single-cell. And so we'll see how those both play out throughout the rest of the year. As far as the GEM-X transition, that could be more transitory. We do expect an impact in Q2, I think similar to what we've seen in Q1 just looking overall. And this is more broadly than just single-cell. If we're talking about Q2, I would expect at the top line somewhere mid-single to high single digits sequential increase over Q1. So maybe 7%, 8% revenue increase Q2 over Q1. And then the last part is just the macro impact overall for single-cell.

Serge, just sticking with the transition and the validation for GEM-X. Where is the confidence in understanding the timelines associated with that process? How would you compare it to other processes for your other single-cell kits? And Justin, if I could, just to kind of finish off Patrick's question there. Last quarter, you said you expected Chromium revenues to grow this year. Does that view still hold just given the way that the start of the year has played out?

Yes. Dan, thanks for the question. So as far as the transition to GEM-X, if I were to put it in a historical context, things to keep in mind is that it is a straight-up replacement over the existing products. It's literally a product that's better on multiple dimensions with very few trade-offs that people have to make, and it's at a lower price. So we do expect that once people go through their initial validation to confirm our claims to make sure they're replicating their own hands and their own samples, the transition should happen relatively quickly. So kind of a different kind of thing than what we had seen previously with Flex, for example, which is a very different kind of workflow for different kinds of applications and also likely faster than what we had seen previously, for example, with the Next GEM transition, which had some trade-offs and not necessarily a huge performance advantage. So the question is what is the feedback that people are giving us, and what are they actually seeing? So far, it's been very positive. And so we're feeling optimistic that as they go through this transition, it will be happening at a pretty rapid pace relative to our previous product introductions.

Dan, as far as the second part of your question, given the results that we've had in Q1, it's certainly going to be more challenging to achieve growth year-over-year in Chromium. So at the midpoint of our guidance range, we are modeling more spatial upside, and we're also modeling more Chromium downside. And so with some of the headwinds that we're seeing related to the GEM-X transition, we do think by the end of the year, those will smooth out. We definitely saw an impact in Q1, and we're expecting to see an impact for that in Q2 as well. As far as the offset coming from spatial, to the extent that Chromium growth is being impacted by spatial, we would expect to see an offsetting upside in spatial. And that's what gives us the confidence to keep our guidance range the same, $670 million to $690 million that we had on the last call.

I'm going to address two different topics. First, as a follow-up to Dan's last question, considering that you launched GEM-X with only a week or two left in Q1, that clearly caused some market stagnation. However, I don't detect any signs indicating that there has been momentum from that launch over the past five or six weeks that would lead you to believe you can get close to your target for single-cell. This seems to be more than just a timing issue; there are additional factors affecting performance in the single-cell area. I want to confirm that. Second, I'd like to discuss Bruker's acquisition of NanoString. This brings a high-quality company to market with significantly stronger commercial and innovation capabilities and a larger balance sheet, which positions them well for investment. How is Bruker entering as a direct competitor affecting your budgeting and tactical planning?

Thank you, Doug. I’ll address the first question regarding Chromium. At a high level, we believe that the Chromium franchise is not where we want it to be. This has been a topic of discussion over several quarters. Our commercial team has focused heavily on spatial efforts over the past few years, and we’ve been reallocating more resources towards Chromium. There is still a significant amount of work ahead of us in this area, and we are actively continuing that work. For this quarter, as you noted, the GEM-X transition is occurring. We announced GEM-X in mid-February, so this is not just a recent development; it has been a longer process that significantly impacted the quarter. Additionally, we are observing increased customer interest in spatial. As we make internal strides to enhance our research efforts in this program, we are also experiencing some market challenges. Moreover, there are broader economic factors at play, particularly budget constraints and an extended sales cycle. However, looking at the bigger picture and based on customer feedback, we see substantial long-term potential in this area. We are still in the early stages of realizing this opportunity and are taking numerous steps to achieve it. Regarding the Bruker question, the spatial field has been attractive for several years, and we have invested significantly in innovation and product development due to our strong belief in its potential. It’s to be expected that new companies will emerge in this appealing field with valuable applications. We have successfully developed products that resonate with customers, as evidenced by their positive feedback, which remains our guiding principle. We will continue to invest in launching new products to solidify our leadership in spatial, and we anticipate that as we move forward in the upcoming quarters and years, our efforts will drive greater success in the market.

Maybe just a follow-up and then a couple of other parts on single cell and spatial. So I know part of the push coming into this year was the reorientation of sales incentives to get them to focus more on single cell, Serge. I think you just mentioned there's still a lot more work to do. So maybe if you can just clarify that. Secondly, I'm just wondering, obviously, Serge, you sound extremely bullish on the untapped opportunity in the demand elasticity. So obviously, we're working through this GEM-X transition right now. But could you speak to as we're through this transition, it sounds like by year-end, kind of how we would think about what a steady-state single-cell growth could look like? And then c, you've talked more about cannibalization on this call than in the past, but arguably that also drives more spatial growth. I'm just wondering, as we think about the cannibalization, like is your outlook for single-cell growth lower today than it would have been given this cannibalization? And is there an offset on higher spatial growth?

Thank you, Dan. There are several questions to address, so let’s go through them one by one. First, regarding our efforts with Chromium, you are correct that this is a priority for us, and we are making progress, though it requires time. A key aspect of this effort is strong leadership, and we are fortunate to have new leadership across all three of our regions this quarter: AMER, EMEA, and APAC. Additionally, our interim Chief Commercial Officer has been doing an excellent job during this transition. We are implementing various new initiatives within our commercial organization to sharpen our focus on Chromium. I previously mentioned setting exclusive quote targets for the Chromium business, which we did not have before. We are also enhancing specialization within the commercial team to allow salespeople to dedicate more time and focus to Chromium. Furthermore, we have established direct KPIs and management goals aimed at increasing Chromium’s performance. We are allocating additional marketing resources and campaigns specifically for Chromium and anticipate that these actions will yield positive results in the upcoming quarters, all while supported by exciting product launches. For your second question about elasticity, I have expressed before that we see tremendous potential for demand elasticity in the single-cell market. Looking at it from a fundamental perspective, biology should ideally be studied in a single-cell context; currently, most research is not optimized for this, and many potential users are not yet utilizing this technology. We consistently hear from customers that price is a significant barrier to adoption, affecting both new customers and those looking to scale their existing projects. There are numerous opportunities for growth based on our foundational understanding and customer feedback, and we are actively working to reduce prices, as illustrated by our GEM-X initiative, to enhance demand. We firmly believe that this will ultimately expand the total market. Regarding your third point about the trade-off with spatial technologies, there has indeed been a noticeable excitement around spatial recently, especially following the launch of Visium HD and our developments with Xenium. Customers seem to be considering their budgets and focus areas, which influences whether they pursue spatial technologies or single-cell methods. In the past, we have noted that early adopters often gravitate toward the newest innovations, which currently includes spatial technology. However, it’s important to note that customers are not merely switching from single-cell to spatial; the insights and research questions each technology addresses are complementary and distinct. We are also welcoming many new customers who have not previously engaged with single-cell or genomics through spatial technologies. As customers experiment with new technologies, there will be fluctuations in their interest based on specific use cases. Ultimately, we envision significant potential for all three of our franchises, expecting them to coexist, enhance, and support one another. We are optimistic about the future of Chromium and our entire portfolio.

Maybe just picking up on that last point, Serge. Obviously, for a long time, you've been talking about the value of the ecosystem and building a portfolio of platform assets within the ecosystem. Could you maybe update us with sort of the proof points you track internally that validate that thesis, be it adoption of spatial technologies by perhaps legacy single-cell customers or retention of single-cell customers in labs where they might have other 10x products that they've committed to? Is there anything that speaks sort of strategically to the value you're seeing of having different modalities in-house?

Yes. So I would say there's good examples and a substantial number of examples of customers purchasing platforms together when they're setting up their genomics infrastructure, where they buy CytAssist, they buy Chromium, they buy Xenium, and they contemplate kind of use cases that define all these platforms. We're also seeing results getting published in papers and data sets that get released. And a consistent kind of feedback when we talk to customers is that oftentimes people do use these platforms together. It's rare that you have a Xenium run, for example, without that doesn't make use of some single-cell information, and same to some extent, same for Visium. And we see the interest going back and forth, where people might run a Xenium experiment and then kind of look at the Visium or a Chromium to put those results in context or vice versa. So we see plenty of examples in there, a lot more of them getting published along those lines. I do want to emphasize it's early in this whole process in terms of collecting reliable statistics because all these products are coming at customers pretty fast at this stage, and it is a pretty dynamic field. But when we look at, again, the use cases and applications, we see plenty of evidence of customers being excited about using multiple platforms.

Maybe this is a bit premature, but I know you've addressed the cannibalization comments. But I just wanted to take a little different take on it. And just given your comments on spatial taking time and wallet share from single-cell, is there a way to maybe effectively manage the potential cannibalization? If you believe this focus on spatial, meaning, would you want to use this transition to spatial to your advantage and just try a much more proactive approach to cannibalization? Are there encouraging existing Chromium customers where spatial makes sense towards spatial, which I'm sure you're doing from a commercial standpoint? But I just think that given sort of your earlier comments about the ecosystem, keeping the customer within the 10x platform is probably the first priority and therefore, maybe actually managing that cannibalization could help sort of ease that transition into it. Or is that just too early at this stage to really go forward with those efforts?

Yes. So one thing I would say, you have to be careful using the word cannibalization because it's not so much a substitution where people get results they could have gotten with Chromium using spatial technologies and approaches. You can't. They're complementary; they complement and they supplement. So it's important to keep that in mind. I think for us, our North Star is really customer success and delivering the value for their particular applications and their questions. And so we want to present the full solution to our customers. And the way that our sales team interacts with our customers is to really try to understand deeply what are they looking for, what are the questions they're asking, what are their research goals and then making sure they understand the capability of the products to give them the most efficient way to get to those goals. And so I think I would frame it as less about what we are driving for ourselves but making sure that we've got the full set of solutions that our customers can take advantage of.

Regarding the performance in China, revenue was down 16% in the quarter. Could you provide any initial color on the status of the strategy here given that inventory is piling up, created some obstacles in last year, how did Q1 fare? Are there any material updates regarding your priority to continue to build up backup sales force in China?

Subbu, thanks for the question. As we talked about on our previous calls, over the last year, we've worked actively to bring down inventory levels at the distributors and service providers. And just for the context here, we sell to distributors who sell primarily to service providers, who actually perform the service for the end customer. And so then when there's any fluctuation in the demand at the end, you can have inventory stack up at either one of those levels of the chain. And so we saw that throughout last year. Each quarter, we work to bring those inventory levels down. We developed closer relationships with the service providers and shared more information with them, and they were able to share more information with us. We've also made some progress on adding distributors in the region to reduce the burden on any given one and also allow us to get closer to the customers as well. And so going back to the last part of 2023, Q3 and Q4 played out roughly like we expected them to. I would say the same with Q1. At least right now, at this level of demand, we do think that we don't expect to see the same issues that we saw last year with inventory, but that could change if demand changes like it did at the beginning of last year.

I want to address the issue of Chromium consumables and pose a broader theoretical question beyond just the first quarter. Looking at the performance of Chromium consumables over the past couple of years, particularly from 2021 to 2022, it has been somewhat disappointing. There have been various challenges, including commercial missteps and headwinds in China. Additionally, with the GEM-X transition and a shift in spending towards spatial technologies, it seems that growth has been affected. In light of the past two years of performance and your updated outlook for Chromium consumables this year, it appears you do not expect to reach the targets previously discussed. Is there a deeper issue at play? It could be competition—like NanoString—and the emergence of smaller vendors in the single-cell market, customer budget constraints, or price sensitivity. Can we reevaluate the single-cell opportunity in the near term from that perspective?

Yes, Mike. Let me address that. It's a valid concern. There have been several credible reasons that have impacted Chromium significantly over the past couple of years. Our business in China saw a considerable decline during this period, which certainly added pressure. This quarter, as I mentioned, we are going through a specific product transition, so these factors are definitely at play. However, the fundamental potential of Chromium remains intact for the same reasons we have always highlighted. From a foundational perspective, most researchers should ideally be using single-cell analysis to gain insights into their tissues, and that is not the case currently. As previously mentioned, the main hurdles to this are workflow ease, which we are working to improve through various measures, and pricing, which we are also addressing through several initiatives, along with increasing awareness through effective commercial execution and market development. We are confident there are significant growth opportunities ahead, but we need to tackle these challenges, and we are actively doing so. Regarding competition, it is indeed a pertinent issue. There has always been competition in the single-cell space, varying over time. In recent years, more players have entered the market. As we have noted before, there is now greater awareness and presence of competitors compared to a year ago. Customers do try out these alternatives, which can introduce some friction in the sales process and exert pressure on pricing. However, customers frequently return to us because of the various advantages our products offer, including superior performance, better data quality, more effective workflows, a wider range of applications, strong customer support, and all the other aspects that our clients appreciate about 10x. Therefore, the overall narrative remains the same. Our success thus far has been driven by product innovation and quality, which guide our efforts. Our objective is to continue delivering value to our customers. We are dedicated to investing in product development and enhancing customer focus, and we believe there are far greater opportunities to stimulate overall market growth than the impacts of any specific competition.

Serge, I have one on single cell and then one on Visium HD. So starting with single cell, you mentioned in an earlier answer that the main obstacle to larger projects was price. And you've talked about the commercial refocusing as well. But I just want to get a sense of how open you are to deeper and more accelerated price cuts on Chromium versus the 10% set you got with the GEM-X launch? And I understand that, that could mean incremental downside to the near-term guide, and perhaps it then puts your commercial folks on more even footing versus some of the incumbents or the new entrants you were talking about and helps to reignite customer interest to pull the trigger on larger projects. And then my unrelated to the second part of the question is on Visium HD. Really good to see the strong start there. And I know there's an interplay of different dynamics here. But to what extent did initial stocking from new users play a role in the upside? Is there a possibility of a natural sort of sequential breather maybe a couple of quarters out before we see the big inflection that you've talked about given the strong customer interest and how they were clamoring for this product to come through?

Tejas, thanks for the questions. So let me talk to the first one. So you're right, so with GEM-X, we showed a 10% drop in per sample price. Now I do have to say that's a substantially larger drop in the per sale price because you've got a lot more throughput with GEM-X, and that's something that many customers appreciate. Your larger point as to whether we intend to drive further into the price? Yes, over time, for sure. We talked about the fact that ultimately, we want to reach the price point of $100 a sample. We're excited by that. We will drive the technology and products in that direction. We just want to be careful in how we do that and kind of stepping into that kind of commensurate with our other efforts in terms of driving demand and in terms of driving sample volume. So certainly, customers should expect to see more along this trajectory. And those are the considerations that we're going to keep balancing as we proceed through the upcoming quarters and upcoming years. Maybe on the second question, I can start. So certainly, there's been a lot of pent-up interest in Visium HD. And we do anticipate there are a lot of customers that were, that came into this quarter with pent-up demand. And we kind of have to see. It's early to make a determination around how much of demand we're seeing right now is sort of the initial bolus versus what the sustained trajectory looks like. There's, again, there's good indications based on the feedback we're getting from customers once they actually see the data, but it's still very early days on that front.

Can you provide an estimate of how many Xenium units you placed? Additionally, could you share any insights on the contribution of Visium compared to Xenium in that revenue base related to spatial, and how that has changed? I'm also interested in understanding the momentum in both businesses to counterbalance the decline in single-cell products, as this will be crucial for meeting your guidance, especially with the significant increase expected in the second half compared to what you have done previously.

Yes. This is Justin. I'll take that. In looking at Xenium instruments, on our last call, we talked about a quarterly range of roughly $50 to $75 per quarter. For Q1, it was about $50. We would expect that to continue to ramp throughout the year from the lower end to the high end. With what we've seen so far last quarter and this quarter with pressures on CapEx budget, elongated purchase cycles, I would expect that it would be closer to $50 again, and that's for Q2. And then when we're looking at Visium versus Xenium overall, looking back at Q1, roughly half and half between each of those on the spatial side. When looking on the consumables side, from Q4 into Q1, most of the growth that we saw sequentially from Q4 into Q1 was driven by Visium HD. And so there has been a lot of excitement around Visium HD. Like Serge said, we've got to see what the sustained level is. But I would say that the initial level that we've been seeing has been exciting. And then there's the potential for the Xenium consumables to ramp up throughout the year. We haven't released too many details on that. I would say that we're still looking at a wide variety of usage across the customer base. But we are seeing good trends as far as increasing use over time when we're looking back at the older cohorts versus the new cohorts. And this is also allowing a couple of quarters to ramp up as well. And so I do think that there's upside on both the Visium side and the Xenium side within spatial when we're looking at offsets between Chromium and spatial and our outlook for the rest of the year.

A quick follow-up on the single-cell questions, I think, for Serge. You have invested a lot in that business this year, GEM-X upstream fixation, other things. That includes additional resources this year that replaced those kind of taken out spatial last year. I wanted to ask what the company's ROI is in single-cell today given that the decelerating kind of decreasing even negative growth in some cases? And does that kind of make sense to keep investing at this pace if the return is becoming less attractive and kind of make the argument that maybe we should shift that focus to spatial possibly, I guess, just in line with some of the cannibalization questions earlier?

Thanks, Kyle. So look, we see, as I said earlier, large market potential in all three platforms. We are going to keep investing in all three platforms. Over the past several years, we made very, very large investments on the spatial front. We've talked about in the past how much we shifted resources on to Xenium. Bringing up HD was also a pretty massive undertaking. There is, at this stage, we don't see any reason to let go of Chromium. In fact, the investments we're making right now, we feel like we have potential to open up a lot of new use cases and much broader use cases with many more categories of customers. So we are certainly managing the spend and investment across our three platforms very carefully and continuously and feel good about the balance and the amount.

Thank you. With that, we do conclude today's presentation. Thank you for your participation today, and you may now disconnect.