# 10x Genomics, Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [10x Genomics, Inc.](/companies/txg.md) (CIK 1770787)
- Form: 10-Q
- Filed: 2023-05-04
- Accepted by EDGAR: May 4, 2023, 17:04 ET
- Period: 2023-03-31
- Accession: 0001770787-23-000029
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1770787/000177078723000029/txg-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1770787/000177078723000029/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $134.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $35.9m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $98.4m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $83.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$52.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $19.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$50.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.44 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 115,619,869 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$4.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $4.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2023-03-31 | $601.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $1.01bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $112.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $211.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $802.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 23,751 characters.

*You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and our audited consolidated financial statements and notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 16, 2023 (our "Annual Report"). As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis, in addition to historical financial information, contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” in this Quarterly Report and Part I, Item 1A of our Annual Report.*

*In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.*

### Overview

We are a life science technology company focused on building innovative products to interrogate, understand and master biology. Our integrated platform solutions include instruments, consumables and software for analyzing biological systems at a resolution and scale that matches the complexity of biology. We have launched multiple products that enable researchers to understand and interrogate biological analytes in their full biological context. Our commercial product portfolio leverages our Chromium X Series and Chromium Connect, which we refer to as “Chromium instruments,” our Visium CytAssist, an instrument designed to simplify the Visium solution workflow by facilitating the transfer of transcriptomic probes from standard glass slides to Visium slides, our Xenium Analyzer, an instrument designed for fully automated high-throughput analysis of cells in their tissue environment, and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium solutions, which we refer to as “consumables.” We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization.

Our products cover a wide variety of applications and allow researchers to analyze biological systems at fundamental resolutions and on massive scale, such as at the single cell level for millions of cells. Customers purchase instruments and consumables from us for use in their experiments. In addition to instrument and consumable sales, we derive revenue from post-warranty service contracts for our instruments.

Since our inception in 2012, we have incurred net losses in each year. Our net losses were $50.7 million and $42.4 million for the three months ended March 31, 2023 and March 31, 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $1.1 billion, and cash, cash equivalents and marketable securities totaling $418.3 million. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

- attract, hire and retain qualified personnel;
- scale our technology platforms and introduce new products and services;
- protect and defend our intellectual property;
- acquire businesses or technologies; and
- invest in processes, tools and infrastructure to support the growth of our business.

### Operational Effectiveness in the COVID-19 Environment

We continue to closely monitor developments surrounding the COVID-19 pandemic including, among other developments, the potential impacts of variants. Some of our customers continue to navigate COVID-19 related challenges that we believe have affected our customers’ productivity. Such challenges have included COVID-19 related protocols and restrictions, difficulties hiring, training and retaining laboratory and other personnel, constraints on logistics, shipping and other distribution operations and impediments to procuring materials, equipment and components required for their experiments. For example, we believe COVID-19 related lockdowns in China have continued to negatively impact our revenues in the quarter ended March 31, 2023.

We, our suppliers and our other partners also have encountered COVID-19 related challenges, including difficulties procuring equipment, materials and components necessary to develop, manufacture and distribute our products, but to date we have not experienced any material impacts as a result of such challenges.

There is considerable uncertainty about the duration of the ongoing impacts of COVID-19. We expect COVID-19 to continue to impact our operating results, however, the extent of the financial impact and duration cannot be reasonably estimated at this time. For further discussion of the risks relating to the impacts of the COVID-19 pandemic, see the section titled “Risk Factors,” generally, and “*Risk Factors—We are subject to risks associated with COVID-19,”* specifically, under Part I, Item 1A of our Annual Report, which is incorporated by reference into this Quarterly Report.

### Results of Operations

*(in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Revenue | $134,285 | $114,496 |
| Cost of revenue | 35,895 | 25,478 |
| Gross profit | 98,390 | 89,018 |
| Operating expenses: |  |  |
| Research and development | 67,098 | 64,078 |
| Selling, general and administrative | 83,280 | 66,675 |
| Total operating expenses | 150,378 | 130,753 |
| Loss from operations | (51,988) | (41,735) |
| Other income (expense): |  |  |
| Interest income | 3,869 | 569 |
| Interest expense | (19) | (128) |
| Other expense, net | (1,516) | (400) |
| Total other income | 2,334 | 41 |
| Loss before provision for income taxes | (49,654) | (41,694) |
| Provision for income taxes | 1,093 | 719 |
| Net loss | $(50,747) | $(42,413) |

### Comparison of the Three Months Ended March 31, 2023 and 2022

### Revenue

*(dollars in thousands)*

| Instruments | Three Months Ended March 31, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Chromium | $11,626 | $14,326 | $(2,700) | (19)% |
| Spatial¹ | 7,550 | 103 | 7,447 | N/M |
| **Total instruments revenue** | 19,176 | 14,429 | 4,747 | 33 |
| **Consumables** |  |  |  |  |
| Chromium | 101,096 | 91,279 | 9,817 | 11 |
| Spatial | 11,282 | 6,671 | 4,611 | 69 |
| **Total consumables revenue** | 112,378 | 97,950 | 14,428 | 15 |
| **Services** | 2,731 | 2,117 | 614 | 29 |
| **Total revenue** | $134,285 | $114,496 | $19,789 | 17% |

#### N/M: result not meaningful.

1 The Spatial instruments revenue in the first quarter of 2022 related to revenue from the Visium Accessory Kit.

Revenue increased $19.8 million, or 17%, to $134.3 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. Instruments revenue increased $4.7 million, or 33%, to $19.2 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to higher volume of instruments sold. The revenue for the three months ended March 31, 2023 includes the sales of Visium CytAssist and Xenium instruments. There were no Visium CytAssist and Xenium instruments sold during the three months ended March 31, 2022. Chromium instruments revenue decreased $2.7 million, or 19%, to $11.6 million primarily due to lower volume of Chromium instruments sold. Consumables revenue increased $14.4 million, or 15%, to $112.4 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily driven by higher volume of instruments sold.

### Cost of revenue, gross profit and gross margin

*(dollars in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue | $35,895 | $25,478 | $10,417 | 41% |
| Gross profit | $98,390 | $89,018 | $9,372 | 11% |
| Gross margin | 73% | 78% |  |  |

Cost of revenue increased $10.4 million, or 41%, to $35.9 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily driven by higher manufacturing costs of $7.2 million due to increased sales and higher costs of newly introduced products, $2.2 million of higher inventory write-downs and $1.0 million of higher warranty charges.

We expect our gross margin will trend lower due in part to change in product mix with newly introduced products, the impacts of inflation, increased supply chain costs and increased costs due to expanding our operations infrastructure. In particular, the Xenium instrument currently carries a significantly lower margin than our other instruments. As we continue to scale our manufacturing capacity to produce more units, the cost per instrument will decline and there are also opportunities for component cost reduction, which we have not yet undertaken, that will improve instrument margin over time.

### Operating expenses

*(dollars in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $67,098 | $64,078 | $3,020 | 5% |
| Selling, general and administrative | 83,280 | 66,675 | 16,605 | 25 |
| Total operating expenses | $150,378 | $130,753 | $19,625 | 15% |

Research and development expenses increased $3.0 million, or 5%, to $67.1 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily driven by an increase in personnel expenses of $7.4 million, including $6.5 million in stock-based compensation expense and $1.6 million of higher costs for facilities and information technology to support operational expansion. The increase is partially offset by lower costs of laboratory materials and supplies and expensed equipment of $5.0 million used to support our research and development efforts, $0.6 million of lower other expenses and $0.4 million of lower consulting and professional services.

Selling, general and administrative expenses increased $16.6 million, or 25%, to $83.3 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily driven by increased personnel expenses of $9.9 million, including $9.1 million in stock-based compensation expense, increased outside legal expenses of $4.5 million and increased marketing expenses of $1.8 million.

We expect our operating expenditures to continue to increase in the remaining quarters of 2023 and beyond as we increase our investment to support new and existing research and development projects and incentivize and retain key talent, which we expect to result in increased stock-based compensation expense in future periods.

### Other expense, net

*(dollars in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $3,869 | $569 | $3,300 | 580% |
| Interest expense | (19) | (128) | 109 | (85) |
| Other expense, net | (1,516) | (400) | (1,116) | 279 |
| Total other income | $2,334 | $41 | $2,293 | 5,593% |

Interest income increased by $3.3 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily due to interest income generated from our cash equivalents and marketable securities during the three months ended March 31, 2023 and an increase in interest rates.

Interest expense decreased by $0.1 million, or 85% for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The decrease was driven primarily by lower interest expense recognized on accrued license fees.

Other expense, net increased by $1.1 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily driven by $1.7 million of realized losses from the sale of available-for-sale debt securities, partially offset by net realized and unrealized gains from foreign currency rate measurement fluctuations.

### Provision for Income Taxes

The Company's provision for income taxes was $1.1 million and $0.7 million, respectively, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The provision for income taxes consists primarily of foreign taxes. Deferred tax assets related to our domestic operations are fully offset by a valuation allowance.

### Liquidity and Capital Resources

As of March 31, 2023, we had $418.3 million in cash and cash equivalents, and marketable securities which were primarily held in U.S. banks. Short-term restricted cash of $2.5 million and long-term restricted cash of $5.0 million primarily serves as collateral for outstanding letters of credit for facilities. We have generated negative cumulative cash flows from operations since inception through the three months ended March 31, 2023, and we have generated losses from operations since inception as reflected in our accumulated deficit of $1.1 billion.

We currently anticipate making aggregate capital expenditures of between approximately $60 million and $70 million during the next 12 months, the majority of which we expect to incur for construction costs of the facilities on our property in Pleasanton, California over the next two quarters, as well as other global facilities and equipment to be used for manufacturing and research and development.

Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, investments in or acquisitions of complementary or enhancing technologies or businesses, the impacts of the COVID-19 pandemic, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and international activities and the introduction of new products.

We take a long-term view in growing and scaling our business and we regularly review acquisition and investment opportunities, and we may in the future enter into arrangements to acquire or invest in businesses, real estate, services and technologies, including intellectual property rights, and any such acquisitions or investments could significantly increase our capital needs. We regularly review opportunities that meet our long-term growth objectives.

In January 2023, we signed an agreement to acquire certain intangible and other assets for an upfront payment of $10.0 million relating to an intellectual property license. Upon acquiring the assets, we expect to pay $10.0 million and up to $36.3 million cash consideration pursuant to the agreement in the event certain future technology development milestones are met as well as additional cash consideration tied to future sales milestones.

While we expect to continue to incur operating losses for the foreseeable future due to the investments we intend to make, we believe that our existing cash and cash equivalents and cash generated from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

We intend to continue to evaluate market conditions and may in the future pursue additional sources of funding, such as mortgage or other financing, to further enhance our financial position and to execute our business strategy. In addition, should prevailing economic, financial, business or other factors adversely affect our ability to meet our operating cash requirements, we could be required to obtain funding though traditional or alternative sources of financing. We cannot be certain that additional funds would be available to us on favorable terms when required, or at all.

### Sources of liquidity

Since our inception, we have financed our operations and capital expenditures primarily through sales of convertible preferred stock and common stock, revenue from sales of our products and the incurrence of indebtedness. In September 2019, we completed our initial public offering for aggregate proceeds of $410.8 million, net of offering costs, underwriter discounts and commissions. In September 2020, we completed a public offering of our Class A common stock for aggregate proceeds of $482.3 million, after deducting offering costs, underwriting discounts and commissions.

The following table summarizes our cash flows for the periods indicated:

*(in thousands)*

| Net cash provided by (used in): | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(4,125) | $(20,802) |
| Investing activities | 119,956 | (257,558) |
| Financing activities | (3,414) | 2,417 |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 24 | (18) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $112,441 | $(275,961) |

### Operating activities

The net cash used in operating activities of $4.1 million for the three months ended March 31, 2023 was primarily due to a net loss of $50.7 million, net cash outflow from changes in operating assets and liabilities of $6.0 million, primarily offset by stock-based compensation expense of $42.1 million, depreciation and amortization of $6.5 million, amortization of leased right-of-use assets of $2.1 million, realized losses on sale of marketable securities of $1.7 million, and other non-cash expenses of $0.2 million. The net cash outflow from operating assets and liabilities was primarily due to a decrease in accrued compensation and other related benefits of $15.1 million related to the prior year annual bonus payments, an increase in other noncurrent assets of $10.5 million primarily due to an upfront payment for an intellectual property license of $10.0 million, an increase in prepaid expenses and other current assets of $4.3 million, and a decrease in operating lease liability of $2.3 million. The net cash outflow from operating assets and liabilities was partially offset by a decrease of accounts receivable of $26.3 million due to timing of collections and an increase in deferred revenue of $1.1 million.

The net cash used in operating activities of $20.8 million for the three months ended March 31, 2022 was due primarily to a net loss of $42.4 million, net cash outflow from changes in operating assets and liabilities of $12.6 million, partially offset by stock-based compensation expense of $26.0 million, depreciation and amortization of $6.2 million, amortization of leased right-of-use assets of $1.8 million and amortization of premium and accretion of discount on marketable securities, net of $0.2 million. The net cash outflow from operating assets and liabilities was primarily due to a decrease in accrued compensation and other related benefits of $13.3 million due to the prior year annual bonus payments, an increase in prepaid expenses and other current assets of $3.9 million, an increase in inventory of $3.7 million to due to the timing of inventory purchases including advance purchases of inventory due to anticipated demand and supply chain management, and a decrease in accrued expenses and other current liabilities of $3.5 million due to the timing of payments including license fees. The net cash outflow from operating assets and liabilities was partially offset by a decrease in accounts receivable of $8.7 million due to timing of collections and an increase of accounts payable of $2.9 million due to timing of vendor payments.

### Investing activities

The net cash provided by investing activities of $120.0 million in the three months ended March 31, 2023 was due to proceeds from sales and maturities of marketable securities of $93.3 million and $31.9 million, respectively, partially offset by purchases of property and equipment and intangible assets of $4.6 million and $0.7 million, respectively.

The net cash used in investing activities of $257.6 million in the three months ended March 31, 2022 was due to purchases of marketable securities of $242.3 million and property and equipment of $28.1 million, partially offset by proceeds from sales and maturities of marketable securities of $12.9 million.

### Financing activities

The net cash used in financing activities of $3.4 million in the three months ended March 31, 2023 was primarily from proceeds of $2.4 million from the issuance of common stock from the exercise of stock options, partially offset by payments on financing arrangements of $5.8 million.

The net cash provided by financing activities of $2.4 million in the three months ended March 31, 2022 was primarily from proceeds of $7.8 million from the issuance of common stock from the exercise of stock options partially offset by payments on financing arrangements of $5.4 million.

### Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the applicable rules and regulations of the SEC. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2023 as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K filed with the SEC on February 16, 2023.

## Market risk

As filed, 313 characters.

For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to Item 7A “Quantitative and Qualitative Disclosures about Market Risk” contained in Part II of our Annual Report. Our exposure to market risk has not changed materially since December 31, 2022.

## Controls and procedures

As filed, 1,747 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023.

### Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 322 characters.

There have been no material changes to our risk factors that we believe are material to our business, results of operations and financial condition from the risk factors previously disclosed in our Annual Report, and any documents incorporated by reference therein, which is accessible on the SEC's website at www.sec.gov.

Filed May 4, 2023.
Source: SEC EDGAR, the filing index for accession 0001770787-23-000029. Last ingested by Listed: Nov 6, 2026, 17:47 ET. No prices; not investment advice.