# 10x Genomics, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [10x Genomics, Inc.](/companies/txg.md) (CIK 1770787)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 2, 2023, 19:27 ET
- Period: 2023-09-30
- Accession: 0001770787-23-000053
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1770787/000177078723000053/txg-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1770787/000177078723000053/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $153.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $434.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $58.1m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $141.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $95.5m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $293.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $82.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $257.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$94.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$210.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $1.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $25.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $1.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $4.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$93.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$206.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.79 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.79 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.77 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 117,728,293 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 116,693,008 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$41.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $45.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2023-09-30 | $562.3m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $948.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $104.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $203.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $745.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,850 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 sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology. Our integrated solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of biology. We have launched multiple products that enable researchers to understand and interrogate biological analytes in their full biological context. Our commercial product portfolio leverages our Chromium X Series and Chromium Connect instruments, which we refer to as “Chromium instruments,” our Visium CytAssist, an instrument designed to simplify the Visium solution workflow by facilitating the transfer of transcriptomic probes from standard glass slides to Visium slides, and our Xenium Analyzer, an instrument designed for fully automated high-throughput analysis of cells in their tissue environment, which we refer to as “Spatial instruments,” and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium solutions, which we refer to as “consumables.” We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization.

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

Since our inception in 2012, we have incurred net losses in each year. Our net losses were $93.0 million and $206.1 million for the three and nine months ended September 30, 2023 and $41.9 million and $148.8 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $1.2 billion and cash, cash equivalents and marketable securities totaling $356.9 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 continue to increase in connection with our ongoing activities, as we:

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

### Results of Operations

*(in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $153,644 | $131,072 | $434,748 | $360,177 |
| Cost of revenue | 58,115 | 30,377 | 141,217 | 83,559 |
| Gross profit | 95,529 | 100,695 | 293,531 | 276,618 |
| Operating expenses: |  |  |  |  |
| Research and development | 66,507 | 67,290 | 205,065 | 202,053 |
| In-process research and development | 41,402 | — | 41,402 | — |
| Selling, general and administrative | 82,415 | 73,401 | 257,205 | 219,413 |
| Total operating expenses | 190,324 | 140,691 | 503,672 | 421,466 |
| Loss from operations | (94,795) | (39,996) | (210,141) | (144,848) |
| Other income (expense): |  |  |  |  |
| Interest income | 4,300 | 2,025 | 12,269 | 3,832 |
| Interest expense | (1) | (114) | (25) | (351) |
| Other expense, net | (1,248) | (1,950) | (4,268) | (4,193) |
| Total other income (expense) | 3,051 | (39) | 7,976 | (712) |
| Loss before provision for income taxes | (91,744) | (40,035) | (202,165) | (145,560) |
| Provision for income taxes | 1,242 | 1,879 | 3,982 | 3,225 |
| Net loss | $(92,986) | $(41,914) | $(206,147) | $(148,785) |

### Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

### Revenue

*(dollars in thousands)*

| Instruments | Three Months Ended September 30, 2023 | 2022 | Change $% |  | Nine Months Ended September 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Chromium | $12,231 | $14,936 | $(2,705) | (18)% | $36,716 | $43,309 | $(6,593) | (15)% |
| Spatial | 22,711 | 5,963 | 16,748 | 281 | 48,357 | 6,755 | 41,602 | 616 |
| **Total instruments revenue** | 34,942 | 20,899 | 14,043 | 67 | 85,073 | 50,064 | 35,009 | 70 |
| **Consumables** |  |  |  |  |  |  |  |  |
| Chromium | 100,282 | 97,868 | 2,414 | 2 | 302,172 | 280,195 | 21,977 | 8 |
| Spatial | 14,091 | 10,239 | 3,852 | 38 | 37,067 | 23,796 | 13,271 | 56 |
| **Total consumables revenue** | 114,373 | 108,107 | 6,266 | 6 | 339,239 | 303,991 | 35,248 | 12 |
| **Services** | 4,329 | 2,066 | 2,263 | 110 | 10,436 | 6,122 | 4,314 | 70 |
| **Total revenue** | $153,644 | $131,072 | $22,572 | 17% | $434,748 | $360,177 | $74,571 | 21% |

Revenue increased $22.6 million, or 17%, to $153.6 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Instruments revenue increased $14.0 million, or 67%, to $34.9 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to higher volume of Spatial instruments sold. The revenue for the three months ended September 30, 2023 includes the sales of Xenium instruments. There were no Xenium instruments sold during the three months ended September 30, 2022 and CytAssist began shipping in June 2022. Chromium instruments revenue decreased $2.7 million, or 18%, to $12.2 million primarily due to lower volume of Chromium instruments sold and changes in product mix. Consumables revenue increased $6.3 million, or 6%, to $114.4 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily driven by growth in Spatial consumables sales.

Revenue increased $74.6 million, or 21%, to $434.7 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Instruments revenue increased $35.0 million, or 70%, to $85.1 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to higher volume of Spatial instruments sold. The revenue for the nine months ended September 30, 2023 includes the sales of Xenium instruments. There were no Xenium instruments sold during the nine months ended September 30, 2022 and CytAssist began shipping in June 2022. Chromium instruments revenue decreased $6.6 million, or 15%, to $36.7 million primarily due to lower volume of Chromium instruments sold and changes in product mix. Consumables revenue increased $35.2 million, or 12%, to $339.2 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily driven by growth in Chromium consumables sales.

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

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change $% |  | Nine Months Ended September 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of revenue | $58,115 | $30,377 | $27,738 | 91% | $141,217 | $83,559 | $57,658 | 69% |
| Gross profit | $95,529 | $100,695 | $(5,166) | (5)% | $293,531 | $276,618 | $16,913 | 6% |
| Gross margin | 62% | 77% |  |  | 68% | 77% |  |  |

Cost of revenue increased $27.7 million, or 91%, to $58.1 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The increase was primarily driven by higher manufacturing costs of $24.8 million due to increased sales and higher costs of newly introduced products, $1.8 million of higher warranty charges and $1.7 million of higher inventory write-downs.

Cost of revenue increased $57.7 million, or 69%, to $141.2 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase was primarily driven by higher manufacturing costs of $49.8 million due to increased sales and higher costs of newly introduced products, $4.5 million of higher inventory write-downs and $3.7 million of higher warranty charges.

We expect our gross margin will continue to trend lower due in part to change in product mix with newly introduced products, the impacts of inflation including, among other impacts, employee compensation and benefits, 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, we believe that there are opportunities for cost reductions and also for increases to average selling price that we expect will improve instrument margin over the long term.

### Operating expenses

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change $% |  | Nine Months Ended September 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $66,507 | $67,290 | $(783) | (1)% | $205,065 | $202,053 | $3,012 | 1% |
| In-process research and development | 41,402 | — | 41,402 | 100 | 41,402 | — | 41,402 | 100 |
| Selling, general and administrative | 82,415 | 73,401 | 9,014 | 12 | 257,205 | 219,413 | 37,792 | 17 |
| Total operating expenses | $190,324 | $140,691 | $49,633 | 35% | $503,672 | $421,466 | $82,206 | 20% |

Research and development expenses decreased $0.8 million, or 1%, to $66.5 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The decrease was primarily driven by lower laboratory materials and supplies of $4.2 million and lower consulting and professional services of $0.9 million. The decrease was partially offset by higher personnel expenses of $2.9 million, including $3.4 million in stock-based compensation expense, $0.8 million of higher costs for facilities and information technology to support operational expansion, and $0.6 million increase in other expenses.

Research and development expenses increased $3.0 million, or 1%, to $205.1 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The increase was primarily driven by an increase in personnel expenses of $13.8 million, including $13.9 million in stock-based compensation expense, $2.8 million of higher costs for facilities and information technology to support operational expansion, and $0.9 million increase in other expenses. The increase is partially offset by lower costs of laboratory materials and supplies of $13.2 million and $1.1 million in consulting and professional services.

In-process research and development expense during the three months ended September 30, 2023 related to the January 2023 agreement to acquire certain intangible and other assets which was accounted for as an asset acquisition. In connection with the acquisition, we recognized an in-process research and development intangible asset of $41.4 million which did not have alternative future use and therefore was recognized as an expense during the period. See Note 3 to the condensed consolidated financial statements for further details. There were no similar purchases in the three and nine months ended September 30, 2022.

Selling, general and administrative expenses increased $9.0 million, or 12%, to $82.4 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The increase was primarily driven by $4.0 million of increased outside legal expenses, increased personnel expenses of $2.8 million which was primarily stock-based compensation expense, $0.8 million of higher marketing expenses, $0.6 million of higher costs for facilities and information technology to support operational expansion and higher consulting and professional services of $0.6 million.

Selling, general and administrative expenses increased $37.8 million, or 17%, to $257.2 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The increase was primarily driven by increased personnel expenses of $16.0 million, including $16.9 million in stock-based compensation expense, $12.3 million of increased outside legal expenses, $5.6 million of higher costs for facilities and information technology to support operational expansion, $2.3 million of increased marketing expenses and $1.2 million of higher consulting and professional services expenses.

We expect our operating expenditures to continue to increase as we invest to support new and existing research and development projects and incentivize and retain key talent.

### Other income (expense), net

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change $% |  | Nine Months Ended September 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest income | $4,300 | $2,025 | $2,275 | 112% | $12,269 | $3,832 | $8,437 | 220% |
| Interest expense | (1) | (114) | 113 | (99) | (25) | (351) | 326 | (93) |
| Other expense, net | (1,248) | (1,950) | 702 | (36) | (4,268) | (4,193) | (75) | 2 |
| Total other income (expense) | $3,051 | $(39) | $3,090 | (7,923)% | $7,976 | $(712) | $8,688 | (1,220)% |

Interest income increased by $2.3 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Interest income increased by $8.4 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase was primarily due to interest income generated from our cash equivalents and marketable securities during the three and nine months ended September 30, 2023 reflecting an increase in interest rates.

Other expense, net decreased by $0.7 million, or 36% for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The decrease was driven by lower net realized and unrealized losses from foreign currency rate measurement fluctuations. Other expense, net increased by $0.1 million, or 2% for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 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 lower net realized and unrealized losses from foreign currency rate measurement fluctuations.

### Provision for Income Taxes

The Company’s provision for income taxes was $1.2 million and $4.0 million, respectively, for the three and nine months ended September 30, 2023, and $1.9 million and $3.2 million, respectively, for the three and nine months ended September 30, 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 September 30, 2023, we had $356.9 million in cash and cash equivalents and marketable securities. Short-term restricted cash of $0.5 million and long-term restricted cash of $3.0 million primarily serves as collateral for outstanding letters of credit for facilities. We have generated negative cumulative cash flows from operations since inception through September 30, 2023, and we have generated losses from operations since inception as reflected in our accumulated deficit of $1.2 billion.

We currently anticipate making aggregate capital expenditures of between approximately $20 million and $25 million during the next 12 months, which we expect to include, among other expenditures, equipment to be used for manufacturing and research and development.

Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, investments in or acquisitions of complementary or enhancing technologies or businesses, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and international activities 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 cash payment of $10.0 million relating to an intellectual property license. Upon the close of the transaction in July 2023, we paid additional cash consideration of $10.0 million upon acquiring the assets. Under the agreement, we are obligated to provide additional cash consideration if certain technology development milestones are met. As of September 30, 2023, we have paid $21.3 million relating to the completion of development milestones. Up to $15.0 million of cash consideration is due if an additional technology development milestone is met. Furthermore, we expect to pay cash consideration tied to future sales milestones if such milestones are met.

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

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

### Sources of liquidity

Since our inception, we have financed our operations and capital expenditures primarily through sales of convertible preferred stock and common stock, revenue from sales of our products and the incurrence of indebtedness. 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): | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(40,955) | $(47,329) |
| Investing activities | 120,394 | (317,715) |
| Financing activities | 8,056 | 10,816 |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (110) | (295) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $87,385 | $(354,523) |

### Operating activities

The net cash used in operating activities of $41.0 million for the nine months ended September 30, 2023 was primarily due to a net loss of $206.1 million, of which $41.4 million related to in-process research and development expense, partially offset by stock-based compensation expense of $128.0 million, depreciation and amortization of $25.8 million, amortization of leased right-of-use assets of $6.1 million, lease impairment charges of $2.8 million, realized losses on sale of marketable securities of $1.7 million, other non-cash expenses of $0.5 million and net cash inflow from changes in operating assets and liabilities of $0.3 million. The net cash inflow from operating assets and liabilities was primarily due to an increase in accrued expenses and other current liabilities of $9.2 million, an increase in deferred revenue of $6.6 million, an increase in other noncurrent liabilities of $0.6 million and a decrease in accounts receivable of $0.4 million. The net cash inflow from operating assets and liabilities was primarily offset by a decrease in operating lease liability of $5.9 million, a decrease in accrued compensation and other related benefits of $4.2 million primarily related to the prior year annual bonus payments, an increase in prepaid expenses and other current assets of $3.6 million and a decrease in accounts payable of $2.8 million due to timing of vendor payments.

The net cash used in operating activities of $47.3 million for the nine months ended September 30, 2022 was primarily due to a net loss of $148.8 million, net cash outflow from changes in operating assets and liabilities of $20.1 million, partially offset by stock-based compensation expense of $95.9 million, depreciation and amortization of $18.8 million, amortization of leased right-of-use assets of $5.7 million, amortization of premium and accretion of discount on marketable securities, net of $0.7 million and loss on disposal of property and equipment of $0.5 million. The net cash outflow from operating assets and liabilities was primarily due to an increase in inventory of $19.8 million due to ramp-up of inventory for anticipated demand and supply chain management, a decrease of $4.6 million due to payment of operating lease liabilities, a decrease in accrued compensation and other related benefits of $3.2 million due to the prior year annual bonus payments, a decrease in other noncurrent liabilities of $3.0 million and an increase in prepaid expenses and other current assets of $2.5 million. The net cash outflow from operating assets and liabilities was partially offset by an increase in accounts payable of $6.1 million due to timing of vendor payments, an increase in accrued expenses and other current liabilities of $2.9 million, an increase in deferred revenue of $1.8 million and a decrease in accounts receivable of $1.7 million due to timing of collections.

### Investing activities

The net cash provided by investing activities of $120.4 million in the nine months ended September 30, 2023 was due to proceeds from sales and maturities of marketable securities of $96.1 million and $70.3 million, respectively, partially offset by purchases of property and equipment and intangible assets of $45.2 million and $0.9 million, respectively.

The net cash used in investing activities of $317.7 million in the nine months ended September 30, 2022 was due to purchases of marketable securities of $282.9 million and property and equipment of $91.9 million and payment of acquisition-related holdback cash of $1.5 million, partially offset by proceeds from sales and maturities of marketable securities of $41.4 million and $17.2 million, respectively.

### Financing activities

The net cash provided by financing activities of $8.1 million in the nine months ended September 30, 2023 was primarily from proceeds of $13.9 million from the issuance of common stock from the exercise of stock options and employee stock purchase plan, partially offset by payments on financing arrangements of $5.8 million.

The net cash provided by financing activities of $10.8 million in the nine months ended September 30, 2022 was primarily from proceeds of $16.2 million from the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases 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 nine months ended September 30, 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, 1,754 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 September 30, 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 September 30, 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 Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0001770787-23-000053. Last ingested by Listed: Nov 6, 2026, 17:47 ET. No prices; not investment advice.