10x Genomics, Inc. (NASDAQ:TXG) is a life sciences technology company that has established itself as a leader in the field of single-cell and spatial biology. The company's innovative products and solutions have enabled researchers to interrogate, understand, and master biological systems at an unprecedented level of resolution and scale.

In the fiscal year 2023, 10x Genomics reported annual revenue of $618.7 million, a decrease of 5.2% compared to the previous year. The company's net loss for the year was $255.1 million, and its annual operating cash flow and free cash flow were -$15.2 million and -$64.7 million, respectively.

Despite the challenging macroeconomic environment, 10x Genomics has continued to execute on its strategic priorities, with a focus on driving growth through its spatial biology platform while navigating headwinds in its single-cell Chromium franchise.

Business Overview

10x Genomics' product portfolio consists of three complementary platforms: Chromium, Visium, and Xenium. The Chromium platform is the company's flagship single-cell analysis solution, enabling researchers to study biological systems at the individual cell level. The Visium platform, on the other hand, provides spatial transcriptomics capabilities, allowing researchers to analyze gene expression patterns within the context of tissue architecture. The Xenium platform, the company's newest offering, is designed for high-throughput spatial analysis of cells in their native tissue environment.

The company's strategy has been to position these platforms as a comprehensive suite of tools that enable researchers to tackle a wide range of biological questions, from understanding fundamental cellular processes to uncovering disease mechanisms and developing new therapies.

Spatial Innovations Driving Growth

During the first quarter of 2024, 10x Genomics reported a 5% year-over-year increase in total revenue, driven by strong performance in its spatial biology offerings. Spatial instrument revenue grew by 133%, primarily due to increased demand for the Xenium platform. Spatial consumables revenue also saw a 134% year-over-year increase, largely attributable to the successful launch of the Visium HD product.

The Visium HD launch has been a significant milestone for the company, as it enables whole-transcriptome spatial analysis at single-cell resolution. The positive customer feedback and strong initial demand for this product have fueled the company's ambition to establish Visium HD as the platform of choice for translational discovery.

In addition to the Visium HD launch, 10x Genomics has continued to enhance its Xenium platform, introducing new capabilities such as multi-modal cell segmentation and an expanded immuno-oncology gene panel. These advancements have further solidified Xenium's position as a feature-performance leader in the spatial biology market.

Chromium Headwinds and the GEM-X Transition

While the spatial biology segment has been a bright spot for 10x Genomics, the company has faced headwinds in its Chromium single-cell franchise. During the first quarter, Chromium consumables revenue declined by 17% year-over-year, primarily due to the transition to the company's new GEM-X technology.

The GEM-X launch, which occurred in the last month of the first quarter, has had a significant impact on Chromium performance. Many customers have been trialing the new GEM-X products, leading to lower-than-expected orders for the legacy Chromium products. This transition is expected to continue into the second quarter, with the company anticipating a more linear transition to GEM-X by the end of the year.

Despite the near-term challenges, 10x Genomics remains confident in the long-term potential of the Chromium platform. The company believes that the superior performance and lower cost of the GEM-X technology will enable broader adoption of single-cell analysis, ultimately expanding the overall market opportunity.

Navigating Competitive Landscape and Macro Headwinds

The spatial biology market has become increasingly competitive, with the recent acquisition of NanoString Technologies by Bruker Corporation. This move has created a more formidable competitor for 10x Genomics, with a larger commercial and innovation infrastructure, as well as a stronger financial position.

In addition to the competitive landscape, 10x Genomics has also had to navigate broader macroeconomic challenges, such as pressure on customer budgets and elongated sales cycles. These factors have impacted the company's Chromium business, as customers have had to make difficult choices in allocating their resources between single-cell and spatial technologies.

Despite these headwinds, 10x Genomics remains committed to its long-term strategy of delivering innovative products and solutions that address the evolving needs of its customers. The company continues to invest in research and development, with a focus on enhancing its existing platforms and introducing new capabilities that will drive growth across its portfolio.

Financials

For the first quarter of 2024, 10x Genomics reported total revenue of $141.0 million, a 5% increase compared to the same period in the prior year. Gross margin for the quarter was 66%, down from 73% in the first quarter of 2023, primarily due to a change in product mix driven by the Xenium platform.

The company's operating expenses for the quarter increased to $154.4 million, up from $150.4 million in the same period last year. This increase was driven by higher legal expenses and costs for facilities and IT, partially offset by lower personnel expenses.

10x Genomics has maintained its full-year 2024 revenue guidance of $670 million to $690 million, representing growth of 8% to 12% over the prior year. The company expects to continue investing in its operations, with capital expenditures projected to be in the range of $15 million to $20 million over the next 12 months.

Geographic and Segmental Performance

During the first quarter of 2024, 10x Genomics saw mixed performance across its geographic regions. Revenue in the Americas grew by 1% to $79.6 million, while EMEA revenue increased by 22% to $34.7 million. Revenue in the Asia-Pacific region, however, declined by 2% to $26.7 million.

Looking at the company's revenue breakdown by product segment, instruments revenue increased by 33% to $25.5 million, driven by strong demand for the Spatial platform. Consumables revenue, on the other hand, decreased by 2% to $110.3 million, with a 17% decline in Chromium consumables revenue partially offset by a 134% increase in Spatial consumables revenue.

Services revenue, which includes extended warranty contracts and Xenium instrument training and installation, grew by 91% to $5.2 million during the quarter.

Liquidity

As of March 31, 2024, 10x Genomics had $371.8 million in cash, cash equivalents, and marketable securities. The company used $15.7 million in cash from operating activities during the first quarter, primarily due to a net loss of $59.9 million, partially offset by non-cash adjustments such as stock-based compensation.

10x Genomics has maintained a disciplined approach to capital allocation, with plans to invest between $15 million and $20 million in capital expenditures over the next 12 months. The company's goal is to self-fund its innovation and scale by investing the cash generated from its operations back into the business.

Conclusion

10x Genomics has navigated a challenging macroeconomic environment and increased competition in the spatial biology market, while continuing to drive innovation and growth across its product portfolio. The company's spatial biology offerings, particularly the Visium HD and Xenium platforms, have been the primary growth drivers, offsetting headwinds in the Chromium single-cell franchise.

As 10x Genomics works through the GEM-X transition and addresses broader market dynamics, the company remains focused on delivering innovative solutions that enable researchers to better understand and master biological systems. With a strong balance sheet, a commitment to R&D, and a comprehensive portfolio of complementary platforms, 10x Genomics is well-positioned to capitalize on the significant long-term opportunities in the life sciences technology market.