10X Genomics Inc (TXG) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the 10x Genomics First Quarter 2021 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Mr. Eric Jaschke, Director of Investor Relations and Strategic Finance. Thank you. Please go ahead, sir.

Thank you. Earlier today, 10x Genomics released financial results for the first quarter ended March 31, 2021. 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 e-mail to investors@10xgenomics.com. An archived webcast of this call will be available on the Investors 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 different -- differ from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties and factors that could cause results to differ appears in the press release 10x Genomics issued today and in the documents and reports filed by 10x Genomics from time to time with the Securities and Exchange Commission. 10x Genomics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

Joining the call today are Serge Saxonov, our CEO and Co-Founder; and Justin McAnear, our Chief Financial Officer. In addition, Brad Crutchfield, our Chief Commercial Officer, will be available for Q&A.

With that, I'll now turn the call over to Serge. Serge?

Thanks, Eric. Good afternoon, and thank you for joining us. On today's call, I will start with a brief review of our performance and execution during the first quarter. Next, I will discuss our views on current market dynamics, our vision for the century of biology and our investment across the business to achieve this vision. I will then turn the call over to Justin for a more detailed look at our financials and outlook for the year.

We had a strong start to 2021, with first quarter revenues growing 47% year-over-year to $106 million as we continue to drive adoption of our Chromium and Visium platforms. While we saw good results this quarter, there are many indications that our customers are not yet back to normal productivity. This is due in large part to COVID-related protocols, which have a disproportionate impact on decentralized bench experiments. That said, our conviction in the advanced opportunity ahead remains as strong as ever.

The frontiers of biology continue to expand with 10x leading the way. Our rapid pace of innovation has continued as we have launched breakthrough products for both our Chromium and Visium platforms. At our inaugural Xperience event, we were inspired by our global customer community and their intense engagement in our technology, applications and product road maps. It is precisely this engagement that defines the urgency of our mission and commitment to our customers.

Now moving to our quarterly results and starting with Chromium. Demand for instruments and consumables remained strong in the first quarter. And it is clear that our diverse product set is resonating across a wide range of applications and use cases. Adoption of our Gene Expression solution continues to expand, and single cell gene expression is increasingly becoming the standard for measuring biological systems across most areas of life sciences.

While earlier in its life cycle, our Immune Profiling solution is also on an encouraging trajectory. From COVID and infectious disease applications to immuno-oncology and autoimmunity, this solution enables a detailed and comprehensive view of the immune system and is now becoming an essential tool for discovery and validation experiments.

We're also excited by the strong interest in our Gene Expression plus ATAC-seq Multiome solution, which began shipping last September. This product is a game changer for understanding the rules of epigenetic programming. By simultaneously measuring chromatin accessibility and gene expression within in the same cell, research is able to link individual epigenetic programs to their outputs across varieties of cells, tissues and experimental conditions.

We're now beginning to see publications from our early adopters. In a recent preprint, researchers used our gene expression and ATAC solutions, and subsequently, Multiome to profile the developing human cerebral cortex and to better understand the pathogenesis of neurodevelopmental disorders, such as autism. The team created an atlas and mapped various gene regulatory elements in the developing brain, which will help understanding the programs governing human development and disease.

We remain focused on increasing access to Chromium and bringing more customers into the single-cell ecosystem. During the first quarter, we launched our CellPlex and Low Throughput Kits and opened general access to our 10x Cloud solution, lowering barriers to adoption. We're pleased with the response to these products and capabilities since launch, and they're progressing in line with our expectations.

Now moving to Visium. We're encouraged by the speed of adoption and the pace of discoveries from our customers. There are now approximately 100 publications and preprints to date featuring Visium. For example, just recently, in Cell, researchers used Visium in concert with Chromium to characterize the development of the human intestine, identifying and mapping the function of over 100 different cell states linked to major developmental milestones. These researchers were able to describe specific expression to programs and define cells and locations linked to rare developmental intestinal disorders, providing the scientific community with an important resource to facilitate further studies.

Visium is early in the life cycle, and we will continue to bring additional enhancements to this platform. The product road map we laid out earlier this year featured new foundational capabilities that will help fulfill its potential. This starts with the launch of Visium for FFPE, which is now available for preorder. This product gives researchers access to the full transcriptome across the entire tissue, enabling for the first time true unbiased discovery in FFPE samples.

While we're seeing significant interest from our existing Visium customers, the majority of interest thus far is coming from translational customers new to 10x. And while it remains very early, we are pleased with the reception in the market thus far. We anticipate shipping this product later this quarter.

As we look to the future, there is a vast universe of opportunities ahead of us. This is the century of biology, and our goal is to develop technologies to accelerate the mastery of biology and to help researchers develop precision diagnostics, targeted therapies and cures needed to solve humanity's most pressing health challenges.

The COVID is pandemic is a striking demonstration of the importance of our mission. Due to the massive and relentless efforts by scientists across the globe, we have seen incredible advancements in our understanding of the SARS-CoV-2 virus, the underpinnings of the disease and approaches to fighting it, all culminating in the rapid development of multiple but effective vaccines.

There is an increasing recognition of the importance of investing in the life sciences among the public industry and the policymakers. For example, the latest U.S. federal budget proposals have called for large increases in the resources allocated to science-related agencies and the creation of a new agency aimed at driving transformational innovation within biomedical research. If approved, the proposed 2022 budget would represent one of the largest annual increases for the NIH on record. These trends are not limited to the U.S. alone. Around the world, we are seeing calls for increased investment in science and general research. And while these are only proposals, we think they are emblematic of increased support for life sciences research and a favorable funding environment for our customers going forward.

We believe these trends will accelerate the progress our customers have been making, further building on the large number of scientific discoveries that have been enabled by our platforms. To date, there have been more than 2,500 publications using our products across a wide variety of research areas, including cancer, autoimmunity and infectious disease. These publications have uncovered one of the key research findings of recent years: that cell heterogeneity intertwined with complex gene networks is a pervasive feature of all tissues. Ultimately, this means that every tissue sample will need to be analyzed with single cell and spatial context, whether for basic research or for clinical diagnostics.

We have laid the foundation for this future by investing in our 3 complementary platforms: Chromium; Visium; and our in situ platform, which is under development. Together, they will provide a comprehensive set of solutions for researchers and clinicians.

For example, significant elements of this future could be gleaned from AACR, a major cancer conference which took place last month, where our products were featured prominently. From identifying rare progenitor cell types to understanding the biology of subclonal populations, to measuring immune infiltrations and tumor microenvironment, to discovering and analyzing potential tissue-based biomarkers, the benefits of single-cell and spatial multi-omics approaches are becoming increasingly clear.

Since inception, we have focused on innovation, on building new technologies to enable our customers to make breakthrough discoveries and accelerate the understanding of biology. We have invested nearly $1 billion in product development and innovation and launched more than 15 pioneering products since 2015. These products have won multiple awards, kicked off the single-cell revolution and catalyzed the emergence of spatial genomics.

Our research and development work has resulted in a broad intellectual property portfolio with 1,100 patents and patent applications, covering the breadth of our products as well as many important application areas.

Moving forward, we intend to protect our existing and future innovations as we continue to invest in creating revolutionary products. We're now in an incredible position to capitalize on the immense value-creation opportunities ahead, and we will continue to invest broadly to ensure that we have the necessary resources to achieve these goals.

This starts with continued investment in the 10x team. Our employees have laid the foundation of the company's success to date. As we look to achieve our ambitious goals, preserving our collaborative culture and sense of urgency while also massively scaling the organization is going to be essential. We will remain intensely focused on finding, hiring and developing top talent across the organization.

Within R&D, we're investing in our teams, spanning Pleasanton, Singapore, Stockholm and Copenhagen to drive product innovation across all 3 of our platforms. With Chromium, we're investing to remove barriers for those new to genomics while also adding powerful new capabilities. Visium is early in its life cycle, and we're focused on adding the core features necessary to make this platform the standard for spatial genomics research. And finally, with in situ, we're focused on building the right solutions with the user experience and quality that our customers have come to expect.

Consistent with our investment in R&D, we're expanding our commercial organization in response to the strong demand we're seeing in the market. With our extensive road map of new products and capabilities, we're investing to support our entry into new markets and application areas. And finally, we're expanding our global infrastructure, operations and manufacturing capabilities to support growth across all of these vectors.

We have a deep conviction that very little in biology can be fully understood except through the lens of single-cell analysis. This conviction has materialized in our Chromium and Visium platforms and is guiding the development of our in situ platform. We unequivocally see a future where every tissue sample should be analyzed using at least 1 of these 3 approaches. We look forward to realizing this future as we pursue our mission of mastering biology to advance human health.

With that, I will now turn the call over to Justin for more detail on our financials.

Thank you, Serge. Total revenue for the 3 months ended March 31, 2021, was $105.8 million compared to $71.9 million for the prior year period, representing a 47% increase year-over-year. Consumables revenue was $93.1 million, which increased 52% over the prior year period. Instrument revenue was $11.1 million, which increased 22% over the prior year period. Service revenue was $1.6 million, which increased 21% over the prior year period. The increase in consumables revenue this quarter was primarily driven by the growth in the instrument installed base. The increase in instrument revenue was driven by increased instrument placements during the quarter. Service revenue increased due to a larger number of instruments coming off of their initial 1-year warranty and on the paid service contracts.

North America revenue for the first quarter was $51.8 million, which increased 30% over the prior year period. EMEA revenue for the first quarter was $19.2 million, which increased 46% over the prior year period. APAC revenue for the first quarter was $34.8 million, which increased 83% over the prior year period.

Now turning to the rest of the income statement. Gross profit for the first quarter was $88.8 million compared to a gross profit of $56.8 million for the prior year period. Gross margin for the first quarter was 84% compared to 79% for the prior year period. The gross margin increase was driven primarily by lower accrued royalties related to ongoing litigation.

Total operating expenses for the first quarter were $99 million, an increase of 29% from $76.7 million for the first quarter of 2020. The increase in operating expenses was driven by increased personnel-related expenses due to ongoing expansion within R&D and the commercial organizations, including stock-based compensation, increased costs related to facilities expansion and increased information technology spend in support of general expansion of our operations and expenses related to our ongoing COVID-19 employee testing program.

R&D expenses for the first quarter were $41.9 million compared to $26 million for the first quarter of 2020. The increase was driven by $10.3 million of increased personnel-related expenses, including stock-based compensation, and a $1.8 million increase in expenses related to lab materials, supplies and equipment.

SG&A expenses for the first quarter were $56.9 million compared to $50.4 million for the first quarter of 2020. The increase was driven by $9.9 million of increased personnel-related expenses, including stock-based compensation, and a $2.1 million increase in expenses related to IT and facilities. These were partially offset by decreased legal expenses.

Operating loss for the first quarter was $10.2 million compared to a loss of $19.9 million for the first quarter of 2020. This includes $16.2 million of stock-based compensation for the first quarter of 2021 compared to $6.7 million in stock-based compensation for the first quarter of 2020.

Net loss for the period was $11.6 million compared to a net loss of $21.1 million for the first quarter of 2020. We ended the quarter with $617.2 million in cash and cash equivalents net of restricted cash. The decrease in cash from the prior quarter includes the impact of our $28 million land purchase in Pleasanton on which we will construct our future operations center.

Now turning to our outlook for the remainder of 2021. In our last call, we disclosed that we ended Q4 with about 90% of customer labs operational at varying degrees of capacity and that we were seeing a wide range of efficiencies within that open capacity. We noted that we did not expect much improvement in Q1 or Q2. And so far, this has transpired as we had expected.

Unlike bulk sequencing approaches, which are typically centralized and batched and performed in core labs, 10x experiments are performed at the lab bench where the samples are. Customer labs are continuing to be impacted by overall capacity available, prioritization of COVID-related experiments over general research and limited access to our sales and support staff due to on-site COVID-related protocols. There is also a variation within geographic regions.

We continue to expect full year revenue for 2021 to be in the range of $480 million to $500 million, representing a growth of 61% to 67% over full year 2020. Thus far into Q2, we have seen little change in lab efficiency from Q1, and we expect our Q2 revenues to be slightly up sequentially.

At this point, I'll turn it back to Serge.

Thanks, Justin. 2021 is off to a strong start. I want to thank our employees for their continued dedication and excellent execution so far this year. You are the reason for our success and are the foundation for our successes in the future.

I would also like to thank our customers for their incredible response to our inaugural Xperience event. Their engagement surpassed even our highest expectations and reaffirms our vision for the future and the vast opportunities ahead.

With that, we will now open it up for questions. Operator?

(Operator Instructions) Your first question will be coming from the line of Doug Schenkel with Cowen.

My first one is just building off of one of the last things that Justin talked about, his remarks on lab activity remaining at about, I think, 90% of norm. I'm just wondering if there's instances that you could detail where certain parts of the world are maybe more open than others. And as we've moved into the second quarter, what parts of the world or what types of labs maybe have opened up more than others? And thinking about other parts of the world where there are -- there's a little bit of a resurgence, if you are seeing a change in activity. So that's the first question, just trying to dig a little bit deeper on that 90%.

And then the second topic is on Visium. It's great hear that Visium, FFPE and I think HD are on track for first half commercial launches. FFPE, we're pretty clear. HD, I just want to make sure. And you indicated that most of the early FFPE interest is from new to 10x translational customers. On that, I'm wondering what you're doing commercially to support those customers that you haven't necessarily gone after as aggressively in the past. And I'm wondering if you're hearing anything in terms of large retrospective studies? I'm just wondering if you have any visibility from partners or customers that the Visium technology is increasingly going to be used in this context with a quick path to peer-reviewed publications?

Well, Doug, that's a lot. I'll start with the sort of the regional highlights. Yes, it's pretty dynamic and it's changing kind of all the time, to say the least. Certainly, in Europe, we saw the U.K. bounce really -- bounce back nicely. They had some equal or some additional headwinds with Brexit and some new import regulations and processes. But that was -- the demand was nice and strong out of there, and we've seen approaching some level of normalcy.

Maybe similar in Scandinavia, but France specifically is where we've seen some real slowdowns and even more specifically just recently. So that's been a little more of a challenge.

If we were to go over to Asia Pac, obviously, China, Korea and Japan are really, essentially back to what is the new normal. A little bit more issues in Southern Europe. Obviously, very topical right now with India, but we don't typically do a tremendous amount of business in India, so not as big an issue.

And then U.S., surprisingly, we found -- well, actually, let's start with North America. Canada was very slow specifically and acutely based on the government did not release their typical budget in the first quarter. And in fact, they released it towards the end of the quarter, but that was hard to get some of the orders booked.

And then as far as the U.S., again, we started the year with a lot of slowness in Southern California and more on the West Coast, but that's really changed in the last few weeks. So there's a lot of things that are working and improving, and there are some sort of intermittent headwinds. I think we're moving quickly to improving situation in the back half of the year, but there's been some level of headwinds in the first half.

Yes. Doug, so this is Serge. On the Visium question, so just a point of clarification. Visium HD is coming in the first half of next year. That's what we indicated at Xperience and earlier in the year. Visium FFPE is on track for this quarter, so just as you suggested.

And yes, we're very excited about the product. Most of the customers are new, at least based on the preorders. But I would want to reemphasize that it's very early. We've just started taking preorders. And it will be some amount of time before there's sort of a transition to large retrospective studies. First, customers are going to be testing out the product, and then they'll start kind of collecting the samples for -- to move forward.

As far as -- I think that's... yes.

Yes, the last thing was just the retrospect. It's -- I was just wondering about kind of the support of translational customers. And any insight as to whether retrospective studies are going to get going quickly here?

Yes. So I mean I would be careful in terms of assuming how quickly that can happen because, again, customers need to first buy the product and get onboarded with it and test it, which obviously we feel pretty optimistic about and have great performance that we've seen so far internally.

And as far as our commercial execution, yes, we've certainly been building up our team over the course of the past year with this in mind, first with the original Visium and now Visium FFPE. We're building out overlays within our commercial function, our science and technology advisers, which are like specialists within the sales force. And also on our support organization, we're actually investing pretty intentionally, aggressively to -- into people with expertise to help our customers with the workflow on Visium.

Doug, maybe just to add. You also asked, is there anything special for FFPE. And it's kind of interesting because in FFPE, these -- the more traditional customers that are used to tissue is really not going to be the issue, which has been more of a challenge as we've been onboarding our traditional customers which haven't worked with tissue.

But for FFPE, we're gearing up to help on the data side of it because a lot of these customers have not worked with high-content data that you get off a sequencing application. In this case, they are. So we have a fairly extensive and we've increased the ability to provide the sort of computational support on the back half of an experiment.

And our next question will be coming from the line of Tycho Peterson with JPMorgan.

This is Julia on for Tycho. So wanted to follow up on Visium FFPE. How much of the translational opportunity can you address with FFPE? I mean, does that get you access to the majority of translational users? Or do you still need a broader protein menu maybe or an automated instrument besides the site of this front-end instrument to further enhance throughput?

So, Julia, you just hit on the major points here. So look, we have a pretty robust pipeline on Visium FFPE we're expecting on the product side. We're also seeing great, great feedback and initial response from our customers. So we do see that this product will, over the coming -- kind of upcoming future, progress with the market really well.

We will put on, there's certainly protein capabilities coming, which will help, and CytAssist will help as well. So I think that's kind of the way we're looking at it over the course of the next year or so, there's going to be sort of a coming together all these capabilities to really round out the solution for translational customers.

But again, as we've seen with Chromium, we see this as a platform with many products in the future, many applications to address all the different kinds of ways that the customers will end up using this platform.

Yes. Julia, this is Brad. Just to also add, the world has not been able to do true unbiased gene expression across tissues until just -- in fact, not really because we haven't shipped the product yet. And I think this is something that people are really excited for, regardless of what other products they're using today. So I think as this becomes clear, I think this is going to be an important growth assets for FFPE.

Got it. That's helpful. And then also, I was wondering -- I'm curious of your thoughts on the clinical side of spatial. Obviously, this market would take time to develop and mature. But I think there's encouraging signs that spatial biomarkers are being developed and starting to be listed in guidelines. So curious, what's your expectations around the time line of clinical spatial market development? And is this clinical market something that you can address with Visium HD? Or is that really for the in situ technology?

Well, I mean, so this is the -- the clinical markets, generally speaking, when you look at them, they tend to develop somewhat slower than people expect. And as we -- our focus -- our near-term focus is still on sort of the research and translational applications because those will form the foundation for clinical applications down the road.

And yes, when we think about the clinic, just from first principles about what are the best -- like what is the best platform for the clinic, you end up thinking in terms of in situ. That is not to say that Chromium and Visium will not have applications that are going to be very powerful and useful, but the in situ approach lends itself particularly well to the clinical context by virtue of it being an integrated system, by virtue of it being explicitly targeted and in the format that the clinicians, the pathologists already used to.

Got it. Very helpful. And last one from me. Last quarter, you mentioned you're adding 100 employees front loaded this year with particular focus on the sales force side. So could you give us a progress update on that?

Yes. So we've got very ambitious hiring plans this year. We actually plan to add about 400 employees over the course of this year and end the year around 1,300 employees. And so we did front load our hiring in our internal plans to have more of the hires in Q1 and Q2. We're running slightly behind that aggressive internal plan, but I'd say we're on a pretty much on a straight-line pace right now overall.

Next question will be coming from the line of Tejas Savant with Morgan Stanley.

Serge, just one quick question for you on the guide here. I know you talked about sort of lab capacity still being a little bit depressed, sort of spotty rebound across the geos, as Brad mentioned as well. Are you seeing any sort of -- are you baking in perhaps any conservatism into those expectations, particularly as you launch Chromium X here? I mean, are you seeing the possibility of customers pushing out orders for the current versions of the Chromium in light of the X coming online in the back half? And similarly, I mean, obviously, the HD launch is still a year or so away. But ahead of that, I mean, any shift in demand that you are detecting at this stage?

So let me start with the second -- the latter part of your question, and then maybe Justin can kind of talk about the guidance. In terms of the Chromium demand, we are not seeing any sort of any waiting on the part of customers for Chromium X, which is coming in the second half.

And Visium HD may be marginal, but not really meaningful to the extent that people are waiting because it's still -- as you said, it's over a year away. So I would say those are not really having a material impact, those dynamics right now, on the revenue.

In terms of the guide, I'll let Justin comment.

In terms of guidance, our new product launches on the schedules that we've previously communicated have all been contemplated in the range of $480 million to $500 million that we've put out.

As far as instrument placements, people waiting on those for the Chromium X, that's not something that we've seen. Placements were strong this quarter, and we expect continued demand going forward.

Got it. Very helpful. And one quick follow-up on the in situ side. Serge, can you share some feedback on the CARTANA early-access launch that you had? What are customers saying to date, particularly around specs or areas for potential improvements? Now I know that this is -- there's not a straight line between CARTANA and the eventual in situ solution that you'll bring to market, but any sort of like key learnings? And then if you can walk us through what remains to be done in terms of those specs evolving on the final version of the platform, I think that will be very helpful.

Yes. So in terms of the program, the CARTANA program, it is a couple of things. So first of all, it is fully subscribed. So there's definitely -- one of the key learnings is just a lot of interest, and there's definitely a lot of interest and interest specifically in the 10x solution by virtue of our reputation. And I think those fields, in general, the customers are excited by.

I think the data is something that resonates as well. We are investing. You mentioned it correctly that it's not going to be what the -- whether we are -- the chemistry we're using right now is not representative of what the final product is going to be, which is going to be sort of a combination of our internal developments and acquisitions that we made. And we are definitely investing pretty aggressively.

In the meantime, we're learning from all these collaborators. And like when we're ready to talk about the actual road map, we will talk about the road map. We're not yet ready to do so.

Got it. Got it. And one final one for me. Any thoughts on the evolving competitive landscape? I mean, obviously, a lot of folks are looking at spatial, looking at in situ. There's a couple of platforms in early access, et cetera. Would love to get your thoughts on how you see the competitive positioning evolving for Visium and then eventually for your in situ platform. And is that something that you're baking into sort of the platform development efforts as well for in situ?

So in terms of the sort of competitive positioning, like we talked about, we've got the 3 platforms, the Visium -- the Chromium, the Visium and the upcoming in situ. We are -- we do see them as being fundamentally complementary. And especially if you want to sort of draw the difference between Visium and where in situ approaches are going to have, Visium is, especially with the arrival of HD, is the ultimate discovery platform. And I think it's going to be very, very challenging maybe ever for in situ approaches to get to there.

And so we are -- we have high conviction on Visium and what it's going to do in terms of enabling discovery, in terms of enabling translational research, and potentially, some clinical applications as well.

We -- it is -- as Brad mentioned, the Visium FFPE is the only unbiased whole tissue solution on the market. And it is giving customers something that is not really possible with any other means.

In terms of in situ, I think there's definitely a lot of interest. There's definitely a lot of companies out there that are working on this area. It is very early for a lot of them. So I hesitate to comment on any particular specs or any particular competitor given how sort of the dearth of information and specificity out there.

I do want to say that we're investing aggressively. We do have a pretty -- by virtue of our scale and by virtue of our relationships with our customers, we have a pretty good handle on what people want and what people would like. And we're -- that's guiding our development. And we have a track record of building great products with really innovative features. And that's how we see this one playing out as well.

And then our next question will be coming from the line of Derik De Bruin with Bank of America.

Serge, Justin, it's Mike on for Derik. I want to sort of go back to your comments on pace of reopening, sort of the status of labs around the world, where your expectations were going into the year, sort of where they are now. As we look forward over the rest of the year, I imagine you'll get that 90% of various labs up capacity up to 95% and 100%. Can you give us an update on sort of your internal thinking of when that will happen? Is this sort of a 3Q event in your mind now? 4Q? I imagine that as vaccines roll out, U.S. and Europe, that number is going to creep higher. So just when are you anticipating getting back to normal operating environment?

Thanks, Mike. This is Justin. Going back to last quarter's call, our view hasn't changed much from then. And during that call, we talked about Q1 being in that roughly 90% of lab capacity being available at varying degrees of efficiency. We expected that to carry forward from Q1 into Q2, and that is what we've seen to date.

We mentioned that we expected things to start getting better in Q3 and then not really feeling the full impact of that until Q4. And so Q4 is normally a big quarter for us just due to customer seasonality, but we expect to be Q4 of this year to be outsized compared to a normal, compared to a normal quarter. But overall, our expectations haven't changed from last quarter, and things are progressing like we expected.

Okay. All right. And then as some of these labs reopen -- and again, I realize there's a lot of moving pieces here. But for example, you called out California started the year slow and sort of ramped back up as you got into later in the quarter. Is it a gradual reopen? Or is there a burst of orders? And I'm not talking about instrument purchases necessarily, but more about Chromium consumables, Visium. I imagine that when labs were shut down, they may have drawn down the inventory a little bit. When they're reopening, are you seeing sort of a bolus of orders as people stock back up to start running at full speed?

Mike, this is Brad. I'll take that. It's interesting because we certainly have seen a level of conservatism with our customers in terms of potentially, as they come back into the lab, there's always the concern that there may be some either systematic or even momentary limitation to access. We've had examples of somebody testing positive in a lab, and then the lab has to shut down for a period of time. And of course, biology doesn't wait for anybody.

And then the other thing that we're starting to see -- what we've seen in the first quarter is -- and we saw maybe in the fourth quarter as well, is that people are -- as they come in back in the labs, they're a little bit more conservative, maybe only ordering a 4-reaction kit versus a 16-reaction kit because there is a shelf life issue and obviously, people don't want to be caught out. So yes, there are various degrees of that.

We can certainly look as we've seen labs come back online through -- starting mid-last year. And it's usually a fairly typical pattern, a little bit slow initially as they get the biology up to -- back where it needs to be. And then obviously, we'll see the orders come in. But what we have seen, not on the consumable side but the instruments, we've had great engagement and even prospects for people wanting to onboard and get into single cell, get their own instrument, and in the case of Chromium, but certainly interesting to onboard into this technology.

Okay. That's helpful. And then one last one for me. Obviously, Visium FFPE is still in very, very early stages. But anything you can comment on in terms of cross-sell between Chromium and Visium, sort of overlap between of customers? Is that getting a little bit higher? Or are you getting a little bit incremental pull as you go into some of these more translational customers? Realize it's early, but just wondering sort of how we should be thinking about that.

So I would say, look, in terms of like one -- the flow from Chromium to Visium is -- obviously it's there. It's very clear. You can look at publications and look at the customers. The flow the other way, I think, is minimal. I'm not sure if we can really expect material sort of coming purchases. The people -- those translational customers, they're used to working with tissue, right? That's the thing that -- I think Visium is really the platform for them.

Next question will be coming from the line of Patrick Donnelly with Citi.

Serge, maybe following up on Mike's question there on Visium. Can you just talk about kind of the repeat customer, reorder rate, whatever you want to call it, on Visium? Obviously, you guys have a pretty nice initial user base here. How have you seen the customer activity on the reorder rate side?

Yes. So that's a good question, and that's something that we've been looking at and paying attention to. It's been robust. It's been quite -- we are seeing it increasing consistently since launch. So definitely happy with that, and you can sort of see it in terms of publication rate, too, because that tends to correlate. Those are the people that are reordering and able to get through the experiments.

The one sort of caveat I would add is that people who have onboarded once the pandemic hit have been -- have had more difficulty getting going, right? Once the people -- the initial bolus that got going pre-pandemic is doing particularly well relative to the ones who kind of had to join afterwards.

Understood. Okay. And then on the Low Throughput Kits, can you just talk through the initial reception there? Obviously, you guys lowered the bar to get into the market for your customers. Just wondering where you're seeing the most uptake, where you're seeing the interest and how the reception has been there so far.

So the reception has been like robust and great, according to with our expectations. And it's been going well, pretty consistently. And I would say most of our existing customers, which we sort of saw that dynamic, especially initially, people who are trying to kind of start up new kinds of studies or just sort of experiment to try out new potential sample types to kind of expand the use cases for the existing platform.

And we do expect that this is the kind of thing that accrues to the platform over time, accrues the benefits to the platform over time. We're not so much counting on selling that particular kit, but it's what follows that kit is what we're really keen on enabling. And I think that it seems to be playing out that way.

Okay. Great. And then one for Justin and maybe, Brad, you can chime in as well. Just in terms of the 400 employees this year, how many -- is it 100 that are kind of sales reps customer-facing? And then in terms of those ones, how long does it take them to kind of flip productive or whatever you want to call it, in terms of their ramp to become productive sales reps? Is it a quarter or 2? Or is it quicker than that? Would love some color on that front.

Yes. Patrick, this is Brad. So we kind of set out -- I think I'd said earlier in the year that we'd hired roughly 100 people in the commercial organization. We're well in our way -- on our way to doing that. So that's kind of on an overall basis.

I don't know, what was the second part of your question?

The ramp.

Oh, the ramp. Oh, I'm sorry, yes. We work -- since we're hiring so many people, this is kind of a big issue for us. It's usually about 6 months, less so on the sort of the technical side because we're generally hiring our customers. So that's been great with our FASs and some of our support people. So they come up really -- come up fast actually.

But on the sales side, definitely about 6 months. We tend to try to find more experienced people that know the territories, and so they at least have that capability. But selling for 10x is not for everybody, and we have to be very selective in who we pick up and put on the team.

Next question will be coming from the line of Dan Arias with Stifel.

Serge, on the CellPlex kit, it sounds like you've been in the field for a little bit there. I'm curious if you're seeing any dampening effect on consumables as you have labs taking advantage of the lower pricing, but to Brad's point, maybe not scaling up fully, just on the size of the experiment.

And then maybe looking out a bit and conversely, if you're starting to get a sense that there's a percentage of the user base that might take advantage of the capabilities there? And are you seeing some signs that you can actually drive platform placements on the back of that?

So on the first question around CellPlex, the demand has been quite robust. So out of the gate, it's quite strong and definitely happy with that. Whether that's having a dampening effect on pull-through, that's an interesting question. It's certainly something that we are interested and we're sort of expecting. It's hard to tell explicitly right now. I think we need to kind of wait another quarter or 2 and sort of start correlating those patterns. People who order those CellPlex kits, what to -- how does the usage change. So it's conceivable that it's having some dampening effect. But again, the whole rationale of this product is that it greatly expands the reach of single-cell ecosystem, and ultimately, has a much greater impact by pulling in all these other experiments onto the platform.

And so, so far, we haven't seen anything that would be counter to that thesis. In fact, it's only -- if anything, it's been sort of reinforced by just the rate of initial orders.

Yes. Okay. All right. And then maybe just on Visium HD. I don't know whether you mentioned this on one of the other calls that you had, but can you just remind us if you have what the economics for 10x will be there? Is there a higher cost per sample that the HD workflow drives? Or is it more or less in line with what you have now with the 1.0 kit?

So we haven't talked about Visium HD, not the economics on the pricing. So it's a bit early for that.

Next question will be coming from the line of Matt Sykes with Goldman Sachs.

This is Dave Delahunt on for Matt. There's been a lot of interest in in situ. Clearly a huge opportunity for you guys. I was wondering if you could talk a bit about what fields of study you expect to see the most interest between oncology, neuro, immune, developmental in those areas.

Yes. Well, so you hit on the right ones right there.

Yes you certainly have.

Yes. Look, I think all of them certainly have -- there's a lot of interest. There's going to be a sort of -- when we're looking at sort of cell-atlasing projects, that's a natural -- it's an [initial] technology as a complement to Chromium and Visium kind of used to validate the markers that get discovered initially and kind of run them on the larger set of tissues. So certainly -- and that kind of brings you to developmental biology and those applications.

Neuroscience, I mean, for sure, is a big one and certainly in oncology and immuno-oncology. So it's hard for me to pick between those. I could rank order them, but they would -- I'm not sure if I would convincingly be able to say that one is significantly higher than the others.

Ultimately, I would say -- I guess I would say one thing ultimately is just because of such a great -- this full technology for clinical applications down the road, I would imagine that those will emerge on the side, like within sort of the general oncology, immuno-oncology space.

But it's important to note that in situ, they're going to be targeted applications. It's going to be sort of unpractical to do unbiased discovery given the amount of data that you would pull on individual molecules. So a big part of the next year or 2 is really finding out and understanding these biomarkers so you can curate those panels on in situ. So then it's kind of a whole connection that started with some of the early discovery work with Chromium, moved to Visium, and ultimately, paying off to in situ in the clinic.

Great. And we've seen among the explosion in omics, an increasing interest in the study of proteomics, notably, a number of companies have gone public in that space recently. So can you talk about the demand for your protein expression platforms? And any correlation there?

Yes. So we do definitely see a lot of protein measurement work going on, on our products, specifically on Chromium. I mean a very large fraction of the single-cell experiments is actually -- whether it's measuring expression or other analytes is actually done with proteins as well using our feature barcoding technology. So it's a pretty substantial part of the application space and it's a sufficiently growing part as well, rapidly growing, lots of interest.

And people who have not previously been actually measuring proteins, so kind of genomics cell kind of biology people who are coming into this anew. So definitely, a good, a growing opportunity for us, growing application space.

We do think that for our single-cell and spatial-type applications, using oligo-conjugated antibodies for general -- those kinds of reagents is the way to go because it gives you the best kind of way, maybe the only way, to really measure these analytes for single-cell resolution at a very high plex.

Great. And last one, on the gene expression panels. Could you talk about which panels have seen the most customer interest between the fixed gene panels and the custom panel designs?

Yes. So that one is a bit of a scatter shot. Maybe going back to your first question. That is kind of -- neuroscience is definitely up there and sort of the development biology and oncology. Yes. So I'm not sure if I can say that one is again significantly higher than the other because those are the areas that get picked up. It's generally where single cell is used.

Next question will be coming from the line of Matt Larew with William Blair.

Serge, you alluded to the Xperience event. So maybe just you or Brad, could you just comment on what metrics you're using to judge the success of that event, particularly in light of some of the reduced lab activity and budget issues you mentioned?

Yes. I'll take that. This was a great success for us. We initially positioned this as somewhat of an alternative than what we would typically do at AGBT. It's really grown into a much bigger event for us and something we'll proceed with.

First, it's about numbers. We had 3,000 -- over 3,000 people consume this on the 2 days that we put it out. There's obviously people because we've made that available to download off or watch off the website. But the other side of it is engagement, and that's the other metric we have. And we -- that blew away the -- we always questioned of how many questions would we get? And how do we do this? We had over 200, almost 300 questions come in. And that -- over those several hours, that level of intensity and the level of engagement with our internal teams, it was incredibly motivating and reaffirming.

And then the other spec that we like to look at is net new, people that we would have not -- we have not seen before. And we -- of those populations, which of those should we have seen. And we had a high percentage, over 1,000 of those, almost 1/3 of those people were new to 10x. So again, overall, I think we checked all the boxes here and something we want to evolve.

And again, I think the thing that we were particularly impressed with -- again, this was focused on our customers. And it was -- it created a really nice venue for us that we probably couldn't even do in an in-person event. So this is something that -- it's been great. Like everything else we do at this company, we'll do it better next year and the year after that. But we were very happy with the results.

Okay. And then on the ATAC+ Gene Expression product that launched last September, you mentioned been pleased with uptick. Just curious if there's any sort of data points or trends you can give us relative to other product launches that sort of are supporting your bullish view on it.

Yes. I mean it's up there. We don't break out individual products, but it certainly is trending well. And it kind of seems to have -- one of those products that hit the sweet spot of the customer base being ready and the product having the right feature set to kind of -- the response has been great, the response both just in terms of feedback we see from customers, the science we see coming out and the numbers we're seeing from orders.

And the other thing just to add, we were fortunate enough, we were able to launch a precursor to that product with ATAC-seq. And so this market was well set up. Because when we launched ATAC-seq and first announced it, the very first question in the first 5 seconds is when can I do gene expression and ATAC in the same cell on the same nuclei. And we delivered that roughly 2 years after that point, and then people were definitely ready for it.

Next question will be coming from the line of David Westenberg with Guggenheim Securities.

This is John on for Dave. So as we're looking at in situ, I realize that you're not able to comment too much on the R&D effort. But can you talk about what's necessary and versus what's nice to have, like a 2D versus 3D, proteins, RNA-/DNA-type results sequencing on the platform?

Yes. I mean a lot of it is a question of when and not what. I think these platforms the capabilities that we have internally, and when we build out, we can certainly release all of this sort of -- all of what's necessary over time. We are focused on making sure we get -- when we get to market with the first product, it has sort of the right set of features for what the market needs right now out of the gate.

We haven't really talked -- I mean we haven't really talked about the specific features, what's coming. And that's part of the learning of what we're doing, collaborating with our customers right now as we're building out this platform.

Okay. And when we're looking at how the Chromium grows, its new customers, new applications and like order applications, could you rank how you think of those 3 levers are going to be driving the revenue growth?

So I would say they're all important. Driving new customers is the thing that drives ultimately the long-run growth, right? So we're focused on that. Although adding every new customer, there's some amount of ramp before they -- their contribution becomes meaningful. But on a long-run basis, obviously, that's the engine that drives the overall business.

We are always -- we're focused on adding applications and capabilities because our existing customers certainly have more budgets that they can spend. They have keep getting -- kept increasing their budgets by virtue of running our products as well. So I wouldn't classify that any of those 3 are like more important than -- relative to others. We're certainly pressing in all of those imperatives to drive revenue growth.

And no further questions on the line. Presenters, back to you.

Thanks for everyone for participating on the call. We look forward to chatting in the future. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.