10x Genomics, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied text does not provide a separate Q4 income statement. The company sells instruments, consumables and related services for single-cell and spatial biology research, primarily through its Chromium, Visium and Xenium platforms.
Financial and operating performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $618.7 million | $516.4 million | +20% |
| Gross profit / margin | $409.3 million / 66% | $396.0 million / 77% | Margin down 11 percentage points |
| Operating loss | $265.3 million | $167.9 million | Loss widened |
| Net loss | $255.1 million | $166.0 million | Loss widened |
| Net loss per share, diluted | $2.18 | $1.46 | Loss per share increased |
| Cash used in operating activities | $15.2 million | $33.6 million | Outflow narrowed |
- Consumables generated $479.6 million, up 10%; instruments generated $123.5 million, up 71%; services generated $15.7 million.
- Spatial instrument revenue rose to $75.6 million from $13.8 million, while Chromium instrument revenue fell 18% to $47.9 million. Chromium consumables remained the largest revenue source at $420.3 million.
- Consumable reactions sold increased 9% to 347,000. Cumulative instruments sold reached 5,966, including 255 Xenium instruments.
- Cost of revenue rose 74%, substantially faster than revenue, reflecting manufacturing costs and newer products, higher inventory write-downs and warranty charges. Gross margin contracted accordingly.
- Research and development expense was $270.3 million, up 2%; selling, general and administrative expense was $343.3 million, up 15%. A $61.0 million acquired in-process R&D charge also weighed on results.
- Cash, cash equivalents and marketable securities totaled $388.7 million at year-end, versus $430.0 million in 2022. Current assets were $596.0 million and current liabilities $127.2 million. Operating cash flow less property and equipment purchases was approximately negative $63.8 million.
- The balance sheet reports $95.4 million of operating lease liabilities. No conventional borrowing balance is presented; the company paid $5.8 million on a technology-license financing arrangement in 2023.
Material changes and unusual items
- Revenue growth was led by Spatial instrument placements and consumables. Chromium instrument sales declined, although Chromium consumables increased 5%.
- Gross margin fell from 77% to 66%. Management cited product mix, higher costs for newly introduced products and operating infrastructure; Xenium instruments currently have materially lower margins than other instruments.
- The company recorded $9.8 million in asset impairment charges, including impairment associated with discontinuing a product line and vacating/subleasing office space. It committed to closing an R&D facility, with restructuring activities expected to be substantially complete in the first half of 2024.
- The Centrillion asset acquisition generated $61.0 million of in-process R&D expense. A further $20.0 million milestone payment was made in January 2024 and had been accrued at year-end; up to $15.0 million more may be due on another development milestone, with additional sales-based consideration possible.
Liquidity, outlook and risks
- Management expects operating losses to continue in the near term and operating expenses to increase in 2024 and beyond, excluding acquisitions. It anticipates higher R&D and commercial spending and increased legal costs. Planned capital expenditures for the next 12 months are approximately $20–25 million.
- Management believes existing cash and cash equivalents and cash generated from product sales should cover anticipated needs for at least 12 months, while cautioning that assumptions may prove incorrect. It reported achieving operating cash flow in excess of capital investment requirements in Q4 2023, but not for FY2023 as a whole, and does not assure this can be sustained.
- Key risks include dependence on research funding and Chromium revenue; intense competition and adoption uncertainty; China and broader international exposure; reliance on some single-source suppliers; manufacturing, shipping and product-quality risks; and possible gross-margin pressure.
- 10x won a jury award of more than $31 million in its GeoMx patent case against NanoString, but recorded no receivable because collection is uncertain. NanoString filed for Chapter 11 bankruptcy in February 2024, staying U.S. post-trial motions. Other patent disputes with NanoString, Vizgen, Parse and Curio remain active; the company said litigation losses were not probable and recorded no contingent liability at year-end.
- The company disclosed a March 2020 ransomware incident in which it believes confidential information was stolen, but said it was not reasonably likely to have a material adverse effect. It reported no known cybersecurity threat that had materially affected, or was reasonably likely to materially affect, the business.
Important facts for investors to verify
- Whether revenue growth and new Spatial placements translate into recurring consumables growth and improved Xenium economics.
- Whether gross margin stabilizes or continues to decline, and how spending, capital needs and cash generation affect the stated liquidity outlook.
- Collection prospects and bankruptcy treatment of the NanoString jury award, along with outcomes and potential costs of the company’s other patent cases.
- Whether research budgets, China demand and supply-chain capacity support management’s growth assumptions.
- Timing and total potential payments under the Centrillion development and sales milestones.