10X Genomics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results are compared with Q1 2023 unless stated otherwise. 10x Genomics sells life-sciences instruments, consumables and related services, including Chromium and Spatial (Visium and Xenium) products.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $141.0 million | $134.3 million | +5% |
| Gross profit / margin | $92.9 million / 66% | $98.4 million / 73% | Profit down 6%; margin down 7 percentage points |
| Operating expenses | $154.4 million | $150.4 million | +3% |
| Operating loss | $61.5 million | $52.0 million | Loss increased |
| Net loss | $59.9 million | $50.7 million | Loss increased |
| Net loss per share, diluted | $0.50 | $0.44 | Loss per share increased |
| Cash used in operating activities | $15.7 million | $4.1 million | Cash use increased |
At March 31, cash and cash equivalents were $355.8 million and marketable securities were $16.0 million, or $371.8 million combined. Current assets were $567.1 million and current liabilities $108.7 million. The filing does not show a material borrowing balance; operating lease liabilities totaled $92.2 million, including $11.1 million current. Stockholders’ equity was $718.8 million, and accumulated deficit was $1.34 billion.
Revenue trends and material changes
- Spatial revenue grew substantially: Spatial instruments rose 133% to $17.6 million and Spatial consumables rose 134% to $26.4 million, reflecting higher Spatial product sales.
- Chromium instruments revenue fell 32% to $7.9 million and Chromium consumables fell 17% to $83.9 million. Total consumables revenue declined 2% to $110.3 million.
- Services revenue increased 91% to $5.2 million. By geography, EMEA revenue rose to $34.7 million from $28.4 million; U.S. revenue was $75.6 million versus $76.3 million.
- Cost of revenue rose 34% to $48.1 million, reflecting higher manufacturing costs, costs associated with newer products and increased warranty charges. Management attributed lower gross margin primarily to product mix, particularly the lower-margin Xenium instrument.
- R&D and SG&A increased 2% and 3%, respectively. Higher outside legal expenses contributed to SG&A growth; stock-based compensation expense declined to $36.1 million from $42.1 million.
Cash flow, outlook and risks
- Cash used in operations was $15.7 million, compared with $4.1 million in Q1 2023. The company cited its net loss and operating asset and liability movements, including a $20.0 million payment of purchase consideration, higher inventory, and annual bonus payments. Investing activities provided $10.6 million, mainly from marketable-security maturities; capital expenditures were $2.9 million.
- Management expects operating losses to continue for the foreseeable future and operating expenditures to increase in 2024 and beyond, including investment in R&D, commercial activities, talent retention and intellectual-property protection. It expects higher legal costs in remaining 2024 quarters.
- Management expects gross margin to trend lower in part because of product mix and product-specific royalties, while noting that pricing and scale-related cost reductions could improve instrument margins over time.
- Anticipated capital expenditures are approximately $15 million to $20 million over the next 12 months. Management believes cash, cash equivalents and cash generated from product sales will cover anticipated needs for at least 12 months, but cautions that assumptions could prove incorrect. A majority of cash is held at financial institutions in amounts exceeding insured limits.
- Unusual items included $2.1 million of impairment charges after the company discontinued a productivity engineering project. The company also reported a $31 million jury award in its NanoString patent case but recorded no receivable because collection is uncertain; NanoString’s bankruptcy filing stayed consideration of post-trial motions.
- Patent disputes are ongoing with NanoString, Vizgen, Parse and Curio, among others. The filing describes unresolved claims and counterclaims; outcomes and financial effects are uncertain. Subsequent to quarter-end, the UPC granted a preliminary injunction concerning Curio products in Germany, France and Sweden, subject to a security deposit. Vizgen also obtained leave to add counterclaims. No material risk-factor changes were reported from the 2023 Form 10-K.
Most important facts for investors to verify
- Whether Spatial growth can offset continued weakness in Chromium sales and support a recovery in gross margin.
- Whether operating cash use, legal spending and planned capital expenditures remain consistent with the company’s liquidity outlook.
- Developments in the NanoString bankruptcy and the collectability of the unrecorded jury award, as well as the outcomes of other patent cases.
- How much of future costs will reflect lower-margin product mix, royalties, warranty costs and stock-based compensation.