10x Genomics(TXG) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements detail Q2 2024 revenue of $153.1 million, a net loss of $37.9 million, and key balance sheet figures Condensed Consolidated Balance Sheets Total assets decreased to $929.7 million as of June 30, 2024, from $965.1 million at year-end 2023, with a slight decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $379,824 | $359,284 | | Total current assets | $579,155 | $596,022 | | Total assets | $929,668 | $965,143 | | Liabilities & Equity | | | | Total current liabilities | $111,019 | $127,162 | | Total liabilities | $205,610 | $224,100 | | Accumulated deficit | $(1,382,266) | $(1,284,420) | | Total stockholders' equity | $724,058 | $741,043 | Condensed Consolidated Statements of Operations Q2 2024 revenue grew 4% to $153.1 million, with net loss narrowing to $37.9 million due to reduced operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $153,104 | $146,819 | $294,110 | $281,104 | | Gross Profit | $104,220 | $99,612 | $197,134 | $198,002 | | Loss from operations | $(41,737) | $(63,358) | $(103,235) | $(115,346) | | Net loss | $(37,897) | $(62,414) | $(97,846) | $(113,161) | | Net loss per share | $(0.32) | $(0.53) | $(0.82) | $(0.97) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $8.2 million for the first six months, with a net increase in cash of $20.5 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,229) | $(15,651) | | Net cash provided by investing activities | $22,579 | $115,494 | | Net cash provided by financing activities | $6,241 | $3,682 | | Net increase in cash and cash equivalents | $20,540 | $103,500 | Notes to Condensed Consolidated Financial Statements Notes detail revenue disaggregation, ongoing patent litigation, and stock-based compensation, with Spatial consumables showing significant growth Revenue by Product Category (in thousands) | Category | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Instruments | | | | | | Chromium | $8,792 | $12,859 | $16,642 | $24,485 | | Spatial | $15,060 | $18,096 | $32,663 | $25,646 | | Consumables | | | | | | Chromium | $94,108 | $100,794 | $178,035 | $201,890 | | Spatial | $29,254 | $11,694 | $55,662 | $22,976 | | Services | $5,890 | $3,376 | $11,108 | $6,107 | | Total Revenue | $153,104 | $146,819 | $294,110 | $281,104 | Revenue by Geographic Region (in thousands) | Region | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Americas | $93,091 | $91,543 | $172,721 | $170,339 | | Europe, Middle East and Africa | $37,362 | $31,246 | $72,083 | $59,668 | | Total Asia-Pacific | $22,651 | $24,030 | $49,306 | $51,097 | | Total Revenue | $153,104 | $146,819 | $294,110 | $281,104 | - The company is engaged in significant, ongoing patent litigation with multiple parties, including NanoString (now Bruker), Vizgen, Parse, and Curio across U.S. and European courts. A jury awarded the company over $31 million in damages from NanoString in one case, but collection is uncertain due to bankruptcy proceedings. Other cases are in various stages, including discovery, appeals, and pending trials[54][65][72] Stock-Based Compensation Expense (in thousands) | Expense Category | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $2,247 | $1,835 | $4,280 | $3,296 | | Research and development | $17,862 | $19,560 | $34,750 | $37,340 | | Selling, general and administrative | $18,383 | $24,301 | $35,591 | $47,161 | | Total | $38,492 | $45,696 | $74,621 | $87,797 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 revenue growth driven by Spatial consumables, stable gross margin, and decreased operating expenses, affirming sufficient liquidity Results of Operations Q2 2024 revenue increased 4% driven by Spatial consumables, while operating expenses decreased 10% despite higher legal fees - Q2 2024 revenue growth was primarily driven by a 150% YoY increase in Spatial consumables, reaching $29.3 million. This offset a 7% decline in Chromium consumables and a 23% decline in total instrument revenue[94][95] - Q2 2024 operating expenses decreased by $17.0 million (10%) YoY. R&D expenses fell by $8.5 million due to lower lab materials and personnel costs. SG&A expenses decreased by $8.5 million, mainly from lower personnel expenses, despite a $3.5 million increase in outside legal costs[99][101] - For the six months ended June 30, 2024, cost of revenue increased 17% to $97.0 million, causing gross margin to decrease to 67% from 70% in the prior year period. The change was attributed to product mix and higher royalties[98] Liquidity and Capital Resources The company holds $380.1 million in liquidity, expects $15-20 million in capital expenditures, and projects sufficient funds for the next 12 months - The company has $380.1 million in cash, cash equivalents, and marketable securities as of June 30, 2024, and believes this is sufficient to meet cash needs for at least the next 12 months[108][110] - Anticipated capital expenditures for the next 12 months are between $15 million and $20 million, primarily for manufacturing and R&D equipment[108] - Net cash used in operating activities improved to $8.2 million for the first six months of 2024, compared to $15.7 million in the same period of 2023, primarily due to a lower net loss and favorable changes in working capital like accounts receivable[112][113][114] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposure, including interest rates and foreign currency, have occurred since December 31, 2023 - There have been no material changes in the company's exposure to market risk since the end of the fiscal year 2023[120] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024[121] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[122] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various intellectual property legal proceedings, with detailed disclosures provided in Note 4 of the financial statements - The company is regularly subject to legal proceedings involving intellectual property disputes. For detailed information, refer to Note 4 of the condensed consolidated financial statements[124] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the filing of its 2023 Annual Report on Form 10-K - No material changes to the company's risk factors have occurred since the filing of its 2023 Annual Report[125] Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during Q2 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the second quarter of 2024[126] Item 6. Exhibits This section lists exhibits filed with the quarterly report, including CEO/CFO certifications and XBRL data files