PART I Business 10x Genomics develops and sells integrated solutions for biological system analysis, including instruments, consumables, and software, generating $618.7 million in 2023 revenue with a 20% increase year-over-year and a net loss of $255.1 million - The company's mission is to accelerate the mastery of biology to advance human health22 - As of December 31, 2023, the company has sold a cumulative total of 5,966 instruments to researchers worldwide since its first product launch in mid-201524 - The company's three main technology platforms are Chromium (high-throughput single-cell analysis), Visium (spatial analysis), and Xenium (in situ analysis), which together provide a comprehensive view of biology27 Financial Performance (2022-2023) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $618.7 million | $516.4 million | | Year-over-Year Growth | 20% | - | | Net Loss | $255.1 million | $166.0 million | Our Solutions and Platforms The company's product portfolio comprises three core platforms—Chromium, Visium, and Xenium—offering integrated solutions for high-throughput single-cell, spatial, and in situ analysis, supported by comprehensive software for data analysis - The Chromium platform uses GemCode technology for high-throughput partitioning and barcoding of single cells, enabling analysis of up to a million cells per run with the Flex solution454650 - The Visium platform, enhanced by the Visium CytAssist instrument, allows for spatial analysis of whole transcriptome and protein expression in both fresh frozen and FFPE tissue samples747981 - The Xenium platform provides in situ analysis, detecting hundreds of RNA targets directly in tissue sections with subcellular resolution, using a fully automated instrument, the Xenium Analyzer858788 - The company provides a suite of software, including Cell Ranger, Loupe Browser, and the 10x Genomics Cloud Analysis platform, to facilitate data analysis and visualization for its customers, generally free of charge9293 Market Opportunity and Strategy The company targets a global life sciences research tools market of over $67 billion, with an accessible market of approximately $16 billion, pursuing growth through R&D, instrument sales, consumable adoption, and strategic acquisitions - The company estimates its current solutions can access approximately $16 billion of the more than $67 billion global life sciences research tools market97 - The accessible market is broken down into four research areas: Cell Atlassing ($2 billion), Genetic Mechanisms ($2 billion), Cellular and Molecular Biology ($5 billion), and Translational research ($7 billion)98100 - Growth strategies include continued R&D investment, expanding the installed base of instruments, strengthening recurring consumable revenue, and acquiring or in-licensing key technologies105106108109 - Competitive strengths are cited as market leadership with over 7,200 peer-reviewed publications, a proprietary IP portfolio with over 970 issued or allowed patents, and a strong multidisciplinary team99101104 Operations Operations are supported by substantial R&D investment, a global commercial team, and certified manufacturing facilities, with $270.3 million in R&D expenses in 2023 and most consumables manufactured in-house Operational Headcount and Expenses (as of Dec 31, 2023) | Department | Headcount | 2023 Expense | | :--- | :--- | :--- | | Research & Development | 451 | $270.3 million | | Commercial (Sales, Marketing, Support) | 450 | - | | General & Administrative | 196 | - | | Manufacturing | 162 | - | | Total Employees | 1,259 | - | - The company's manufacturing facilities in Pleasanton, CA, and Singapore are ISO 9001:2015 certified, with most consumables manufactured in-house and instrument manufacturing outsourced to qualified contract manufacturers126127128 - Sales to academic institutions represented approximately 65% of direct sales revenue in 2023118 Competition, Regulation, and Intellectual Property The company faces intense competition across genomics and analysis fields, markets products for Research Use Only (RUO) to avoid stringent medical device regulations, and protects its competitive position with over 970 issued patents and 1,220 pending applications - The company competes with both new and established companies in the genomics, single cell, spatial, and in situ analysis fields, as well as with existing technologies like bulk sequencing and flow cytometry134 - Current products are marketed for "Research Use Only" (RUO), which exempts them from most FDA and EU IVDR requirements for medical devices, though future clinical use products would face more stringent regulations138139 - As of December 31, 2023, the company owns or exclusively in-licenses over 970 issued or allowed patents and has 1,220 pending patent applications worldwide101140 - Key exclusive license agreements are in place with Harvard University (for sequencing sample preparation) and Stanford University (for ATAC-seq technology), requiring low single-digit royalty payments143145 Risk Factors The company faces numerous risks including fluctuating operating results, intense competition, R&D spending dependency, reliance on Chromium solutions, international operational complexities, supply chain disruptions, increased regulation, and extensive intellectual property litigation - Business & Industry Risks: The company faces risks from fluctuating operating results, intense competition, dependence on R&D spending, reliance on Chromium solutions, international business complexities (especially in China), and potential manufacturing/supply chain disruptions154158 - Regulatory & Tax Risks: Products could become subject to more onerous government regulation (e.g., by the FDA), and the business could be harmed by trade tariffs, import/export restrictions, and adverse changes in tax laws156264267 - Intellectual Property & Litigation Risks: The company's success depends on protecting its IP rights, and it is involved in multiple, costly lawsuits with competitors like NanoString, Vizgen, and Parse to enforce its patents, with uncertain outcomes157336345 - Ownership & General Risks: The multi-class stock structure concentrates voting control, and the company also faces risks related to failing to meet public guidance, stock price volatility, and maintaining effective internal controls157158 Cybersecurity The company's cybersecurity risk management program, based on CIS Controls and overseen by the Audit Committee, addresses threats including a March 2020 ransomware attack, which has not had a material adverse effect to date - The cybersecurity program is designed based on the Center For Internet Security (CIS) Controls framework and is overseen by the Audit Committee of the Board of Directors391394 - The management team, including the Chief Legal Officer and Chief Information Officer, is responsible for assessing and managing cybersecurity threats397 - A ransomware attack occurred in March 2020 where confidential information was believed to be stolen, but the company states it has not had a material adverse effect on the business393 Properties The company's global headquarters, R&D, and manufacturing facilities are in Pleasanton, CA, comprising approximately 338,000 sq. ft. leased and 150,000 sq. ft. owned, with total global leased space of approximately 470,000 sq. ft. - The company's headquarters are in Pleasanton, CA, where it leases ~338,000 sq. ft. and owns a ~150,000 sq. ft. manufacturing and operations facility399 - Total global leased space is approximately 470,000 sq. ft., including facilities in Singapore and Taiwan399 Legal Proceedings The company is involved in various legal proceedings, with detailed information provided in Note 7 of the consolidated financial statements and key litigation risks discussed in the Risk Factors section - Information regarding legal proceedings is detailed in Note 7, Commitments and Contingencies, of the consolidated financial statements400 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on the Nasdaq Global Select Market under "TXG," with no cash dividends ever paid or planned, as earnings are retained for future business growth - The company's Class A common stock is listed on the Nasdaq Global Select Market under the symbol "TXG"404 - The company has never declared or paid cash dividends and intends to retain future earnings for business growth405 Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, revenue grew 20% to $618.7 million, driven by instrument and consumables sales, but gross margin declined to 66%, operating expenses increased 20% to $674.6 million, and net loss widened to $255.1 million Key Business Metrics | Metric | As of Dec 31, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Cumulative Instruments Sold | 5,966 | 4,630 | | - Chromium | 5,180 | 4,411 | | - Visium | 531 | 211 | | - Xenium | 255 | 8 | | Total Consumable Reactions Sold (Annual) | 347,000 | 319,300 | Revenue Breakdown by Product Type (in thousands) | Product Type | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Instruments | $123,471 | $72,396 | $51,075 | 71% | | - Chromium Instruments | $47,866 | $58,552 | ($10,686) | (18)% | | - Spatial Instruments | $75,605 | $13,844 | $61,761 | 446% | | Total Consumables | $479,553 | $435,588 | $43,965 | 10% | | - Chromium Consumables | $420,316 | $400,433 | $19,883 | 5% | | - Spatial Consumables | $59,237 | $35,155 | $24,082 | 69% | | Services | $15,703 | $8,425 | $7,278 | 86% | | Total Revenue | $618,727 | $516,409 | $102,318 | 20% | - Gross margin decreased from 77% in 2022 to 66% in 2023, primarily due to higher manufacturing costs of $79.0 million from increased sales and higher costs of newly introduced products, particularly the lower-margin Xenium instrument433454 - Operating expenses increased by 20% to $674.6 million in 2023, driven by a $61.0 million in-process R&D expense from an asset acquisition and a $45.0 million (15%) increase in SG&A, largely due to higher outside legal expenses of $18.1 million455456457 - Net cash used in operating activities was $15.2 million in 2023, an improvement from $33.6 million used in 2022, with the company ending 2023 with $388.7 million in cash, cash equivalents, and marketable securities463471472 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations and foreign currency exchange rate volatility, with a hypothetical 100 basis-point interest rate increase impacting investments by $0.1 million and a 10% adverse currency movement impacting cash and receivables by $3.8 million - Interest Rate Risk: A hypothetical 100 basis-point increase in interest rates would decrease the fair value of the investment portfolio by approximately $0.1 million as of December 31, 2023488 - Foreign Currency Exchange Risk: Approximately 23% of sales in 2023 were denominated in currencies other than the U.S. dollar, and a hypothetical 10% adverse movement in exchange rates would change the reported U.S. dollar value of cash and accounts receivable by approximately $3.8 million as of December 31, 2023489 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2023, 2022, and 2021, including balance sheets, statements of operations, and cash flows, along with detailed notes on accounting policies, acquisitions, and litigation Consolidated Financial Statements The consolidated financial statements show total assets of $965.1 million and total liabilities of $224.1 million as of December 31, 2023, with $618.7 million in revenue and a net loss of $255.1 million for the year Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $965,143 | $1,028,980 | | Cash, cash equivalents, & marketable securities | $388,695 | $429,984 | | Inventory | $73,706 | $81,629 | | Total Liabilities | $224,100 | $223,237 | | Total Stockholders' Equity | $741,043 | $805,743 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $618,727 | $516,409 | | Gross Profit | $409,313 | $396,023 | | Total Operating Expenses | $674,642 | $563,967 | | Loss from Operations | ($265,329) | ($167,944) | | Net Loss | ($255,099) | ($166,000) | | Net Loss Per Share | ($2.18) | ($1.46) | Notes to Consolidated Financial Statements The notes detail accounting policies, acquisitions like the $61.0 million Centrillion Technologies asset purchase, restructuring charges, extensive litigation with competitors such as NanoString and Vizgen, lease agreements, and stock-based compensation plans - In January 2023, the company acquired assets from Centrillion Technologies, resulting in a $61.0 million in-process R&D expense, with the deal including up to $15.0 million in additional development milestones and future sales milestones569570 - The company is engaged in significant, multi-front patent litigation against NanoString, Vizgen, Parse, and Curio in both the U.S. and Europe to defend its spatial and in situ technology patents611 - In November 2023, a U.S. jury found that NanoString willfully infringed the company's patents related to the GeoMx product line and awarded over $31 million in damages, though post-trial motions are stayed due to NanoString's February 2024 bankruptcy filing612613 - In Europe, the Unified Patent Court (UPC) granted a preliminary injunction in September 2023 requiring NanoString to stop selling its CosMx products in 17 UPC member states622 - As of December 31, 2023, the company had $224.6 million in total unrecognized stock-based compensation related to RSUs, to be recognized over a weighted-average period of approximately two years644 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, a conclusion affirmed by an unqualified opinion from Ernst & Young LLP - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023662 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO 2013 framework665 - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023669 PART III Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters Information for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, and related matters, is incorporated by reference from the company's forthcoming 2024 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's forthcoming Proxy Statement682683684685686 PART IV Exhibits, Financial Statement Schedules This section lists all financial statements and exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications, with financial statement schedules omitted as not applicable - This item lists all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications688
10x Genomics(TXG) - 2023 Q4 - Annual Report