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Good day, everyone, and welcome to the 10x Genomics First Quarter 2024 Earnings Call. Today's call is being recorded. And I would like to turn the call over to Cassie Corneau, Manager of Investor Relations and Strategic Finance. Please go ahead.

Thank you and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the first quarter ended March 31, 2024. 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 [email protected]. An archived webcast of this call will be available on the Investor 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 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. We will host a question-and-answer session after our prepared remarks. [Operator Instructions] With that, I will now turn the call over to Serge.

Thanks, Cassie, and good afternoon, everyone. During today's call, I'll start with an overview of our first quarter progress and performance, highlighted by the launch of 4 major new products that we believe set a new standard for single cell and spatial biology. Next, I will discuss the exciting opportunities we have ahead across our 3 platforms and the steps we are taking to deliver on the future. Then I'll turn the call over to Justin for a more detailed look at our financials, business trends and outlook for the rest of the year. For the first quarter, total revenue grew 5% to $141 million. We continue to drive strong growth in spatial, led by our Visium franchise and the highly anticipated launch of Visium HD. We also saw strong interest in our new Chromium GEM-X technology, which delivers substantially higher performance at a lower price. A significant number of customers trialed the new architecture, contributing to lower-than-expected quarter-end orders for Chromium overall. Despite the near-term sales impact, we believe GEM-X will invigorate Chromium growth over the long term and ultimately enable wider single cell adoption. And while we're working to deliver on the vast opportunity ahead in Chromium, our strategy has always been focused on the strength of the entire portfolio and on providing the full breadth of our capabilities to customers. With our 3 complementary platforms in single cell and spatial, we're committed to innovation that enables the scale and resolution necessary for researchers to better understand biology and disease. We believe that we're still early in this opportunity and in adoption of these tools. This year, we're introducing franchise-defining products in each platform to enhance our performance, leadership and accelerate long-term growth. These products are a testament to the enduring strength and velocity of our innovation engine and its value for customers around the world. These launches also reflect how we listen closely to customer feedback and build products that are most responsive to their needs. Let me highlight a few of our latest advances and how we expect them to extend our technology leadership. First, we are thrilled to officially start shipping Visium HD at the end of March. For our team, there's really no better feeling than seeing new products in the hands of researchers. That's especially true here. Visium HD has not only been the most requested product in our history but also one of the most ambitious development projects we've ever taken on. It is precisely the kind of challenge 10x was built for. It is yet another example of our ability to tackle hard problems and arrive at the best solution possible for our customers and their research. Visium HD enables whole transcriptome spatial analysis at single cell scale resolution. It runs on existing CytAssist instruments, leverages the same robust and easy-to-use workflow as standard Visium and brings the field of spatial discovery to a whole new level. While it's still very early, we're really pleased with the strong initial demand and tremendous enthusiasm we're seeing from our customers. The positive momentum further fuels our ambition to establish Visium HD as the platform for translational discovery. This quarter, we also continued to deliver on our robust Xenium R&D pipeline. We began shipping both our multi-model cell segmentation product and our new immuno-oncology gene panel in March. Cell segmentation includes an add-on kit compatible with existing Xenium assays. It leverages advances of assay chemistry and sophisticated machine learning algorithms to significantly improve the determination of cell boundaries using multiple morphological features and modalities. While Xenium launched with a robust nuclear-based segmentation approach, many researchers have been waiting for this new solution to enable the most accurate biological interpretation for their Xenium brands. Xenium is already well recognized as being feature performance leader, and there is still much more to come. We're planning to launch our 5,000 Flex capability midyear, scaling up Flex by an order of magnitude while still delivering high-quality sensitivity, specificity and throughput. We're also developing panels of 1,000 to 2,000 genes to give customers even more options and flexibility. We're moving forward with integrated protein profiling, which will significantly expand Xenium's existing protein capabilities. And longer term, we have architected Xenium to allow for tremendous technological headroom and enable more applications, higher throughput and lower cost. With the long-awaited launch of Visium HD, the performance of Visium in the field and the interest and buzz around the Xenium pipeline, it's clear we're in the forefront of the spatial biology revolution. We're seeing some cutting-edge researchers and technologists start to reprioritize their team's resources and [indiscernible] from single-cell approaches to explore how spatial methods can push their research forward. We're also seeing spatial resonate with new researchers who have never done single cell or other genomics work before. Take this year's Annual Meeting of the American Association of Cancer Research, or AACR, for example. There was resounding energy and conviction on spatial, which emerged as a huge theme of the conference. In fact, the majority of the plenary sessions featured or referenced 10x spatial data. This burgeoning interest in spatial is drawing the attention of both new and existing customers. And we have work to do to ensure we can satisfy that interest and drive growth across the portfolio. Turning to single cell and the launch of our new GEM-X technology, the first major overhaul to our Chromium architecture since 2019. With this completely reengineered market-leader chip design, GEM-X delivers superior performance at larger scale and lower costs. In March, we began shipping the first 2 products on GEM-X, our highest-volume Chromium assays, 3 prime gene expression and 5 prime immune profiling. These assays take single-cell analysis to the next level. Human researchers [indiscernible] performance advantages across the board from increased sensitivity and capture efficiency to improved robustness and scalability, all at a lower cost. In fact, the new technology provides researchers a more than twofold reduction in cost per cell. We believe GEM-X raises the bar for the field and sets a new standard for single-cell analysis. Our customers have been eager to see and validate this for themselves. In Q1, more customers than expected trialed GEM-X to see firsthand the power of this technology on their own samples. And more recently, customers, including the Fred Hutch Innovation Lab, have started to share their own independent comparisons of GEM-X and their Next GEM technology, verifying our performance claims. We're encouraged by the early enthusiasm, adoption and feedback on GEM-X despite the near-term headwinds as we help customers navigate this product transition. GEM-X delivers great value to customers now. It opens up meaningful possibilities to expand the field long term. As we have said before, we believe there is significant price elasticity in single cell, which presents a significant long-term opportunity for broader adoption. GEM-X is one of several steps we have planned to take advantage of the elasticity. By delivering superior performance of superior economics, we believe GEM-X will help us enable larger projects, reach new customers and encourage more routine use among existing researches. We fully intend to expand the single-cell opportunity through our robust [indiscernible] road map and other efforts to drive better awareness and broader adoption at large scale. Put simply, our goal is to make single-cell analysis the standard for most biological researchers. While we believe there's huge untapped potential for single cell, our conviction is not just in Chromium. It's the combined performance, leadership and differentiation of all 3 platforms together. Our strategy has always been about the power of the full portfolio and the choice it enables for customers. Our goal is to ensure that researchers, and ultimately clinicians, have access to a comprehensive suite of the best-performing products to [indiscernible] biology in the way that's best for their work. We intentionally design distinct, yet complementary platforms to support the broad spectrum of customers' use cases and how their research and research questions may evolve over time. The strength of our execution in R&D and operations has enabled us to deliver a full portfolio of groundbreaking products. And as we continue to evolve our commercial execution, it will better position us to maximize and deliver on the incredible potential ahead. We believe there are clear opportunities to drive growth, utilization and scale with existing customers to bring new researchers into the 10x ecosystem and to accelerate translational and biopharma opportunities. [indiscernible] first announced in November, is a powerful example of the progress we're making in translational applications. This large-scale project is on track to complete spatial profiles on thousands of tumor samples across 7 different cancer indications by the end of the year. The team is looking to discover biomarkers and to build predictive models that could transform how we diagnose, treat and ultimately cure cancer. In addition, we firmly believe there's a long runway ahead for single-cell methods in biopharma. Importantly, we're not the only ones who share this conviction. Some of our pharma customers recently published on the value and the impact of our products in therapeutic development. Sanofi reported that 90% of the company's disease targets are credentialed using single-cell genomics. A recent preprint in [indiscernible] helped shed light on why. The study analyzed single-cell data across 30 diseases and 13 tissues to examine associations between genes, cell types and diseases. They found that support from single-cell analysis significantly increased the odds of clinical success for a given gene to be a viable drug target. In fact, the authors estimate that their approach could approximately triple the chances of a drug target reaching a Phase III clinical trial. So while we have established strong beachheads in translational and biopharma, it's still very early relative to the expected large potential. With all of the advances in our portfolio, we're in a better position than we've ever been to deliver. As one customer at AACR told me, "FFPE changes everything." Our FFPE capabilities available in all 3 platforms open up vast archives of biobank samples along with exciting possibilities for new biological discoveries. These capabilities reflect yet again how we listen to our customers, think deeply about their research and build innovative products to accelerate and advance their work. We believe the long-term potential for single cell and spatial is boundless. While we're focused on delivering in 2024, we will remain steadfast in maintaining the long-term orientation that has always guided us. I have every confidence when I say we're still just getting started. With that, let me turn it over to Justin.

Thank you, Serge. I'll start by reviewing our financial results for the 3 months ended March 31, 2024, and will then provide an update on our outlook for 2024. All growth rates provided will be on a year-over-year basis unless otherwise noted. Total revenue for the quarter was $141 million, up 5%. At a high level, the quarter played out largely in line with total revenue expectations with stronger contributions from spatial, partially offsetting lower Chromium contributions. Looking at our revenue breakout. Total consumables revenue was $110.3 million, down 2%. Spatial consumables revenue was $26.4 million, up 134%. This growth was driven primarily by our Xenium platform along with strong adoption of Visium HD, which started shipping at the end of Q1. Chromium consumables revenue was $83.9 million, down 17%. Some of this year-over-year decline was expected. As discussed on our year-end earnings call in mid-February, we anticipated headwinds for Chromium revenue in the first quarter while customers began their transition to the new GEM-X products. As part of this transition, we anticipated that customers would trial GEM-X and would not stock up on either the legacy or newly introduced products at quarter end. While we believe this increased trialing created stronger headwinds for Chromium consumables in Q1, we are nonetheless encouraged by the initial adoption and enthusiastic feedback from customers thus far. The lower price of GEM-X will continue to drive some near-term revenue pressure, but over time, we believe there is elasticity that will more than offset the lower price. We also believe that the stronger-than-anticipated spatial demand took some customer mind and wallet share away from Chromium this quarter. As Serge shared, we are seeing both new and existing customers prioritize spatial studies given the burgeoning interest in the space. How this plays out over time remains to be seen. But we continue to believe in the power of our full portfolio and offering customers a comprehensive suite of products to fit various needs. Moving on to instruments. Total instrument revenue increased 33% to $25.5 million. Spatial instrument revenue was up 133% to $17.6 million, primarily driven by Xenium instrument placements. We also saw sustained demand for our CytAssist instruments as customers purchase the instrument along with Visium HD consumables. Chromium instrument revenue was $7.9 million, down 32%, driven by fewer units sold. Services revenue was $5.2 million, up 91%, driven by increased service contracts revenue and increased Xenium instrument training and installation revenue. Looking at our revenue by geography. Americas' revenue grew 1% to $79.6 million. EMEA revenue grew 22% to $34.7 million, and revenue in APAC decreased 2% to $26.7 million. Turning to the rest of the income statement. Gross profit for the first quarter was $92.9 million compared to $98.4 million for the prior year period. Gross margin declined to 66% compared to 73% in the first quarter of 2023, primarily due to a change in product mix driven by Xenium instruments. Total operating expenses for the first quarter increased to $154.4 million compared to $150.4 million for the prior year period, driven by higher legal expenses and costs for facilities and IT, partially offset by lower personnel expenses. R&D expenses increased slightly to $68.6 million compared to $67.1 million for the prior year period, primarily driven by higher facilities and IT costs and increased personnel-related expenses. SG&A expenses increased to $85.8 million compared to $83.3 million for the prior year period, primarily driven by increased outside legal expenses and higher facilities and IT costs, offset by a decrease in personnel-related expenses. Operating loss for the first quarter was $61.5 million compared to a loss of $52 million in the first quarter last year. This includes $36.1 million of stock-based compensation compared to $42.1 million of stock-based compensation for the corresponding prior year period. Net loss for the period was $59.9 million compared to a net loss of $50.7 million for the first quarter of 2023. We ended the quarter with $371.8 million in cash and cash equivalents and marketable securities. We burned $17 million of cash over the course of Q1 while making a $20 million payment in January related to the asset acquisition that we recognized in Q4 2023. Turning to our outlook for 2024. We continue to expect full year revenue to be in the range of $670 million to $690 million, representing growth of 8% to 12% over full year 2023. We believe this range represents a balanced view for the year. It incorporates both the upside we've seen in spatial and the headwinds we are experiencing now in Chromium, which we expect to continue into Q2 as additional customers trial and transition to GEM-X. When looking out over the next 12 months, we are anticipating about $15 million to $20 million of total capital expenditures. We are maintaining cash discipline in 2024. Overall, we believe we have a great set-up to drive positive cash flow for the year while making targeted investments to continue driving growth. Ultimately, our goal is to self-fund our innovation and scale by investing cash generated back into our business. At 10x, we continue to be laser-focused on execution to drive growth and impact. We are excited about the strong enthusiasm for the products we launched in Q1 and look forward to providing more updates on our progress throughout the year. With that, we will now open it up for questions. Operator?

[Operator Instructions] And with that, we'll take our first question from Mason Carrico with Stephens.

Congrats on the quarter, particularly in the tough macro backdrop. If you could, could you give us some -- maybe just a bit more insight into the adoption trends and early feedback on HD and GEM-X? How many of your CytAssist customers have purchased HD at this point? And how do you think about that driving sustained demand for CytAssist this year and then similarly, adoption rates among the existing customers on GEM-X? And has initial interest made you maybe more bullish on the opportunity for Chromium in the back half of this year and into next year?

Mason, this is Justin. I'll take the first part of that, and then Serge can add some more color. So as far as Visium goes in looking at the SD versus HD split, I'd say roughly half and half. And when we're looking on the Chromium side around the GEM-X adoption, if you're looking over the last month, as in Q2 to date, seeing roughly about 1/3 of the Chromium consumables on GEM-X. And back to the Visium side, with the launch of HD, we have seen that driving sustained demand for the CytAssist. We do think that anticipation of the Visium HD launch helped us play CytAssist, in particular in the back half of last year. And we are expecting that to be a catalyst for CytAssist placements going forward in 2024. Same thing with GEM-X. That is a product that you need a Chromium iX in order to run. And we do think that that's also going to be driving Chromium iX placements throughout 2024 as well.

Yes. So as far as the -- so the feedback on products is concerned, it has been very positive. So HD, obviously, has been perhaps our most anticipated product to date. A lot of customers were excited and a lot of customers were excited to get their hands on the product. And the early sentiment coming back from seeing the data coming from their samples is very, very positive. So all the investments we made along the way, towards improving the chemistries, the workflows, importantly, CytAssist and now putting HD on top of it, has really seemed to be bearing fruit and resulting in great feedback from customers. On the GEM-X side, the sentiment is also very, very positive. We're just now kind of going through the cycle with the initial customers who got -- who awarded and got their GEM-X [indiscernible] are actually getting the data back and now talking about their results. I mentioned it in my prepared remarks, this testimonial from [indiscernible]. We're hearing from other customers. Very pleased with the fact that there's a substantial boost to performance, great improvements, along with a number of axis and also a lower price. So the feedback has been really positive. People were really excited when we first revealed GEM-X in the middle of February. And a lot of customers have been ordering it now to trial it, to test it against the Next GEM products that are out there. And the feedback that's coming back has been very positive.

We'll take our next question from Patrick Donnelly with Citi.

Want to focus on single cell just given the result there like in terms of what we are looking for. Justin, I know you talked about maybe this weakness or softness lingers into 2Q if people kick the tires on some of the new products and trials and things. Can you just give us some sense of visibility into what that growth trajectory looks like? How are you thinking about that piece, let's call it, single-cell Chromium for the year? Just want to try to think about, again, the cadence this year and the overall expectations for this year on single cell would be appreciated.

Yes. Patrick, thanks for the question. When we think about single cell for the year, I'd go back to the 3 factors that we're seeing impact single cell right now. And so the first is the GEM-X transition. We're talking about a limited time frame in Q1. That launched in the last month of the quarter. And so there's a limited amount of data that we're going off for that. But we did see a higher adoption rate than we were originally planning. And then looking at the customer ordering patterns, we were able to see impacts with customers that ordered GEM-X, ordering smaller kit sizes, smaller number of reactions and just smaller number of orders overall. And as we can tell, too, some customers are still waiting to get the results from that. And so this trial is something that doesn't happen right away. It's over somewhat extended period of time. And so as I just said earlier, for Q2, roughly to date, about 1/3 has been on GEM-X, and so a higher uptick than we initially expected. But then we would expect a more linear transition for the rest of the year to be substantially cut over by the end of the year. And the other impact that we're seeing is that of spatial. And that's a product, it's drawing more mind and wallet share on the customer side towards spatial from single cell. And so we'll see how those both play out throughout the rest of the year. As far as the GEM-X transition, that could be more transitory. We do expect an impact in Q2, I think similar to what we've seen in Q1 just looking overall. And this is more broadly than just single cell. If we're talking about Q2, I would expect at the top line somewhere mid-single to high single digits sequential increase over Q1. So maybe 7%, 8% revenue increase Q2 over Q1. And then the last part is just the macro impact overall for single cell. And I think this is impacting things on the instrument side, probably seeing more of an impact on the instrument side. We are hearing of CapEx budget pressures, elongated purchase cycles. And I think, specifically when you're looking at Chromium, when you have a number of spatial instruments out there as well, customers are having to make hard choices. And I think that's having a bigger impact on the Chromium side than it is on the spatial side.

We'll take our next question from Dan Arias with Stifel.

Serge, just sticking with the transition and the validation for GEM-X. Where is the confidence in understanding the time lines associated with that process? How would you compare it to other processes for your other single-cell kits? And Justin, if I could, just to kind of finish off Patrick's question there. Last quarter, you said you expected Chromium revenues to grow this year. Does that view still hold just given the way that the start of the year has played out?

Yes. Dan, thanks for the question. So as far as the transition to GEM-X, if I were to put it in a historical context maybe, things to keep in mind is that it is a straight-up replacement over the existing products. It's literally a product that's better on multiple dimensions with very little trade-offs that people have to make, and it's at a lower price. So we do expect that once people go through their initial validation to confirm our claims to make sure they're replicating their own hands and their own samples, the transition should happen relatively quickly. So kind of a different kind of thing than what we had seen previously with Flex, for example, which is a very different kind of workflow for different kinds of applications [indiscernible] different kinds of customers and also likely faster than what we had seen previously, for example, with the Next GEM transition, which didn't tail some trade-offs and not necessarily a huge performance advantages. So the question is what is the feedback that people are [indiscernible] customers are going to be giving us and what are they going to be actually seeing [indiscernible] so far, it's been very positive. And so we're feeling optimistic that as they go through this transition that it will be happening on a pretty rapid pace relative to our previous product introductions.

Dan, as far as the second part of your question, given the results that we've had in Q1, it's certainly going to be more challenging to achieve growth year-over-year in Chromium. So at the midpoint of our guidance range, we are modeling more spatial upside, and we're also modeling more Chromium downside. And so with some of the headwinds that we're seeing related to the GEM-X transition, we do think by the end of the year, those will smooth out. We definitely saw an impact in Q1, and we're expecting to see an impact for that in Q2 as well. As far as the offset coming from spatial, to the extent that Chromium growth is being impacted by spatial, we would expect to see an offsetting upside in spatial. And that's what gives us the confidence to keep our guidance range the same, $670 million to $690 million that we had on the last call.

We'll take our next question from Doug Schenkel with Wolfe Research.

So I'm going to try to package in 2 different things here. First, just as a follow-up to Dan's last question, keeping in mind you launched GEM-X with a week or 2 left in Q1, that obviously stalled the market a bit. But it doesn't sound like I'm hearing anything to suggest that there's momentum -- or there is momentum coming off of that launch over the last 5 or 6 weeks that makes you feel like you can get close to target on single cell. So this is not just a timing issue. There are other dynamics that are basically hitting performance here on the single-cell side. I just want to make sure the answer to that is yes. And then my second unrelated thing I want to talk about is Bruker's purchase of NanoString. That brings to market a high-quality company with a much more formidable commercial and innovation infrastructure, a much bigger balance sheet. Obviously, they're poised to invest here. How is the emergence of Bruker as a direct competitor changing how you budget and tactically plan?

Thanks, Doug. So let me take that first question. So on Chromium, so I mean, first of all, just stepping back at a high level, Chromium, like it's not -- fundamentally, the franchise is not where we want it to be, where we think it should be. We've been talking about for past several quarters. In fact, there's been a lot of focus on spatial among our commercial team and actually, more generally for the company in the last few years. And we've been making efforts to shift more of a balance and more focused, more resources on to Chromium. And we still have a lot of work to do on that front, and a lot of work continues. For this particular quarter, like you mentioned, there is the GEM-X transition. And I would just say that we actually announced GEM-X in mid-February. So it's not just the last few weeks -- the last couple of weeks of the quarter. It's kind of a longer [indiscernible] period, and it had a substantial impact on the quarter. We're also seeing, like I said in my prepared remarks, more attention from customers on spatial. So kind of as we're making internal efforts to bring more research to bear on the program, we're also fighting a little bit of that headwind from the market. And then, of course, there are sort of macro factors in play as well in terms of pressure on budgets and this elongated sales cycle. Again, I would say, stepping back, like I said before, from first principles and based on our customer feedback, we see a tremendous long-term opportunity here. We're still very early in our opportunity, and we're taking many steps to realize that opportunity. On the question about Bruker, so the spatial field, like we've said before, is very attractive. We've seen that for several years going back. We've made a lot of investments in innovation and product development because of that conviction. It's not surprising that new companies are going to be entering the space. Again, very attractive field, very attractive applications. We've done a great job of developing products that customers -- that really resonate with customers. We've been getting great feedback. And that's really our North Star. And we continue to make investments in rolling out new products. That's how we establish our leadership now in spatial. And we anticipate as we progress through the coming quarters and coming years that that's going to keep propelling us to a greater and greater success in the market.

We'll take our next question from Dan Brennan with TD Cowen.

Maybe just a follow-up and then a couple of other parts on single cell and spatial. So I know part of the push coming into this year was the reorientation of sales incentives to get them to focus more on single cell, Serge. I think you just mentioned there's still a lot more work to do. So maybe if you can just clarify that. Secondly, I'm just wondering, obviously, Serge, you sound extremely bullish on the untapped opportunity in the demand elasticity. So obviously, we're working through this GEM-X transition right now. But could you speak to as we're through this transition, it sounds like by year-end, kind of how we would think about what a steady-state single cell kind of growth could look like? And then c, you've talked more about cannibalization on this call than in the past, but arguably that also drives more spatial growth. I'm just wondering, as we think about the cannibalization, like is your outlook for single-cell growth lower today than it would have been given this cannibalization? And is there an offset on higher spatial growth?

Thanks, Dan. So a number of questions in here. So let me kind of go through them in sequence. So first of all, in terms of the efforts that we're making on Chromium, yes, you're right. So we identified that as a priority. And we've been making progress. It does take time. I would say one of the -- like the foundational elements here is it starts with leadership. And we have great new leadership in place across all our 3 regions now this quarter: AMER, EMEA and APAC. We also have a great interim CCO leader in place, [indiscernible] who's been doing an amazing job in the transition. And we have been implementing a number of new initiatives within the commercial organization to bring more focus on Chromium. So I've talked about in the past about setting up exclusive quote targets around Chromium -- the Chromium business. We have not had that in the past. We're creating a great amount of specialization within the commercial team to provide more headroom, more bandwidth for salespeople to be able to spend more time and more focused on Chromium. We also have implemented direct KPIs and management expectations around driving Chromium. We're also putting to bear more marketing resources and campaigns specifically for Chromium as well. And we do expect that that's going to bear fruit in the coming quarters, for sure. And of course, this is being done on the background of a really exciting product launches as well. Kind of your second question on elasticity, yes, yes, I've commented a lot in past around the fact that, yes, we do believe there is a tremendous elasticity of demand in the single-cell market. And one way you can look at it is from first principles. Biology, like I've said before, really should be studied in single-cell context. And the vast majority of it currently is not studied that well, and most people who should be using single cell are currently not using that. And we know that price is a major obstacle to them using it. And we hear it, and that's the second sort of chain of evidence we hear a lot from our customers consistently, that price is a major obstacle both in terms of new customers who are interested in single cell and when they see price, that tends to turn them away or at least slow them down in adoption. We hear from existing customers who are interested in making single cell becoming a more routine part of their research as opposed to a method of exception when you need to get really, really deep insight into a particular sample. And then we hear it from our customers who want to scale to really large projects. The main obstacle consistently is price. And so we do see a lot of opportunities both from first principles and based on the feedback we've been hearing from customers. And we've been making efforts. GEM-X is a strong example of that to kind of work down the price curve and to generate increasing demand. We have strong conviction that over time, this will lead to the expansion of the total market. And then kind of the third point you mentioned was around the sort of trade-off with spatial. And it is definitely the case that there's a lot of -- there's been a lot of excitement around spatial recently, certainly, especially with the launch of Visium HD, with the progress we've been making on Xenium. And it's certainly the case that we see in customers making those trade-offs, thinking about their budgets, their mind share, where they're going to be kind of spending their time. This was true, we've talked about in the past, for -- certainly for early technologies, people who are specifically focused on what is the latest, greatest innovation. They are looking at spatial where in the past, they might have been looking at single cell, and other customers too. And also, this interest from customers is drawing attention of our sales team as well naturally and as one might expect. Now it is not the case that people are just switching over from single cell into spatial. The insights that you get, the kind of research questions you can ask and answer are complementary. They're different. And we're also seeing a lot of customers that are new to this whole ecosystem coming in through spatial. People who've not done single cell before, people who have not even done genomics before. And so there's going to be ebb and flow as customers kind of figure out specific use cases as new technologies come to prominence to figure out the precise and appropriate use of them. Ultimately, we see huge potential for all 3 of our franchises. We expect them to coexist and complement and supplement each other. And we expect that there is great, great future ahead for Chromium and really for the whole portfolio.

We'll take our next question from Matt Larew with William Blair.

Maybe just picking up on that last point, Serge. Obviously, for a long time, you've been talking about the value of the ecosystem and building a portfolio of platform assets within the ecosystem. Could you maybe update us with sort of the proof points you track internally that validate that thesis, be it adoption of spatial technologies by perhaps legacy single-cell customers or retention of single-cell customers in labs where they might have other 10x products that they've committed to? Is there anything that speaks sort of strategically to the value you're seeing of having different modalities in-house?

Yes. So I would say there's good kind of example [indiscernible] and a substantial number of examples of customers purchasing platforms together when they're kind of looking at kind of setting up their genomics infrastructure, where they buy CytAssist, they buy Chromium, they buy Xenium, and they contemplate kind of use cases that define all these platforms. We're also seeing kind of results getting published in papers and data sets that get released. And a consistent kind of feedback when we talk to customers is that oftentimes people do use these platforms together. It's rare that you have a Xenium run, for example, without -- that doesn't make use of some single-cell information and same -- to some extent, same for Visium. And we see kind of the interest going back and forth, where people might run a Xenium experiment and then kind of look at the Visium or a Chromium to put those results in context or in the other way, you run your Chromium experiments, you generate data, and then you want to follow up and validate it using Xenium with -- for your specific biological system. So we see plenty of examples in there, a lot more of them getting published along those lines. I do want to emphasize it's kind of early in this whole process in terms of collecting kind of reliable statistics because all these products are coming at customers pretty fast at this stage, and it is a pretty dynamic field. But when we look at, again, the use cases and applications, we see plenty of evidence of customers being excited about using multiple platforms.

We'll take our next question from Matt Sykes with Goldman Sachs.

Maybe this is a bit premature, but I know you've addressed the cannibalization comments. But I just wanted to take a little different take on it. And just given your comments on spatial taking time and wallet share from single cell, is there a way to maybe effectively manage the potential cannibalization, if you believe this focus [indiscernible] spatial, meaning, would you want to use this transition to spatial to your advantage and just try a much more proactive approach to cannibalization? Are there encouraging existing Chromium customers where spatial makes sense towards spatial, which I'm sure you're doing from a commercial standpoint? But I just think that given sort of your earlier comments about the ecosystem, keeping the customer within the 10x platform is probably the first priority and therefore, maybe actually managing that cannibalization could help sort of ease that transition into it. Or is that just too early at this stage to really go forward with those efforts?

Yes. So one thing I would say, you have to be careful using the word cannibalization because it's not so much a substitution where people kind of are getting results they could have gotten with Chromium using the spatial technologies and approaches. You can't. They're complementary, they complement and they supplement. So it's important to keep that in mind. I think for us, our North Star is really kind of customer success and delivering the value for their particular applications and their questions. And so we want to present the full solution to our customers. And the way that our sales team kind of interacts with our customers is to really try to understand deeply what are they looking -- what are the questions they're asking, what are their research goals and then making sure they understand the capability of the products to give them the most efficient way to get to those goals. And so I think I would frame it as less about what we are driving for ourselves but making sure that we've got the full set of solutions that our customers can take advantage of.

We'll take our next question from Subbu Nambi with Guggenheim Securities.

Regarding performance in China, revenue was down 16% in the quarter. Could you provide any initial color on the status of the strategy here given that inventory is piling up, created some obstacles in last year, how did 1Q fare? Are there any material updates regarding your priority to continue building up backup sales force in China?

Subbu, thanks for the question. As we talked about on our previous calls, over the last year, we've worked actively to bring down inventory levels at the distributors and service providers. And just for the context here, we sell to distributors who sell primarily to service providers, who actually perform the service for the end customer. And so then when there's any kind of fluctuation in the demand at the end, you can have inventory stack up at either one of those levels of the chain. And so we saw that throughout last year. And each quarter, we work to bring those inventory levels down. We developed closer relationships with the service providers and shared more information with them, and they were able to share more information with us. We've also made some progress on adding distributors in the region to reduce the burden on any given one and also allow us to get closer to the customers as well. And so going back to the last part of 2023, Q3 and Q4 played out roughly like we expected them to. I would say the same with Q1. And at least right now at this level of demand, we do think that we have -- we don't think that we'll see the same issues that we saw last year with inventory, but that could change if demand changes like it did at the beginning of last year.

We'll take our next question from Michael Ryskin with Bank of America.

I hate to belabor the Chromium consumers point. But I just want to ask sort of a big-picture theoretical question, not just focusing on the first quarter. If you take a look at Chromium consumables over the last couple of years now going back to 2021, 2022, I think it's safe to say that that's been somewhat disappointing over the last 2 years-plus. There's been a number of different issues, commercial missteps. Justin, you were just talking about China headwinds. Now you've got the GEM-X transition, the broader macro, you're having some of the shift into other spend into spatial. I won't call it cannibalization, but probably you will. Given that performance over the last 2 years, I mean, in your comments on what feels like a revised Chromium consumables outlook for this year, it sounds like you're not expecting to hit the levels you were talking about before. Is there's some deeper issue at play here, where it's not just any one of these, whether it is competition and someone brought up NanoString, but there are a number of smaller vendors coming into the single-cell market that are making inroads in the market. Whether it is just budget constraints from customers, whether it is price elasticity? Just -- I mean, is there a way we can revisit sort of the single-cell opportunity in the near term and maybe take a look at from that perspective?

Yes, Mike. Yes, let me kind of take that. So I mean a fair point. There has been, I mean, a number of legitimate reasons why Chromium has been particularly buffeted over the past couple of years. The fact that our business in China went down a lot all this current period. So that certainly put a lot of pressure. We are this quarter, like I said, going into a particular product transition. So those factors are all at play, for sure. The -- but ultimately, the question of the underlying potential of Chromium, there is still -- it's still there for the same reasons we've always articulated. Like I said earlier, most first principles, most researchers should really be using single-cell analysis to understand their tissues. That's where the biology is, and that certainly is not the case now. And like we said before, the main obstacles to that are workflow ease, which we're in the process of addressing through various means and price, which we're also addressing through a number of steps, and then also driving greater awareness through commercial execution and general market development. We do believe there's lots of robust growth ahead, but those obstacles do need to get addressed, and we are in the process of addressing them. The question of competition is, yes, certainly, it's a relevant one. There's always been stock competition in single cell. Sometimes more, sometimes less. Over the last year -- a couple of years, there has been a few more players that have come into the space. We've talked about this before. There's -- compared to a year ago, there's somewhat more awareness and somewhat more prevalence of them out there. I would still say that the story is largely the same. Customers do trial them, which does create -- introduce some friction to sales process. It does put pressure on prices. But by and large, customers come back to us due to all the various advantages our products have, like much better performance, much better data quality, much better workflow, much better breadth of applications, customer support and all the other things that people love about 10x. So it's still largely the same story. And we -- the reason we've been successful up to now is because of the product innovation and the product quality. And that is our North Star. The goal is to keep delivering value to customers. We're continuing to invest both in terms of product development and in terms of customer focus. And we believe the much, much larger opportunities to drive the overall growth of the market relative to the effects of any particular type of competition.

We'll take our next question from Tejas Savant with Morgan Stanley.

Serge, I have one on single cell and then one on Visium HD. So starting with single cell, you mentioned in an earlier answer that the main obstacle to larger projects was price. And you've talked about the commercial refocusing as well. But I just want to get a sense of how open you are to deeper and more accelerated price cuts on Chromium versus the 10% set you got with the GEM-X launch? And I understand that, that could mean incremental downside to the near-term guide, and perhaps it then puts your commercial folks on more even footing versus some of the incumbents or the new entrants you were talking about and helps to reignite customer interest to pull the trigger on larger projects. And then my unrelated to the second part of the question is on Visium HD. Really good to see the strong start there. And I know there's an interplay of different dynamics here. But to what extent did initial stocking from new users play a role in the upside? Is there a possibility of a natural sort of sequential breather maybe a couple of quarters out before we see the big inflection that you've talked about given the strong customer interest and how they were clamoring for this product to come through?

Tejas, thanks for the questions. So let me talk to the first one. So you're right, so with GEM-X, we showed a 10% drop in per sample price. Now I do have to say that's a substantially larger drop in the per sale price because you've got a lot more throughput with GEM-X and something that a number of customers appreciate. Your larger point as to whether we intend to drive further into the price? Yes, over time, for sure. We talked about the fact that ultimately, we want to reach the price point of $100 a sample. We're excited by that. We will drive the technology and products in that direction. We just want to be careful in how we do that and kind of stepping into that kind of commensurate with our other efforts in terms of driving demand and in terms of driving sample volume. So certainly, customers should expect to see more along this trajectory. And those are the considerations that we're going to keep balancing as we proceed through the upcoming quarters and upcoming years. Maybe on the second question, I can start. So certainly, there's been a lot of pent-up interest in Visium HD. And we do anticipate there are a lot of customers that were -- that came into -- sort of into this quarter with pent-up demand. And we kind of have to see. It's early to make a determination around how much of demand we're seeing right now is sort of the initial bolus versus what the sustained trajectory looks like. There's -- again, there's good indications based on the feedback we're getting from customers once they actually see the data, but it's still very early days on that front.

We'll take our next question from Luke Sergott with Barclays.

So can you guys help us give a sense of how many Xenium you placed? And then any type of directional commentary on -- I know you don't typically break it out, but the contribution of Visium versus Xenium in that revenue base on spatial and how that trended? And then really just kind of figuring out the momentum within those 2 businesses to offset the single-cell decline for you guys to be able to hit that for your guide because the back half step-up is now outsized of what you've done in the past?

Yes. This is Justin. I'll take that. In looking at Xenium instruments, on our last call, we talked about a quarterly range of roughly $50 to $75 per quarter. For Q1, it was about $50. We would expect that to continue to ramp throughout the year from the lower end to the high end. With what we've seen so far last quarter and this quarter with pressures on CapEx budget, elongated purchase cycles, I would expect that it would be closer to $50 again, and that's for Q2. And then when we're looking at Visium versus Xenium overall, looking back at Q1, roughly half and half between each of those on the spatial side. When looking on the consumables side, when you're looking from Q4 into Q1, most of the growth that we saw sequentially from Q4 into Q1 was driven by Visium HD. And so there is -- there has been a lot of excitement around Visium HD. Like Serge said, we've got to see what the sustained level is. But I would say that the initial level that we've been seeing has been exciting. And then there's the potential for the Xenium consumables to ramp up throughout the year. We haven't released too many details on that. I would say that we're still looking at a wide variety of usage across the customer base. But we are seeing good trends as far as increasing use over time when we're looking back at the older cohorts versus the new cohorts. And this is also allowing a couple of quarters to ramp up as well. And so I do think that there's upside on both the Visium side and the Xenium side within spatial when we're looking at offsets between Chromium and spatial and our outlook for the rest of the year.

We'll take our last question from Kyle Mikson with Canaccord Genuity.

A quick follow-up on the single-cell questions, I think, for Serge. [indiscernible] a lot in that business this year, GEM-X upstream fixation, other things. That includes additional resources this year that replaced those kind of taken out spatial last year. I wanted to ask what the company's ROI is in single cell today given that the decelerating kind of decreasing even negative growth in some cases? And does that kind of make sense to keep investing at this pace if the return is becoming less attractive and kind of make the argument that maybe like shift that focus to spatial possibly, I guess, just in line with some of the cannibalization questions earlier?

Thanks, Kyle. So look, we see -- like I said earlier, potential -- large market potential in all 3 platforms. We are going to keep investing in all 3 platforms. Over the past several years, we made very, very large investments on the spatial front. We talked about in the past how much we shifted resources on to Xenium. Bringing up HD was also a pretty massive undertaking. There is -- at this stage, we don't see any reason to let go of Chromium [indiscernible]. In fact, the investments we're making right now, we feel like we have potential to open up a lot of new use cases and much broader use cases with much broader categories of customers. So we are certainly managing the spend and investment across our 3 platforms very carefully and continuously and feel good about the balance and the amount.