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Ladies and gentlemen, thank you so much for standing by and welcome to 10x Genomics First Quarter 2025 Earnings Conference Call. Please note that this call is being recorded. After speakers’ prepared remarks, there will be a question and answer session. [Operator Instructions] Thank you. I’d now like to hand the call over to Cassie Corneau, Senior Director, Investor Relations. You may now begin.

Thank you and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the first quarter ended March 31, 2025. If you have not received this news release or 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 Adam Taich, our Chief Financial Officer. We will host a question-and-answer session after our prepared remarks. We ask analysts to please keep to one question so that we may accommodate everyone in the queue. With that, I will now turn the call over to Serge.

Thanks, Cassie, and good afternoon everyone. Today I’ll cover Q1 performance and share updates on how we’re navigating the rapidly evolving macro environment. I’ll also walk through recent business developments before handing it over to Adam for the financial review and outlook. Total revenue for the first quarter was $155 million. During the quarter, we settled our worldwide patent litigation with Vizgen on very favorable terms. As one component of the settlement, we received [Technical Difficulty] of $26 million as we allocated in part to operating expenses related to gain on settlement and in part to license and royalty revenue. Excluding the portion allocated to license and royalty revenue, our first quarter revenue was $138 million, down 2% year-over-year, primarily driven by a significant decrease in instrument revenue offset by continued strength in consumables, a sign of solid core demand and growing usage across our platforms. Our Q1 results demonstrated clear signals that customer demand for our products is robust and reinforced our conviction in the long-term growth potential ahead, which I will discuss more later. But first I’d like to take a moment to reflect on the significant changes in the macro environment since the beginning of the year, changes that went far beyond what any of us expected. Signs of risk and uncertainty across academic research funding and the macro landscape begin with a cap on indirect funding from the NIH, and since then the research funding environment has continued to deteriorate, particularly across U.S. academic and government labs. Within U.S. academic and government research funding, we’re seeing two distinct but interconnected dynamics. First, there are real time effects impacting our customers today, including delays, reductions and outright cancellations of grants. Second, there is a growing threat of future changes such as proposed budget cuts, implementation of indirect NIH funding gaps, and widespread concern over further grant review delays or project cancellations. Taken together, these pressures are creating a climate of deep uncertainty. We’re increasingly hearing from customers that the combination of actual cuts and looming risks is making them hesitant to initiate new projects or invest in capital purchases. The uncertainty for our customers is driving increasingly unpredictable customer purchasing behavior and reduced visibility on our outlook for the year. Approximately 40% to 50% of our revenue is supported by U.S. academic and government research funding. As a result, we announced earlier today that we’re withdrawing our full year revenue guidance and implementing quarterly guidance beginning with Q2. Adam will share additional context on our outlook. While the current environment is undeniably difficult and unpredictable, I am confident that we’re well equipped to navigate through this period and emerge stronger. We’re seeing increased usage of our products driven by price elasticity and the emergence of new applications, both of which support the long-term expansion of our opportunity. Our recent slate of product launches continues to resonate with customers and further extends our technology leadership that, together with our roadmap, positions us extremely well for the future. We have completed our sales reorganization, giving us the structure, coverage and focus we need to take on today’s challenges, and we have a strong cash position that we are actively protecting through this turbulence. We have implemented a reduction in both headcount and non-headcount related expenses across the company. This week we reduced our global workforce by approximately 8%. While these changes are never easy, they will allow us to be a more efficient organization, better positioned to navigate today’s environment while continuing to invest in our highest priorities. We recognize that the strength of our balance sheet is an asset. We have the result to protect it and the levers to further adjust expenses if necessary. Importantly, our fundamentals remain strong and we continue to have full confidence in our ability to capture the large opportunities ahead. To that end, we saw multiple positive developments in Q1 that underscored the strength of our platforms and reinforced our conviction in our mission. First, we saw solid signs of single cell elasticity demonstrated by robust year-over-year growth in Chromium reaction volumes. This growth was supported by strong adoption of our Flex and universal on-chip multiplexing products, both of which are specifically designed to boost volumes through lower cost per cell and per sample. Second, we’re continuing to see increased Xenium usage demonstrated by strong growth in Xenium consumable revenue and volume. Our Xenium platform keeps gaining traction among new customers, while our earliest and largest users continue to grow their utilization. Researchers are drawn to Xenium for its ability to elucidate biology that was previously inaccessible at a resolution and scale that were inconceivable until recently. And as researchers use the platform, they increasingly recognize Xenium’s robustness, accuracy, superior data quality and ease of use. Third, our recent and upcoming product launches are resonating with customers and continue to advance our leadership in single cell and spatial biology. Our GEM-X technology has been delivering great advances to single cell analysis. Visium HD has become a leading approach for unbiased spatial discovery and Xenium 5K assays have gained rapid adoption across our customer base. At the AGBT conference in late February, we unveiled innovations across all three platforms, including a new plate based Chromium Flex product to massively expand scale and the number of samples per run. Expand these cloud-based capabilities to support the large project analysis, continued expansion of our Visium platform with Visium HD 3 prime, Visium cell segmentation and Visium HD XL and Xenium RNA proteins to enable multiomic analysis on the same tissue section. Together, these launches strengthen our roadmap and deepen our ability to serve all of our customers, including biopharma and translational researchers as well as those working on consortium scale studies. Finally, we’re seeing a trend of exciting new use cases driven by the imperative for larger scale analysis and the promise of single cell and spatial in opening up new clinical research applications. Let’s talk about some of the notable examples from the last few months. A powerful and accelerating wave across research is the use of AI with massive single cell data sets to uncover patterns, generate insights and accelerate discovery in ways that simply weren’t possible before. Building on the collaboration we announced in February with the Chan

Thank you, Serge. I’ll start by reviewing our financial results for the three months ended March 31, 2025 and will then provide further details on our updated outlook for 2025. All growth rates provided will be on a year-over-year basis and unless otherwise noted. Total revenue for the quarter was $154.9 million. Excluding the license and royalty revenue from the settlement, first quarter revenue was $138.1 million, down 2%. Total consumables revenue was $115.4 million, up 5%. Chromium consumables revenue was $84.1 million, approximately flat. Spatial consumables revenue was $31.2 million, up 18%, driven by Xenium consumables revenue. Moving on to instruments, total instrument revenue was $14.8 million, down 42%. Chromium instrument revenue was $5.9 million, down 25%, driven primarily by lower average selling prices. Spatial instrument revenue was $8.9 million, down 49%, driven primarily by fewer instruments sold. Looking at our revenue by geography, Americas decreased 7% to $73.8 million; EMEA decreased 8% to $31.9 million; APAC increased 22% to $32.4 million. Instrument revenue was down across all geographies, though strong consumable sales offset the impact in APAC. Turning to the rest of the income statement, gross profit for the first quarter was $105.4 million compared to $92.9 million for the prior year period. Gross margins increased to 68% from 66% the year prior, primarily driven by higher license and royalty revenue and lower manufacturing costs, partially offset by increased inventory reserves. Excluding the impact of license and royalty revenue, gross margin was 64%. Total operating expenses for the first quarter decreased to $144.8 million compared to $154.4 million for the prior year period. This decrease was primarily driven by a gain on settlement. R&D expenses decreased to $64.2 million compared to $68.6 million for the prior year period, primarily driven by lower personnel expenses including stock based compensation expenses, partially offset by higher lab materials and supplies. SG&A expenses increased to $89.7 million compared to $85.8 million for the prior year period, primarily driven by an increase in outside legal and personnel expenses, partially offset by a decrease in marketing expenses. Operating loss for the first quarter was $39.3 million compared to a loss of $61.5 million in the first quarter of last year. Net loss for the period was $34.4 million compared to a net loss of $59.9 million for the first quarter of 2024. We ended the quarter with $427 million in cash, cash equivalents and marketable securities. Turning to our outlook for the rest of the year, as Serge mentioned, we are withdrawing our previously issued annual revenue guidance and in its place we are providing guidance for the second quarter. The U.S. policy changes have introduced increased uncertainty into purchasing behavior for many of our customers. As a reminder, approximately 40% to 50% of our revenue is exposed to the U.S. academic and government research funding environment. We are highly exposed to ongoing uncertainty in the current environment. While the change to our guide reflects the current macro funding environment rather than company specific performance, we believe it is prudent to take this step to ensure transparency and avoid setting expectations with the significantly limited visibility we have under these evolving conditions. We remain focused on assessing conditions in real-time and will reinstate our annual guidance when our visibility on macro impacts to customer spending improves. For the second quarter, we expect revenue to be within a range of $138 million to $142 million, representing 1% growth sequentially at the midpoint, excluding the impact of the aforementioned license and royalty revenue. We anticipate that the funding and macro environment will remain challenged and that ordering patterns will continue to be impacted, particularly for instruments and larger consumable orders as customers work through grant delays, program cancellations and reprioritized budgets. At the same time, we’re encouraged by the continued strength in core usage trends, including double digit growth in Chromium reactions and broader Xenium utilization. In regards to the evolving tariff landscape, we are tracking developments very closely. When it comes to components in our products, we have a limited reliance on China in our supply chain. In addition, we have a global manufacturing footprint, with nearly all of our manufacturing occurring in the United States and in Singapore. Sales to China, which accounted for approximately 10% of our revenue in 2024, is where we see the largest potential risk. Given our ability to manufacture many of our products in Singapore and other mitigation strategies, we believe the impact from currently proposed tariffs is likely to be minimal. Stepping back from the near term uncertainty, we remain confident in the underlying health of our business and our competitive positioning. Our teams are executing well, customer engagement remains strong and our recent product launches are driving meaningful uptake. As Serge mentioned, we have recently implemented several cost saving measures in order to protect our balance sheet. Over the past few months, we undertook a full and detailed review of all of the costs in our business and took actions to reduce our ongoing operating costs. This included a reduction of 8% of our workforce as well as significant reductions in non-headcount spend. Together, we anticipate these measures to reduce operating expenses for 2025 by more than $50 million compared to 2024. As a result of these measures, we estimate we will incur between $5.5 million and $6.5 million of costs and consisting primarily of cash severance costs, which will be paid by the end of the third quarter. With our strong balance sheet, we have the ability to continue to execute on our strategy and fuel future innovation. We believe we are positioned well for long-term growth and we are committed to staying agile as conditions continue to evolve. With that, I’ll turn the call back to Serge.

Thanks, Adam. As we wrap up, I’d like to end on a personal note. I wasn’t born in this country, but I love America. In fact, I love America especially because I didn’t grow up here. In no other country in the world could I have dreamed of the opportunities that came my way of being given the chance to make a dent in the universe. There is no other place we could have started 10x. No other place has such a welcoming culture of boundless innovation and positive ambition. No other place has this concentration of insanely talented people, incredibly sophisticated capital markets, and a remarkable ecosystem across academia and industry supporting scientific innovation. We’re living in a time of incredible progress in life sciences. The mysteries of biology are right in front of us, ready to be unlocked. Scientific progress in the coming years has the potential to bring cures to many, many diseases and completely transform the human condition. We are indeed on the threshold of a golden age, but we’re shooing ourselves in the foot right when we should be pressing on the accelerator. Recent U.S. Federal actions are massively hampering the ability of our universities and our government agencies to pursue their goals of advancing science. I’d be the first to tell you that many of these institutions are in need of reform. That the current system often suffers from too much process, too much politicization and too much bureaucracy that younger scientists and unusual ideas face more challenges than they did in the past. But overall, these institutions are incredibly valuable and productive. Our university system is the global engine of scientific discovery and the envy of the world. The NIH is the foundational jewel of biomedical progress. We should certainly endeavor to reform and make these organizations ever more effective. But recent federal actions are not doing that, instead, they’re severely undermining these enterprises and run the risk of fundamentally dismantling their ability to support research. And that would be a tragedy. America is the greatest country in the history of the world, the beacon of hope for all of mankind. My exhortation to those who are listening, let’s not squander a great inheritance. Let’s work to defend and improve our greatest institutions. Overall, despite the current turbulence, I remain optimistic. The progress of science and technology just holds so much promise to improve the human condition and create massive value. As always, we’re deeply committed to helping that progress and to always be great partners with our customers. We’re focused on disciplined execution as we navigate the current environment while always keeping our eye on the long-term mission. With that, we will now open it up for questions. Operator?

Thank you. We’re now opening the floor for question-and-answer session. [Operator Instructions] Your first question comes from the line of Patrick Donnelly of Citi. Your line is now open.

Hey guys, thank you for taking the questions. Serge, maybe just wanted to talk through the current backdrop. I mean, can you give us a sense as to what the recent conversations with customers have looked like, let’s say, over the last couple of months, did the NIH and broader academic volatility, did that cause a freezing up by customers that led to this level of uncertainty that drove you guys to kind of pull the guide. Now that we had the NIH proposal, to your point there, a significant 40% type cut, has that changed any of the conversations? Or is it now we have to wait on the final budget numbers? I’m wondering, even if it’s a double-digit cut, does just having that certainty lead to better visibility from your side and from customer side, essentially just wondering, I guess, the path for you to have that visibility back in the business and seeing a pathway to growth? I mean, does it come down to the budget? Maybe just pull the curve back a little bit on that. Thank you so much.

Yes, Patrick. Great question. Key question for sure. So let me start with some background color about the conversations with customers and what we’re hearing from the field. And then I’ll hand it over to Adam to talk about sort of the implications, how we’re thinking about the guide and as we progress through the year, how we’re thinking about the numbers. So yes, as far as the conversations with customers are concerned, like as we said on the call, the environment kept getting worse as we proceeded through the quarter. And in fact, the conversations with customers, what we’ve been hearing have been getting in many places, more and more, let’s say, dire in terms of just the lack of clarity and uncertainty about where their funding was coming from. The initial news around caps around indirect, that was – that created a lot of uncertainty around a lot of churn. But there was a lot of other activity. And I would say that compared to sort of the initial outlook that people had around this being just an NIH issue or like NIH budget issue, there is a more systemic set of issues now that you have to be looking at for when you’re looking at academic and government funding in the U.S. Other agencies that are being affected, there is a ton of different procedural issues that are making it very challenging for people to actually get the funds as well as having like huge uncertainty around where the funds are going to be coming from in the future, whether they’re going to be coming. As well as multiple disputes with universities that are – all of them are large customers of ours as well. So there’s sort of a very large cloud of uncertainty that we are hearing from customers. And I think the big theme is just the uncertainty, right? And that has prompted the different organizations, different institutions to implement numbers of cost-cutting measures and reducing their spend in various ways. And so there is an impact that we are certainly seeing right now in terms of spending patterns, but there is also kind of an anticipatory impact that, that people are baking in into their sort of plans or lack of plans. Adam, yes.

And maybe, Patrick – Adam here, I could just add to your question sort of around the suspension of guidance. And I think as you heard from Serge, we’ve been spending a lot of time with customers out there trying to do our best to support, but also to learn. So it’s a fair question when we spent a lot of time weighing that carefully. So philosophically, we believe that forward guidance should enable the investment community to model our business with a reasonable degree of accuracy. And I think as you just heard from Serge, the facts given the uncertainty, they don’t support that standard. As we just talked about kind of in our prepared remarks, we started the year with good momentum. Q1, really multiple positive developments, double-digit year-on-year growth in Chromium reactions, strong Xenium consumables utilization, which really confirms what we said when we set out the initial guide and also confirms the fundamentals of our business are robust. But since that call, as Serge just mentioned, funding backdrop, customer confidence, it’s worsened materially, academic and government research budgets tightening, NIH grants and the outlays as you sort of track those, that remains in Flux. And then there’s a variety of procedural changes that have been put in place that actually really disrupt our customers’ ability to know their funding levels and then it makes it difficult for them to commit to projects and programs for us in the second half of the year. Just as a reminder, 40% to 50% of our revenue is exposed to those U.S. academic and government sources, half of that being the NIH. The other sort of portion of that is the non-NIH federal state institutional sort of academic and government sources. So the range of possible full year outcomes become unusually wide due to the unpredictability of that external environment. And generally, we seek to provide as much transparency as possible. But given our line of sight into Q2, we provided guidance for this quarter today. However, in the second half, there are plausible scenarios where conditions improve and there’s others where they deteriorate further. And so giving a full year number at this juncture would create a false sense of precision and withdrawing it is the most intellectually honest approach until external signals stabilize.

Your next question comes from the line of Kyle Mikson of Canaccord Genuity. Your line is now open.

Hey guys, thanks for the questions. Adam, on your last point there, could you just maybe provide a little more detail on what you – how you expect the year to kind of play out going forward, whether it’s like instrumentation versus consumables? You kind of commented on that or maybe Chromium versus Spatial, if you could be helpful to understand that. And also the – if there was an NIH pull forward in the first quarter because we saw that from some other folks in the sector. And just a second question I want to ask maybe for Serge. Spatial instruments declined 50% year-over-year. Can you just comment on the current market dynamics given Bruker has been pretty active at AACR. Just would love your thoughts on that. Thanks.

Yes, Kyle, I can start. Let me take through. We didn’t see NIH pull forward, so I can start there. And then it kind of – if we think about the balance of the year, let me start with Q2 because we just withdrew guidance for the second half, so not really in a position to be providing specific outlook beyond Q2. That said, based on what we’re seeing today, Q2 is shaping to look a lot like Q1. So consistent trends, similar dynamics we had, as I think you could see from the numbers, real pressure on the CapEx in the instrumentation side of our business and consumables held their own. We were flat on Chromium consumables and really nice growth on the spatial side, particularly in the Xenium side. So when we think about the back half of the year, it’s just a really wide range of possible outcomes. If the current trends hold, it could be reasonable to expect sort of flat to low-single digit sequential growth trajectory, which is what we’ve sort of baked into our Q2 guide here versus Q1. So there’s a world where things improve, and we see trends even better than that. The budget could very well favor spatial and single cell research relative to other areas. The new head of the NIH has sensible ideas around reforms. And to the extent that money gets unstuck, it could create some upside for us. But also given what we’re seeing in the environment, there’s a possibility for further deterioration. So for now, we’ve got the plans. We’ve got the financial means to execute and respond across a wide range of scenarios. And we’re committed to providing an update when we have our Q2 call in August.

Yes. And maybe, Kyle, on your second question on spatial instruments and sort of the market dynamics there. But fundamentally, from the competitive perspective, there hasn’t – I wouldn’t say there was a material change, similar dynamics that we’ve seen over the last several quarters. People really, really like our spatial products. They love Xenium. In fact, I was at AACR last week and got a lot of really gushing feedback from our customers, just real delight in the kind of data they’re seeing in the kind of insights they’re drawing. And you could see that manifesting itself in various posters and presentations and papers that are coming out. So we feel really, really good about Xenium’s position in the market. Again, the biggest thing, the biggest variable, the biggest reason for the decline is the macro environment. CapEx has been getting tighter across the world and particularly challenged within the U.S., especially within the academic and government markets.

Your next question comes from the line of Doug Schenkel of Wolfe Research. Your line is now open.

Hi, this is Madeline Mollman on for Doug. I just wanted to touch on what you just said about sequential increases throughout the year. I think there’s a slight step-up from Q1 to Q2, the midpoint of the Q2 guide, excluding some of the litigation money. What gives you confidence in this, especially in light of your earlier comments that things got increasingly tire as the quarter went on?

Yes. Thanks, Madeleine. Yes. And so first of all, you’re correct. So essentially the Q2 guidance provided is $138 million to $142 million. That’s the range, and it represents 1% growth sequentially at the midpoint. What gives us confidence around there? Well, thankfully, we’re 8 days here into May. We’ve got pretty good visibility into the order book and the order patterns between now and the end of the quarter. But I think that’s an important distinction to make, which is it’s not that we are – have sort of lost visibility entirely. It’s that we just don’t have, given the dynamic environment and sort of the ever-changing procedures and other changes that are really impacting our customers’ ability to have clarity around funding. That’s really a second half dynamic for us in the Q2 here. We’ve got a pretty good sense of what’s going on. And both from a customer segmentation standpoint, and really even from a product and product mix standpoint, it’s going to look a lot like Q1 did.

Your next question comes from the line of Mason Carrico of Stephens. Your line is now open.

Hi guys, thanks for taking the question. This is Ben on for Mason here. Just wanted to hit on the headcount reduction you spoke to and sort of your OpEx initiatives. How should we think about that in light of the recent restructuring that you’ve done? And really how does that impact your ability to hire certain commercial teams and the ability to grow going forward? Thank you.

Yes. So – yes, good question. So the cost that we implemented have been across the company kind of touching on every department. But mathematically, R&D had more of an impact than other functions just because it’s a large – particular large organization. There was less of an impact on direct sales roles on that organization, because we have just built out that team, that organization, and we do feel strongly that it is now a source of a foundation for growth for us for going forward. And we’re quite happy and satisfied how that’s going. We fundamentally really, really carefully considered all of our programs, all our initiatives across the company and focused the company in the most critical areas, the most critical initiatives with ideas that we will emerge kind of once we through this turbulence in a very strong position. We feel good about our ability to retain the talent. And this is something that is very, very important to us going forward.

And Ben, let me just add just from a P&L impact standpoint, the measures that we’ve undertaken and that we’ve announced will reduce operating expense for 2025 by more than $50 million compared to 2024. And also as part of that related to the reduction in force, we’ll incur between $5.5 million and $6.5 million of costs, predominantly cash severance costs which will be paid out by the end of the third quarter.

Your next question comes from the line of Dan Arias of Stifel. Your line is now open.

Hi, this is Paul on for Dan. Thanks for taking our question. Just wondering a little bit about sort of the regional view. EMEA sales declined as much as the U.S. against a really tough comp. But the next two quarters have kind of similarly tough comps. Is that something that we would expect to see continue and what are the factors that are kind of holding back customers in Europe and causing that single digit decline?

Yes, Paul, thanks. Good question, good catch. Like, I would say, first of all, to make sure not to over index on any given quarter, because there are different dynamics around just the timing of different orders and shipments. The fundamental business in Europe is strong. So yes, there are some timing effects here. But – and I would also say there is no question on the CapEx environment year-over-year compared to the first quarter of last year has gotten worse. So yes – so the instrument environment continues to be challenging. And I mentioned on the last call, in the last quarter that from the commercial of reorg, our CapEx team was sort of – was still falling in place. In Europe in particular, it takes longer to hire people there and this was the last sort of piece of the puzzle to put in place. And over the course of this last quarter, we actually completed the full CapEx team in Europe and it is now in full force. And going forward, we feel optimistic about doing better with instruments and Xeniums in particular.

Your next question comes from the line of Tejas Savant of Morgan Stanley. Your line is now open.

Hey, guys. This is Edmond of for Tejas. Thank you for the time. Speaking on the regional view, you guys had really strong consumable sales in APAC. Are you seeing any pull forward of consumables in the region? And more broadly speaking, are you seeing any signs of customers stocking up ahead of potential price increases?

I would say that the first order sort of answer here is that there is great underlying demand in Asia, in China and in Japan in particular. So the other sort of – the other elements to consider is that in Japan, we went direct. Now we kind of change our model of how we do business there and that allowed us to capture additional revenue because of that. Also Q1 is the fiscal year end there and so that tends to draw – drive an additional business. So yes – so there’s, there’s a number of structural improvements we made over the course of the past year, both Japan and China and we’re seeing robust demand in those regions and it is manifesting itself in strong performance.

Your next question comes from the line of Matt Sykes of Goldman Sachs. Your line is now open.

Hi, good afternoon. Thanks for taking my questions. Maybe just focusing on the Xenium consumable pull through which was good to see and you talked about increasing utilization, particularly amongst the larger customers. Just given the instrument placement has been weaker because of the CapEx environment. How much runway is there for you to continue to increase utilization with existing customers, particularly ones that are a little bit earlier in their cycle in terms of owning the instrument? Do you think that can continue to drive the spatial consumable growth over the course of at least next quarter and for based on your visibility the rest of the year?

Yes. Matt, good question. And the answer is yes, absolutely. In fact, when we’re looking at our utilization patterns we’re seeing the increase across the full range of customers. So I pointed out the heavily earliest users are still increasing their usage. I also mentioned new customers kind of ramping up and it is actually the low users, the medium and the high are still increasing. So we haven’t really reached an asymptote in terms of the biggest users. They’re still scaling up and we have a very large bolus of customers that are still like in early stages of that curve of adopting as well. So that is certainly one of the reasons why we do feel very bullish about the Xenium potential. And I would say that, it is playing out the way that we had talk about before where this platform fundamentally is incredibly attractive to people both for the kinds of insights you can get and just the practicalities of getting the data and making their discoveries. But it has this sort of element where it takes some other time for people to ramp up on it, right. Because you need to make typically select your genes, you have to make do some amount of customization, most customers do. And that entails an initial sort of burning period as people kind of go through that. But once they get over that, they start steadily what we’ve been seeing, increasing their utilization. So yes, there is a lot of runway even independent of instrument placements to keep increasing utilization.

Your next question comes from the line of Dan Brennan of TD Cowen. Your line is now open.

Hey, good afternoon, guys. This is Kyle on for Dan. Thanks for taking the questions. I wanted to go back to the P&L and the cost out this year. You guys are pretty meaningfully taking cost out this year just given the current environment. But you mentioned in the prepared remarks, there might be some other levers in the P&L you can pull, if the current environment sort of continues. Can you go into more detail about what other areas you think you see the most potential for cuts, at least in the near-term? Thank you.

Sure. Kyle, I can take a start on that and then turn it over to Serge for additional color if needed. So I think – yes, I think as you, as you noted, I mean, we’re committed to – with the cost actions we’ve taken thus far, at least $50 million reduction over where we were in 2024. And the way that that breaks down is roughly half of that was coming from headcount, the 8% headcount reduction that we announced today after the market closed. The other half was discretionary spend. And so there is more to be done, particularly in the discretionary spend area. And those are areas really as part of the holistic view that we took over the last couple of months and even more urgency and intensity as the macro situation began to deteriorate a bit more become – became a bit more cloudy in March. We learned a lot and there’s more cost we could continue to take out, as needed. So I think most importantly, we just want to remain nimble. We’ve got our fingers on the pulse of the situation as best as we possibly can, and we’re committed to doing what we can to protect and preserve the strength of the balance sheet that we have.

Yes, I’ll just add, philosophically, we have strong conviction in our markets, in our development, in our team. We’re focused on making sure that we capture the opportunity that we see kind of on the other side of the turbulence. But of course, we are agile and we’ll be carefully assessing kind of as we navigate this environment. And we a strong balance sheet and we will absolutely keep it that way.

Your next question comes from the line of Luke Sergott of Barclays. Your line is now open.

This is Sam on for Luke. Thanks for taking our questions. First of all, Serge really appreciated that end to the prepared remarks. But anyways, getting into the question, I’m kind of left with a bit of a niche and long-term question here. But given the FDA’s recent emphasis on moving away from animal testing in favor of the use of new alternative methodologies including organoids. And kind of looking in the background of that technology, I noticed some use cases for single cell sequencing when it comes to either researching new organoids or verifying the quality or reproducibility of those or even interrogating the cells after the study. So I’m wondering if you guys have put any thought into albeit a pretty niche area of single cell. Not sure if that’s much of a needle mover, but I’m wondering if that is an upside driver in the long-term for chromium.

No, I mean, actually that’s a really good question. It’s actually a really perceptive question. And that’s something that has been coming up very consistently as we talk to our biopharma customers. Because if you think about it, it’s not just sort of the endpoint where the FDA is requiring the testing. It’s like – it is a core sort of fundamental issue for biopharma for drug development is what systems do you actually test your drugs in. Cell cultures are just not – they don’t represent human biology or they’re not complex enough. And animal models are just like that too different from humans, right. And for sure, a lot of our customers across the board have been investigating different models like organoids and different tissue models. And absolutely, single cell and spatial in fact, are by far the best ways of working with them, both as you say, in kind of assessing them, whether they do represent kind of the biology you trying to capture. And then in that sort of in a production setting, analyzing when you’re applying a particular drug to the system, what is doing, what you expect it to do and whether it’s having any effect that you don’t want to be having. So we actually do see that as a very promising, a pretty fundamental area of growth for us. I talk quite a bit about the fact that our tools can be applied just across the full continuum of drug development. And that is definitely one of the kind of core elements of what we’ve been seeing, where we see the potential is. And still very early in this kind of business opportunity.

Your next question comes from the line of Michael Ryskin of Bank of America. Your line is now open.

Hi. This is Avantika on for Mike. You wanted to know outside of the U.S., how did ANG hold up. And I know that pharma is like a pretty small part of the business so far, but how has that trended in 1Q so far? Thank you.

Yes. So I mean, in general, academia government there held up pretty well outside of U.S. Again, different countries create different pressures, and there’s different budget considerations for sure. And the specialist sort of with the geopolitics being fairly unstable or in flux right now that create some pressures. But overall, I think at a high level, the environment has been relatively healthy outside the U.S., and the business has been good.

Next question comes from the line of Matt Larew of William Blair. Your line is now open.

Hi. This is Jacob on for Matt. Thanks for taking the questions. I wanted to just ask quickly on tariffs, specifically related to China and just the overall demand in that region as well. I think you mentioned you – you see this as the largest potential risk related tariffs to the business. I mentioned there’s ways to shift manufacturing in Singapore and other mitigating efforts. So just wondering because this demand is in this region pretty well with previous quarters. I think it’s up double digits now for three consecutive quarters and even at the highest level since the fourth quarter of 2022. So I guess just first, did you see any pull forward in this region during the quarter? And then second is mitigating the potential China tariffs in near, medium or long-term opportunity. And what would the costs look like to shifting the manufacturing to nearby regions? And then third, I guess, just what is your – or the long-term growth opportunity you still see in that region? Thanks.

Sure. Thanks Jake. Adam here, I can take that. So just on your question on pull forward, no, I mean, it wasn’t really a factor for us in Q1. I should just take a step back and say, look, we’re in a fortunate position of having manufacturing sites inside and outside the United States. And specifically, we have the ability to manufacture most of our products in both locations here in the United States and in Singapore. Our team did a great job reacting to the news which has been quite dynamic and moving inventory as needed to get product sort of in region and try to do our best to anticipate tariffs and the changes there. Most of our single cell products are actually made in Singapore. And we’re working on additional mitigation strategies, as you sort of noted, and as we talked about to have more products originate from Singapore as needed. So it’s really kind of a twofold dynamic. I think about the revenue side, which we talked about and you just noted around China and cost impacts. For revenue, sales to China would be the biggest risk. It was roughly 10% of our business last year. And the impact there will be predominantly in our

Your next question comes from the line of Puneet Souda of Leerink Partners. Your line is now open.

Hey. This is Philip on for Puneet. Thanks for the question. My question is just on new product launches. Could you just sort of give an update on sort of how the recent product launches have been contributing so far and what you’re baking in for 2Q, specifically GEM-X, GEM-X Flex and some of the other upgrades across Xenium and Visium HD? And then maybe if you could give us a sense of the mix of GEM-X kits [ph] now compared to prior kits? Thanks.

Yes. So like on that last question, Philip. So the GEM-X at this point is a large majority of what we sell on the Chromium product line. As far as just the contribution of the new products, well, look, last year we launched a lot of new products, all across our platforms. So by and large, like our business now is driven by those products, those launches, whether it’s Visium HD, Xenium 5K, all the different GEM-X products on the Chromium side. On – in my remarks earlier, I mentioned that GEM-X Flex and on-chip multiplexing are doing particularly well. Now those are the most recent product launches that we have. So yes, no. I think they’re driving demand they’re driving sort of the volume on the Chromium side among special people, like I said, have been really delighted in what they’ve been able to now discover with these new products, and they are driving our business by and large going forward now.

Your next question comes from the line of Rachel Vatnsdal of JPMorgan. Your line is now open.

Thank you. This is Cassie on for Rachel. Thanks for taking our questions. So first one, just on gross margins, it looks like they were a bit light in the quarter versus where the Street has been ex the settlement. So just curious if you can elaborate on the current margin profile relative to your expectations and maybe what you’re assuming for 2Q? And as a follow-up for 2Q, you said you have a bit more visibility there. I guess at the midpoint, what are you assuming for placements between Visium, Xenium and Chromium in the quarter? Thank you.

Cassie, I can answer your question as it relates to on the margin side of things. Yes, I mean the margins, excluding the Vision settlement was 64%. So it’s kind of in the zone of our sort of historical range. What I would note we put in the press release, we did have higher than normal levels of inventory reserves related to product transition that occurred there in Q1. As it relates to Q2, and sort of thinking about that going forward, typically, the biggest driver of variability in our gross margins is Xenium instruments, sort of mix of instruments versus consumables. And given that we’re anticipating Q2 really from a product mix standpoint to look more similar to Q1. I mean, we’re not currently anticipating that same level of inventory reserves. We would expect gross margins to improve modestly from sequentially from Q1 into Q2.

Our last question for today comes from the line of Tycho Peterson of Jefferies. Your line is now open.

Hi guys. This is Priya for Tycho. Thanks for taking our question. You mentioned social cell opportunities regarding your biopharma customers. Can you talk more about any trends you see within your biopharma customers and what you’ve been hearing from them? Anything you are also baking in for 2Q and beyond?

Yes. So as far as biopharma kind of look we’re zooming on just sort of the first quarter, there’s a number of moving pieces there. I would say that biotech has definitely been under pressure. I mean the capital markets have been tough. There’s a – there’s a number of sort of competitive dynamics that are going to make it – the whole space very challenging. And that was the more under pressure we saw that in our business. That said, there is a number of biotechs with a lot of funding or big users of single cell who believe, for example, in this kind of AI-based approaches to target and drug discovery. And are leaning in heavily into single cell and special. On the larger pharma side of things, there is also some amount of kind of promotion as companies have been restructuring their investments and priorities. But the business overall has been doing well. Now kind of zooming out a bit, pharma has been a priority for us, as I talked about it last year. That was one of the one of the reasons for us to do our sales team restructuring. We are now in a great position given the capabilities of our products. The ability to work whether FSP kind of clinically relevant samples, the ability to scale now, the pricing configurations that we’re now delivering, the workload investments all of that. And together with now the fully formed sales team that’s focused exclusively in biopharma, we feel really good about being able to make progress. And in fact, we’re starting to see some progress along these lines. And like I said earlier, I mean, the exciting thing for us is that we have – as you look at the whole continuum of drug development of the drug development process, there’s applications like critical applications for single cell and spatial although that continuum. And also kind of as I referenced in my remarks earlier, there’s now been also new publications that have been coming out at a pretty rapid clip kind of showing the use of single cell and spatial to understand client of clinical tissue samples and being able to predict the drug response to that. To is obviously a great value specialist to think about kind of later stages of drug development. So our goal, ultimately, overcome is to get to 50% or more of our business coming from biopharma. We won’t get there overnight, but kind of my expectations step by step, we’ll make our way that.