Thank you for standing by. My name is Aaron, and I will be your conference operator for today. At this time, I would like to welcome everyone to the 10x Genomics Third Quarter 2023 Earnings Conference Call. All lines have been placed in mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn our call over to Cassie Corneau, Director of Investor Relations and Strategic Finance. Please go ahead.

Thank you and good afternoon, everyone. Earlier today, 10x Genomics released the financial results for the third quarter ended September 30th, 2023. 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 investors at 10xgenomics.com. 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 the question-and-answer session after our prepared remarks. We ask analysts to please keep to one question and one follow-up 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. On today’s call, I will begin with a brief overview of our third quarter performance and update you on our progress across each platform. Then Justin will provide a more detailed look at our financials, business trends and updated outlook for the remainder of the year. After that, we’ll open it up for your questions. Revenue increased 17% year-over-year to $154 million in the third quarter. Our results were once again driven by Xenium, as we continue to ramp operations and drive exceptional demand with researchers worldwide. We achieved strong growth despite continued headwinds in China and excluding China, our growth exceeded 20% during the quarter. Just like 10x catalyzed the single cell revolution, we’re now offering in a new era of genomic analysis with Xenium. Our mission is bigger than any one technology or any one platform. Our goal has always been to provide scientists with new generations of tools to measure biology at the right resolution and scale. That is why we have invested in our three platforms. That is why we have invested in foundations: our innovation engine, commercial breadth and manufacturing scale. And that is why we firmly believe we’re still just getting started. Now, let me share more about each platform. I’d intentionally like to start today with Xenium, which we believe is the best performing platform for In Situ analysis. In the third quarter, revenue from our Spatial products exceeded $36 million, largely driven by the accelerated adoption and operational ramp of our Xenium platform. It’s worth pausing here for a moment. Very few platforms ever achieved the type of success that our team has accomplished with Xenium in just the first three quarters of launch. Its steep adoption curve has put it on a truly special trajectory…

Thank you, Serge. I’ll start by reviewing our financial results for the three months ended September 30th, 2023. Then I’ll provide an update on our outlook for 2023. To summarize, from an income statement standpoint, we saw exceptional performance from Xenium, which was above our expectations. And given its effect on product mix, this had a negative impact on overall gross margins. From a balance sheet and cash flow standpoint, we continued to be disciplined in our spending while being opportunistic on acquiring assets to accelerate our strategy. In the quarter, we closed on an acquisition which we signed earlier in the year to acquire certain intangible and other assets to accelerate our R&D pipeline. It’s important to note, that net of the transaction, we were operating cash flow positive, and this will continue to be a focus of ours going forward. Now, on to the detailed results. Total revenue for the quarter grew 17% year-over-year to $153.6 million compared to $131.1 million for the prior year period. Looking more closely at our revenue breakdown and starting with Consumables, total Consumables revenue was $114.4 million, an increase of 6% over the prior year period. Worldwide Chromium Consumables revenue was $100.3 million, up 2% year-over-year and Spatial Consumables revenue was $14.1 million, up 38% year-over-year. Turning to instruments, total instrument revenue was $34.9 million, an increase of 67% over the prior year period. Chromium instrument revenue was $12.2 million, down 18% year-over-year, driven primarily by lower unit volume and shifting product mix. Spatial Instrument revenue was $22.7 million compared to $6 million in the third quarter of 2022. As a reminder, our Xenium instrument launched in Q4, so Xenium did not contribute to Spatial Instrument revenue in Q3 of last year. Services revenue was $4.3 million, which increased 110% over the…

Thanks, Justin. Given the progress we’ve made executing on our three platform vision, my conviction in the long-term is stronger than ever. There are vast opportunities before us. I believe we’re still early in the Chromium opportunity and a long way from realizing the full promise of Single Cell. In addition, the incredible customer enthusiasm for Xenium solidifies my view that Spatial has the potential to be bigger than anything in the history of the industry. There are many reasons why I’m so bullish on what lies ahead: The fundamental performance advantages of our products, the formidable strength of our innovation engine, the scale of our operations network, the breadth of our commercial organization, but ultimately, it all comes down to the talent and tenacity of the 10x team. Day in and day out, our team works tirelessly in pursuit of our mission, developing groundbreaking tools to transform the world’s understanding of health and disease. Their relentless focus on our mission and customers is a core part of what makes 10x, 10x. And why we’re so well positioned to deliver on all the tremendous opportunities ahead. With that, we will now open it up for questions. Operator?

Thank you, Mr. Saxonov. [Operator Instructions] Our first question comes from the line of Patrick Donnelly with Citi. Your line is live.

Hey, guys. Thank you for taking the questions. Serge, maybe on the Xenium piece, it sounds like the order funnel remains pretty healthy. Any metrics you can kind of throw around that? I think last quarter, you said orders outpaced placements. So anything you can share on the backlog or activity on that order side would be – appreciated.

Thanks, Patrick. Yeah. So like I said, Xenium has had tons of momentum this quarter, increasing momentum, really excited how it’s been going, in particular, the performance of it – with customers out there in the field has been really phenomenal, and the feedback from customers has been really phenomenal. And so that has been building up to this momentum that we’ve been seeing an increasing traction there in the field. We had - we don’t comment on backlog generally. This time around, just to give a sense of the momentum. We did – our backlog increased once again. We shipped more than – we sold more than 80 instruments and clearly showing just the trajectory here that’s really remarkable, which is what I was alluding to in my comments as well.

Okay, that’s helpful. And then maybe just it might be for Justin. Just on the Chromium Consumables side, can you just help us think about the right growth rate for the year on that front? And also just trying to think about what the exit rate is there and the implications for ‘24. Just the right way to think about that business as maybe it’s a little bit more – obviously more mature than Xenium. I’m just trying to get a good handle on the growth rate there and the right way to think about it. Thanks.

Yeah, so Chromium overall has been a regional story. And so we talked about the challenges that we’ve seen in China. But when looking at AMR and EMEA, you look at Chromium Consumables year-to-date, they grew mid-to-high teens over last year. And if you look at our updated guidance range, we’re assuming at the midpoint of that range. Heading into Q4 is that, the existing business would exhibit the same kind of year-over-year growth rates that we saw in Q3 for AMR and EMEA, and similar sequential growth rates from Q3 to Q4 that we saw last year.

Okay. Thank you –

Thank you for your question. Our next question is from the line of Dan Arias with Stifel. Your line is live.

Yeah. Hi, guys. Thanks for the questions. Serge, on Xenium, can you just maybe talk to how you see the adoption curve evolving there? I mean, I know we’re not talking about 2024. But when you think about the next 12 months to 18 months at a high level, do you see the potential for a pause as that first wave of, I guess, sophisticated users get their systems? Or does the way that the market is expanding, and I guess the way that the product is being received, does that suggest that maybe that doesn’t happen?

Yeah, Dan. Good question. We hesitate to comment on 2024. Still early, obviously. But as far as the trajectory of the Xenium launch, it is clearly on a different tier compared to sort of your certainly typical launch as you alluded to in this in the industry where you get some early adoption and then kind of a wave and then we’ll see what happens after that. This one is going on a really, really strong trajectory. And there’s a lot of science of strength going forward as well. You do have to assume that there is some amount of initial pent-up demand, but overlaid on top of that, we’re seeing a great sustained trajectory of customers seeing the results from the data and coming back to us and ordering more instruments and thinking of more studies and thinking of larger and larger applications. So I think we’ll have to see how it plays out, but the early signs are quite bullish.

Okay, fantastic. Thank you. And then just maybe in the interest of keeping on top of the litigation, you’ve got this Delaware trial on genomics infringement this month. It’s a week and a half from now, if I’m not mistaken. Caveat there being, I know you don’t get too detailed on the legal stuff, but what are your general expectations there? And then what do you think about the timing for a final ruling? And what should be keeping in mind here?

Yeah. So, I hesitate to comment on any particular case. You’re correct. There’s a trial that’s scheduled to start shortly, within a couple of weeks. I would say that, we do have multiple cases going on in multiple jurisdictions on multiple products and multiple patents. So it’s not really about any particular case or any particular trial. What is important to us is that, we invest a lot in innovation. We invest a lot in R&D and it’s incumbent enough to protect those investments so that we can keep investing in R&D, in our products to deliver best-in-class products that our customers love.

Okay, appreciate it.

Thank you for your question. Our next question is from the line of Kyle Mikson with Canaccord Genuity. Your line is live.

Hey, guys. Thanks for taking the questions. Congrats on the awesome Xenium ramp. So on the – like Spatial Consumables side, it grew well in the quarter. I guess it could have expected like a faster kind of rates and there were the macro headwinds. Could you comment maybe, Serge, like how Xenium utilization is trending like thus far is it close to inflecting possibly? And are people kind of slowing down or pausing ordering in front of the Visium HD launch because it sounds like an early ‘24 situation? Thanks.

So when it comes to Xenium and utilization, it’s too early to talk about patterns. We have a wide dispersion of customers and how quickly they are able to ramp. We can certainly point to examples of people who are ready to go from almost day one, both with samples and applications, for others is going to take longer. In particular, I’d like to remind people that this platform necessitates, it’s built around targeted panels, which means, in a lot of cases, it necessitates some amount of customization where people have to go through the process of selecting and choosing genes for gene panel to then run an instrument. And that means, that there is a certain amount of ramp up that many customers need to go through. So early days, there are some really promising signs. Again, there are some customers that really go run large studies at large – in large volumes, but there’s a big dispersion. So, hesitate to make a projection, it’s too early at this stage. As far as Visium is concerned, I mean, it is undoubtedly true that there’s a lot of anticipation for Visium HD out there in the market. And certainly, a lot of our customers eager for that product have been holding off potentially on running the standard kit.

Okay, that was helpful, sir. Thanks for that. And can you also comment on the biopharma end market, how that’s going for you? Like what percentage of revenue is at this point, how fast is it growing? And I know that like connecting factors supposed to help there. Is that kind of playing out as you anticipated? And are people actually using connected the habit.

So biopharma has been – as you know, biopharma has been a relatively stable fraction of our business in the neighborhood of 20% or so. We have seen some of just like everywhere else, there has been a tightening of budgets in biopharma recently. Again, relatively attenuated effect on our overall business just because it is a small fraction of the business. So we’ll have to see how that plays out in the future. But as far as Connect is concerned, it has its use cases. But we’ve seen sort of the need for automation out there, especially with pharma customers across a range of different applications and across different use cases. And with that in mind, we formed the partnership with Beckman Coulter. We provide a wide range of automation services and this should give us the means of scaling automation solutions to many, many thousands suppliers that use Beckman Coulter and to many others that can adopt it gradually.

Okay, perfect. Thanks for the time guys.

Thank you for your question. Our next question comes from the line of Dan Brennan with TD Cowen. Your line is live.

Great, thank you. Thanks for the questions. Maybe just the first one just on single cell. I think the prior guide was for high single-digit growth for the year. I’m just wondering kind of what that is now? I know, Justin, you gave some math earlier. And Serge, I believe in the prepared remarks, you discussed this more balanced growth as you reallocate resources? Just kind of wondering what that would imply as we look ahead for single cell?

Yeah, Dan, I’ll start with talking about single cell. As far as China goes, maybe I’ll start there. On the last call, we shared that we thought that the back half of this year would be roughly flat to Q2. And in Q3, we saw that to be the case. But we are seeing lower demand there. And although we’ve been working at reducing the inventory levels, they still are higher, and we plan to reduce them even more in this next quarter. So, we’re projecting that there’s going to be a decline from Q3 to Q4 there. And then like I said before, for EMEA and AMR right now at the midpoint of the guide, we’re expecting similar seasonality to what we’ve seen in the past. And then, overall, for Chromium growth year-over-year, that’s a single-digit growth rate when you put all of those together, yeah mid-single digits.

Great. And then – go ahead, go ahead.

So

Oh, go ahead. Sorry.

No, I was just going to say kind of taking up what I said earlier in my prepared remarks, we strongly believe in single cell growth and the potential of the Chromium franchise going forward. You’re right, we’re going to be balancing our focus on our resources to put more emphasis relatively speaking, on Chromium. So that should yield results. And we also have a really, really exciting product roadmap that will further take the franchise to the next level and drive more growth.

Great. And then maybe just on Spatial. It’s hard. I mean, the feedback we’ve gotten has been really positive, just about the market opportunity and the ultimate size of the market, but it’s always hard to project out into the future and see this kind of growth keep going up and up on placements. So I’m just wondering from what you see today, could you just give us some sense of like the level of like placement, not necessarily a number, but like is it fair to think placements can continue to grow certainly in like ‘24 and ‘25, without putting a number on it like grow year-over-year. Obviously, you’re on the steep ramp now, but just to kind of help us think about how many labs would actually look to adopt Spatial in the future? They’re not cheap boxes, but they are offering some really unique capabilities. Thank you.

So, Dan, I would think in terms of maybe two kind of variables. As I look at this. One is just the trajectory in the moment, which is kind of like you suggested up and to the right, which gives us a good – some amount of confidence going forward. And then I also think in terms of the potential market and the breadth of applications and experiments that people are thinking about. And that also, at this stage, looks very healthy and very robust, which also makes us, I think, bullishly about next year and beyond.

Great. Thanks, Serge.

Thank you for your question. Our next question is from the line of Luke Sergott with Barclays. Your line is live.

This is Salem on for Luke. Thanks for the questions. Just wanted to start off with Chromium in China. You guys outlined or mentioned some struggles there. That’s certainly not exclusive to 10x. We’ve been hearing that all earnings season. But I just wanted some more color how much exposure in China is kind of biopharma-related, any more color there? And on timing, what do you think is kind of a realistic idea of when those issues will resolve themselves when you’re working with your service providers?

Yes, this is Justin. I’ll take that one. As far as our exposure in China, we mostly sell to the academic market, our biopharma exposure. They’re smaller than other companies that we’ve heard from. As far as the demand looking forward, I mentioned earlier that we’re looking at reducing inventory going from Q3 to Q4. We sell through distributors who sell through service providers there, they typically hold inventory. We’ve been working more recently to get closer with those service providers to better forecast the demand and better help them manage the inventory levels and smooth the ordering patterns out going forward. So, I hesitate to call a bottom in what we’re seeing in China. But our expectation in the decline from Q3 to Q4 is mostly driven from the demand signal that we’re seeing with that inventory reduction layered on top of it.

Great, that’s helpful. Thank you. And then on prioritizing the Xenium launch, it seems like that was kind of at the expense of Chromium. Could you provide a little more color there? Did that come from maybe incentives from the sales force towards placing boxes or any more color there? And then as you kind of balance back out and start to prioritize the Chromium again, what are kind of the risks to Xenium? And then kind of lastly on Xenium orders, how did those kind of trend through the quarter? And did those kind of outpace revenues? And that’s it for me. Thank you.

Yeah. So in terms of the focus on Chromium, so on the commercial – sorry, on Xenium. So on the commercial side, there’s – it’s a number of things. First of all, most directly as their incentives to drive Xenium placements that certainly can direct it ourselves into to spend more attention there. We also – we have careful tracking now of how our commercial team where they spend the time and how they allocate their attention. And we were certainly encouraging them to make sure that the Xenium takes first priority. Also in terms of the resources, in terms of marketing resources, we put a lot of that on Xenium as well. And now going forward, we’re kind of rebalancing these things, both in terms of the resources in terms of attention in terms of incentives. Another kind of factor over the course of this year that has led to this dynamic is that, we have built out a separate function, overlay function in our commercial team for driving Xenium sales specialists. And to some extent, it takes more effort to get – to launch a product and get it on that trajectory going forward in terms of creating the right infrastructure and creating the right trajectory of demand. And that’s what we went through this last year. Now going forward, we feel like we are over that initial hurdle, and we have the flexibility to balance our attention and our focus and put more resources now more attention behind Chromium. While at the same time, driving the rapid progress of Xenium. And so, we feel good about the kind of the balance of attention going forward. But of course, we’re going to need to watch it. And internally, we have a lot of metrics to help us stay very closely on top of these dynamics. And as far as Xenium traction is concerned, like I mentioned, we sold more than 80 and in the meantime, our backlog grew. So, we feel very good about where – how the quarter progressed.

Thank you for your question. The next question is from the line of Tejas Savant. Your line is live.

Hey, guys. Good evening and thanks for the time here. Serge, one for you on the Xenium pipeline. You mentioned the multimodal cell segmentation, the 5K-plex and then the high-plex protein assay on the same tissue section. So, in terms of how you see these three capabilities impacting your Xenium order book next year? Any color you can share there? And then just as a point of clarification, is that last one essentially true co-detection?

True co-detection, sorry, Tejas, I didn’t get the last one. Let me answer the question. The product launch questions general. Well, so I mean, first of all, just with the existing capabilities, there is obviously, tons of demand and a lot of enthusiasm for the product as it is. And we are certainly – we feel really, really good about the capabilities and what the customers are getting from the product. At the same time, as historically, we’ve always been very, very keen to listen to our customers and we stay on top of the initial feedback and react to that feedback very quickly to deliver new capabilities and to prioritize the features that customers find most valuable. And that’s what we’re doing again here. That’s why segmentation is coming very soon. That’s why we’re coming out with a large plex panel. And we are excited about co-detection of proteins on the same tissue. I think that’s going to be a powerful capability. I do want to point out that, if you – one can detect protein already using immunofluorescence on the same tissue and our customers definitely see huge value in that already.

Got it. That’s helpful, actually. And that’s exactly where it’s going with the co-detection bid. And then, Justin, one for you on that sort of $29 million of quarter-over-quarter step-up in the fourth quarter. You talked about Americas and EMEA strength there or rather the sequential uptick similar to last year. Is that sort of essentially year-end budget flush dynamic that you’re assuming here? Or is it sort of the Xenium product cycle that underpins your confidence there or a bit of both?

Yeah. Great question, Tejas. So at the midpoint of our guidance range, here’s the basic assumptions, is that, on the Xenium side that we would ship, sell roughly the same amount of Xenium in Q4 than we did in Q3. And then as far as products, excluding Xenium instruments that we would have the same kind of seasonality that we’ve seen previously. And so that would include a year-end budget flush. When you’re looking at the range of our guidance from the low end to the high end, at the lower end would be not the same kind of budget flush that we’ve seen before or not being able to ramp – not being able to maintain the Xenium ramp in Q4 as we saw in Q3 for any number of issues. And then, at the higher end would be over-delivering on Xenium in Q4 and perhaps seeing a stronger year-end budget flush than we’ve seen historically or perhaps not seeing the decline in APAC, primarily driven by China that we’ve got built into the midpoint.

Got it. Super helpful. Thanks for the time, guys.

Thank you for your question. Our next question is from the line of John Sourbeer with UBS. Your line is live.

Hi. Thanks for taking the questions. First one here on Chromium. Any color on where you see pricing on Consumables for next year? I think you had record increases this year. Do you think you can get similar levels in 2024?

So our plan for this year, the plan around Chromium pricing is pretty moderate price changes. And much of that is driven by the premise that there’s tons and tons of potential demand in Chromium and we tend to gain a lot more ultimate growth by increasing number of samples, and increasing number of customers. And so that’s where we’re going to be focused to a large extent.

Thanks. And then a follow-up here on Xenium. I guess, in the US and APAC, where you don’t have an injunction. Just any color on competitive win rates there? And where do you think you’re winning on what customer type or features versus competitors out there?

Yeah. So, just to be clear, the Xenium traction has been really strong across the world. And in fact, it has been particularly strong in the Americas, really, really strong momentum there. And as far as where we’re winning, I would say it’s across the board. I mean, the big evolution over the last couple of quarters has been that the Xenium systems have been out there in the field and have been performing really well, generating awesome data and the work has been spreading more on our customers and it’s getting a lot of – I mean, issue to our field teams now to go and talk to the customers and make more sales. That has been the overwhelming story, and I don’t think it’s particular to any particular application or any particular geography or any particular customer type. It is real and across the board kind of phenomenon.

Thanks for taking the questions.

Thank you for your question. Our next question is from the line of Mason Carrico with Stephens. Your line is live.

Hey. Thanks. I’m jumping between a few calls tonight. So sorry if this has been asked. I’ll just ask one here. Could you talk about your outlook for Xenium pricing going forward? Do you plan on continuing to be accommodative and somewhat flexible with pricing given the opportunity to capture these customers and kind of lock them in? Or how should we be thinking about pricing going forward?

Yeah. Mason, I’ll take that one to start. I think back to when we launched Xenium. It was a very, very competitive and still is a very competitive environment, a lot of noise out there and not a lot of data. And so, we launched Xenium with introductory pricing, basically to encourage adoption and make sure that there was less friction getting the instrument in hands of those early users that could generate the data that could help drive future sales. And so, as time has progressed and we are starting to see more data come off the instrument, the results of the head-to-head study that we saw mentioned in the prepared remarks and other customers presenting data that they’ve run on their own instruments in their labs. This is really showing the true value of the platform. And so, we are confident moving away from the introductory pricing at a lower price point. And we took the list price up in this past quarter. Now, the average selling price is still trending below the list price, and we’ll continue to do so because, as you mentioned, we’re very – we are open to working with customers around packaged deals with other instruments and also taking reductions off the list price of the instrument for customers that couple that with a larger Consumable order.

Got it. Thanks, Justin, I appreciate it.

Thank you for your question. Our next question is from the line of Michael Ryskin with Bank of America. Your line is live.

Great. Thanks for squeezing me in guys. I’m going to ask two hopefully quick ones, sort of tidying up some points from earlier. One, on the gross margins and gross profit in the third quarter. I know you guys have said a number of times that the Xenium instrument ramp, but still, the drop off to 62% was steeper than we anticipated. And if I just look at it on a gross profit dollar basis, sequentially, last quarter you guys had $99.6 million, now it’s $95 million. So you got $4 million less gross profit despite the higher revenues and despite Chromium essentially being flat sequentially. So, I’m just trying to do the math on that. Was there some discounting in the quarter, some inventory functions there? Or I just don’t see how it could be – how Xenium could be that dilutive to margins or if something else’s going on? What am I missing here?

Yeah. Good question, Mike. When you look both year-over-year and sequentially, maybe I’ll just start with year-over-year and then I’ll get to the sequential piece. But, if you look back to a year ago, and you look at the margin that we had and what we’ve declined to this year. Practically all of that variance is due to Xenium. And so, if you were to exclude Xenium and calculate the gross margin, it would be roughly the same as it was a year ago. And so, then sequentially, there’s also been a mix towards Xenium instruments. There’s been a mix towards more instruments overall. There’s also been a mix to more – higher increases in the service line as well. And so when we install and train on Xenium, that portion gets booked into service, and that’s also lower margin as well. But nothing – yeah so nothing fundamentally has changed about our cost structure that would be outside of the product mix that we’ve talked about, driven by the increase in Xenium.

Okay. All right. I’ll redo the math again, directionally, no surprise, but just surprised the magnitude. And then follow-up again on the Chromium Consumables. I know you guys have been giving the sort of ex-China or specifically Americas and EMEA number. But sometimes you give the quarter and sometimes you give the year-to-date. So I think my notes got a little mixed up. Did you say that year-to-date, that Americas and EMEA Chromium Consumables is mid-to-high teens. What was it 1Q and 2Q just so we have like the sequential numbers? I’m just trying to see if it accelerated or decelerated as you’ve gone through?

Yes. So Mike, we provide that just to give some additional color as far as the regional breakout by product. But year-to-date Chromium overall has been in the low-teens, AMR EMEA. If you look at Chromium Consumables year-to-date, that’s been in the mid-to-high teens. And when you look at Q1 and Q2 this year, it was easier compares to the prior period a year ago. So those rates have increased were higher.

Thank you. I appreciate the clarification. Thanks guys.

Thanks for your question. Our next question is from the line of Justin Bowers with Deutsche Bank. Your line is live.

Hi, good afternoon. So just two quick ones for me. In terms of Xenium, are you starting to see some – repeat customers in the order book there? And then, just taking a step back in the academic landscape, are you starting to see like sort of – can you paint a picture of what sort of new core lab activity is around Single Cell and Spatial more broadly or even regionally? Thank you.

Yeah, Justin. So to the first question on Xenium and whether we’re seeing repeat customers. So that, I mean, the answer is yes, for sure. Relatively speaking, is still very much new customers. That’s what we’re about. That’s where we’re focused to get sales. But we’ve seen multiple instances, and this is always really gratifying when a customer has gotten their instrument. They have run their samples and then after seeing the results from those first front, getting ordering another instrument. And in fact, we’ve seen more examples of that where people would run studies get biological results. And on the basis of that biology go back and buy another Xenium. So, probably the best measure of how something is performing when you see this kind of repeat business from customers. So very gratifying for us to see. As far as like a demand, just random or core labs, I mean, those generally tend to be fairly consistent. We do see decent adoption with the core labs around the world is kind of puts and takes, some core labs have issues with having enough staff to run experiments and some core labs have sort of other issues. But overall, no major trends to call out here.

Appreciate it.

Thank you for your questions. Our next question is from the line of Rachel Vatnsdal with JPMorgan. Your line is live.

Great. Thank you for taking the questions. And good afternoon. First off, I just want to clarify your comment around the 80 Xenium in this quarter. Was that comment around 80 instruments sold? Or was that more around the number of instruments shipped this quarter? And then you mentioned backlog grew for Xenium. So how long is the backlog at this point?

Hi, Rachel, this is Justin. We – yeah, so that’s what we shipped this quarter was over – we shipped over 80 Xenium. We sold over 80 Xenium and we grew the backlog on top of that.

Okay, that’s helpful. And then just on China, can you walk us through how the region trended really throughout the quarter? Also, how has October trended relative to September and the rest of 3Q? And then can you just frame up some potential scenarios for China for 2024 next year? Is it really possible for that region to hold flat without any stimulus support? And that’s it for me. Thank you.

As far as how China has trended throughout Q3, I think it came in line generally with what we called out in our last earnings call, when we said that we expected China in Q3 and Q4 to be roughly flat to Q2, and that’s how it came in. Ordering patterns in China just due to the consolidation of volumes through distributors and service providers can be somewhat lumpy. As far as looking at Q4, from the demand signal that we’re seeing, we are calling a decline right now going from Q3 into Q4. But that is mostly driven with our targeted inventory reductions that we’re driving with the service providers. So the actual demand, at least from what we can tell right now is more than we expected our revenues in Q4 would reflect.

Great. And then just frame up on 2024 for China?

Well, like I said, hesitate to call the bottom right now. So we’ll have to see on 2024. We’ll have to see how the rest of Q4 progresses.

Fair enough. Thank you.

Thank you for your question. Our final question for today will come from the line of Matt Sykes from Goldman Sachs. Your line is live.

Hi. This is Ivy on for Matt. Thanks for taking my questions. You gave some color on competition and wins with Xenium, but are there any changes to the environment within Chromium maybe within the different regions and customer types?

Yeah. I don’t think there’s anything in particular that’s material that has changed in the Chromium business. We see – the environment only – the CapEx environment has been tighter recently for sure, especially outside of the US, and we’re definitely seeing the effects of that. Again, I think there’s sort of the underlying demand on the Xenium side has kind of broken through a lot of that, but we do see the CapEx constraints manifesting themselves out there. There’s also – biopharma has been somewhat pressured and we’re seeing some impact from that. We saw it in Q3, like we’re seeing it in Q4 as well. But overall, I wouldn’t call out any other really big trends on the Chromium side.

Okay, great. That’s helpful. And then on Xenium pricing, I know you said you increased your list price. But could you talk through when you might start to roll off some of the discounts in the Xenium instruments? Or do you see that continuing for the near future?

We’re always open to working with customers to get an instrument in their hand and get them using that instrument. As we’ve talked about before, the strategy and the value with Xenium is the Consumable revenue streams. And so, if we compare an order for an instrument with a larger Consumable order, we’ll take a deeper discount on the instrument just to get that out there and get that instrument being used.

Okay, great. Thank you.

Thank you for your question. And, ladies and gentlemen, that will conclude today’s 10x Genomics third quarter 2023 earnings conference call. Thank you all for attending. Have a great night.