Earnings Call: Q2 2021

Aug 4, 2021

Ladies and gentlemen, thank you for standing by, and welcome to the 10x Genomics Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Eric Jasky, Director of Investor Relations and Strategic Finance. Thank you, sir. Please go ahead. Thank you. Earlier today, Tenex Genomics released financial results for the Q2 ended June 30, 2021. If you have not received this news release or if you'd like to be added to the company's distribution list, please send an e mail to investorskenxgenomics.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. You should not place undue reliance on forward looking statements. Additional information regarding these risks, uncertainties and factors that could cause results Genex 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 Saxonoff, our CEO and Co Founder and Justin McAnear, our Chief Financial Officer. In addition, Brad Clutchfield, our Chief Commercial Officer and Eric Whitaker, our General Counsel will be available for Q and A. With that, I'll now turn the call over to Serge. Serge? Thanks, Eric. Good afternoon and thank you for joining us. On today's call, I will start with a brief overview of our performance and solid execution during the Q2. Next, I will discuss our progress in enabling broad adoption Single cell analysis as we continue to advance our vision of bringing into every biology researcher in the world. In addition, I'll share more about our relentless I will then turn the call over to Justin for a more detailed look at our financials and outlook for the year. Revenue for the Q2 totaled $116,000,000 up 170% year over year and 9% sequentially, driven by increasing adoption of our products. We're pleased with our team's strong execution this quarter as we continue to deliver on our commercial plans And this is beyond our R and D pipeline. As we anticipated, customer lab operations returned to near normal levels during the quarter. While some labs experienced lingering COVID related impacts for much of the period, the majority of customer sites were open to in person meetings with our sales and which Justin will discuss further. Now moving to our results. We saw strong demand for our Chromium instruments. During the quarter, we initiated a price change to the Chromium controller to position it strategically within our expanded instrument lineup ahead of the launch of Chromium X. As a result, we saw approximately 100 incremental placements during the quarter, bringing many new customers into the 10x ecosystem. Adoption of our single cell and spatial consumables continue to grow. With the ability to measure gene expression, proteins, epigenetic programming, In new features and other modalities, our customers have access to a comprehensive toolkit for integrating biology at the right resolution and scale. The breadth of these offerings is resonating well within our growing customer base. Take our multi home solution for example. It has had an impressive trajectory since we began shipping less than a year ago. The ability to analyze gene expression and epigenetic programming from the same cell is inspiring rapid adoption with existing customers as well as customers new to Temax and to single cell approaches more generally. Directly connecting regulatory signals with cellular function is essential to understanding biology at its most fundamental level. In a recent preprint featuring Molteum, researchers analyzed cells from human pituitary samples to uncover the first regulatory mechanisms involved in stem cell development. Molsheome allowed these scientists to identify and characterize uncommitted stem cells and determine the transcription factors and epigenetic mechanisms that shape their fate and function. These findings should help develop therapies to treat endocrine diseases caused by pituitary deficiencies and tumors. Adoption of our Visium solution also continues to expand. Since launch, the number of preprints and publications with Visium has increased each quarter As more and more users progress through their experiments and generate relevant insights. And to date, there have been more than 120 publications and preprints featuring Vizium Technology. In one recent Vizium preprint, researchers performed an in-depth spatial analysis of somatic mutations These researchers were able to identify small clonal cells not evident for visual assessment and which would have been overlooked by typical histological analysis. Additionally, the study showed that copy number variations This study showcases the power of unbiased spatial approaches for uncovering the biology of tumor progression, which could lead to improved early detection of cancers and improved patient outcomes. This quarter, we also launched the biggest shipping Vizium for FSP, enabling for the first time true unbiased facial gene expression analysis in FFPE samples. Early demand has been strong as pre marketing activities inspired both new and existing customers to initiate pilot studies. We are encouraged by the adoption of BISIOM FFPE to date, Though as we said in the past, it will likely take time for initial customers to progress through their pilot studies and onto large experiments. Looking into the future, the interest we're seeing affirms our view of the wide applicability of this product in both the discovery and translational setting. After the quarter end, we announced the availability of Chromium X. This platform represents a huge advance for single cell genomics As it will allow our customers to supercharge the experiments, interrogating as many as a 1000000 cells in a single run at a significantly lower cost per cell. Chromium X was developed in response to the desire of many of our early customers to run ultra high throughput experiments. We're pleased with the initial response and look forward to getting it in our customers' hands this quarter. The Chromium platform has come a long way since we introduced the Chromium Controller 5 years ago. We launched this platform with a vision of making single cell analysis Accessible to every biology lab in the world. And we have made tremendous progress toward that goal. There are now thousands of customer labs using our products And more than 2,800 papers across a wide diversity of journals and research areas. And in turn, these publications are helping inspire a broad spectrum of researchers by validating our solutions across an increasing number of applications. And while thousands of labs are using our products, We're still very early in realizing our vision. There are well over 100,000 researchers globally available to 10x And we estimate that 2 thirds of them could already benefit from single cell and spatial genomics applications. With this in mind, we have consistently pursued a strategy focused on broad access to bring new researchers into our ecosystem. The success we had this quarter with instrument placements CNU Labs is an example of that strategy. As our solutions become more widely adopted, we're increasingly reaching new customer profiles. Many of these customers are less experienced with single cell workloads and high content experiments unlike our earlier adopters. In particular, sample prep and data analysis are important areas where these customers face greater challenges. With the launch of our load throughput and CellPlex kit and introduction of the 10x cloud earlier this year, we have made important progress in addressing some of these barriers. Since launch, the demand for CellFX has been particularly robust and we have seen strong interest in our 10x cloud solution, especially among our users who are not Brian from Exis. Moving forward, we will continue to prioritize the tenets of customer success, Enabling access and addressing barriers to adoption has laid the groundwork for continued growth and expansion into the vast opportunity ahead. The strength and talent and commitment of the 10x team give us tremendous confidence as we advance this vision. The team's ability to persevere despite challenges related to the pandemic has been consistently impressive. Because of their efforts, we have been able to maintain our rapid velocity Product introductions, including the breakthrough launches such as Chromium X and Visium for FFPE. At the same time, We have been making significant progress on our extensive R and D roadmap to deliver many future products. Developing and launching these products will be highly ambitious Our ability to maintain our planned cadence of product introductions in the face of a pandemic underscores this important competitive differentiator and is a testament to our entire organization. We strongly believe that single cell and spatial approaches Over the past several years, it has become increasingly clear that complex cellular heterogeneity is a pervasive feature of all human tissues and is fundamental to understanding all biological systems. Technologies that resolve this heterogeneity and enable single cell resolution at scale will be critically important for unlocking future scientific discoveries and clinical applications. Our Chromium platform is an established leader in single cell analysis. While we have rounded out its core set of capabilities with the recent product launches, including Chromium X, This platform remains early in its development and adoption. We plan to continue to add capabilities and improvements in the future to enable broad adoption and create additional value for existing customers. Bizium and spatial biology more broadly are even earlier. Our core discovery customers have been adopting Vizium since its launch in late 2019 and with introduction of FFP this quarter, We have expanded access to translational researchers. We will continue to invest aggressively in this platform to have fundamental new capabilities and breakthrough features As far as an extensive product roadmap, we are in the process of building a sophisticated factory here in Pleasanton Develop the next generation of high resolution lithium consumables. This effort is a result of multiple technical innovations that we believe will give us a set of highly differentiated capabilities that don't exist anywhere else in the world. We expect our vertically integrated capabilities to provide a powerful foundation With our in situ platform, we're continuing to expand our investment to build a 3rd complementary platform to Chromium and Vizium, which will help transition many of the discoveries made with those platforms to the clinic in the future. We will also invest broadly in our organization, including our R and D and commercial and our global operations to support broadening adoption of our products. Finally, last week, we announced a worldwide settlement of all our litigation with Bayer. This settlement results more than 1 to 5 separate matters and over 8 years of litigation from the companies. We were scheduled to go to trial on our claims against Bayer's CELSI products this week. In our litigation, we had assorted the Verselce product to print 6 of our patents. This settlement broadly cross licenses Each company's intellectual property is related to single cell analysis, with the exception that we did not license patents related to certain application areas and technologies under development. Importantly, the settlement also does not include intellectual property related to spatial or in situ approaches. Each company will make royalty payments through 2,030 of the license funds for the life of the patents. From a financial point of view, we expect the agreement to be cash positive for us when considering cost savings from litigation, our ability to Offset certain payments against other licenses and the reduction in past royalties related to the Delaware litigation. Any payments of royalties by Bio Rad on the sales and services would be incremental to this. We expect the impact to our gross margins will be less than 1%, also excluding any potential royalty payments from Bio Rad. Apart from the financial benefits, this agreement eliminates the distraction and uncertainty of litigation. This is a victory for science and allows us to turn our full attention to our mission of mastering biology to advance human health. We were able to achieve this outstanding result in part from the strength of our intellectual property, which now includes over 11.50 patents issued and pending. We believe that our deep and broadband portfolio is a key competitive differentiator. We will continue to defend the technology breakthroughs, which have resulted from our significant investment in the Vision Development. I would note that it is our general policy not to license Before turning it over to Justin, I'd like to thank our employees for their continued hard work and dedication so far in 2021. We entered the year with highly ambitious goals With that, I will now turn the call over to Justin for more detail on the financials. Thank you, Serge. Total revenue for the 3 months ended June 30, 2021 was $115,800,000 compared to $42,900,000 for the prior year period, representing a 170% increase year over year and a 9% increase quarter over quarter. Consumables revenue was $97,100,000 which increased 184 percent over the prior year period. Instrument revenue was $16,900,000 which increased 131% over the prior year period. Service revenue was $1,800,000 which increased 25% over the prior year period. The increase in consumable revenue this quarter was primarily driven by growth in the instrument installed base and decreased impact of the pandemic on customer operations. The increase in instrument revenue was driven by increased instrument placements during the quarter. Service revenue increased due to a large number of instruments Coming off of their initial 1 year warranty and on the paid service contracts. Americas revenue for the 2nd quarter was $65,800,000 which increased 2 25% over the prior year period. EMEA revenue for the Q2 was $28,800,000 which increased 146% over the prior year period. APAC revenue for the Q2 was $21,300,000 which increased 95% over the prior year period. Turning to the rest of the income statement. Gross profit for the 2nd quarter was $110,900,000 compared to a gross profit of $32,900,000 for the prior year period. Gross margin for the Q2 was 96% compared to 77% for the prior year period. The gross margin increase was driven primarily by a one time reversal of $14,700,000 of accrued royalties to cost of sales as a result of the settlement with Bio Rad. Total operating expenses for the Q2 were $121,300,000 an increase of 68% from $72,300,000 for the Q2 of 2020. The increase in operating expenses was driven By increased personnel related expenses due to ongoing expansion within R and D and the commercial organizations, including stock based compensation, increased costs related to facilities expansion and increased information technology spend in support of general expansion of our operations. R and D expenses for the Q2 were $53,400,000 compared to $27,500,000 for the Q2 of 2020. The increase was driven by $14,000,000 in increased personnel related expenses, including stock based compensation and a $8,000,000 increase in expenses related to lab materials, supplies and equipment. SG and A expenses for the Q2 were $68,700,000 compared to $44,400,000 for the Q2 of 2020. The increase was driven by $15,900,000 of increased personnel related expenses, including stock based compensation, dollars 3,300,000 of external legal fees and a $2,700,000 increase in expenses related to IT and Operating loss for the 2nd quarter was $10,300,000 compared to a loss of $39,400,000 for the Q2 of 2020. This includes $26,900,000 of stock based compensation for the Q2 of 2021 compared to $13,900,000 for the Q2 of 2020. Net loss for the period was $11,100,000 compared to a net loss of $40,200,000 for the Q2 of 2020. We ended the quarter with $622,000,000 in cash and cash equivalents, net of restricted cash. The increase in cash from the prior quarter includes proceeds from option exercises and positive operating cash flow, partially offset by capital expenditures related to our operational expansion in Pleasanton. Now Turning to our outlook for the remainder of 2021. We look forward to a strong finish to the year as we build on our progress to date and continue to fuel our rapid pace of innovation. We remain confident in the long term trajectory of the business and we'll continue to invest heavily in our team and facilities to support this vision and serve our ever increasing customer base. On our last call, we noted there was a wide range of operating efficiencies within our customer labs due to COVID-nineteen And the lingering impact was likely to persist through the Q2. This largely played out as expected. Towards the final weeks of the quarter, We began to see a marked improvement and the majority of our customer labs had returned to near normal operations by the end of June. While these improvements were encouraging, More recently, we have seen some customer labs reinstating COVID related protocols due to the emergence of the Delta variant and closing access to outside visitors. The situation is increasingly uncertain and due to the extent that increased restrictions impact our customers' ability to progress through their experiments Given this environment, we are maintaining our full year revenue guidance for 2021 of $480,000,000 to $500,000,000 representing growth of 61% to 67% over full year 2020. At this point, I'll turn it back to Serge. Thanks, Justin. As we look ahead, we firmly believe that single cell and spatial analysis represents the future of biology. The vast majority of biological tissue samples will need to be analyzed with single cell resolution and spatial complex. While it's still very early, The investments we're making in our platforms have us well positioned to make that future a reality. With that, we will now open it up for questions. Operator? Your first question comes from the line of Doug Shekhar from Cowen, your line is open sir. Hi, good afternoon and thank you for taking my questions. If I could start with just a couple of questions on the quarter and then, and then pivot to a longer term question. It looks like instrument revenue, if I'm doing the math right, increased over 50% relative to Q1. Just going back to your prepared remarks, if I did that right, which hopefully I did, was this a function of the ASP change for the premium controller that you referenced increasing the number of placements you were able to make in the quarter. And if that's right, it does seem like this was probably a record placement quarter for you. If I'm doing all this math right, Is it plausible you could actually increase the installed base by 40% this year because it does seem like you're tracking to something like that? Hey, Doug, this is Justin. So going back to the beginning part of your question, You've got it right. We lowered the price of the Chromium controller to $35,000 in advance of the launch of Chromium X to make sure that we had that product positioned appropriately in what's going to be our new lineup of products between the Chromium Controller, the IX and the X. And as Serge noted in his remarks, that drove about 100 placements in addition to what we expected we would have done this quarter, so 100 incremental overall. And so yes, with that kind of growth that we've seen In Q2 year to date, we could demand for instruments is strong, especially at this price point. And so that could drive a pretty large increase in installed base this year. Okay. That's You're at the sound, Doug. Okay. That's always good to know I can still do that. So thank you for that. And then, I guess the bigger picture question, as you're rolling out new consumable kits On new instruments and I prominently have the Chromium X in my head as I'm thinking about this. The assumption is that There's going to be elasticity in the market as you and I'm kind of using elasticity liberally here, but as you both reduce the cost per data point, As you're allowing researchers to profile more features, in many instances for the same price per cell and also increasing The throughput, so how many cells can be processed in a certain amount of time. At points when we've seen that in tools, In other categories, there has been a periodic lag that's quickly over Over time, but it could take a quarter or 2 for the elasticity to play out the way one expects it to longer term. I'm just wondering if that's a dynamic that we should be keeping in mind as you're rolling out new products and new kits and if so how you're incorporating that So Doug, let me this is Serge. Let me pick up on that question. So we definitely think a fair amount about elasticity of demand and especially as it relates to different use cases. You mentioned Chromium X. So with that, of course, we have the high throughput kits coming out where the cost per cell is going to be Low significantly lower while people will be running large experiments. So this is kind of almost a classic case of pushing on The elasticity on the Percell level, but toward larger experiments. We also earlier in the year launched our CellPlex Kit, which I mentioned in my remarks as well, which by Mixing multiple samples together, the customers can effectively get a lower price per sample. And that has sort of the one hand, we said that we're potentially putting some pressure on our revenues because instead of paying some amount for every sample now, it's So you're kind of compressing multiple samples into 1,000,000 in the near term, but by elasticity can potentially drive more usage. It's too early, I would say, for either to talk with great confidence about how these effects are going to be like are shaping out. Certainly, right now, CellPlex, we're feeling good about it. It's doing robustly well in line with our expectations. Customers are adopting it. At this stage, a lot of the adoption is coming from people who had previously run homebrew approaches for what's called cell hashing And kind of converting now to Cellflex. There's also new use cases, new customers We're picking it up and we're seeing both kinds of examples where on the one hand there was an experiment that got strong, just instead of buying Sorry, we're also seeing examples where studies that were previously not possible, they're just too expensive, now are becoming possible. So we're definitely feeling good about it. I don't think it's the kind of thing that's going to play out in a material way like in a quarter or 2. It's a longer term kind of dynamic. And the Chromium X more so, I would say, first, you kind of have to expect People to actually adopt the instruments and then the new workflows and then kind of those larger experiments. So it's not just a simple switch that happens mid quarter or to scale up to those kinds of experiments. But over time, certainly the worst trend there. Super helpful detail and sorry to interrupt. I mean, the only thing I was going to ask as a follow-up is, so it sounds like Given how much thought and how much detail you just shared, the assumption is this isn't going to have a major impact in terms of like how you're guiding the second half Or it doesn't represent a risk based on the cadence of when products are coming out that you could be off by a quarter or 2 in terms When the elasticity materializes, is that right? Yes, that's right, Doug. This is not going to have a major impact on how we're thinking about guidance for the second half. 2nd of it. Okay. All right. Thanks, guys. Thank you. Next up, we have Tycho Peterson from JPMorgan. Your line is open. Hey, good afternoon. A couple of follow ups on the pipeline, maybe similar to kind of Doug's thinking here. But as we think about I'll start with capabilities, you mentioned it will take some time for customers to expand beyond the pilot studies. How are you thinking about that ramp and how important will Cytosys Just to be next year and kind of really maybe opening up more of that market on the clinical side. Yes, and that's a good question. That's early, right? And we certainly are excited about Cytosys and it's going to be by the time when it comes out, it's likely to be an accelerator. It is Hard to tell at this stage. Again, we need to see the customers actually going through the pilot studies and come back to the other side to know for sure. We do know that some people are kind of gearing up for doing larger studies in the absence of Cytosys. And I mean, I guess the other thing to also keep in mind is that 50% of the FFP customers are new to So, these are new people. So, overall, the launch is going well, Very much in line with our expectations and it's going to take some other time for us to learn The sort of how people are actually ramping, but there's definitely nice encouraging early signs. And then I guess similarly on Chromium X, obviously the ability to enable routine million cell experiments is attractive. I How important is kind of the funding backdrop here? I mean, the good news is the NIHL is getting better and better, but how important is it for labs to kind of line up Funding here or do you think this is something that they've already kind of secured funding for? I'm just trying to understand the grant dynamics here that could obviously drive the adoption. Yes. Yes. I mean, I think there's definitely a mix. I mean, there's people who have money available and the part of the reason why we started talking about it earlier this year is for that reason, so that they can sort of Start preparing for that. But we're also we've been helping our customers with the grant applications precisely in anticipation of this coming and that's a longer cycle. So, definitely it's a mix. Definitely will be people who have money, especially with our pricing, but there's definitely Also a larger cohort that will be more of a grand cycle kind of a deal for that. Okay. And then just lastly for Justin. I appreciate The thought process is not raising guidance given the pandemic. I'm just curious, I mean, is this a real issue now that you're seeing that labs are not allowing access? Or is this just being a little Prudent knowing cases are going up. And then can you also comment just on how we should be thinking about margins? I know you said less than 1% impact from the settlement, What was the chromium price adjustment? I'm wondering if there's any impact on margins in the back half of the year? Tycho, for the first part of your question, we have seen instances of customers, larger customers that have shut down access to our sales and support staff. And we're getting new information every day on this, but even in the area where our headquarters is located, we're under a new Mass mandate now and we're watching closely what kind of changes there are going to be to the local guidelines. As far as the second part of your question, can you please repeat that gross margin? It just gives and takes on margins in the back half of the year. I know you said it was a less than a one Impact from the Bio Rad settlement, but also with the Chromium pricing adjustment, I'm just yes, can you just talk on how you're seeing about gross margins in back half year? Sure. So the price adjustments have been part of our plan for some time. So that's been incorporated into the guidance that we've given before. And in the past, we've guided a slightly decreasing gross margin each quarter, also partially due to Newer products with lower gross margin profiles become at a larger percent of our overall revenue. And then if you look this quarter, without the impact of the one time reversal of Bio Rad, Of the accrued contingent liabilities related to the buyback settlement, you could see that we would have followed that profile that we laid out previously. Okay. That's helpful. Thank you. Thank you. Moving on, we also have Tejas Savant from Morgan Stanley. Your line is open. Hey, guys. Good afternoon. Just one on Vizium FFP for you, sir, Jameen. Can you just talk about traction following the launch and how you're going about sort of differentiating the product among translational researchers who perhaps may have GeoMx already up and running. And by when do you expect to see the early customers be done with their pilot studies and scaling up to larger work? Is that 22 dynamic at this stage? So let's see. So the launch is going in terms of as I said, The launch is going well. We are encouraged by both the interest and how people are adopting the product. As far as kind of How they're looking at relative to GeoMx? So we certainly have customers, quite a few who are looking at both platforms. The big difference here is that you don't have to pick your regions of interest. You see the full slide. You see the full expression across the entire tissue slides. And I think this is really important, especially people who are doing research, right, where you don't necessarily But kind of almost by definition, you don't know the answer ahead of time. So that is really the crucial point of I would say, in terms of the timing, and it's going to be a range. Some people look like they're going to be getting through this fairly quickly, but I won't say that. Especially, I would say, in the Like in a COVID environment where there's whenever you're adapting a new technology, there's all kinds of restrictions around it, some that people So I'd be cautious in terms of assuming that people can just sort of sprint through these, Especially the new customers, we've been seeing that there's again all these constraints put pressure on how fast people can get through the initial Experiment. Experiment. So I would say that this is more of a 'twenty two kind of thing. Got it. Very helpful. And then on a similar vein, I mean, any color You can share on the order funnel here ahead of the Chromium X and IX launches. And how many of those customers do you think are new to 10x versus those already Using the Chromium controller perhaps familiar with you via Vizium or ZEMSTECH? Yes. It's a good question. I mean, obviously, this is very early. I mean, we just started talking To our customers with a concrete specs and pricing. So very early days. Initially, our goal with this platform has been to learn to To the high end of our users and this is where like our focus has been and this is where a lot of the demand has been coming from. At the same time, It's still very early, but there is quite a few new customers as well that are coming with interest in the platform, Especially kind of maybe more on the biotech side of the world. Got it. And then just a couple of housekeeping ones for you, Justin. I mean, I know you mentioned Bio Rad and you guys will be paying royalties to each other. So how should we think about an Offset to that 1% because if I heard right, that sounds like it was a gross number that could be partially offset by inbound payments from Bio Rad. And then separately, any color you can provide on OpEx cadence in the back half of the year would be super helpful. As far as the Bio Rad payments, Tejas, we don't know what kind of payments we'll get from them in the future. So the comments that we made around Having less than a 1% impact, any payments that we reported would be incremental to 2. And so right now, with that statement, we're assuming 0. Very helpful. And then on the OpEx, please? Yes. So our OpEx continues to increase each quarter as we execute on our hiring ramp. Headcount is one of the biggest drivers there. In the last call, we talked about how we plan to hire 400 heads this year. And if you look at where we ended Q2, We've hired just over 200. So we're well on track there and we'll continue to execute On that hiring ramp, and so you'll see OpEx continuing to increase quarter over quarter as we add those additional heads. Very helpful. Thank you. Thank you. Your next question comes from the line of Garrett DeBron from Bank of America. Your line is open. Hey guys, thanks for taking the question. This is Mike Ryskin on for Derek. I want to go back to the point on the instrument placement growth in the quarter. I've gotten a lot of questions from clients. Just want to make sure I flush this out thoroughly. The color you provided, I believe, It was incremental 100 placements versus expectations, but I mean it's something in the 325 to 350 total units Sound about right. I just want to make sure we're thinking through the overall weighted ASP appropriately. Yes. So Mike, keep in mind there is a good there is Connect's in there as well. And Q2 was a really strong quarter for Connect. The increase from Q1 to Q2, It was a pretty good increase and part of that was driven by some instruments that we had shipped out, but not been able to fully install and get up Running due to COVID restrictions and we are able to get on-site and get those installed this past quarter. But Connect is still A very low percentage of the overall instruments that we're shipping each quarter. So if you look at the range that We have talked about in the past the $50,000 to $55,000 you can divide the bookends of that into our Total into our total revenue, and that would give you basically a number that does not include Connex. And then I would take it down from there a little bit just assuming a smaller percent of Connects in there as well. Connect is roughly 5 or 6 Chromiums at this point as far in terms of revenue. Okay. All right. No, I appreciate that. And then on the on that big jump In Chromium this quarter, does that it was a little bit more than we would expect, but given your commentary On the price cut, does that give you any thoughts on sort of what the elasticity of demand is for the instrument? I mean, Does that lend to potential further cuts down the road? Given what we know about the model, just how much of this is about driving the installed base? If you've got some opportunity there, is that something we could be seeing down the road for the flexibility there just to really drive that installed base? Yes. So it's definitely something that we're keeping a close eye on. We learned a lot when we dropped the price down to 35,000. It was a promotion, which we then made permanent as we started Q3. And so I think Some of that could be driven by the urgency of having a promotion that's expiring at the end of the quarter. And what that means as far as when The price has made $35,000 on a long term basis. We'll have to measure that over time. Okay. I appreciate that. Thanks. Thank you. Next We also have David Westenberg from Guggenheim Securities. Your line is open, sir. Hi. Thank you for taking the question. So I'm going to Keep going with the kind of that theme on that higher placement thing and maybe walk up models and you guys can have a chance to kind of pull me down here because With that higher instrument number, you've had really good pull through and you've kind of converted those customers in the past To be going up and driving that consumable towards that $150 price, as we build out our models, Should we be actually lowering that consumable pull through following that great instrument placement number? Yes, that's a great question, Dave. We've talked about 150,000 Dollars being a good pull through number to base the model on for near term purposes. But obviously, as you add More instruments to that and you increase the denominator, that's going to bring the pull through down. And that's one of the dynamics that we've highlighted Quite a bit over time. In the near term, I think we still feel good about 150 Being a good number to use, but keep in mind as we place additional instruments and we bring on Additional customers, there's no guarantee that the new customers are going to ramp exactly the same as the previous customers have, Especially once they're buying in at a lower price point that weren't buying in at the previous higher price point. So there's information that we'll learn Over time, I probably wouldn't make any drastic changes to what we said before, but we think that generally what we're seeing is still going to be in line with what we put out before. Perfect. And I'm going to kind of stick with this similar theme of consumable pull through. Kind of when you think about ChromiaMax, I believe you've mentioned in the past that it's really kind of for those top 10% customers. And it goes back to kind of Doug's question about Elasticity demand as you decrease prices, would there be any kind of way to quantify the way you were maybe thinking About that decrease in pricing, I mean, say, were you thinking about the customer doing 30% reduction in pricing and doing 50% Increase and pull through, I mean, any way to quantify it would be great. If you can't, maybe there's a tiny bit of conceptualization you can do. And then just as a reminder on because you have such a wide group of ranges in terms of your customer pull throughs, Can you remind us maybe what that top decile might do in terms of your revenue, if you're comfortable given that? And I'll take my rest of the questions offline. So your first question on Chromium X and sort of the dynamics there, it's way too early To say, certainly not like in any kind of a number grounded way in terms of how much the reduction on price per cell will drive total spend. I think it's the kind of thing that probably also manifests itself not over a single quarter as I said before, but kind of more on the timescale of multiple quarters is not years where people actually have to conceptualize new kinds of experiments. And Opendums actually put in grants Get more money to run those kind of experiments. So I wouldn't say I think it is way too challenging even at sort of the conceptual level to think about What the trade off would be on a sort of any kind of a near term basis? I think we do believe that ultimately kind of as you think really big picture and really As everything kind of trends towards single cell resolution, there's no escaping the fact that that should drive more demand. The exact trajectory though, like at this stage, like where it's like in the very beginning of this, it's hard to estimate. I think your second question was around sort of the dispersion of different types of customers. So Yes. I mean, there's definitely a dispersion. I mean, one of the things that's been interesting for us, almost from the beginning, we do have a pretty wide diversity of customers. So it's not like Super concentrated with just a few usual suspects. We do have our early customers, some of those most sophisticated ones Our headwinds, but not they do not dominate our revenue by any stretch. It is also the case that just as Justin was alluding to, as we have been placing more instruments, especially kind of getting into new labs over the course of the last year and a half since the start of the pandemic, We brought in tons of new customers and their ramp has been slower, potentially kind of exacerbated by the effects of COVID. But again, everyone has been increasing their usage for time. Thank you. Thank you. Your next question comes from the line of Patrick Donnelly from Citi. Your line is open. Hey, thanks guys. I know in prior quarters, I think it was Brad kind of talked about labs coming back a bit conservative, Ordering smaller amounts of kits given the shelf life, not wanting to get stuck with them in case things shut down again. Have you guys seen that ease? I guess, Justin, when you talked about A month ago, things started to look maybe a little more normal. Now they're kind of back to a bit of a pause. Is that what's happening? Maybe can you just talk through, I guess, what you're seeing in terms of order patterns from customers Hey, Patrick, this is Brad. Yes, I think that's waning quite a bit, but That seems changed daily now. So at this point, we'll wait and see what happens. But generally, I think for the most part, People are confident they're back in the lab, and I think a lot of the data shows that there hasn't been transmission in the lab. I mean these are scientists, so we hope they know what they're doing. So ultimately, I think that that's probably not a factor anymore. If it is, it's a second or third order factor. Okay. That's good to hear. And then Serge, maybe just on the Chromium Controller, obviously, nice to see the 100 place incremental placements there. Can you just talk about the customers where you're seeing adoption? Are there any surprises in terms of applications where that's seeing more adoption than you expected on kind of the lower end? Well, not sure if it surprises so much, but we have talked about for some amount of time and have made some sort of efforts on The marketing organization to start reaching new customers, new to 10x. So especially within neuroscience, infectious disease, That was obviously kind of spurred by also accelerated by COVID. So those are kind of these new customer segments and that has been Bearing some fruit getting into these areas. Yes, that's what I would Yes. And maybe just last one on the Chromium X. I know, Serge, you talked about Talking specs and pricing with customers just recently, it doesn't seem like it, but should we be expecting a bolus of demand where customers were kind of holding off to order this and now they're going Come in waves or anything? It doesn't again, it doesn't seem that way, but just wanted to make sure. Yes. I don't think there has there would have been sort of a huge Sort of pent up kind of dynamic, I think this is definitely sliding to our customers. And our early Especially some of our earliest most forward looking customers have been kind of asking for this kind of capability for a while. So definitely, There is some amount of kind of baked in demand that's coming, but I'm not sure if I would classify it as like a huge sort of So not any kind of deal. Understood. Thanks guys. Thank you. Your next question comes from the line of Matt Sykes from Goldman Sachs. Your line is open. Hi, thanks for taking my questions. Just maybe first just following up on Tejas' question on OpEx, just specifically as it relates to sort of inflationary pressures and then more specifically on the labor side. Obviously, you guys have made great headway in terms of increasing your headcount. I'm just wondering, are there any inflationary pressures on that in terms of wages and what you have to pay to bring new people on board or has it been fairly consistent throughout the year? Well, Market is hot right now, Matt. So we just updated our ranges recently and we looked at how much the market has moved Last time that we did that kind of analysis, which wasn't that long ago. And there's definitely been movement Higher in the market. And so we it's in our plans right now, but yes, we are seeing that a little bit. Okay. So that's accounted for in your current plans right now, that inflation? Yes. And then just a quick question. Just on the overall Comments on sort of the resurgence in COVID and the things that are going on with the labs most recently. Is there any regional aspect to that? Obviously, it's Surrounding where there's resurgences, but I'm just wondering if it's if there's any regional differentiation into how labs are reacting most recently to the resurgence? Yes. This is Brad. Yes, it's pretty much it's fairly dynamic across all of our regions. One thing that we're following closely is the U. K. Where we saw it being hit fairly hard by the delta variant. And there was some Somewhat acute limitations, but those kind of went away fairly quickly and now we're seeing things starting to emerge there, which I think is Hopefully, something we can all look forward to. But overall, generally, right now, the world is going backwards when it comes to adding more of these protocols and Sort of restrictions, but again to be clear, this is not closing labs or going home kind of thing. This is just normal things. And the most important thing is Our ability to get on-site. There's a lot of we have a lot of supportive people out there. They've done amazing things virtually, but there's nothing When those substitute for being on-site, shoulder to shoulder with our customers and helping them and in some cases just giving them confidence Because these are big experiments and there's an element of risk. So in general, I think it's very dynamic, but I think we're prepped to get through it. Great. Appreciate the color. Thank you. Thank you. Our next question comes from the line of Matt Larew from William Blair. Your line is open. Yes, good afternoon. You talked in the past about potential for the consumable pull through on Chromium Connect To be about 2x Chromium controller and we're about 18 months since launch. So just curious what you're seeing from Early adopters of Connect in terms of pull through and then perhaps it's too early to comment on potential pull through for Chromium X, but If it isn't, I'd be curious for your comments there too. Hey, Matt, our plan for Chromium Connect and our longer term assumptions It would be between 2 and 3x that of the Chromium controller. But Keep in mind with many of these instruments placed during the pandemic and many of them just coming online recently in the last two quarters, We obviously aren't seeing that now, and we aren't seeing anything that is having an impact on the average chromium Pull through right now, Peter. Okay. And then last quarter, you mentioned that some customers who onboarded during the pandemic We're having more trouble getting Columbus Physiom. And I think you alluded to trying to provide additional computational support. So just curious whether it was The ability to interact with customers in person or any additional capabilities and services you offered, if that was something that was improved on in the quarter? This is Brad. I think in general, yes, we the Helping people onboard a new technology is best done in person and I'd just be clear about that. But and so I think over time we've Actually increased our or certainly deliberately increased our resources around support because ultimately We are expecting to be back in front of our customers and that's an area where we think we can add a lot to help customers Faster through the workflow and that goes even just with Chromium as well as Vazeal. Okay, sorry. And then just one more on The demand number obviously was very strong and maybe that was just a one time order or some pent up demand, but Just kind of curious if there's anything driving that number in the quarter? Yes. For EMEA specifically, Yes. Yes, when you look at the quarter over quarter increases by region, there was a pretty big increase for EMEA, These increase for AMR as well, but EMEA was primarily driven by just labs that were previously either shut down or running at reduced capacity, Just coming back towards more closer to normal operations by the end of that in Q2. Okay. Thanks, Justin. Thank you. Presenters, there are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now all disconnect.