10x Genomics, Inc. (NASDAQ:TXG) Q4 2022 Earnings Call Transcript

10x Genomics, Inc. (NASDAQ:TXG) Q4 2022 Earnings Call Transcript February 15, 2023

Operator: Good afternoon. Thank you for attending today’s 10x Genomics Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Bethany, and I will be the moderator for today’s call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Cassie Corneau with 10x Genomics. Please go ahead.

Cassie Corneau: Thank you, and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the fourth quarter and full year ended December 31, 2022. 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 email to investors@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. With that, I will now turn the call over to Serge.

Serge Saxonov: Thanks, Cassie. Good afternoon, and thank you for joining us. During today’s call, I’ll start with an overview of our performance during the fourth quarter. Next, I will highlight our progress and momentum across our business and exciting opportunities we have ahead in each of our three platforms. I’ll then turn the call over to Justin for a more detailed look at our financial results as well as our revenue guidance for 2023. While 2022 had its challenges, we ended the year strong with revenue of $156 million in the fourth quarter, up 9% year-over-year. This represents quarter-over-quarter growth of 19%, demonstrating our momentum and focus on execution as we closed out the year. Total revenue for the year was approximately $516 million, up 5% over 2021.

In 2022, we sold more than 1,100 instruments, surpassed 4,500 peer review publications using our products, and expanded our intellectual property portfolio to more than 1,750 patents and patent applications. Yes, the clear highlight of the year was the continued strength and velocity over our innovation engine. 2022 was the biggest and most exciting year of new products in our history as our team delivered catalytic launches in all three platforms. In Chromium, our new products further expanded our broad menu of high-performing assays. We released Chromium Flex, the new gold standard for single cell gene expression, which we believe has the potential to be transformative to the Chromium franchise. In addition, we introduced our first sample perp product, the Nuclei Isolation Kit, and opened up new applications with the launch of BEAM.

In Visium, we launched CytAssist, our first spatial instrument. We see CytAssist as the foundation of the Visium platform going forward, transforming the Visium workflow and outperforming manual methods. And finally, we launched our Xenium platform, which we believe is the most advanced in situ platform on the market. The platform includes a versatile and easy-to-use instrument, a diverse menu of curated, customizable and high-quality panels and Xenium Explorer, intuitive software for interactive data visualization. We’re incredibly proud of what our innovation engine delivered in 2022 and we’re confident we’ll have the commercial scale and operations infrastructure in place to get everything out of the opportunity ahead. On the commercial front, we’re building from a solid foundation with broad reach and a talented team obsessed with customer success.

Last year, we started implementing better commercial processes, systems and tools as we prepare for our next phase of growth. On the operation side, we made tremendous progress building our new R&D and manufacturing center here in Pleasanton, which is on track to be completed soon. This is one of our initiatives to build our global manufacturing network for scale and significant capacity for future growth. Now, let me share more about our recent progress on pipeline, starting with Chromium, the definitive platform for single cell analysis. Throughout the year, we’ve seen ongoing demand for Chromium X Series instruments as both new and existing customers chose the X Series for its high performance, extended capabilities and series specific assets.

In fact, after several consecutive quarters of customers overwhelmingly opting for X Series instruments, we made the decision during Q4 to discontinue future sales of our legacy Chromium Controller. On the consumables side, our comprehensive portfolio of high-performance assays, which are easy to use and scale, delivered deep biological insights across a wide range of applications and analytes. The performance, differentiation and scalability of our consumables portfolio should position us well to drive growth with existing customers, welcome new researchers into the 10x ecosystem and accelerate translational and biopharma opportunities. In Q4, we saw particular strength with our Multiome product, as researchers continued the trend toward measuring multiple analytes per cell.

We also saw increased adoption of our high throughput assays as customers embark on larger scale projects. We’re pleased with the customer response to Chromium Flex, which we believe will become the new flagship assay for single cell gene expression. After completing their initial evaluation cycles, customers are reordering consistently and starting to adopt larger kits for more scale and lower cost per sample. We’re still very early in this launch, particularly with the FFPE opportunities. Flex is the first and only assay to open up the vast volumes of archival FFPE samples for single cell analysis, which should enable much more research particularly in translational settings. We have now rigorously validated Flex across a broad range of different FFPE samples and have published demonstrated protocols to better enable our customers to access this ground-breaking capability.

Also, in Q4, we began shipping BEAM. BEAM’s proprietary screening approach enables researchers to quickly analyze up to millions of BRT cells to determine their antigen binding of (ph) and high resolution. We believe the scale, resolution and throughput of BEAM can revolutionize therapeutic discovery, making it of particular interest to our pharma and biotech customers. BEAM is a great example of how innovation opens new applications for single cell analysis. As the unambiguous leader in single cell, we continue to invest in new product development to unlock more sample types, enable larger scale, lower the cost of experiments and engage a broader base of researchers. At the AGBT conference last week, we shared proof-of-concept data, demonstrating how Chromium Flex can easily scale to up to 10 million cells and hundreds of samples in a single experimental run.

We believe that data illustrates the power and the long-term potential of Chromium Flex to deliver scale at levels that were inconceivable just a few years ago. In addition, this shows how 10x continues to raise the bar on scalability and ease of use and how our product innovation can drive down the cost of single cell experiments. Now, I’d like to share more about our spatial platforms. Through our internal investments and our acquisitions of Spatial Transcriptomics, ReadCoor and CARTANA, 10x has been leading the way in spatial for a decade. We have built incredibly powerful technologies, developed foundational intellectual property and have deep experience in customer insights that have been instrumental to our Visium and Xenium platforms.

Visium is the leader in unbiased spatial discovery. It has been adopted in thousands of labs around the world, used in more than 440 publications in pre-print, and has generated by far, the largest number of public data sets than any other spatial platform. And we’re still just getting started. We made big strides last year with the launch of CytAssist, which we believe will be a great catalyst to accelerate the platform. We’re pleased with the sustained customer interest and demand for CytAssist in its second full quarter since launch. We’re hearing very positive feedback from customers as they complete their initial runs of CytAssist along with its companion assay, Visium FFPE version 2. FFPE is increasingly the sample type of choice for Visium users as demand nearly doubled that of fresh frozen in Q4.

We designed CytAssist to help solve the key challenges our customers have faced with the Visium workflow. Beyond its ease of use, the instrument outperforms manual methods, ensuring customers not only have a better experience but also receive better insights. With CytAssist, researchers can access more samples and more sample types, including tissue sections previously stored on standard glass slides. In addition, we recently released a new protocol, enabling customers to use fresh frozen tissues on CytAssist. This new protocol, along with the performance advantages inherent in our v2 chemistry resulted in much higher sensitivity than our standard manual fresh frozen assays. We’re continuing to invest in Visium new product development with CytAssist as the foundation of our pipeline moving forward.

At AGBT, we shared more about the future products and capabilities that will be exclusively available in CytAssist. We will continue to expand CytAssist to be compatible with more sample types, including Tissue Micro Arrays. We’re also working to bring multiome to the platform with planned launch of gene plus protein expression in the first half of 2023. And we’re fully committed to delivering higher resolution. Our team is making tons of exciting progress on Visium HD, which will be offered only on CytAssist. As you may have seen on AGBT, the HD data looks exclusive, showing us power to deliver unbiased whole transcript on discovery across the entire tissue sections of single-cell scale resolution. We’ve come a long way with this ambitious project, and we’ll share more when we get closer to launch.

Now turning to Xenium, our newly launched platform for in situ analysis and what we believe is the best performing system on the market. As we shared at Investor Day, we delivered our accelerated timeline and officially began global commercial shipments in December. Both instrument shipments and orders exceeded our internal expectations in Q4, reflecting a strong customer enthusiasts for Xenium. For our team, there is really no better feeling than seeing new products in the hands of researchers. It was especially rewarding to have a customer share data from his own Xenium runs at AGBT just weeks after we started shipments. With feedback from our initial customers, we are now more confident than ever in Xenium’s differentiation and performance advantages across a number of fronts.

First, Xenium offers excellent sensitivity and specificity. Because of the unique features of our chemistry, Xenium delivers high specificity even on difficult tissues, ensuring that customers can reliably measure the genes they are interested in. At the same time, our chemistry ensures high specificity giving customers confidence that they are not seeing phantom genes or cells in their samples. Second, Xenium offers the best workflow from instrument to insight. We’ve worked hard to design easy and straightforward sample preparation assay protocols, and we have brought our world-class software capabilities to Xenium, which is the only platform to feature comprehensive onboard analysis in parallel with the instrument run, including cell segmentation and clustering results.

Directly after the run, without additional processing, results can be easily transferred of instrument for interpretation using Xenium Explorer, or a wide variety of open-source tools. Our differentiated approach is both flexible and fast, and significantly reduces the computational burden from customers. Third, our gene panel strategy developed in collaboration with leading researchers best enables customers to answer their specific research questions. Our approach combines targeted gene panels, optimized by tissue type with the flexibility to add in large numbers of custom genes. This year, we plan to add several tissue-specific and multi-tissue panels to our lineup, as well as fully custom panels for maximum flexibility. And finally, Xenium delivers best-in-class throughput, enabled through advances across the full technology stack in chemistry, hardware and software.

With Xenium, researchers can analyze the most tissue area at single molecule resolution in the least amount of time. We build Xenium to have key performance advantages for launch and for the long term. Xenium is backed by a comprehensive multiyear road map and 10x’s track record of innovation, giving customers even more confidence in their investment. At AGBT, we put some of these future capabilities on full display and building new proof-of-concept data to demonstrate just how powerful Xenium is already and how much more it can enable in the future. This data showcased some of our key development directions, including multimodal cell boundary spans and trained cell segmentation algorithms, multiplex RNA protein on the same tissue section and isoform mapping deduction.

In addition, we shared R&D data from a 5,000-plus multi-tissue gene panel on seven human FFPE tissues, demonstrating the platform’s capability to scale to many thousands of genes. Also, at AGBT, we announced the Xenium Catalyst program. Through this service, prospective customers can see proof-of-concept data on their own samples to support their brand applications and funding requests. While many researchers are able to use our provided data sets for this purpose, we believe the Xenium Catalyst program will be a great resource for select customers who require sample specific data. We can’t wait for even more customers to see first-hand why we strongly believe Xenium is the most advanced in situ platform on the market. Coming over this record-setting year of catalyzing launches across all three platforms, we are fully focused on driving new product adoption, ensuring our customer success and getting the most out of the tremendous opportunities ahead.

At our Investor Day, we shared our view of the large opportunities in life science research and beyond. When you look at all the ways our platforms are being used, the diversity of applications, diversity of analyzes and a number of customers, we see that our technologies are replacing much of the conventional toolkit in life sciences. Our tools are revolutionizing biological questions. By analyzing how much scientists currently spend pursuing their answers, we can estimate the magnitude of our opportunity. At a high level, there are four broad categories of research questions where single-cell and spatial methods are particularly useful. The first category, atlasing is the initial (ph) for single cell analysis, yet we’re less than 20% penetrated.

The second category, which entails the investigations of genetics mechanisms also sees a meaningful use of our tools, but is less than 10% penetrated. It’s the same in the third category, which encompasses a large opportunity and broader diversity of mainstream biology. And similarly, we’re barely scratching the surface with our fourth category, translational and biopharma applications. We have established strong beachheads, but it’s still very early relative to the large potential. Now turning to 2023. While it’s still a dynamic environment, most geographies have stabilized with the exception of China. We have so much to look forward to and deliver on this year. 2023 will be the first full year on market for several key products, including Chromium Flex, Visium CytAssist and Xenium.

Our commercial team is fully focused on driving adoption and increased use with new and existing customers alike. While we’re coming off the biggest year of product launches in our history, we’re not slowing down. Our innovation engine is focused on extending our product leadership with new capabilities in all three platforms. Capabilities that will open up our tools for more samples, more research and more customers. From a commercial and operations perspective, we are continuing to put the pieces in place to get back to our track record of execution and scale to the next phase of growth. At our core, 10x is fundamentally about growth and impact. It’s why since the earliest days of the company, we have invested to build foundations and scale for the long term.

This next phase of growth will be complemented by increased focus on operational excellence and efficient scaling. We’ll be disciplined yet remain bold and ambitious in pursuit of our mission to accelerate the mastery of biology and advance human health. With that, let me turn it over to Justin for more detail on our financials.

Justin McAnear: Thank you, Serge. Total revenue for the three months ended December 31, 2022, was $156.2 million compared to $143.5 million for the prior year period, representing a 9% increase year-over-year and a 19% increase quarter-over-quarter. Consumables revenue was $131.6 million, which increased 8% over the prior year period. Instrument revenue was $22.3 million, which increased 15% over the full year period. Services revenue was $2.3 million, which increased 29% over the prior year period. America’s revenue for the fourth quarter was $85.6 million, representing 11% growth over the prior year period. EMEA revenue for the fourth quarter was $43 million, representing 24% growth over the prior year period. APAC revenue for the fourth quarter was $27.6 million, representing a 13% decrease over the prior year period, which was primarily due to COVID disruptions during the quarter.

Turning to the rest of the income statement. Gross profit for the fourth quarter of 2022 was $119.4 million compared to a gross profit of $115.9 million for the prior year period. Gross margin for the fourth quarter was 76% compared to 81% for the fourth quarter of 2021. The gross margin decrease was driven primarily by the impact of shifting product mix due to newly introduced products. Total operating expenses for the fourth quarter of 2022 were $142.5 million compared to $131.8 million for the fourth quarter of 2021. R&D expenses for the fourth quarter of 2022 were $63.6 million compared to $61.9 million for the fourth quarter of 2021. SG&A expenses for the fourth quarter were $78.9 million compared to $69.9 million for the fourth quarter of 2021.

The increase in R&D and SG&A expenses during the quarter were primarily due to increased personnel-related costs as we continue to scale the organization over the last year. Operating loss for the fourth quarter was $23.1 million compared to a loss of $15.8 million for the fourth quarter of 2021. This included $41 million of stock-based compensation for the fourth quarter of 2022 compared to $26.9 million for the fourth quarter of 2021. Net loss for the period was $17.2 million compared to a net loss of $18.4 million for the fourth quarter of 2021. Turning to our full year results. Total revenue for the full year ended December 31, 2022, was $516.4 million compared to $490.5 million for 2021, representing a 5% increase. Consumables revenue was $435.6 million, an increase of 4% over the prior year.

Instrument revenue was $72.4 million, an increase of 12% over the prior year. Services revenue was $8.4 million, an increase of 16% over the prior year. As of year-end, we have sold a cumulative total of 4,630 instruments, up 1,119 instruments from the end of 2021, representing a 32% increase in cumulative instruments sold across all three platforms. Pull-through per instrument for 2022 was $109,000, decreasing from $142,000 in 2021. As we discussed at our Investor Day, due to a number of factors, pull-through per instrument is becoming less relevant for our business today, and this will be the last year that we report on this as a key metric. Our focus is to increase the utilization of our products and drive growth in overall consumables revenue.

To assess our performance in these goals, in addition to revenue, we also track the number of reactions sold in a given period. During 2022, our customers bought over 316,000 reactions worth the consumables products. This was up from approximately 310,000 reactions in 2021, and represents an increase of 2% year-over-year. Looking at our regional results for 2022. Revenue for the Americas for the full year was $293.8 million, representing 11% growth over the prior year. EMEA revenue for the full year was $117.1 million, representing 8% growth over the prior year. APAC revenue for the full year was $105.6 million, representing a 10% decline over the prior year. Gross profit for 2022 was $396 million compared to a gross profit of $416.4 million for 2021.

Gross margin for 2022 was 77% compared to 85% for 2021. The decrease in gross margin was primarily due to a one-time reversal of $14.7 million of accrued royalties in 2021, the impact of shifting product mix with newly introduced products and the impacts of inflation and increased supply chain costs. Total operating expenses for 2022 were $564 million compared to $468.7 million for 2021. The increase in operating expenses was primarily driven by an increase in personnel expenses, including stock-based compensation expense, and higher costs for facilities and information technology to support operational expansion. R&D expenses for 2022 were $265.7 million compared to $211.8 million for 2021. The increase was primarily attributable to increased personnel-related costs including stock-based compensation expenses, laboratory materials, supplies, expense equipment and facilities costs.

SG&A expenses for 2022 were $298.3 million compared to $257.6 million for the prior year. The increase was primarily due to increased personnel-related costs, including stock-based compensation expenses, marketing expenses and facilities costs. Operating loss for 2022 was $167.9 million compared to a loss of $52.3 million for 2021. Net loss for 2022 was $166 million compared to a net loss of $58.2 million for 2021. We ended 2022 with $430 million in cash and cash equivalents and marketable securities net of restricted cash. Turning to our outlook for 2023. We expect full year revenue to be in the range of $580 million to $600 million, representing growth of 12% to 16% over full year 2022. Looking at Q1 trends, we have seen an impact to bookings in China, and while we believe activity levels are recovering, there is typically a lag in reorders after the disruptions as customers work through existing inventory.

This has been reflected in our 2023 annual guidance range. Moving to gross margin. We expect our gross margin percentage to trend lower from where we exited the year, as newly introduced products expand and become a large percentage of overall revenue. This is particularly the case for the Xenium instrument, as this is currently a low-margin instrument. The impact on overall company gross margin will be greater as more instruments are placed. We plan to continue to invest across the business to support our growth. And while our rate of headcount growth in 2023 will be lower than in 2022, we will still be adding additional headcount, mainly to support new product development and support. As our new operations facility in Pleasanton nears completion, we expect a significant reduction in capital expenses in the back half of this year and will continue to drive towards becoming free cash flow positive by the end of 2023.

We will maintain a disciplined and targeted approach to OpEx spend throughout the year and expect some increases over 2022 due to increased stock-based compensation expense as a result of our previous equity grants to incentivize employees, the additional headcount to support new products and increased litigation expenses as we continue to defend our intellectual property. We look forward to an exciting year and feel well positioned financially and operationally to capitalize on what lies ahead. At this point, I’ll turn it back to Serge.

Serge Saxonov: Thanks, Justin. What I hope you heard today was our focus on execution and scale as we continue to push the frontiers of biology. We’re proud of the formidable strength of our innovation engine to deliver new products that fuel scientific research and enable major discoveries across every area of life sciences. These discoveries continuously reinforced my conviction that just about all tissue samples will one day need to be analyzed with single-cell resolution at large-scale and spatial context. With our three platforms, we’re uniquely positioned to bring this feature forward. We believe our platforms, each on their own, are by far the best-in-class in their respective fields. And when used together, our tools provide even more value and reveal the deepest biological insights.

As I look to 2023, I’m more optimistic than ever about our future. There are massive opportunities ahead, and we’re in a very strong position to capture them. We have incredible products, broad commercial scale and an amazing team, all of which give me every confidence we’re still just getting started. My sincere thanks to the 10x team for making this magic happen day in and day out. Our team’s relentless focus on our mission and customers has always been a fundamental strength that sets 10x apart and will continue to propel us well into the future. With that, we will now open it up for questions. Operator?

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Q&A Session

Operator: Thank you. Our first question comes from the line of Dan Brennan with Cowen. Please go ahead.

Dan Brennan: Great. Thank you. Thanks for the question. Congrats on the quarter, guys. Maybe the first one just on the guide. 12%, 16%, bit below where consensus was, but certainly can make sense given macro and the comments on China that you made and the experience during 2022. But just would love why you don’t kind of breakdown single cell and kind of spatial today — would love just a little help to the extend you can just kind of how we think about those two buckets, in particular, I think the single cell bucket, which is the bigger one, just kind of what you’re seeing both from academia and biopharma and kind of how you incorporated that into the guidance?

Justin McAnear: Hey, Dan. This is Justin. I’ll take that one. As far as our 2023 guidance goes, you’re right, we’ve got Chromium bucket and a spatial bucket. And if we look on the Chromium side, we’re looking at probably from the low- to mid-teens growth year-over-year. And keep in mind, this does include the impact that we’ve seen so far in China in Q1, which we’ve called out. We think China is probably going to end up around 20% down for Q1 year-over-year, and that’s probably going to drive Q1 somewhere in the low- to mid-teens percent increase year-over-year over Q1 of last year. So, that’s incorporated in the overall guidance range. So, on the Chromium side, low- to mid-teens increase. On the Spatial side, with the addition of Xenium in the ramp that we’ve seen so far with Visium, looking at about 40%-plus increase year-over-year as the initial input for the guidance range there.

Dan Brennan: Great. Thanks for that. And then, as maybe as a follow-up, I’m sure there’ll be a lot of questions to pick that apart. But just when we think about profitability, I heard you at the end, Justin, at the prepared remarks, can you just walk through again how we’re thinking about exiting the year, you said free cash flow positivity. I know in the past you’ve talked about EBITDA positivity. Just kind of what should we expect in the fourth quarter of this year? And what is that exit rate kind of pretend as we go beyond ’23? Thank you.

Justin McAnear: Yes. Thanks, Dan. So, driving towards free cash flow positive by the end of the year is still our goal. We believe that we can do that under multiple different scenarios. There’s many levers that we could pull if we did see things trending down towards the lower end. As we mentioned before at Investor Day and then also on the prepared remarks, after we complete our facility here in the first half of the year and get all the payments out for that, we are going to see a pretty steep drop off in CapEx going from the first half of the year to the second half of the year. And also keep in mind that this is under our current business. It’s not taken into account any significant non-recurring events. But overall, it’s important for us — we’re being disciplined in how we’re managing our OpEx. We’re being very thoughtful with how we invest right now.

Operator: Thank you. Our next question comes from the line of Dan Arias with Stifel. Please go ahead.

Dan Arias: Good afternoon, guys. Thanks for the questions. Serge or Justin, maybe specifically on Xenium, now that systems are making their way into the field here, what’s the best way to think about contribution specifically for that box just given that it sounds like you’re trying to be, I think, measured early on with the launch, but you’re also pretty clear about demand being strong? So, anything you can sort of help us with sort of to frame out year one for that product? And then, maybe relatedly, is there anything that you’re thinking about in terms of the impact of the Visium franchise?

Justin McAnear: Yes. So, when we’re looking at 2023, I believe that Xenium is likely to be the largest variable in our guidance range. We expect the revenue from Xenium to be more skewed towards the instruments rather than consumables this year. And we expect the placements to ramp through the year. We gave the overall thoughts on how just the Spatial platforms will contribute overall to the 2023 revenue; so Visium and Xenium together over a 40% increase year-over-year. We have mentioned before that this is a complex technology. It’s a product that we pulled forward quite a bit to launch by the end of last year. And we’re really focused right now on the initial placements and early customer success. And looking at how those placements have gone, and looking at the data that customers themselves have generated off the instruments that we’ve delivered and installed, initial signs are looking good.

And I think we need a little bit more time to see how that continues to ramp, at which point, we’ll assess how quickly we’ll execute the rest of the installs and what kind of constraints there might be after that.

Serge Saxonov: Dan, so to your question on the Visium and Xenium interactions, so at this stage, the platform exists — platforms exist in fairly distinct use cases and (ph) in terms of what kinds of obligations customers would be considering it for and obviously quite different sort of shape of capital requirements and run rates. So, we don’t see them kind of cross cannibalizing each other to a significant extent right now. In fact, there’s a fair amount of synergy between using the platforms. And we do see customers kind of opting into the sort of the full 10x Spatial ecosystem and we certainly are eager to encourage that as well. And so that’s how we see this year kind of playing out. In the long run, of course, it’s very hard to predict how the different applications and platforms will sort of overlap, interact and support each other.

I don’t think anyone quite knows that. But at this stage, I think they are both gaining a lot of momentum and quite complementary out there.

Dan Arias: Okay. Thank you for that color there. Maybe I’ll just stay on the new products. On the Flex assay, how meaningful do you think that can be this year? I mean, you had talked about customers needing to see some validation data and just get comfortable with the assay. But it sounds like that’s happening now at a fairly decent pace, although I’d love to hear whether you think that’s the case. Should we think about that being a needle mover this year? And then, relatedly, is that assay driving Chromium X placements forward when you just look at the install rate over the last quarter? And what you’re looking for bookings wise?

Serge Saxonov: Yes. So, there’s several variables here. So first, to kind of your initial framing question, yes, I mean, we’re definitely seeing good momentum on Flex. And especially kind of increasing the good momentum as we look at the last quarter and how customers have been scaling. We definitely see people kind of doing the initial test coming back with positive results by and large, very enthusiastic reactions, and then scaling to larger experiments and growing more and more. The key variables that we’re going need to watch is some amount of Flex usage is going to be crossover from our flagship — previous flagship assay, 3 Prime or 5 Prime gene expression. So that’s not going to be necessarily additive. Another variable to watch is that the Flex enables much more streamline multiplexing, which allows people to drop the price per sample.

And while we’re seeing it allowing — creating possibilities, running new types of experiments that people weren’t planning to do before, so adding to the to the ecosystem, it also has the effect of potentially moderating some of the top line, because now people are running the same study, they don’t have to spend as much. We see that as more of a near-term effect in the long run, have full conviction there is tremendous elasticity of demand, and it’s only going to drive more, but we’ve got to be cautious in the meantime. And we do see Flex has been driving instrument placements, certainly that is the feature — the key feature now that differentiates or differentiated iX series instruments from the Chromium Controller. So, it definitely is an enabling feature.

And so, that will create more momentum going forward. Also, Flex, of course, opens up — as we’ve always planned on, opens up new sample types, new tissues in particular FFPE samples, which was something that was not even conceivable for single cell analysis, not that long ago. So, there’s great potential there. It’s still early, especially on FFPE side. We kind of make predictions around how the trajectory is going to evolve. We just started really putting full force marketing behind it at the end of last year, so early to say .

Operator: Thank you. Our next question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead.