Q3 2021 10X Genomics Inc Earnings Call
And potential of our solutions stood down to human health.
For instance in a pair of recent publications in times researchers used our single cell products to identify and characterize the immune cells within the brain.
It has been previously understood the brand was immune privilege.
However, researchers discovered monetize and B cell originally from call them vertebral bone marrow and that exist separately from their peripheral counterparts.
These studies show that the brand has access to distinct and specialized populations of immune cell, which has profound implications for how we approach a variety of CNS related conditions.
Many single cell applications will become even more powerful the chromium next which enables routine volume cell experiments.
Since launched many customers as far as ordering high throughput consumables, while others are transitioning their standard throughput experiment the chromium.
In the interim our head of larger future studies.
We're seeing interest in several areas, including functional genomics studies using crisper screens in the cell <unk> and large scale immune receptor profiling application.
While it's still early interest is high and we look forward to the first publications Fisher and chroma chromium us in the future.
Yeah.
Turning now to special adoption of video consumables remained strong this quarter and the publication cadence continues apace.
There are now more than 150 preference in publications featuring the <unk> technology.
Just as we're still in the early days of chromium. These papers are validating the fundamental importance of digital technology for uncovering through biology, and a key to developing a special markets.
In a recent preprint researchers conducted a multi cohort studies featuring our recently launched dividend philosophy to investigate potential genetic markers.
Breast in the respiratory tract, which may help predict COVID-19 outcomes.
This group identified a specific gene I have $5 seven which when elevated is associated with the presence of a high viral load and outperformed other known predictor of COVID-19 severity and respiratory filler.
Funding findings like these show the importance of busy I mean disease related research and will be important in developing new diagnostic tools to the future.
With the launch of <unk>, we enabled for the first time true unbiased gene expression analysis of F&B samples.
Lithium, we're bringing the world of high content genomics and tissue based analysis together.
Additionally, S&P capabilities now unlocks much more of a constellation of opportunities.
And even if the F&B has attracted many new completions researchers to connect with continued to see strong interest in dividend fresh frozen within the discovery research community.
It's clear that the vision that now the established leader in spatial discovery research. This platform remains very early in its lifecycle.
Well continue to support adoption of spatial analysis, we have hired a new team of dedicated tissue support specialists and they're using customer feedback to optimize experimental protocols enhanced current products and develop new products.
And as part of our focus on advancing the field of spatial biology, and ensuring our customer success, we convened our first annual spatial symposium last month.
This event showcased how leading researchers including members of the connect genomics clinical translational research networks are harnessing the borrowers faithful trusted pemex to reveal new biological discoveries.
Now before we turn to our longer term opportunity I want to share a few thoughts on the current operating environment.
We have a very collaborative relationship with our customers and we believe this gives us a unique perspective into new trends and some of the emerging complexities, we're seeing in the marketplace.
Why labs are largely open many of our customers continue to navigate second quarter COVID-19 related challenges that are affecting productivity.
I'm a readily apparent such as Covid related operating protocols supply chain constraints and labor shortages that reduced staffing levels and formal and informal training opportunities.
Others are more subtle for example, COVID-19 has impacted the ability of the research community to connect collaborate Tim conferences share best practices.
This is a good connectivity helps the proliferation of new technologies, such as single cell and spatial tools.
While we expect these challenges to persist into 2022.
We remain confident in the strength of our market demand for our products and the long term opportunity we'd ever had.
We believe there are well over 100000 labs globally available to Capex and two thirds of them put immediately leverage our existing portfolio to advance their science.
We have penetrated less than 10% of these labs pointing to a substantial opportunity to bring additional apps connects ecosystem.
Additionally, we believe there's a long runway for growth to increase usage.
Within our existing customer base as many customers currently use our products for just a fraction of their research.
Finally, our products will help to expand the amount of funding available to researchers by increasing access to more grants at the larger Graham as single cell is increasingly becoming the standard for publication.
Okay.
We have made great strides realizing those opportunities. So we have established a broad base of installed instruments, representing a firm foundation for future growth.
To date, there has been one of 3000 publications featuring our products.
One of the central learnings from all of these papers and perhaps the greatest regulation of the last several years of biological research.
As the pervasive cellular complexity that underlies just about every biological system.
It turns out that every tissue harbors much greater diversity of cell and cell types than we had thought all of them interacting with each other in a complex interplay of massive gene expression networks.
Furthermore, the focus of much single cell research has recently moved to understanding the implications of the celadon complexity on disease entity.
I believe the implications of this is still very much underappreciated.
To understand biology, and made progress in addressing disease, we need to measure biological samples with single cell contacts.
We expect that in the future all tissue samples Weatherford based decreases over clinical diagnostics will need to be analyzed at single cell resolution and at large scale.
Since the early days of this vision has driven our investment priorities beginning with a common platform, which is the established leader in single cell analysis.
We see a similar opportunities for spatial biology, and justice with chromium, we're making substantial investments in our vision and forthcoming in situ platforms to fulfill their potential.
From the beginning we are focused on developing a broad set of durable and differentiated capabilities that we believe will come from any particular product and continue to fuel our growth and success over the long term.
Moving forward, we expect to accelerate our investments three key areas.
First in RMB to develop more breakthrough technologies and market leading products.
Second in our global operations to deliver differentiated products fortify our supply chain and anticipate future growth and third and scaling our commercial organization globally to enable our growing customer base and expansion into new customer segments.
Let me provide more detail on each investment priorities, starting first with R&D.
And then next we're intensely focused on innovation, it's core to what we do.
Since inception. This culture of innovation has yielded a strong cadence of technological advancement in product development launching over 20 pioneering products, resulting in a broad intellectual property portfolio of over 200 patents and patent applications.
Those velocity of innovation development and execution is a testament to the incredible cross functional talent we have cultivated.
Today.
We have deep expertise across a wide range of disciplines from biology, chemistry, and Microfluidics to hardware engineering being analysis and software development.
This down to supported by a robust product development infrastructure focused on.
Integration across these diverse disciplines.
Our foundational strength was truly differentiated about timex. These integrated core capability, which are central to developing the breakthrough products and technologies and our pipeline.
Yeah.
Looking ahead, we plan to increase our investments and build out our R&D capabilities across our three complementary platforms.
The chromium, where you'll make it get it on ambitious product roadmap, we have outlined over the last two years.
Additional enhancements in the future to increase access and improved usability.
This includes our new fixed RNA profiling kit for gene expression, which we expect to launch in early 2022.
This product addresses a key request from customers and adds flexibility to the chrome and workflow.
By allowing visitors to fix their samples of tissue collection, our customers will be able to optimize how they progress through their experiments by aggregating samples overtime or collecting samples from distributed sites.
Vizio is much earlier in our slide cycle, and we're excited but it's rich product pipeline.
Next year, we plan to that high Plex protein analysis of lithium VR antibody Ali good technology, yielding true multi omics.
We also expect to launch our <unk> instrument to automate the process of applying <unk> tissues monitored on standard class slides.
This will enable researchers to access additional bank F&B tissues or polo existing tissue handling protocols common and pathology course.
Lastly, as the visit image D. We will enable true single cell resolution on our vision platform.
While other high resolution spatial analysis technologists are often limited in our ability to offer high plex measurements.
Zoom HD will access the entire transcriptome across the entire tissue sample at single cell resolution.
We believe this product will represent the single best platform for special Discovery, and translational research and we intend to bring it to market next year.
Moving to the second area of focus we're making substantial investments in our global operations to deliver differentiated products fortify our supply chain and support the long term growth trajectory of the business since the beginning we haven't had the type of relationship between our operations and R&D teams.
We believe this is essential to our rapid speed of innovation and the ability to develop highly differentiated products.
We are proactive in managing our supply chain and continued leap is validating our ability to source key components.
We also recognized a when we invent technologist.
World has never seen before you often have to invest novo manufacturing capabilities to go along with that.
For instance, with Wyndham HD, we developed a new proprietary approach for manufacturing micro arrays, which enabled smaller features and single cell resolution on our volume slides.
We are incorporating this technology into our existing manufacturing capabilities to support <unk> upon launch.
We believe initiatives like these are essential to supporting our growth and our new product roadmap.
Brokers, thus far in 2021 has been encouraging yoga continued to be vigilant in light of emerging challenges in the global supply chain.
We remain on track with the development of our new manufacturing operations facility here in Burlington and just last month was able to visit our new state of the art manufacturing commercial hub in Singapore.
We expect to accelerate our investments and grow our global footprint as we move into 'twenty to 'twenty two.
And finally moving to our commercial organization, we remain intensely focused on providing a superior customer experience.
We have built a best in class commercial team and our ability to sell and support diverse high content genomic technologies is unmatched within our industry. We plan to build on our momentum and continue to scale, our organization to effectively enable and engage our customers globally.
We're also adding customer support specialist with deep technical expertise in areas, such as tissue analysis automation and bioinformatics.
These team members will help to ensure that our customers are successful in designing and executing their experiment as.
As we add to our product lineup and access to new customer segments.
We have made great progress so far this year and we remain on track to meet our current growth for 2021.
Stepping back we started the company with a premise that improving human health requires an exponential increase in our understanding of biology.
The main challenge to understanding biology, because it's enormous complexity.
To address this complexity, we set out to build technologies to measure biology at the right resolution and a massive scale.
Catalyze the single cell resolution, which over the last few years reveals a cellular heterogeneity in the pervasive feature of all human tissues.
We unequivocally see a future where every tissue should be analyzed with single cell and spatial context.
And we're developing a suite complementary platforms chromium museum and in situ to deliver precisely that future well, there's four basic science professional research clinical diagnostics.
There is a vast set of opportunities ahead, and we will continue to develop the global scale multidisciplinary capabilities and advanced technologies needed to accelerate the master of biology in a bounce from a cogs.
With that I will now turn the call over to Justin for more details on our financials.
Thank you Serge.
Total revenue for the three months ended September 32021 was $125 3 million compared to $71 $8 million for the prior year period, representing a 74% increase year over year, and an 8% increase quarter over quarter.
The current operating environment remains complex with many of our customers continuing to grapple with the ongoing effects of COVID-19, specifically the reinstatement of Covid related operating protocols.
In recent months second order Covid effects have emerged these include supply constraints and critical plastics, and reagents, especially to our customers and labor challenges, reducing staffing levels and training for new investigators.
We believe these second order COVID-19 effects impacted our customers' ability to efficiently perform their experiments and subsequently impacted our consumable revenue for the third quarter.
We expect these impacts to persist into 2022.
In spite of this challenging environment, we saw solid demand for both consumables and instruments this quarter.
<unk> revenue was $106 1 million, which increased 75% over the prior year period on continued demand for our single cell and spatial consumable products.
Instrument revenue was $17 1 million, which increased 77% over the prior year period on the back of the impressive launch of the chromium X series instruments.
Service revenue was $2 1 million, which increased 30% over the prior year period.
Moving now to regional results revenue for the Americas was $70 2 million, increasing 66% over the prior year period.
EMEA revenue for the third quarter was $25 8 million, increasing 67% over the prior year period.
Finally, APAC revenue for the third quarter was $29 2 million, increasing 110% over the prior year period.
Turning to the rest of the income statement.
Gross profit for the third quarter was $108 million compared to a gross profit of $57 $4 million for prior year periods.
Gross margin for the third quarter was flat year over year at 80% as the impact of product mix was offset by a decrease in accrued royalties related to the bio Rad agreement in line with our expectations.
Total operating expenses for the third quarter were $116 7 million a.
A decrease of 5% from $122 7 million for the third quarter of 2020.
The decrease in operating expenses was primarily driven by lower in process research and development expenses.
Compared to the third quarter of 2020.
Which included a $46 million million dollar charge, resulting from the acquisition of Cortana.
This decrease in operating expenses was partially offset by increased personnel related expenses, including stock based compensation increased costs related to materials facilities and technology to support operational expansion and increased marketing expenses related to conferences and seminars.
R&D expenses for the third quarter were $54 6 million compared to $30 1 million for the third quarter of 2020.
The increase was driven by $15 million of increased personnel related expenses, including stock based compensation of $5 million increased expenses related to buy materials supplies and equipment and a $2 $9 million increase in expenses related to ITC and facilities.
SG&A expenses for the third quarter were $62 1 million.
Compared to $51 $5 million third quarter of 2020.
The increase was driven by $15 million and increased personnel related expenses, including stock based compensation $2 $5 million in marketing expenses, and a $2 $3 million increase in expenses related to IP facilities, partially offset by a decrease of $8 $9 million of outside legal expenses.
<unk>.
Operating loss for the third quarter was $15 9 million compared to a loss of $65 $3 million for the third quarter of 2020, primarily due to the impact of lower in process research and development expense.
This includes $26 million of stock based compensation for the third quarter of 2021 compared to $13 8 million.
For the third quarter of 2020.
Net loss for the period was $17 $2 million compared to a net loss of $65 $8 million or third quarter of 2020.
We ended the quarter with $604 million in cash and cash equivalents net of restricted cash.
The decrease in cash from the prior quarter includes the impact of increased capital expenditures related to our global operational expansion and a portion of our payments to bio Rad as part of the settlement agreement.
We expect elevated capex moving forward as we continue to scale our cooperations.
Now turning to our outlook for the remainder of 2021.
We believe that we remain on track for a strong finish to the year.
Now expect our full year 2021 revenue to be $490 million to $500 million.
Representing growth of 64% to 67% over full year 2020.
Thus far in the fourth quarter, the operating environment remains complex our customers.
We are continuing to experience supply constraints and critical plastics, and reagents and labor challenges impacting staffing levels and training of new investigators.
While we believe that these issues are ultimately temporary it's likely that they will persist into 2022.
These challenges are not unique to our customers and we are seeing additional constraints in obtaining certain key components for our products and R&D activities, such as electronic components pipette tips and other plastics and reagents.
While we have been proactive in managing our supply chain and to date have not experienced any material impacts there is an increasing amount of downside risk related to the global logistics and supply chain and current supply constraints may limit our revenue upside in the near term.
Despite these temporary challenges are the larceny of innovation and pipeline of new products remains unmatched and we are continuing to invest aggressively in our commercial and operations teams.
Our prospects remain strong and we have incredible conviction in the long term trajectory of the business.
At this point I'll turn it back to search.
Thanks, Justin.
Before we open the line for questions I want to thank the tenants team around the world for their drive fashion and intense focus on our mission.
They're doing a profoundly important work and their ongoing commitment and litigation is both passive and inspiring.
As we look ahead.
The opportunities before us are both clear and compelling the answers that he manages most pressing health challenges will be pumped and understanding of mastering biology.
We're early in this journey and fully expect to next to lead the way and pushing forward with the frontier scientific knowledge.
With that we will now open it up for questions.
Later.
Okay.
If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind its a stall followed by tape when asking your question. We ask that you. Please limit yourself to one question and one follow up thank you.
The first question comes from Tejas Savant of Morgan Stanley. Your line is open. Please go ahead.
Hey, guys. Good evening, just one quick question for me for you Justin in terms of the bump in the guide at the midpoint I was just curious as to what's driving that was it an improvement.
Month over month on the Covid front or was it more related to.
The consumables on some of these newer chromium send the workflows starting to ramp or is it just all instrument upside because the instrument number did come in materially higher versus our estimate.
Yeah. Thanks, Hey, just there's a lot of factors that go into where we ultimately choose choose to guide to and where we ultimately choose to update our guidance in this case.
We are placing more instruments than we had originally planned.
There was a good amount of instruments that were that were shipped in Q.
Q2, and then we also saw following in Q3 strong demand for both the chromium.
Strong demand for launch the chromium X series instruments IX next together so.
So really instruments.
Primarily the.
The driver behind that.
Got it and then a quick one on margins here in Louisiana as well so first on vision in terms of the FSP launch Serge.
Can you give us some color on sort of the month over month momentum do you think those customers who are sort of pushing out of purchase as they wait to perhaps evaluate the HD launch.
In early next year.
Then on the margins Justin can you share some color on what you're baking in for an inflationary pressures in some of the increases in freight costs and so on as you look to 2022.
Yes, I'll go first thanks, Serge ourselves vision is also on the definitely we launched stuff will start shipping at the end of Q2 and the product is falling.
Sometimes that's very typical of our products, where there's initial pent up demand because people work through.
Yes.
Just up to speed on our product.
And then new sort of grows from there. So it's growing is going well, it's going according to our expectations as far as H <unk> and petrol based on our customers' yes. There is some people who are only kind of anticipating the arrival of as HD.
I'm not sure at this stage caused a massive effort, but it is it is there and it's something we're definitely hearing fairly consistently.
Yes.
Hey, Josh as far as as far as margins going forward, we arent, we arent guiding anything for 2022.
This time, we are seeing pressure from suppliers on on price increases our primary concern right now is to make sure that we have the right amount of supply secured.
But depending upon how we choose to handle things on with pricing on our end will share future information on our margin outlook going forward when we shared 2022.
Guidance on our next call.
Got it I appreciate the color guys. Thank you.
The next question comes from Don <unk> of Stifel. Your line is open. Please go ahead.
Good afternoon, guys. Thanks for the question Serge or Justin on the operating environment. This is probably a tough question to answer so apologies in advance I suppose but just given that it feels like COVID-19 is going to be around to some degree or another for a while and to your point, you're expecting that headwind to carry into 2022.
I'm just curious to get your thoughts on the threshold that we should think about for you guys.
The factors that are most important in order to sort of have COVID-19 go from something that needs to be called out to something thats, just sort of background noise akin to what you have broadly across the space. They thought there would be really helpful.
Yeah.
Yeah, It's a it's a challenging question to answer given that it's a number of factors and they're not yes, none of them would pull out this first order effects, but they're all kind of a it's a combination of second order effects that are often times cell. It's subtle right I mean, there's obviously.
Kind of the.
Let me guess orange as a patient.
You're buying hydro because but we do have a fairly diverse set of customers that are buying.
Some just totally new customers just want to kind of go get on board with the right technology, but also existing customers who are sort of what they have budgets don't want a future proofed anticipate wanting to do with maybe in the future.
[noise], so definitely across the board.
[noise] [noise], okay very good thank coach.
The next question is from Derek Japan, a fan because America. Your line is I P. I N. Please go ahead.
[noise] great. Thanks for taking my question. This is micro skin on on for Derek just maybe one for you to start realize there's a lot of moving pieces and that instruments number, but any clarity you could give us on placements or a S. P. As it sort of came in especially relative to three.
Relative to cure we saw in prior years, just to help us build out the model given all the moving pieces on E. S. P N and in the next coming in.
Oh ESP has come up.
Due to the mix you know most of the instruments. They were they were shipped this quarter, where the regular coming in control or chromium X and I X and then and chromium connect was a was a smaller per se, but with the addition of chromium I X and they come in X coming into the next in addition to the crummy connect as well we've got.
<unk> the average ESP right now above roughly 60000.
And as far as parsing out those instruments individually will be will share more on placements in.
Or at least the actual placement number when we reported you're in.
But we are placing more instrument, okay in general all and we had originally anticipated going into this year.
Okay. That's really helpful. And then maybe another quick one on on the accident I ask the following up on on dance questions. Just now I think [noise].
Anything you're seeing in terms of cannibalization are sort of how people are and incorporating those instruments relative to to.
Chromium a relative to the connect just thinking about how that could translate into you the utilization trends down the road as installed base gets bigger.
And so for chromium IX an accident.
The primary instrument for most customers to order with eds in N. I X really provides an opportunity for them to help future proof against the need that they might have in the future to run to run high throughput and as far as looking at usage for the ex now.
We can look at.
Orders of high throughput kits and how that attachment compares to the chromium X orders and also look at the medium throughput kiss as well and what I can share right. Now is that we've got some customers that are ordering high throughput and have a need for high throughput and that's hoping to drive demand for the for the S. And then we have other customers that have ordered a chromed.
Next and are using it with medium throughput in summer existing customers that are replacing their chromium controller with the chromium X getting their instrument getting their experiments up and running on that anticipation of a future need for high throughput, but are using medium to put today.
[noise] [noise], okay, great. Thanks, so much I'll get back in the queue.
The next question comes from Patrick down any of city. Your line is eight and please go ahead.
Hey, guys. Thanks for taking the questions just maybe another one on on the kind of go forward. You know, obviously intraquarter you guys came out and sounded a little a little softer come out of August clearly things to improve quite a bit September October you know I guess can you just talk through the moving pieces I mean, it seems like the numbers.
Sells for 40, you are above expectations your tone, and maybe suggesting that there's just mix things, but you know just kind of curious how you're feeling about the environment, what the real puts it takes or I mean, obviously supply chain stuff from Covid seemed like the biggest overhang, but it doesn't seem like an overly conservative numbers here is supposed to be feeling pretty good I just wanted to talk.
You got a little bit.
Sure, there's there's definitely an increased amount of risk.
Overall in the in the supply chain.
Above and beyond what we've seen in the past and so that's a concern that's a concern going forward. There's the impacts of of Covid that we've talked about on basic.
Basically lab efficiency of our customers and then the second order impacts of them being able to get materials that they need to run experiments and then also having the labor available in the lab to execute running the experiments and we've seen customers impacted by that and so really relate that has an impact on our consumable revenue overall.
Now as far as instruments go.
Instrument budgets capital budgets are are flush right now demand for instruments remains remains strong.
You know looking back at Q3, we had a launch coming up for chromium X. The month of August [noise]. It was lower than we expected and we hadn't yet moved into where customers were making the decisions you know the final decisions on them, an extra or not and so.
We had a we had a light we had a light months in in August and then there was upside in September primarily driven by instruments shifts.
And so that's the best that's the best I can describe it and then going forward as we look at Q4 I think that we're still gonna have we're still gonna have those those headwinds on consumable revenue for the reasons that I mentioned.
There is the risk around the supply chain, which we are doing our best to manage that effectively and mitigate that mitigate that risk, but the demand for instruments remains strong and.
Overall, taking all of that into account.
We feel good about where we've updated our range and barring anything completely unusual you know, maybe a standstill and supply chain or something like that we feel good about what we're gonna do it.
Okay, well, that's encouraging and then maybe on a consumable side can you just talk about kind of a pull through ramp on new instruments. Obviously, you guys place place a bunch last quarter and then can you just talking about how long it's taken me for them to kind of get up to speed I think just you know.
Trying to figure out how deluded, they orange kind of overall number initially and then secondarily maybe for Brad just just would love to hear about customer tone out there, how how receptive folks aren't going to get back in the lab and getting things come back full speed.
I would say in general and from what we've seen the ramp is taking a little bit longer for the new for the new customers for the reasons for the reasons that we've mentioned and we also have an increasing amount of new customers that we're adding just due to the changes that we made to the.
Romeo.
The regular chromium controller pricing and then the introduction of the of the X as well so.
Slower slower overall.
Yeah, and then just adding a general customer sentiment I mean, I think most people are getting sort of tired of operating in this environment and but the other side of it is the opportunity to get back with their colleagues to get back for us to get in front of our customers is really changing the whole tone and it really underscores what we miss when we.
Went to a completely virtual room. So overall, it's positive I mean, there there's a lot of focus on the science and getting a lot of the things that we helped generate and created a lot of interest in.
And is Serge described there's some challenges and some of the subtle aspects of the ecosystem around Howard products get used and how customers gaining confidence inspiration from each other but we're weathering that and.
[noise] again, but most people are are are careful not to assume to be too much positive because we've seen any change fairly quickly.
Maybe maybe I can add to that because.
I actually happen to be able to go into the field with a burst on them.
A long time, and so a little bit of some impressions meeting customers, great just personally again being able to go and see people.
Definitely like really strong fundamental enthusiasm around products around these applications wrong single cell in general people are.
You know you kind of hear about people planning to scale upset is starting a new studies new people comments coming until you've been system I was kind of more of the I mentioned this on the call kind of a small research or I'm clinically oriented questions do so all of that I think I just kind of feels good around the fundamentals, but then there's also kind of this overlay of.
The only service drug tests on the lack of what they like they sent them ecosystem of this is this is kind of a new variable that I haven't been tracking before is the fact that the way there's a lot of new customers get trained on single cell is by previous by that are established signal. So users can I'm getting them on to laugh trailing them things training them in in general that's how a lot of side.
Done, but depot colleagues cell to each other go to conferences slobs interacting with each other and a lot of that has been severance for the last 15 months.
And so figuring out the effects of that.
It's a new variable are items available specific around growth.
New technologies as opposed to restoration of activity, which was there I mean, it allows them back and.
Doing all right, but it's going to be something going to have to watch. So there's definitely sort of this overhang of.
Right just the environment being like restricting people are eager to do science.
Would that sort of overlay of government.
That's helpful. In fact that thanks Serge.
Okay.
The next question comes from David Western back escaping High Security is your line is eight and please go ahead.
Hi, Thank you for for taking my questions I'm Gonna piggyback on that last one here can you just maybe talk about a enthusiasm to maybe not shut down and in terms of kind of a project that there are there are assigned maybe I should say funding that they're accessing I mean are you really seeing now.
A post COVID-19 it kind of a research grant world and starting projects, which really.
Kind of don't seem like they would be put on hold again in the future or is there still sign us some of that hesitancy left in your customers.
Oh [noise].
Yeah, I'm not sure if I.
You have enough samples.
So I have to do.
Two comments.
With full conviction I mean, I system has been set out there I mean, the first orders people are first sort of thought glad people are kind of eager to go forward. The designs. There is an overlay of there are some amount that doesn't don't see it I think it's sort of probably somewhat geographically dependent you. Just can't you just have a lot more than saying right now that you did before.
Sure right again, what is supply chain, whether it's labor shortages people cord like single cell, let's just leaving loves him.
Not being around or whether it's not being able to communicate and when he needs a coordinated sample arrival.
Running.
Conducting experiments and analysis, just does all of that being somewhat more challenging.
Yes, David maybe I'll add just another side I think for awhile. There. There was the thought of a lot of research dollars are gonna be shifted to Covid related research and.
<unk> flew level of uncertainty and I think what we've seen maybe in the last two quarters as the realisation that a lot of those insights has already been determined and so what we see now a lot more of customers now projecting a future where they're back to their research. They can see where their grants are and and generally there is.
Less money than specifically earmarked for Covid research and back to sort of a general improvement and understanding of fundamentals of biology, which is kind of where we come in.
[noise] got it down it that was all really helpful. Can you talk about maybe some of the sub cohorts for chromium acts I know you've sat in the past you know this is the top 10% of customers that use it but and any thoughts to what <unk> sub cohorts might be like a first order and kind of what I'm getting at is is this really a C.
Service provider first or maybe it's just the core lab first I mean, where is there a certain geography's first just you're just trying to see how that that that that launched cycle might play out in Ah I'm done after that of course.
And then I'll I'll I'll take that generally we fought.
[noise] play out exactly as you described but it's really across the board and generally all of our customers pharma academic.
As I think Serge talked about it and.
His prepared remarks it was.
You know broadly adopted for for people that absolutely thought that they needed it and it had actually experiments and involved in so we bought the Ht Kid as well and then we have other people that like some of the August telemetry and the connectivity of it and see how they can integrate that in future uses so overall.
Broadly applicable, but obviously with this sort of earmark around that H T can to drive this full performance.
I appreciate you guys could you got a ton of great quarter.
Instead of.
The next question comes from Don Brennan is Colin Your line is eight and please go ahead.
[noise] great. Thanks, Thanks for taking the question guys I.
Quite so it's pretty high level Orange faithful can you just walk through a little bit on the competitive environment. There. Obviously, you've got you know one notable public company, but you know there's a handful of private companies to do all that are coming out. So just maybe it's a very large market, where early which is kind of what are you, saying there in terms of the competitive.
And how are you feeling.
Yeah. So that has been over the course of the saucier there has definitely been.
And the emergence of a lot of smaller companies kind of coming into the general in situ technologist space I think it's.
Yeah, Yeah that sounds as Dubuque suddenly because the market has become very limited market potential has become very clear to people and but at the same time. All all of these companies are very early and both of them. There in terms of the aspirations in in terms of the practical sort of place.
The market.
We always take competitor seriously at the same time recognized again. This is very early and I was going to focus on on our yard dumpsters wishes innovation and focus on customer experience.
Being and are in situ platform in our special in the vision bathroom feel very really good about where those are good where are those going to come out and how they're going to be position and uhm. That's ultimately kind of what I was going to play out for us. So I feel very good about our our progress.
And what to expect going forward.
Great. Thank you for that and then in terms of.
Good good trying to one I think there was a question earlier in the call, but maybe.
It wasn't directly addressed but in terms of bringing the price down and expanding Pam on kind of a single cell took maybe can you speak to a little bit about how much of the market that opened up for you and in terms of you know is there is there any not concerned, but the fact that you're needing care or wine to bring down the <unk>.
<unk> is there any negative connotation to that in terms of the opportunities that with your existing customers who are <unk> excuse me who are more hyper <unk>.
Yeah. So if you. So if you would like to just kind of two to clarify here the when when people look at the pricing. The thing that was really important to customers is present.
Burma consumable price or the advise really a lot of the decisions for for adoption.
And we haven't dropped the price of neuro consumables, north north or core reagents decided they can sort of drifting up what we have done is lowered the price for his date of once while making the experiments, especially on the highest kind of a high on a side of things more more extensively.
So the idea is you'll do spend less for example, but you spend more in total by writing more samples or writing more cells right. Those are the product configurations. We'd have released recently so that is still subject capturing more more of the top and while while just being able to kind of creating a path for new people.
To come into the the system and police.
New people coming into the ecosystem in particular or at least a little a duplicate two which which is actually higher cost for for a data point, but lower cost for experiment now it is not it is not in any way mental or.
Functional can have what kind of lighting annual the higher.
Research or me any of our current customer research is enabling the new people to come in or more frequently for existing customers. So try kind of trying new studies before try new extreme.
Experimental protocols.
Before applying a sort of standard gives to the to their studies.
So I think.
We have and we expect to continue to do sort of have are taken any of that too that sounds.
That sounds great. Thank you.
The next question comes from that Sikes of Goldman Sachs. Your line is Eitan. Please go ahead.
Hi, everybody. Thanks for taking my questions, maybe just going back to the gross margin for a second just and you you you always talked about the lower crude royalties from the bio rights litigation, but that that was offset by the shifting product mix [noise] could you maybe give a little more details on the various puts and takes in that product mix shift in terms of specific products or the details you can provide.
Sure so.
First of all.
Our new products in general have slightly lower gross margins in our existing products on.
On the consumable site and so.
Products like busy is that because.
Of the overall.
Overall revenue.
There can be that can pull gross margin is down a little bit, but the bigger impacted on the instrument side, where the chromium connect and the chromium I X and the chromium X.
I'll have a lower gross margins at higher revenue points.
Then the chromium controller.
And so as those become a larger.
Larger percentage of our overall revenue that's gonna help drive alright, that's going to contribute towards bring.
Bringing gross margins download it.
Got it thanks for that and they just maybe tying up on on one of Pat's questions earlier, and just about the lag from the new instruments in terms of consumables I mean, obviously positive commentary on an instrument placements, but as we as we kind of think about it.
Including the supply chain constraints with your customers is it fair to assume that lag might take a little bit longer because you. You you had the new instruments ramp up plus the supply chain constraints. If we assume those persistent at 22 as you said.
Yeah that makes them I think that's I think that's reasonable I think that when you when when you look at some of the impacts that we're seeing or call them. The <unk>.
Second order Covid impacts.
It's impacting growth.
More so that it is impacting.
The more stable part of the visit served with a more stable part of the customer base. So.
I do think that's reasonable chosen.
Alright, Thanks I appreciate it.
The next question comes from Tai Chi Pizza, It's J P. Morgan Your line as I said. Please go ahead.
Hi, Thanks census, Juliann I tie call apologies if any of these questions have already been asked S. My line kept dropping how're you may have a castle pavarotti starting on that supply chain, you don't see any impact on our customer asking a neighbor to get Aluminous little south to run back and goes back.
<unk> you know like just give them down with a pretty high profile development during a corner and how do you guys contemplate that far too bad.
And so hi, Julia this is Justin we.
We did make some comments earlier around customers were struggling to get critical critical reagents to perform their experiments and so when you mentioned that that is part of the customer workflow that they're using and that's been published other sources as well and so you know we've seen evidence of that.
We've read the reports on it so.
That is a headwind going in is something that we considered along with a lot of other factors and how we guided for the rest of this year, but I wouldn't say that that's a.
It was the only factor or the most the most important factor, but it was definitely one that we consider.
Got it in my account and then last quarter I think he had 100 and come out next can I plant due to what customers perceived to be a one time promotion and now that the price cut on call me Internet is permanent how much terrible elasticity did you obsess into the queue.
Yeah. So there.
When we look at the queue to results. It was a mix between a pull forward and also just reaching new customers at the new at a new price point in retrospect, I think that you know.
If you're just looking at cue to the bigger impact there was the pull forward for customers that were already basically in the in the purchase cycle, but in Q3. We also had strong demand at the new at the new price point, considering that we that we had to pull forward a demand out of Q3 into Q2.
And we also had.
Really strong reception for the chromium for the chromium excellent as well so.
Just look at quarter over quarter rare.
Revenue from instruments.
Slightly.
Could say it was just about just about flat so.
H, a strong compared to a competitive with strong Q2, and then just because because the revenue was flat and the chromium X next had higher price points in the currently a controller.
You can assume that we place less units overall from in Q3 compared to Q too.
And how far thank you.
Seven nights at the questions on the lines at this time. So this concludes today's cool. Thank you for joining you may now disconnect your lines.