Q2 2025 10x Genomics Inc Earnings Call
Hello and thank you for standing by. My name is Tiffany and I will be your conference operator. Today at this time I would like to welcome everyone to the 10x genomics. Second quarter 2025 earnings conference call all lines have been placed on mute to prevent any background noise.
After the speakers are marked, there will be a question and answer session.
If you would like to ask a question during that time, simply press Start. If the number 1 on your telephone keypad, I would now like to turn the call over to Cassie Corneau, Investor Relations and Strategic Finance. Cassie, please go ahead.
Thank you and good afternoon everyone.
Earlier today, 10x genomics released Financial results for the second quarter ended, June 30th 2025.
If you have not received this news release or 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 table of the company's website, connection.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 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 issue today and in the documents, and reports filed, by pennex, genomics from time to time with the Securities Exchange Commission.
Senate genomics, disclaims any intention or obligation to update or revise any Financial projections or forward-looking statements?
Because of new information, future events or otherwise.
Joining the call today are searching off our CEO and co-founder and Adam Tate, our Chief Financial Officer.
We will host a question-and-answer session after our prepared remarks.
We asked analysts to please keep to 1 question so that we may accommodate everyone in the queue.
With that, I will now turn the call over to Serge.
Thanks, Cassie, and good afternoon, everyone. Today, I'll cover Q2 performance and share updates on what we're seeing across our customer base.
I'll also walk through a recent business development before handing it over to Adam for the financial review and Outlook.
Photo of revenues for the second quarter was $173 million during the quarter. We settled our worldwide patent litigation with Bruker on favorable terms and recognized an upfront payment of $68 million that we allocated to both operating expenses and license and royalty revenue.
Was 146 million.
And as we continue our focus on cost management, we increase our cash, balance by $20 million during the quarter, not including any settlement related payments, which began in Q3
The current funding environment remains challenging and highly uncertain, in particular. The academic funding landscape remains marked by shifting policies, weaker grant disbursement, and a lack of clarity around future budgets.
All of which are contributing to Extended project timelines and cautious customer spending.
We're staying closely aligned with our customers to support them and remain. Flexible as we all navigate the uncertainty,
against this challenging backdrop, the current quarter played out largely as we anticipated,
We saw some upsides from strong performance in China, which was driven in part by purchasing Dynamics associated with the timing of terrorists.
even in the difficult environment, our business fundamentals are solid and the key positive drivers of performance that we've seen recently carried through into Q2,
We continue to see solid signs of underlying single-cell demand on the consumable side. While revenue was down year-over-year, Chromium reaction volumes grew both year-over-year and sequentially, indicating an increasing demand for our solutions and single-cell products more broadly.
This growth was driven by robust adoption of our latest products, including gmax, flex and Universal on-chip Multiplex.
Which have been instrumental in lowering cost periods in enabling larger scaling and opening up new applications.
Additionally, we saw meaningful year-over-year and sequential growth in spatial consumables revenue and volume within spatial zenium, consistently serves as a strong driver of growth and performance. Utilization per instrument continues to grow reflecting, both higher number of runs and increase spend per run.
We're seeing continued Ram, across both our earliest adopters and in our customers and regularly receive strong feedback on the new Superior data quality, accuracy robustness throughput and ease of use.
Together these qualities, continue to submit them. Apart is the best in-class platform and the fueling broad adoption across both basic science and translational research.
We continue to monitor customer sentiment closely as the funding environment, remains highly uncertain.
While the US academic and government funding landscape has no, deteriorated further. We also have not seen meaningful Improvement in customer Behavior.
Across many institutions, spending remains conservative and Capital Equipment, spending continues to be a significant challenge.
Both in the US and more broadly around the world.
Customers are facing increased scrutiny on purchases longer, approval timelines. And in many cases, new restrictions on Capital spending and Staffing within their labs.
These challenges are leading to delays in Project starts to scale back in both ongoing and pilot studying design and heightened price sensitivity.
With open proposals around next, year's Federal funding and institutional budgets still in early stages. We expect these uncertainties to continue impacting customers spending behavior, until there's greater Clarity on the policy Direction and actual distribution of funding resources.
As customers work through evolving project timelines and operational planning Cycles, we're partnering closely to help them navigate this environment and support continuity of their research.
And despite this backdrop, we continue to hear clearly there are tools that are essential to Scientific progress.
Our conversations with customers reinforce our conviction, that single cell and spatial are the most promising areas of growth in life science tools.
With researchers, increasingly shifting, both mind, share and funding toward these areas.
I was researchers increasingly invest in these Technologies. We are prioritizing our efforts to advance our technology leadership. Unlock new, high value applications, and ensure the long-term Financial strength of our business.
Looking at across our product roadmap, our recent, and upcoming launches are continuing to resonate with customers.
During the quarter, We Begin shipping busy mhg 3 Prime which expands the capabilities of the business deep portfolio by extending into more applications.
HD cell segmentation capabilities, which enables researchers to assign transcripts to individual cells, with Precision, simplified data analysis, and uncover new biological insights.
In parallel we're also preparing for the release of several important Innovations across spatial including busy mhd Excel and xenium RNA plus protein which will further enhance multiomics, spatial analysis and unlock deeper insights from complex tissue samples.
Turning into single cells. I'm really excited about Flex V2. Our new play based, chromium flux product that we expect to launch in the near term.
Built to dramatically, increase throughput and streamline work flows. Flux V2 provides ultimate flexibility for customers when designing their experiments.
This next-generation Flex is an important step as we continue driving lower costs across the full spectrum of studies, from small to large, while maintaining the highest quality data.
What we do is designed to be the ideal method for large scale, perturbation experiments, and by far, more applications from early Target Discovery to clinical trial integration, delivering higher self. Throughput more flexible, workflows sop sample, compatibility, and the quality needed to train and validate AI models.
In addition to the launches planned for this year, our team is hard at work on future products that will further expand the capabilities of our platforms. We are excited about our roadmap for the coming years and the opportunity to deliver even more value to an increasing number of customers.
As we look at the broader opportunity, we continue to believe that both single cell and spatial are in the early stages of the adoption. Curve with large scale. High impact applications, gaining traction across both platforms
In particular, I'd like to highlight 2 very exciting trends.
Large translational studies using Zoom and large scale. Single cells, perturbation experiments to train AI models and build virtual cells.
As an input metric example of the first trend, we recently announced a collaboration with the Genome Institute of Singapore on a tissue map initiative aimed at accelerating the discovery of drug targets and biomarker signatures in cancer and inflammatory diseases.
This study will use genium to enable high resolution spatial mapping of gene, activity and cells within impact. Fsp tissue samples paired with detailed clinical data
His goal is to analyze, thousands of samples to discover clinical relevant, biomarker signatures and therapeutic targets.
On a single cell front. They emerge, as of increasingly powerful AI methods that are hungry for high quality data is accelerating researchers interest in running larger and larger single cell perturbation studies.
For example, this quarter, Zyra Therapeutics use, our chromium Universal 5, Prime essay and its industrial expiratory workflow to produce the largest publicly available genome wide perturbing data set to date, capturing transcriptional responses across 8 million perturbed cells.
This quarter. We also extended our partnership with The Arc Institute to support the virtual cell challenge, which is a worldwide competition. To incentivize the development of powerful computational models of biology
The challenge has established a rigorous evaluation framework and uses our Chrome, and flex as a as the standard.
The work being done right now is clearly just the beginning virtual cells and large scale. Single cell experiments represents the next Frontier at the intersection of AI and biology.
To understand biology to understand health and to understand disease. You need to understand how cells work. We can model cells and perturbations computationally using AI. We can guide the discovery of new drugs stimulate patient responses, and reduce the experimental trial and error that defines so much of biology and Drug development today.
Finally, we remain focused on cost management and cash generation.
We have a strong balance sheet and results of productive.
Across our business. We continue to carefully evaluate costs to ensure operational efficiency. While also continuing to invest in long-term growth,
And continue to feel innovation.
To that end, as part of our strategy for continued Innovation within single cell we announced earlier today. The signing of a definitive agreement to acquire scale biosciences.
The acquisition brings us key inventions and technologies that will accelerate Innovation across our Chrome and platform. It enables us to broaden access to single cell analysis by making it more powerful, more affordable and more accessible to researchers worldwide.
By integrating these Technologies into our broader road map. We're strengthening our ability to support larger scale applications while continuing to deliver at the high quality multi media. The researchers expect from us
We're excited by the Strategic value of this transaction and its benefits to the scientific community.
Atom will share more details on the financials.
Our conviction in a potential single cell and spatial biology is stronger than ever.
Executing with discipline and continuing to invest in our Technologies to capture the large opportunities ahead.
With that, I'll turn the call over to Adam.
Thank you, sir. I'll start by reviewing our financial results for the 3 months, ended June, 30 2025.
And will then provide further details on our outlook for the third quarter.
all figures and growth rates provided will be on a year-over-year basis unless otherwise noted
as surge mentioned, the quarter unfolded largely in line with our expectations
Total revenue for the second. Quarter was 172.9 Million up 13%.
Excluding the license and royalty revenue from the settlement Revenue was 145.6 Million down 5%.
Total, consumables Revenue was 122.2 Million down 1%.
Chromium, consumables Revenue was 85.8 Million down 9%, primarily driven by lower average, reaction prices.
Spatial consumables revenue was $36.4 million, up 24%, primarily driven by Xenium consumables revenue.
Moving on to instruments. Total instrument Revenue was 14.5 million down 39%.
Chromium instrument Revenue was 5.7 million down, 35% driven, primarily by lower average selling prices.
We implemented strategic discounts during the quarter as we partnered with customers who were navigating capex constraints. These discounts facilitated broader instrument adoption and an 11% increase in chromium placements year-over-year.
Revenue was 8.8 million down 42% driven primarily by fewer instruments sold
Services Revenue was 8.5 million up 47%, primarily due to an increase in xenium service plans.
Looking at our Revenue by geography ongoing capex. Headwinds continued to persist globally. However, solid consumables performance contributed to sequential improvements in most areas.
Excluding settlement impacts America's Revenue was 78.9 Million down 15% from the prior year and up 7% sequentially.
Amia Revenue was 34.7 Million down 7% from the prior year and up 9% sequentially.
APAC Revenue was 32 million up 41% year-over-year and downed 1% sequentially.
As Serge mentioned APAC, benefited from a temporary pull forward in purchasing activity in China as customers accelerated orders ahead of potential tariff changes.
We estimate the revenue impact from that pull forward was approximately 4 million.
Turning to the rest of the income statement.
Gross profit for the second quarter was 125.1 Million compared to 104.2 million for the prior year period.
Gross margin increased to 72% from 68%, to Prior year, primarily driven by higher licensed and royalty Revenue.
Excluding settlement. Impacts gross margin was 67%.
Total operating expenses for the second quarter, decreased to 95 million compared to 146 million for the prior year, period, driven by gain on settlement.
Tax operating. Expenses were 135.7 million.
Operating income for the second quarter was 30.1 Million compared to an operating loss of 41.7 million in the second quarter of last year.
Excluding settlement impacts operating loss was 37.9 million.
Net income for the period was 34.5 million compared to a net loss of 37.9 million for the second quarter of 2024.
Excluding settlement impacts. Net loss was 33.5 million. We ended the quarter with 447 million in cash, cash, equivalents and marketable securities.
Turning to our outlook for the third quarter, we expect Revenue to be in the range of 140 million to 144 million.
This Outlook takes into account approximately 4 million dollars of Revenue. In China, that was pulled forward from Q3 into Q2 ahead of potential tariff changes.
Excluding this poll forward. We expect Q3 Revenue to be broadly in line with Q2 Revenue, given the continuation of cautious customer spending behavior and ongoing Capital Equipment, spending constraints.
As we announced earlier today, we signed a definitive agreement to acquire scale biosciences for upfront cash and stock consideration of dollars, plus contingent considerations that could become payable upon the achievement of certain milestones.
This acquisition is subject to customary closing conditions.
As Serge mentioned, we're excited about the Strategic value of this acquisition as scale. Brings key inventions and Technical capabilities. That augment our Innovative Foundation within single cell
We do not expect this transaction to have a material impact on our revenue or operating expenses for the remainder of 2025.
Our balance sheet remains strong, giving us flexibility to continue executing on our strategic priorities while investing in Innovation and long-term growth.
We believe we are well positioned to navigate uncertain market conditions, to remain committed to staying agile and responsive, as the environment evolves with that, I'll turn the call back to search.
Thanks Adam. Before we open it up for questions. I'd like to make a note of appreciation to our customers.
the last 6 months have been a particularly trying time for many of you
While many of these challenges remain unresolved.
Your work and continued perseverance are an absolute inspiration to us at 10x.
Progress and science is the ultimate public good.
So much new knowledge and so much potential to improve. The Human Condition is coming within our grasp.
Your work is more important than ever.
We will continue to root for your success and support you any way we can.
And to our team.
Thank you.
The current environment has been incredibly challenging.
But it is during times of adversity that you can really tell what the team is made of.
By that measure I couldn't be more proud of all of you. You have stayed focused creative and Relentless in the pursuit of our mission. Regardless of what has been thrown at you.
Remember to you the times of stress build strength. This is not the first time we have faced adversity and I'm sure it won't be the last
our team has only gotten stronger Through Time.
I have more confidence than ever that we will solve whatever challenges lie ahead of it.
We have been through a lot together.
But there's so much more to do.
After all, we're just getting started.
With that, we will now open it up for questions, operator.
At this time, if you would like to ask a question, press star, then the number 1 on your telephone keypad. So withdraw your question, simply press star 1 again.
We kindly ask that you limit your questions to 1 for today's call.
We will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Patrick Donnelly with City. Please go ahead.
Like the NIH and and what that's going to shake out to be. Did you sense any Improvement as a quarter went? You know, where are we on the visibility side at this point, you know, I'm just curious what you're hearing from customers and what the right expectations are on that front, um, as we move forward. And again, you know, if the certainty on the budget as we get closer to, that will help a little bit or, or just, you know how those conversations progressed during the quarter would help.
Thank you. Yeah, yeah. Uh, thanks Patrick. Um, yeah. So as we, you know, as we said it was certainly, uh, a dynamic environment over the past 6, months, to say the least,
Uh, the quarter of overall, at a high level um Q2 government transport pretty similar to um, you know, to what we were. Uh, contemplating um, at the, the last uh call. Um, there was certainly a lot of um,
A lot of different events. Um, and I would say with customers compared to 3 4 months ago, there's probably more optimism because there has been, um, uh, you know, some, you know, arguably positive developments at the same time. Overall things helped pretty steady the customers when it comes to the substance of their spending the substance of their grants, uh, have been very cautious, um, because, um, you know, the actual disbursement of funds has been
Uh, has been quite slow. And uh, the the budgets are still very much in the early phases and it's quite uncertain what they are going to be. Um, and you know, there's a continuous still continuous news flow of um, you know, of issues um, just coming out. I mean, just last week, we had a day when it looked like NIH wasn't going to be allocating any funds, uh, for an indefinite amount of time. Now that policy got overturned within that day. But uh, you know, that doesn't make people feel, uh, particularly confident about the future. Um, you know, there are things like ongoing fights with universities. Uh, there's a proposal of putting around around around multi-year, Grant, uh, Grant changes. Um, other other other kinds of fears, again, some positive signs, uh, you know, the by partners and support for NIH, which wasn't, you know, clear, uh, earlier is seems to be coming through now but
Lots of uncertainty at this stage going forward as well. Uh, so we're going to have to kind of uh um, see how that evolves. Um and uh
And we'll kind of expect that, Q3 will roughly involve the way that you do us.
Your next question comes from the line of Dan Eras with...
Good afternoon, guys, thanks for the questions here. Serge on the scale deal. What is it that made this the right move and the right time for the move and for customers that are looking for the lowest cost per sale, as a part of a big study, will it be the chromium kit or the scale kit that best serves that need? How are you going to position these products for your customers?
Yeah, thanks. Yeah. Um, well kind of Step
back on, uh, on
now here, like we've long said, there's tons of bedrooms in single cells.
Um especially if you think about uh lowering costs and driving to higher scale and if you look over the course of the past year past several quarters, recently, the opportunity and then you in a way is actually like celebrating because of the emergence of AI and this increasing interest in uh building larger and larger scale models of biology using single cell running this very large preservation screens. And so uh, that that whole Vision, that we have had, uh, since the beginning really to drive single cells of higher, higher scales, more routine, use lower prices, lower costs through that. Um, that's what's driving, that's kind of the overarching. Uh, rationale
Behind the acquisition, it helps us to execute on that strategy. Um the the acquisition itself is fundamentally technology acquisition. It's meant really to broaden the capabilities of our existing and and and future products.
Scales products on the market. Um, and certainly make sure that all the existing customers are, uh, are satisfied. Uh, but, uh, in particular what we excited by is integrating this technology into our roadmap, um, and delivering ever more value to our customers.
Your next question.
Hey guys, thanks for the questions. Congrats on the quarter and the acquisition, congrats to Japan at scale as well. Just to follow up on that. Question about the acquisition um, sounds good about the um, you know, your perspective while you did it. But is this the deal like, you know, of an instrument Free Solution kind of an admission that the drop would based architecture is not capable of scaling enough to, you know, address the needs of future signals. So projects for large projects and then, secondly, when I mean, when when will this contribution from scale, these products become more material? Could that become like a dominant technology in your portfolio over time? Thanks.
So uh, you know, like first of all on the um on your first question uh like I would say not uh not at all. Like we have a really strong when it comes to instruments. We have really strong conviction that there is a huge value to having an instrument in a workflow is affords, really high Precision, really great workflow, uh, great quality of data robustness, all these things that customers love our products for. So, uh, and you know, when you look to see what has been actually,
Happening in the market. Uh, the instruments have not been at all, a barrier for, um, for single cell and uh,
Uh we believe the Big Value here is actually integrating the Technologies with our with our portfolio the Technologies are highly complementary. Um and uh it will allow us to push certainly the scale technology and the Innovations there will allow us to push scale
And uh uh and and the Doral technology further ahead. Um, I would say it's far as uh,
Kind of the, you know, the revenue impact, the near-term revenue impact is uh is going to be minimal. Um
And um um and really the kind of the, the overall uh Vision here is integration with capabilities into the broader uh portfolio.
Your next question comes from the line of Doug, Chinko with wolf research. Please go ahead.
Hi, this is Moline. Mullen on for Doug single sell consumables Revenue was down in the quarter but reactions were up. Can you give us any color on how you're thinking about the pricing, how to win related to the new lower cost product road map that you rolled out and how long you think it will take you to work through that? And then could incorporating the scale technology into the 10x portfolio exacerbate. This.
Um, yeah, so uh, thanks man. So let me maybe just kind of push them out a little bit and give context for the product transitions, uh, because we have multiple going on on the chromium side. First of all, there is a transition from the next GM architecture to GMX. And that's well on its way. Uh, you know, by the end of the year we should be just about finished with that. Um, and uh, that's been going. Well, customers are responding really well to GMAT and all this great, great benefits from that architecture. We also have other products that we launched last year, uh, that, um, yeah, around flags and around ownership multiplexing which, uh, you know, which which has multiple kind of Dynamics. Uh, uh, uh, uh, kind of operating there. Uh, many are opening up new use cases and new customers. Um, so that's, that's obviously a creative. Uh, so for sure some customers are converting from kind of a higher price products to these uh, new Solutions uh, and
You know, in some customers will never convert, um, because they need the features in the, in the other products. And so we do see those Dynamics kind of playing out, uh, in, uh, kind of encountered. Um, and, you know, fundamentally we believe that lower prices. Like, I've always said lead to higher volumes and there's tremendous amount of elasticity here in this market, uh, in these fields. Uh, but you know, this happens with the time lag.
Um, and, you know, overall kind of high level, you know, the price per reaction needs to be in hundreds of dollars rather than thousands to really kind of unlock, uh, uh, you know, a lot more experiments and a lot more samples. And that, that is what we're seeing. I would say that in general, the trends, we're seeing, are fundamentally encouraging. Seeing the growth in reaction volumes, uh, and that is, especially given the challenges, uh, in the macro environment.
Have, uh, email absence of those challenges, but overall, the fundamental Trends are are positive and we do expect us to drive more growth. Both ultimately, in reaction and Revenue.
Your next question comes from the line of Mason cico with Steven zinc. Please go ahead.
Hey guys.
Thanks for taking the question here. Um,
could you talk about the maturity or ramp of the zenium sales force in Europe? How have you seen the sales funnel in conversion rates of New Opportunities? Evolved over the course of 2025. Now, that that team is in place.
Yeah, Mason uh, yeah, good question. So the team is, uh, is fully in place. Uh, we've got, uh, you know, a number of people joined more recently. I would say, it's kind of, of, of all of our commercial kind of reorganization, uh, is the genium cap, uh, capacity team was sort of the last piece to pull in place and specifically in Europe, but now we have everyone in place. And uh uh, you know, the people who are, who signed up who joined recently are ramping up nicely. Um, what we're seeing as far as uh kind of execution has been. Uh certainly it's been a big uh uh uh uh big Improvement relative to what we have seen before, because of the focus because of the of the expertise we now have uh, in the company.
Um, the uh, you know, the funnel management, the uh, uh, the opportunity management has all have all been, uh, great, but all of this is happening on the background of a much more challenging capex environment.
Uh, and so the way like, what is uh, what we end up seeing is that, we are adding consistently more and more opportunities to the funnel, but the opportunities are taking longer and longer to close.
And uh by and large uh where they get stuck is funding uh, and in kind of in various configurations of funding challenges, whether the customer is just having fun, having more restrictions on the funding that they thought they had, or they need to find more funding, uh, than they. Uh, they would have uh, maybe previously or uh, there's just more scrutiny on on these budgets.
Uh, so I I would say that after this Dynamic is playing out, um, uh, again, we see uh both better kind of execution. Now that we have this Focus team in place and also we are seeing continuous enthusiasm for the platform itself. What customers are doing the feedback we're getting so that those, those factors fundamentally make us, uh, quite, uh, optimistic, uh, especially for, you know, as we kind of work ourselves through this environment. And by the for setting us up really well for when we get through these uh this these macro challenges and get to the other side of it.
Your next question comes from the line of Dan Brennan with titty Cohen, please go ahead.
Hey, good afternoon guys, this is Kyle on for Dan, thanks for taking the questions. Um I wanted to go back to scale again, maybe on the technology side. Specifically can you sort of just talk about what you saw as a unique, you know, attractive factor of the scale technology versus you know, maybe some other single cell assets that are out there, I guess. What's so unique in your view about scale and um how much incremental R&D, do you think needs to go into that, uh, you know, platform?
um so uh, scale, um, like you know, kind of like a, like I said earlier, we we do a very thorough assessment of Technology the technology landscape out there and we have a track record of, uh, of I think being having that success, uh, being
Um in in our assessments and in, in determining, what technologies have particular problems, and how they can be built into awesome products in the case of uh, scale. Uh, there's really some really great inventions really foundational inventions around combinatorial and vaccine around Quantum, barcoding that, uh, that that, that make that company stand out. So we're really looking forward to, to bringing into our uh, portfolio. Um, as far as, uh, R&D expenses to, you know, to do develop integrate these products. I think, uh, this gets really nicely into our existing.
Infrastructure and into our existing Innovation engine. So we don't expect there to be any material incremental costs.
Your next question comes from the line of Michael rice, skinned, with Bank of America. Please go ahead.
Um, China overall, even if you back that out, still did really well. Um 1 of the better quarters, you've had there for a while um or like better than any quarter you've had since uh 2023. So just what are you seeing there? Um that's spurring this recovery. Thanks.
Yeah uh Mike. Thanks for the question. So um yeah, a couple of things. Uh you may remember that over the last couple of years, we've got quite a bit about kind of changing our go to market uh model in China. And we um we did a lot to get closer to the customers. Um kind of change, get closer to our service providers, their Distributors uh change the uh, the business structures there and uh, that has been bearing fruit. Uh, this the business, we're really close to customers. We have a really good false on both, their decision making and, uh, inventory levels. And we feel really good that we do have a really strong, a really, uh, tight pause on on their decision-making input, and in particular, uh, sort of the uh,
The issue around, uh, the the tariffs, uh, we heard from the customers, specifically that they wanted to get those products in, um, into their hands ahead of any potential tariffs. It was uh, and yeah, we do think that, uh, 4 million is a very good, uh, solid estimate for that. Um, uh, we have very good visibility to the End Market um, and yeah, I mean on your other
Point, uh, China, uh, is doing is is doing well, and again, I think partially it's a function of all the changes in all the work that that we have made, that the team has made and the team is doing really well uh over there uh the underlying market dynamics. There also are, uh favorable at least relative to what they were a couple of years ago.
Your next question comes from the line of Luke sergot with.
Clays, please go ahead.
This is Salem Salem on for Luke. Thanks for taking our questions. Uh, just 1 on royalties from Brooker.
Um, could you just talk about the structure of those royalties and the settlement? Um, what's the percent or dollar amount that you'll get paid?
Per unit of sales on that side whether it's instruments or consumables and and which uh instruments and consumables there. If you could clarify. Um, are there any potential minimum or maximum payment thresholds as well? And uh, you know, any other Dynamics there would be helpful and then kind of lastly, on China just piggybacking off of
Mike's question there, uh, wondering, you know, if you expect this type of strength, going forward into the 32 and 4 q,
Um, and uh, that that's it for me. Thank you.
yeah, excuse me, let me take the uh, the the the Brooker question first, in terms of the the details, you know, the the rates and sort of that level of detail we're not providing
But let me just give a little bit of a high level, on sort of, the, the structure and how this worked its way through the p&l. So first 68, million cash payments that's coming, uh, 17 million over 4 quarters. It's important to note that the cash that you see in Q2 doesn't include, uh, the first of those 4 installments. So that, uh, is due here in Q3, um, 27.3 million, uh, of that 68 was recognized in Revenue, in Q2. Uh, of course, that came through at 100% margin. This is why we provided an adjusted gross margin number for you in the detail. Um, and then there was close to 41 million dollars. Uh, that was recognized as a gain on settlement, so it's essentially a credit to Opex and again, part of the reason we transparently wanted to provide uh, an adjusted number. So you could really see what Baseline. Uh Opex was looking like,
Um, it's also I guess the last thing I would note on that when you think about the Q3 guide that we provided, it does not include the ongoing royalties which is sort of the root of your question. Um, it doesn't, uh, include that
For Q3, um, you know, and that is an area. You know, as you start to look at the tables in our financial uh, reporting license and royalty revenue is something that's specifically called out. So you can see sort of the 1-time, uh, you know, effects that are called out. But you'll also be able to see, uh, transparently where that, uh, running royalties. Are those running royalties from this settlement with broker and various other things that we've gone along the way.
So teams executing very well. Uh we're competing very uh well in those markets um I would expect and that's part of the reason that we called it out, as it related to our Q3 guidance uh that we are lower. Uh, as a result of that poll forward, um, in Q3 not just the overall level, but obviously, that'll be, uh, that's focused in China. Um, but as a surge mentioned, you really think that's a 1 quarter Dynamic, um, from an inventory perspective. Uh, and you know we should see that business bounce back, kind of to the strength that we've been seeing as we work our way into Q4.
Your next question comes from the line of blue Lee with UBS. Please go ahead.
Great. Thank you for taking my questions. Um, I want to I want wondering if you can comment a little bit on the order book in the quarter and what is the order pattern that you have been seeing and what I spell visibility into the second half, thank you.
Yeah, I I can take that. I mean, I think, you know, for our business. Um, you know, given that we're providing, quarterly guidance, I can, you know, speak to you about what we're seeing here. Um, you know, in Q3, um, you know, it's a simplest level, you know, we have confidence here as we're, uh, you know, whatever 5 weeks into the, the quarter. Um, providing the number that we did.
Um we're seeing mostly really a continuation of where we were in Q2, so continuing to see really good strength. Uh, in spatial consumables,
Um, continuing to see really nice reaction volume growth, as it relates to uh, the chromium consumables business. An ongoing pressure is, you know, are persisting on capex. Um, you know, more pronounced in the, you know, spatial side of things with a higher priced, zenium, analyzer. But also even uh, on chromium and is 1 of the things that we commented on. Um, you know, in my script earlier was just the uh, discounting and the work that we were doing in Q2 to get chromium instruments into the hands of customers, you know, who are really excited to get kind of into our single cell ecosystem. Um, but yeah, I think the simplest level order book is looking, you know, consistent with the guy that we provided
Your next question comes from the line of Matt LaRue with William Blair, please go ahead.
Hi. This is Jacob crano on for Matt, thanks for the questions. Maybe, uh, just a more high level 1 on the, the macro sounds like things have held fairly stable since last quarter in terms of the demand and funding environment. Maybe on margin slightly better. But, um, you know, just wondering as you've talked to customers in the field, what have you learned or heard from them? That could provide the biggest unlock and spend, is it just more clarity on the the NIH budget for
2026 a release or pickup in certain parts funding or grants, maybe a grand light, from department, heads on new project starts. And I mean, what do you think a realistic timeline for an unlock unlock? Like, this is in the market and, and what our customers, um, telling you that they're, they're kind of assuming for their budgets next year.
Yeah. Um, so I mean there's um
there's a range of
input that we're getting from customers. Um, you know, depending on geography, depending on, uh, on their particular institution, different institutions have different issues, they are, uh, dealing with. Uh, but you know, if I kind of synthesized at the very highest level, I would say, probably, 2 things are most important, 1 is budget Clarity for next year. People are currently waiting for that, and I think that has a lot of Downstream effects. And then second while the general, um, kind of orientation, emotional orientation has gotten, has been getting marginally better. The thing that has been particularly is been holding people back is that the, the first month of funds, uh, the actual money, uh, Landing with people, and that has been held up in a, you know, across the board in a lot of lot of instances. And I think kind of that uh, seeing the ground seeing the money actually cost, uh, go to customers would be another important variable.
that could, you know, would give them comfort and give them confidence to start uh, spending
Your next question comes from the line of Sabu nambi with Guggenheim please go ahead.
Yeah, so, uh, so multiple elements the question. So first of all you know, kind of touching on the commercial restructuring. Yeah, we do really good about where the team is. Now we've made the structural changes, we have still the roles and uh folks have been ramping up quite nicely uh that that have joined uh more recently. So overall you know when we look at the business have really strong signs of just the the fundamentals. Like I talked about in terms of, you know, chromium consumable reactions, spatial consumable reactions and spatial consumable Revenue. Uh, those are all good strong indications for the future. The feedback from customers is consistently positive. Both in terms of the kind of the performance of the products, they're excitement of products and the new applications that they see emerging, um, that uh, that require, you know, kind of more and more. Um,
Uh, more of these products and larger scale. So uh all those fundamentals are strong. And um you know, as we've been saying now, um, you know, last quarter, this quarter, we've been, we've got a really strong focus on uh, cost and cash management. And uh, are in a really good position. Now uh with as far as our balance sheet is concerned and as far as our spending profile is concerned, so the team has done a really great job of this. We generate a cash last quarter and it feels really good about kind of the trajectory going forward. Um and of course uh you know we'll continue to be
Really, really focused on clothes discipline, uh, because the environment is still very unsure. But from where we see right now, I think we're in a, in a really good shape.
Your next question comes from the line of Rachel do send doll with JP Morgan. Please go ahead.
Hi. This is Jaden on for Rachel, just a quick 1 for me to get into the placement assumptions. What are you assuming for? Placements between vizium genium and chromium next quarter and the full year even if it's just higher level comments and what are the drivers on each of these franchises? That would be really helpful. Thank you.
Sure. I I I can take that 1. I mean, you know, we're out is we don't break those, uh, 2, uh, specifically what I can tell you though, as it relates to Q3, um, you know, given uh, what we've embedded in guidance is that from a an instrument perspective, you know, from a spatial instrument given. That's where your question lies participating in the Q3 is going to look fairly similar to the Q2 um and I guess even though we haven't given a Q4 guide, we don't have any reason to believe that Q4 would look meaningfully different from where Q3 is. Other than the fact that they're, you know, typically is an uptick from Q3 to Q4 and capex. Again, not something in this environment. We've got great visibility into at this moment but that has been you know, more of a historical pattern, um capex environment continues to be challenged. Um but you know, as as Serge is mentioned, we
We've got a fantastic.
Uh, ZM sales team that's out there, you know, selling. Um, they've got, you know, really good robust disciplined pipelines. Uh, we continue to work those things through. Um, so you know we feel very confident that we're out there competing, you know, for each of the placements uh out there in the market and we'll continue to be aggressive to ensure we're winning business.
Your next question.
Kind of Tau Peterson with Jeffrey. Please go ahead.
Hi team. This is Lauren on for Tau congrats on the quarter um going back to the discount on chromium during the quarter that you talked about, do you see maybe some visibility into kind of 2 H and into 2026 if you're going to be continuing this discount or how the price you know overall is going to look um of evolving over time? Thanks.
Um, yeah. I mean, so in terms of uh the discounting and chromium uh instruments. Like the really, uh, this is a function of the environment, wherein, right? Uh, customers, uh, have been dealing with all kinds of challenging challenges, when it comes to purchases especially around capex, all kinds of new limits, all kinds of new scrutiny on buying, uh, buying instruments. And we have been, uh, um, you know, working creatively with our, uh, with our customers to allow them to, uh, to to buy instruments as long as there's also, uh, a material commitment and reagents, to go along with it. And we do expect
That as long as this kind of environment to, uh, continuous, we expect to keep working with our customers to keep doing that. And I also would want to emphasize that all of these kinds of interactions and dealers are ultimately are created to 10x as well. So it's in our interest economic interests as well to to, to, uh, to to keep, uh, you know, pursuing the strategy.
Concludes our question and answer session, ladies and gentlemen, this will conclude today's call. We thank you all for joining you may now. Disconnect