10x Genomics Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025
Earnings Conference Call
10x Genomics Q2 2025
00:00 / 00:00

There are 13 speakers on the call.

Operator

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 twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

I would now like to turn the call over to Kathy Corneau, Investor Relations and Strategic Finance. Kathy, please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the second quarter ended 06/30/2025. 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 investors10xgenomics dot com. An archived webcast of this call will be available on the Investors tab of the company's website, 10xgenomics.com, for at least forty five 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.

Speaker 1

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 Saxonoff, our CEO and Co Founder and Adam Taich, our Chief Financial Officer. We will host a question and answer session after our prepared remarks.

Speaker 1

We ask analysts to please keep to one question so that we may accommodate everyone in the queue. With that, I will now turn the call over to Serge.

Speaker 2

Thanks, Cassie, and good afternoon, everyone. Today, I'll cover our Q2 performance and share updates on what we're seeing across our customer base. I'll also walk through recent business developments before handing it over to Adam for the financial review and outlook. Total revenue for the second quarter was $173,000,000 During the quarter, we settled our worldwide patent litigation with Bruker on favorable terms and recognized an upfront payment of $68,000,000 that we allocated to both operating expenses and license and royalty revenue. Excluding the portion allocated to license and royalty revenue, our second quarter revenue was $146,000,000 And as we continue our focus on cost management, we increased our cash balance by $20,000,000 during the quarter, not including any settlement related payments which began in Q3.

Speaker 2

The current funding environment remains challenging and highly uncertain. In particular, the academic funding landscape remains marked by shifting policies, weaker grant disbursements and 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 upside from strong performance in China, which was driven in part by purchasing dynamics associated with the timing of tariffs.

Speaker 2

Even in this 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, an indicator of increasing demand for our solutions and single cell more broadly. This growth was driven by robust adoption of our latest products, including GemX Flex and Universal On Chip Multiplex, which have been instrumental in lowering cost barriers, enabling larger scaling and opening up new applications. Additionally, we saw meaningful year over year and sequential growth in spatial consumables revenue and volume.

Speaker 2

Within spatial, Xenium consistently serves as a strong driver of growth and performance. Utilization per instrument continues to grow, reflecting both higher number of runs and increased spend per run. We're seeing continued ramp across both our earliest adopters and newer customers, and regularly receive strong feedback on Xenium's superior data quality, accuracy, robustness, throughput, and ease of use. Together, these qualities continue to set Xenium apart as a best in class platform and are fueling broad adoption across both basic science and translational research. We continue to monitor customer sentiment closely as the funding environment remains highly uncertain.

Speaker 2

While The U. S. Academic and government funding landscape has not 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 U. S.

Speaker 2

And more broadly around the world. Customers are facing increased scrutiny on purchases, longer approval time lines and in many cases, new restrictions on capital spending and staffing within their labs. These challenges are leading to delays in project starts, scale backs in both ongoing and pilot study 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 customer spending behavior until there's greater clarity on policy direction and actual distribution of funding resources. As customers work through evolving budget timelines and operational planning cycles, we're partnering closely to help them navigate this environment and support continuity of their research.

Speaker 2

And despite this backdrop, we continue to hear clearly that our tools 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 mindshare and funding toward these areas. And as 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 across our product roadmap, our recent and upcoming launches are continuing to resonate with customers. During the quarter, we began shipping Visium HD three prime, which expands the capabilities of the Visium HD portfolio by extending into more applications.

Speaker 2

We also launched HD cell segmentation capabilities, which enable researchers to assign transcripts to individual cells with precision, simplify data analysis and uncover new biological insights. In parallel, we're also preparing for the release of several important innovations across spatial, including Visium HD XL and Xenium RNA plus protein, which will further enhance multi omic spatial analysis and unlock deeper insights from complex tissue samples. Turning to single cell, I'm really excited about FlexV2, our new plate based Chromium Flex product that we expect to launch in the near term. Built to dramatically increase throughput and streamline workflows, FlexV2 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.

Speaker 2

FlexV2 is designed to be the ideal method for large scale perturbation experiments and biopharma applications, from early target discovery to clinical trial integration, delivering higher cell throughput, more flexible workflows, FFP 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 opportunity to deliver ever more value to increasing numbers 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 two very exciting trends: large translational studies using Xenu and large scale single cell perturbation experiments to train AI models and build virtual cells.

Speaker 2

As an emblematic example of the first trend, we recently announced a collaboration with the Genome Institute of Singapore on the tissue map initiative aimed at accelerating discovery of drug targets and biomarker signatures in cancer and inflammatory diseases. This study will use Xenium to enable high resolution spatial mapping of gene activity and cells within intact FFPE tissue samples paired with detailed clinical data. Its goal is to analyze thousands of samples to discover clinically relevant biomarker signatures and therapeutic targets. On a single cell front, the emergence 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, Xyrem Therapeutics used our Chromium Universal five prime assay in its industrialized perturbedSeq workflow to produce the largest publicly available genome wide perturbed seq dataset to date, capturing transcriptional responses across 8,000,000 perturbed cells.

Speaker 2

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 Chromium FLEX assay 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.

Speaker 2

We can model cells and perturbations computationally using AI. We can guide the discovery of new drugs, simulate 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 the result of Protected. Across our business, we continue to carefully evaluate costs to ensure operational efficiency while also continuing to invest in long term growth.

Speaker 2

With our strong balance sheet, we have the resources to pursue our strategic priorities and continue to fuel 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 Chromium 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 roadmap, we're strengthening our ability to support larger scale applications while continuing to deliver the high quality, multi only data that researchers expect from us.

Speaker 2

We're excited by the strategic value of this transaction and its benefits to the scientific community. Adam will share more details on the financials. Our conviction in the potential of single cell and spatial biology is stronger than ever. As we move forward, we remain focused on staying closely aligned with our customers, 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.

Speaker 3

Thank you, Serge. I'll start by reviewing our financial results for the three months ended 06/30/2025, 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 Serge mentioned, the quarter unfolded largely in line with our expectations. Total revenue for the second quarter was $172,900,000 up 13%.

Speaker 3

Excluding the license and royalty revenue from the settlement, revenue was $145,600,000 down 5%. Total consumables revenue was $122,200,000 down 1%. Chromium consumables revenue was $85,800,000 down 9%, primarily driven by lower average reaction prices. Spatial consumables revenue was $36,400,000 up 24%, primarily driven by xenium consumables revenue. Moving on to instruments.

Speaker 3

Total instrument revenue was $14,500,000 down 39%. Chromium instrument revenue was $5,700,000 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 drove broader instrument adoption and an 11% increase in Chromium placements year over year. Spatial instrument revenue was $8,800,000 down 42%, driven primarily by fewer instruments sold.

Speaker 3

Services revenue was $8,500,000 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, Americas revenue was $78,900,000 down 15% from the prior year and up 7% sequentially. EMEA revenue was $34,700,000 down 7% from the prior year and up 9% sequentially.

Speaker 3

APAC revenue was $32,000,000 up 41% year over year and down 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 $4,000,000 Turning to the rest of the income statement. Gross profit for the second quarter was $125,100,000 compared to $104,200,000 for the prior year period. Gross margin increased to 72% from 68% the prior year, primarily driven by higher license and royalty revenue.

Speaker 3

Excluding settlement impacts, gross margin was 67%. Total operating expenses for the second quarter decreased to 95,000,000 compared to $146,000,000 for the prior year period, driven by gain on settlement. Excluding settlement impacts, operating expenses were $135,700,000 Operating income for the second quarter was $30,100,000 compared to an operating loss of $41,700,000 in the second quarter of last year. Excluding settlement impacts, operating loss was $37,900,000 Net income for the period was $34,500,000 compared to a net loss of $37,900,000 for the 2024. Excluding settlement impacts, net loss was $33,500,000 We ended the quarter with $447,000,000 in cash, cash equivalents and marketable securities.

Speaker 3

Turning to our outlook for the third quarter. We expect revenue to be in the range of $140,000,000 to $144,000,000 This outlook takes into account approximately $4,000,000 of revenue in China that was pulled forward from Q3 into Q2 ahead of potential tariff changes. Excluding this pull 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 $30,000,000 plus contingent consideration that could become payable upon the achievement of certain milestones. This acquisition is subject to customary closing conditions.

Speaker 3

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 and remain committed to staying agile and responsive as the environment evolves. With that, I'll turn the call back to Serge.

Speaker 2

Thanks, Adam. Before we open it up for questions, I'd like to make a note of appreciation to our customers. The last six months have been a particularly trying time for many of you. While many of your challenges remain unresolved, your work and continued perseverance are an absolute inspiration to us at 10x. Progress in science is the ultimate public good.

Speaker 2

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.

Speaker 2

And 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 too that 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.

Speaker 2

I have more confidence than ever that we will solve whatever challenges lie ahead. We have been through a lot together, but there is so much more to do. After all, we're just getting started. With that, we will now open it up for questions. Operator?

Operator

Your first question comes from the line of Patrick Donnelly with Citi.

Speaker 4

Serge, maybe one for you just on the backdrop. I mean, sounds like in the prepared remarks, it's still a little bit constrained, not surprising there, particularly on the academic research side. Can you just talk about how the quarter progressed on that front, what the conversations looked like? Obviously, a lot of volatility on the headlines around things like the NIH and what that's going to shake out to be. Did you sense any improvement as the quarter went?

Speaker 4

Where are we on the visibility side at this point? Just curious what you're hearing from customers and what the right expectations are on that front as we move forward. And again, if the certainty on the budget as we get closer to that will help a little bit or just how those conversations progress during the quarter would help. Thank you.

Speaker 2

Yes. Thanks, Patrick. Yeah. So as we've you know, as we said, it was certainly dynamic environment over the past six months, to say the least. The quarter overall at a high level, Q2, kind of, us, pretty similar you know, to what we were contemplating at the the last call.

Speaker 2

There were certainly a lot of a lot of different events. And I would say with customers, compared to three, four months ago, there was probably more optimism because there has been, you know, some arguably positive developments. At the same time, overall, things held pretty steady. Customers, when it comes to the substance of their spending, the substance of their grants, have been very cautious because, you know, the actual disbursement of funds has been has been quite slow. And the the budgets are still very much in the early phases, and it's quite uncertain what they are going to be.

Speaker 2

And, you know, there's a continuous still continuous news flow of, you know, of issues 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 for an indefinite amount of time. Now that policy got overturned within that day, but, you know, that doesn't make people feel particularly confident about the future. You know, there are things like ongoing fights with universities. There's a proposal floating around around multiyear grant, grant changes, other kinds of fears.

Speaker 2

Again, some positive signs, you know, the bipartisan support for NIH, which wasn't, you know, clear earlier, is seems to be coming through now, but lots of uncertainty at this stage going forward as well. So we're to have to kind of see how that evolves, and we'll kind of expect that Q3 will roughly evolve the way that Q2 is.

Operator

Your next question comes from the line of Dan Arias with Stifel. Please go ahead.

Speaker 5

Good afternoon, 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

Speaker 4

part of a big study, will it

Speaker 5

be the Chromium kit or the scale kit that best serves that need? How are you going to position these products for your customers?

Speaker 2

Yes. Thanks, Dan. Look, kind of stepping back on on the strategic rationale here. Like, we've long said, there is tons of headroom in single cell, especially if you think about lowering costs and driving to higher scale. And if you look over the course of the past year, past several quarters, recently, the opportunity in a way is actually accelerating because of the emergence of AI and this increasing interest in building larger and larger scale models of biology using single cell running these very large perturbation screens.

Speaker 2

And so that the whole vision that we have had since the beginning really to drive single cell to higher scale, more routine use, lower prices, lower cost through that. That's what's driving that's kind of the overarching rationale behind the acquisition. It helps us to execute on that strategy. The the acquisition itself is fundamentally a technology acquisition. It's meant really to broaden the capabilities of our existing and and and future products.

Speaker 2

And, you know, I would also point to that to to learn about track record of previous acquisitions. We've been consistently really good at identifying technologies and bringing them and making really great products out of them that customers really love. And that's what we expect to see here as well. As far as, you know, the kind of the portfolio here, we are going to keep some of the scaled products on the market and certainly make sure that all of existing customers are satisfied. But in particular, we're excited by is integrating this technology into our roadmap and delivering ever more value to our customers.

Operator

Your next question comes from the line of Kyle Mixon with Canaccord. Please go ahead.

Speaker 6

Hey, guys. Thanks for the questions. Congrats on the quarter and the acquisition. Congrats to Jeevan on scale as well. Just to follow-up on Dan's question about the acquisition.

Speaker 6

Sounds good about the, your perspective why you did it. But is this deal like of an instrument free solution kind of an admission that the drop off based architecture is not capable of scaling enough to address the needs of future single flow projects to large projects? And then secondly, when I mean, like when will this contribution from scale with these products become more material? That become like a dominant technology in your portfolio over time? Thanks.

Speaker 2

So, know, like, first of all, on the on your first question, like, I would say, not not at all. Like, we have really strong when it comes to instruments, we have really strong conviction that there is a huge value to having an instrument and a workflow. It affords really high precision, really great workflow, great quality of data, robustness, all these things that customers love our products for. So and when you look to see what has been actually happening in the market, the instruments have not been at all a barrier for for a single cell. And we believe the big value here is actually integrating the technologies with our portfolio.

Speaker 2

The technologies are highly complementary, and it will allow us to push certainly the scale technology and the innovations there will allow us to push scaling and and the dural technology further ahead. I would say as far as kind of the, you know, the revenue, but the near term revenue, but it's it's going to be minimal. Really, they kind of the overall vision here is integration with capabilities into the broader portfolio.

Operator

Your next question comes from the line of Doug Schenkel with Wolfe Research. Please go ahead.

Speaker 1

Hi, this is Madeline Mullen on for Doug. Single cell 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 headwind related to the new lower cost product roadmap that you rolled out? And how long do you think it will take you to work through that? And then could incorporating the scale technology into the 10x portfolio exacerbate this?

Speaker 2

Yeah. So thanks, Nalin. So let me maybe just kind of zoom out a little bit and give context for the product transitions because we have multiple going on on the Chromium side. First of all, there is a transition from the NextGem architecture to GemX, and that's well on its way. You know, by the end of the year, we should be just about finished with that.

Speaker 2

And that's been going well. Customers are responding really well to GemX and all the great great benefits from that architecture. We also have other products that we launched last year that yeah. Around Flex and around Bone Chip Multiplexing, which, you know, which which has multiple kind of dynamics kind of operating there. Many are opening up new use cases and new customers, so that's that's

Speaker 2

For sure, some customers are converting from kind of a higher priced products to these new solutions. And, you know, and some customers will never convert because they need the features in the in the other products. And so we do see those dynamics kind of playing out in kind of in concert. 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 in these fields. But, you know, this happens with a time lag.

Speaker 2

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, 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. And that is especially given the challenges in the macro environment. And I would also say because of the challenges in the macro environment, actually getting to a net positive revenue net growth would take longer than it might otherwise have in the absence of those challenges. But overall, the fundamental trends are positive, and we do expect this to drive more growth both ultimately in Reactions and revenue.

Operator

Your next question comes from the line of Mason Currico with Stephens Inc. Please go ahead.

Speaker 7

Hey guys. Thanks for taking the question here. Could you talk about the maturity or ramp of the Xenium sales force in Europe? How have you seen the sales funnel and conversion rates of new opportunities evolve over the course of 2025 now that that team is in place?

Speaker 2

Yeah. Mason. Yeah. Good question. So the team is is fully in place.

Speaker 2

We had, you know, a number of people join most recently. I would say it's kind of of all of our commercial kind of reorganization. The Xenium cap CapEx team was sort of the last piece to pull in place, specifically in Europe. But now we have everyone in place, and, you know, the people who are who signed up who joined recently are ramping up nicely. What we're seeing as far as kind of execution has been certainly, it's been a big big improvement relative to what we have seen before because of the focus, because of the of the expertise we now have in the company.

Speaker 2

The, you know, the funnel management, the opportunity management has all have all been great. But all of this is happening on the background of a much more challenging CapEx environment. And so the way like, what is 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 by and large, where they get stuck is funding. And it's kind of in various configurations of funding challenges, whether the customer is just having having more restrictions on funding that they thought they had or they need to find more funding than they they would have maybe previously or there's just more scrutiny on on these budgets.

Speaker 2

So I I would say that's how sort of this dynamic is playing out. Again, we see both better kind of execution now that we have this focused 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 quite optimistic, especially for as we kind of work ourselves through this environment and by the for setting us up really well for when we get through these macro challenges and get to the other side of it.

Operator

Your next question comes from the line of Dan Brennan with TD Cowen. Please go ahead.

Speaker 4

Hey, good afternoon, guys. This is Kyle on for Dan. Thanks for taking the questions. 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 unique attractive factor of the scale technology versus maybe some other single cell assets that are out there?

Speaker 4

I guess what's so unique in your view about scale? And how much incremental R and D do you think needs to go into that platform?

Speaker 2

So scale, like kind of like I said earlier, we do a very thorough assessment of technology technology landscape out there. And we have a track record of of, I think, being having had success being in in our assessments and in in determining what technologies have particular promise and how they can be built into awesome products. In the case of scale, there's really some really great inventions, really foundational inventions around combinatorial indexing, around quantum barcoding that that that make that company stand out, that we're really looking forward to into bringing into our portfolio. As far as r and d expenses to, you know, to do develop and integrate these products, I think this fits really nice into our existing infrastructure and into our existing innovation engine. So we don't expect there to be any material incremental costs.

Operator

Your next question comes from the line of Michael Ryskin with Bank of America. Please go ahead.

Speaker 8

Great. Thanks for taking the question guys. I want to dig into a

Speaker 3

little bit some of the

Speaker 8

geo comments you made. Called out $4,000,000 pull forward in China. Just always a question of how do you size that? How do you estimate that? What makes you confident it's not a little bit less, a little bit more?

Speaker 8

And then beyond that, China overall, even if you back that out, still did really well. One of the better quarters you've had there for a while or I think better than any quarter you've had since 2023. So just what are you seeing there? Whether that's spurring this recovery? Yes,

Speaker 2

Mike. Thanks for the question. A couple of things. You may remember that over the last couple of years, we've thought quite a bit about kind of changing our go to market model in China, and we we did a lot to get closer to the customers, kind of change get closer to our service providers, their distributors, change the the business structures there.

Speaker 2

And that has been bearing fruit. The the business, we're really close to customers. We have a really good pulse on both their decision making and inventory levels. And we feel really good that we do have a really strong, a really tight pulse on their decision making and in particular sort of the issue around the the the tariffs. We heard from the customers specifically that they wanted to get those products in into their hands ahead of any potential tariffs.

Speaker 2

It was and, yeah, we do think that 4,000,000 is a very good solid estimate of that. We have very good visibility to

Speaker 9

the end

Speaker 2

market. And, I mean, on your other point, China is doing well. And again, I think partially it's a function of all the changes and all the work that we have made, that the team has made, and the team is doing really well over there. The underlying market dynamics there also are favorable, at least relative to what they were a couple of years ago.

Operator

Your next question comes from the line of Luke Sergott with Barclays. Please go ahead.

Speaker 10

This is Salem Salem on for Luke. Thanks for taking our questions. Just one on royalties from Bruker. Can you just talk about the structure of those royalties and the settlement? 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 which instruments and consumables there, if you could clarify.

Speaker 10

Are there any potential minimum or maximum payment thresholds as well? And any other dynamics there would be helpful. And then kind of lastly on China, piggybacking off of Mike's question there. Wondering if you expect this type of strength going forward into 3Q and 4Q? And that's it for me.

Speaker 10

Thank you.

Speaker 3

Yes. Excuse me. Let me take the Bruker question. First, in terms of the details, you know, 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 structure and how this worked its way through the P and L.

Speaker 3

So first, 68,000,000 cash payment. That's coming $17,000,000 over four quarters. It's important to note that the cash that you see in Q2 doesn't include the first of those four installments. So that is due here in Q3. 27,300,000.0 of that 68,000,000 was recognized in revenue in Q2.

Speaker 3

Of course, that came through at 100 margin That's why we provided an adjusted gross margin number for you in the detail. And then there was close to $41,000,000 that was recognized as a gain on settlement. So it's essentially a credit to OpEx. And again, of the reason we transparently wanted to provide an adjusted number so you could really see what baseline OpEx was looking like. 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.

Speaker 3

It doesn't include that for Q3. And that is an area as you start to look at the tables in our financial reporting license and royalty revenue is something that's specifically called out. So you can see sort of the onetime effects that are called out, but you'll also be able to see transparently where that running royalties or those running royalties from this settlement with Bruker and various other things that we've done along the way. I think just quickly on your question on China. Yes, was close to 40%, roughly a 40% growth in China even excluding the customer driven acceleration of business related to tariffs.

Speaker 3

The team's executing, just reinforcing what Serge said. The team's executing very well. We're competing very well in those markets. I would expect, and that's part of the reason that we called it out as it related to our Q3 guidance, that we are lower as a result of that pull forward in Q3, not just at the overall level, but obviously that will be that's focused in China. But as Serge mentioned, we really think that's a one quarter dynamic from an inventory perspective, and we should see that business bounce back kind of to the strength that we've been seeing as we work our way into Q4.

Operator

Your next question comes from the line of Lou Li with UBS. Please go ahead.

Speaker 1

Great. Thank you for taking my questions. I wanted to 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 is the visibility into the second half?

Speaker 1

Thank you.

Speaker 3

Yeah. I can take that. I mean, think for our business, given that we're providing quarterly guidance, I can speak to you about what we're seeing here in At the simplest level, we had confidence here as we're, whatever, five weeks into the quarter, providing the number that we did. We're seeing mostly really a continuation of where we were in Q2. So continuing to see really good strength in spatial consumables, continuing to see really nice reaction volume growth as it relates to the Chromium consumables business and ongoing pressures are persisting on CapEx, more pronounced in the spatial side of things with a higher priced Xenium analyzer, but also even on Chromium.

Speaker 3

And as one of the things that we commented on in my script earlier was just the discounting and the work that we were doing in Q2 to get Chromium instruments into the hands of customers. We're really excited to get kind of into our single cell ecosystem. But yes, I think at the simplest level, book is looking consistent with the guide that we provided.

Operator

Your next question comes from the line of Matt Larew with William Blair. Please go ahead.

Speaker 9

Hi. This is Jacob Cranby on for Matt. Thanks for the questions. Maybe just a more high level one on the macro. It sounds like things have held fairly stable since last quarter in terms of the demand and funding environment.

Speaker 9

Maybe on margin, slightly better, but 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 in spend? Is it just more clarity on the NIH budget for 2026, a release or pickup in certain past funding or grants, maybe a green light from department heads on new project starts? I mean, what do you think a realistic timeline for an unlock unlock like this is in the market? And what are customers telling you that they're they're kind of assuming for their budgets next year?

Speaker 2

Yeah. So, I mean, there's a there's a range of input that we're getting from customers, you know, depending on geography, depending on on their particular institution. Different institutions have different issues they are dealing with. But, you know, if I kind of synthesize at the very highest level, I would say probably two things are most important. One is budget clarity for next year.

Speaker 2

People are certainly waiting for that, and I think that has a lot of downstream effects. And then second, while the general kind of orientation emotional orientation has gotten has been getting marginally better. The thing that has been particularly has been holding people back is that disbursement of funds, the actual money landing with people. And that has been held up in a in a you know, across the board in a lot of lot of instances. And I think kind of that seeing the grant, seeing the money actually go to customers would be another important variable that could you know, would give them comfort and give them confidence to start spending.

Operator

Your next question comes from the line of Nambi with Guggenheim. Please go ahead.

Speaker 11

Hi, guys. This is Thomas on for Subbu. Thanks for taking our question. Your quarter into the headcount reduction and a few quarters removed from commercial restructuring. Now you have the scale acquisition.

Speaker 11

Can you just talk about how you feel about the base business at this point heading into the second half? Is it where you want it to be? Or are there more cuts coming? Then what will 10x look like exiting this year or maybe into 2026? Yes.

Speaker 2

So there's multiple elements to the question. So first of all, kind of touching on the commercial restructuring, we feel really good about where the team is now. We've made the structural changes. We have filled the roles, and folks have been ramping up quite nicely that that have joined 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.

Speaker 2

Those are all good, strong indications for the future. The feedback from customers is consistently positive both in terms of the performance of the products, their excitement of the products and the new applications that they see emerging that require more and more of these products at larger scale. So those fundamentals are strong. And as we've been saying now, last quarter, this quarter, we've been we've got a really strong focus on cost and cash management and are in a really good position now 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.

Speaker 2

We generated cash last quarter and feel really good about kind of the trajectory going forward. And of course, you know, we'll continue to be really, really focused on cost discipline because the environment is still very uncertain. But from where we sit right now, I think we're in a in a really good shape.

Operator

Your next question comes from the line of Rachel Botzendahl with JPMorgan. Please go ahead.

Speaker 12

Hi. This is Jaden on for Rachel. Just a quick one for me. Digging into the placement assumptions, what are you assuming for placements between Visium, Xenium 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?

Speaker 12

That would be really helpful.

Speaker 3

Sure. I can take that one. Mean, we don't break those two out specifically. What I can tell you though as it relates to Q3, given what we've embedded in guidance is that from an instrument perspective and from a spatial instrument, given that through your question lies, we're anticipating that Q3 is going to look fairly similar to Q2. 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 there typically is an uptick from Q3 to Q4 in CapEx.

Speaker 3

Again, not something in this environment we've got great visibility into at this moment, but that has been more of a historical pattern. The CapEx environment continues to be challenged. But as Serge has mentioned, we've got a fantastic Xenium sales team that's out there selling. They've got really good robust disciplined pipelines. We continue to work those things through.

Speaker 3

So we feel very confident that we're out there competing for each of the placements out there in the market, and we'll continue to be aggressive to ensure we're winning business.

Operator

Your next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.

Speaker 1

Hi, team. This is Lauren on for Tycho. Congrats on the quarter. Going back to the discount on Chromium during the quarter that you talked about, do you see maybe some visibility into kind of 2H into 2026 if you're gonna be continuing this discount or how the price, you know, overall is gonna look evolving over time? Thanks.

Speaker 2

Yeah. I mean, so in terms of the discounting and chromium instruments, like, really, this is a function of the environment we're in. Right? Customers 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 buying instruments. And we have been, you know, working creatively with our with our customers to allow them to to to buy instruments as long as there's also a material commitment and reagents to go along with it.

Speaker 2

And we do expect that as long as this kind of environment to continues, 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 deals are ultimately accretive to 10x as well. So it's in our interest, economic interest as well to keep pursuing the strategy.

Operator

That 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.

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