TXG

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and our audited consolidated financial statements and notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 12, 2026 (our "Annual Report"). As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis, in addition to historical financial information, contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” in this Quarterly Report and in Part I, Item 1A of our Annual Report. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Overview We are a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology. Our integrated research solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of biology. Our commercial product portfolio is made up of our Single Cell and Spatial solutions. Our products include our instruments, which include our Chromium instruments, our Visium CytAssist and our Xenium Analyzer, and our consumables, which include proprietary microfluidic chips, slides, reagents and other consumables for our Single Cell and Spatial solutions. We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization. Customers purchase instruments and consumables from us for use in their experiments. We also derive revenue from post-warranty service contracts for our instruments. Acquisition On June 8, 2026, we entered into a stock purchase agreement (“SPA”) to acquire 100% of the outstanding shares of common stock of Proteintech Genomics, Inc. (“PTG”), a division of Proteintech Group, Inc. (“Proteintech”), for $6.1 million in cash. PTG specializes in developing high-plex proteomic solutions for single cell and spatial applications on 10x platforms. We expect the acquisition will allow us to expand our proteomics capabilities. Concurrently with the SPA, we and Proteintech entered into a supply agreement under which Proteintech will supply products to us for use in single-cell and spatial analysis. The supply agreement was accounted for separately from the acquisition of the PTG business. The total consideration paid for the supply agreement and the PTG business was allocated based on the relative fair value of each component, with the fair value of the supply agreement determined by using the income approach and the fair value of PTG’s enterprise value determined by using the net asset value method. Based on the allocation, $12.4 million related to the supply agreement was recorded in “Other noncurrent assets” and “Prepaid expenses and other current assets” in the condensed consolidated balance sheets. The amount allocated to the supply agreement will be reclassified to inventory as quantities are purchased over a 10-year period. $6.1 million was allocated to the PTG business. The fair value measurements used to allocate the total consideration between the supply agreement and the PTG business, as described above, are classified as Level 3 within the fair value hierarchy, as they are based on significant unobservable inputs, including management's estimates of future purchase volumes, contractual and market pricing, and a discount rate. The acquisition of the PTG business was accounted for as a business combination using the acquisition method of accounting. The purchase price consideration was preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, including $3.7 million of developed technology, with the excess of the purchase consideration over the estimated fair value of the identifiable net assets acquired recorded as goodwill. The fair value of the developed technology was estimated using a cost approach, reflecting the estimated current cost to recreate the technology with comparable functionality and utility. The developed technology intangible asset will be amortized over an estimated useful life of 10 years. Because these inputs involve significant judgment and are not observable in the market, the fair value measurement is classified as Level 3 within the fair value hierarchy. 19 Table of Contents Comparison of the Three and Six Months Ended June 30, 2026 and 2025 Revenue The following table represents total revenue by source for the periods indicated (dollars in thousands). Spatial includes our Visium and Xenium products: Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Instruments Single Cell $ 3,087 $ 5,727 $ (2,640) (46) % $ 8,310 $ 11,640 $ (3,330) (29) % Spatial 4,574 8,770 (4,196) (48) 10,613 17,672 (7,059) (40) Total instruments revenue 7,661 14,497 (6,836) (47) 18,923 29,312 (10,389) (35) Consumables Single Cell 88,451 85,788 2,663 3 177,345 169,897 7,448 4 Spatial 42,301 36,397 5,904 16 83,208 67,644 15,564 23 Total consumables revenue 130,752 122,185 8,567 7 260,553 237,541 23,012 10 Services 10,681 8,475 2,206 26 19,514 16,127 3,387 21 Products and services revenue 149,094 145,157 3,937 3 298,990 282,980 16,010 6 License and royalty revenue 1,942 27,751 (25,809) (93) 2,889 44,811 (41,922) (94) Total revenue $ 151,036 $ 172,908 $ (21,872) (13) % $ 301,879 $ 327,791 $ (25,912) (8) % Products and Services Revenue Products and services revenue increased $3.9 million, or 3%, to $149.1 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Consumables revenue increased $8.6 million, or 7%, to $130.8 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Instruments revenue decreased $6.8 million, or 47%, to $7.7 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Services revenue increased $2.2 million, or 26%, to $10.7 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Products and services revenue increased $16.0 million, or 6%, to $299.0 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Consumables revenue increased $23.0 million, or 10%, to $260.6 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Instruments revenue decreased $10.4 million, or 35%, to $18.9 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Services revenue increased $3.4 million, or 21%, to $19.5 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. License and Royalty Revenue License and royalty revenue decreased $25.8 million, or 93%, in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The decrease was primarily due to one-time royalty revenue of $27.3 million recognized in the three months ended June 30, 2025 in connection with the settlement of our worldwide patent litigation with Bruker Corporation (“Bruker”), partially offset by $1.6 million of revenue recognized during the three months ended June 30, 2026 in connection with our patent litigation settlement with Takara Bio USA Holdings, Inc. (“Takara”). License and royalty revenue decreased $41.9 million, or 94%, in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The decrease was primarily due to one-time royalty revenue of $44.1 million recognized in the six months ended June 30, 2025 in connection with our worldwide patent litigation settlements with Vizgen, Inc. (“Vizgen”) and Bruker, partially offset by $1.6 million of revenue recognized during the three months ended June 30, 2026 in connection with our patent litigation settlement with Takara. 20 Table of Contents Excluding non-recurring license and royalty revenue related to patent litigation settlements in 2026 and 2025, we expect our revenues to moderately increase in 2026 as compared to 2025. Cost of Products and Services Revenue, Gross Profit and Gross Margin Three Months Ended June 30, Change Six Months Ended June 30, Change (dollars in thousands) 2026 2025 $ % 2026 2025 $ % Cost of products and services revenue $ 38,539 $ 47,824 $ (9,285) (19) % $ 83,204 $ 97,262 $ (14,058) (14) % Gross profit $ 112,497 $ 125,084 $ (12,587) (10) % $ 218,675 $ 230,529 $ (11,854) (5) % Gross margin 74 % 72 % 72 % 70 % Cost of products and services revenue decreased $9.3 million, or 19%, to $38.5 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The decrease was primarily driven by lower manufacturing costs of $3.3 million which included $2.6 million of tariff refunds, lower inventory write-downs of $3.0 million, lower warranty costs of $2.7 million, and lower royalty costs of $0.4 million. Gross margin increased to 74% for the three months ended June 30, 2026 as compared to 72% for the three months ended June 30, 2025. The increase was primarily due to lower manufacturing costs including tariff refunds, lower inventory write-downs, lower warranty costs, and changes in product mix, partially offset by a decrease in license and royalty revenue due to the non-recurring benefit in license and royalty revenue recorded in the three months ended June 30, 2025. Cost of products and services revenue decreased $14.1 million, or 14%, to $83.2 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The decrease was primarily driven by lower inventory write-downs of $12.2 million and lower warranty costs of $5.2 million, partially offset by higher manufacturing costs of $2.8 million and higher royalty costs of $0.4 million. Gross margin increased to 72% for the six months ended June 30, 2026 as compared to 70% for the six months ended June 30, 2025. The increase was primarily due to lower inventory write-downs, lower warranty costs and changes in product mix, partially offset by a decrease in license and royalty revenue due to the non-recurring benefit in license and royalty revenue recorded in the six months ended June 30, 2025. We expect our gross margin to fluctuate throughout the remainder of 2026 due to a number of factors including changes in product mix. Operating Expenses Three Months Ended June 30, Change Six Months Ended June 30, Change (dollars in thousands) 2026 2025 $ % 2026 2025 $ % Research and development $ 56,791 $ 61,224 $ (4,433) (7) % $ 113,638 $ 125,469 $ (11,831) (9) % Selling, general and administrative 78,661 74,434 4,227 6 145,038 164,162 (19,124) (12) Gain on settlement (3,400) (40,700) (37,300) N/A (3,400) (49,900) (46,500) N/A Total operating expenses $ 132,052 $ 94,958 $ 37,094 39 % $ 255,276 $ 239,731 $ 15,545 6 % Research and development expenses decreased $4.4 million, or 7%, to $56.8 million for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The decrease was primarily driven by an $8.3 million decrease in personnel expenses, including a $2.1 million decrease in stock-based compensation expense, partially offset by a $4.2 million increase in laboratory materials and supplies. Research and development expenses decreased $11.8 million, or 9%, to $113.6 million for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The decrease was primarily driven by a $13.6 million decrease in personnel expenses, including a $5.5 million decrease in stock-based compensation expense and a $2.3 million decrease in facilities and information technology costs, partially offset by a $3.8 million increase in laboratory materials and supplies. Selling, general and administrative expenses increased $4.2 million, or 6%, to $78.7 million for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The increase was primarily driven by a $1.8 million increase in travel and entertainment expenses, $1.5 million increase in outside legal expenses, $1.2 million increase in marketing expenses and a $0.3 million increase in facilities costs partially offset by a $0.7 million decrease in personnel expenses. Selling, general and administrative expenses decreased $19.1 million, or 12%, to $145.0 million for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The decrease was primarily driven by a $10.7 million 21 Table of Contents decrease in outside legal expenses, a $5.0 million decrease in personnel expenses primarily due to a $3.9 million decrease in stock-based compensation expense, a $1.5 million decrease in professional services expenses and a $2.0 million decrease in facilities and information technology costs. Gain on settlement decreased in the three and six months ended June 30, 2026 due to non-recurring gains on settlements of $40.7 million recorded in the three months ended June 30, 2025 and $49.9 million recorded in the six months ended June 30, 2025, as part of our patent litigation settlements with Bruker and Vizgen in 2025. In both periods, the decrease was partially offset by a $3.4 million gain on settlement recorded in the three months ended June 30, 2026 as part of our patent litigation settlement with Takara. Excluding gains on settlements recorded in 2026 and 2025, we expect our operating expenses to modestly decrease in 2026 compared to the prior year as a result of our ongoing efforts to manage our spend. Total Other Income Three Months Ended June 30, Change Six Months Ended June 30, Change (dollars in thousands) 2026 2025 $ % 2026 2025 $ % Interest income $ 4,797 $ 4,271 $ 526 12 % $ 9,811 $ 7,957 $ 1,854 23 % Interest expense — (3) 3 (100) — (3) 3 (100) Other income (expense), net (3,887) 2,603 (6,490) (249) (4,702) 4,739 (9,441) (199) Total other income $ 910 $ 6,871 $ (5,961) (87) % $ 5,109 $ 12,693 $ (7,584) (60) % Interest income increased $0.5 million, or 12%, to $4.8 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to higher money market fund balances. Interest income increased $1.9 million or 23%, to $9.8 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The increase was primarily due to higher money market fund balances and interest income applicable to legal settlement payments we received from Bruker during the six months ended June 30, 2026. Other income (expense), net decreased $6.5 million to $3.9 million other expense, net for the three months ended June 30, 2026 as compared to $2.6 million other income, net, for the three months ended June 30, 2025. Other income (expense), net decreased $9.4 million to $4.7 million other expense, net for the six months ended June 30, 2026 as compared to $4.7 million other income, net, for the six months ended June 30, 2025. The decrease in both periods was primarily driven by a $3.5 million loss resulting from the change in fair value of contingent consideration and increases in net losses from foreign currency remeasurements of $2.6 million and $4.9 million for the three and six month periods, respectively. We expect other income (expense), net, to fluctuate, potentially significantly, from quarter to quarter due to potential changes in the fair value of contingent consideration and fluctuations in foreign currency exchange rates. Provision for (Benefit from) Income Taxes Our benefit from income taxes was $0.7 million and $0.1 million for the three and six months ended June 30, 2026 and our provision for income taxes was $2.5 million and $3.3 million for the three and six months ended June 30, 2025. The change in both periods was primarily driven by the income tax benefit of $1.4 million recognized in the second quarter of 2026 from a reduction in the valuation allowance recorded against our net deferred tax assets. This release was due to deferred tax liabilities recognized in connection with the PTG acquisition, which can be used as a source of income to realize certain domestic deferred tax assets. Additionally, the comparable 2025 periods included federal and state income tax expense of $1.2 million related to Internal Revenue Code Section 174 capitalization. This expense did not recur in 2026 following the enactment of an act to provide for reconciliation pursuant to title II of H. Con. Res. 14 on July 4, 2025, which restored the immediate deductibility of U.S. research and experimental expenditures, thereby lowering U.S. taxable income in the current year periods. Liquidity and Capital Resources As of June 30, 2026, we had approximately $552.0 million in cash and cash equivalents and marketable securities, which increased by $28.6 million as compared to December 31, 2025, and were primarily held in U.S. banks. We have generated losses from operations since inception as reflected in our accumulated deficit of $1.5 billion. We currently anticipate making aggregate capital expenditures of between approximately $10 million and $15 million during the next 12 months, which we expect to include, among other expenditures, equipment to be used for manufacturing and research and development. 22 Table of Contents Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, investments in or acquisitions of complementary or enhancing technologies or businesses, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and international activities, legal costs associated with defending and enforcing intellectual property rights and the introduction of new products and new versions of existing products. We take a long-term view in growing and scaling our business and we regularly review acquisition and investment opportunities, and we may in the future enter into arrangements to acquire or invest in businesses, services and technologies, including intellectual property rights, and any such acquisitions or investments could significantly increase our capital needs. We regularly review opportunities that meet our long-term growth objectives. In 2025, we completed the asset acquisition of Scale Biosciences, Inc. (“Scale Bio”) and recorded contingent consideration related to the potential achievement of certain milestones. In the first quarter of 2026, we made a milestone payment consisting of $10.0 million in cash and $8.7 million in shares (396,584 shares) of our Class A common stock in connection with a technology transfer completed in the third quarter of 2025. In the future, we may pay up to $30.0 million of contingent consideration if certain milestones are met. In 2023, we signed an agreement to acquire certain intangible and other assets from Centrillion Technologies, Inc. and Centrillion Technology Holdings Corp. Under the agreement, we are obligated to pay for certain technology development milestones if they are met. As of June 30, 2026, we have paid $41.3 million relating to the completion of development milestones. Up to $15.0 million of cash consideration is due if an additional technology development milestone is met. We expect to continue to incur operating losses for the foreseeable future. We believe that our existing cash and cash equivalents and cash generated from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. The adequacy of our cash resources depends on many assumptions, including primarily our assumptions with respect to product sales and expenses, as well as the other factors set forth in "Risk Factors" under the heading "Risks related to our business and industry” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. We intend to continue to evaluate market conditions and may in the future pursue additional sources of funding, such as mortgage or other financing, to further enhance our financial position and to execute our business strategy. In addition, should prevailing economic, financial, business or other factors adversely affect our ability to meet our operating cash requirements, we could be required to obtain funding through traditional or alternative sources of financing. We cannot be certain that additional funds would be available to us on favorable terms when required, or at all. Cash Flow Analysis The following table summarizes our cash flows for the periods indicated: Six Months Ended June 30, (in thousands) 2026 2025 Net cash provided by (used in): Operating activities $ 43,094 $ 52,059 Investing activities (9,046) (2,832) Financing activities (5,401) 3,944 Effect of exchange rates changes on cash and cash equivalents (101) 474 Net increase in cash and cash equivalents $ 28,546 $ 53,645 Operating activities The net cash provided by operating activities of $43.1 million for the six months ended June 30, 2026 consisted of a net loss of $31.4 million, non-cash adjustments of $73.3 million and a net cash inflow from changes in operating assets and liabilities of $1.2 million. The non-cash adjustments of $73.3 million primarily consisted of stock-based compensation expense of $48.3 million, depreciation and amortization of $19.6 million, non-cash lease expense of $4.0 million and fair value adjustments on contingent consideration of $3.5 million, partially offset by a $1.4 million of tax benefit recognized in relation to the acquisition of the PTG business. The net cash inflow from operating assets and liabilities was primarily driven by cash inflows associated with a decrease in other receivables of $32.1 million primarily related to the Bruker settlement, an increase in accounts payable of $8.1 million, a decrease in inventory of $5.7 million, and a decrease in prepaid and other current assets of $3.2 million. The net cash inflow from operating assets and liabilities was partially offset by cash outflows associated with a decrease in 23 Table of Contents accrued compensation and other related benefits of $17.8 million, an increase in other noncurrent assets of $11.9 million, a decrease in accrued expenses and other current liabilities of $9.7 million, a decrease in the operating lease liability of $5.8 million, a decrease in deferred revenue of $1.5 million, a decrease in accrued contingent consideration of $0.6 million and an increase in accounts receivable of $0.5 million due to timing of collections. The net cash provided by operating activities of $52.1 million for the six months ended June 30, 2025 consisted of net income of $0.2 million, non-cash adjustments of $77.3 million and a net cash outflow from changes in operating assets and liabilities of $25.4 million. The non-cash adjustments of $77.3 million consisted of stock-based compensation expense of $58.6 million, depreciation and amortization of $15.8 million and non-cash lease expense of $3.6 million. The net cash outflow from operating assets and liabilities was primarily driven by an increase in other receivables of $68.5 million primarily related to the Bruker settlement, a decrease in accrued compensation and other related benefits of $7.8 million, a decrease in the operating lease liability of $5.0 million and a decrease in accrued expenses and other current liabilities of $2.9 million. The net cash outflow from operating assets and liabilities was partially offset by cash inflows associated with a decrease in accounts receivable of $37.9 million, a decrease in inventory of $15.1 million, an increase in accounts payable of $3.5 million and a decrease in other noncurrent assets of $2.4 million. Investing activities The net cash used in investing activities of $9.0 million in the six months ended June 30, 2026 was due to the purchase of marketable securities of $49.3 million, net cash paid for the business combination of $6.1 million and cash paid for purchases of property and equipment of $3.2 million, partially offset by maturities of marketable securities of $50.0 million. The net cash used in investing activities of $2.8 million in the six months ended June 30, 2025 was due to the purchase of marketable securities of $49.4 million and purchases of property and equipment of $3.5 million, partially offset by maturities of marketable securities of $50.0 million. Financing activities The net cash used in financing activities of $5.4 million in the six months ended June 30, 2026 was due to the payment of contingent consideration of $8.7 million related to the Scale Bio acquisition, partially offset by proceeds related to the issuance of common stock from the exercise of stock options. The net cash provided by financing activities of $3.9 million in the six months ended June 30, 2025 was primarily from proceeds related to the issuance of common stock from the exercise of stock options and employee stock purchase plan. Critical Accounting Estimates Critical accounting estimates are those estimates made in accordance with United States generally accepted accounting principles (“GAAP”) that involve a significant level of judgments and estimates that can affect the results of operations and financial position of the Company. For further discussion of our critical accounting estimates, see our critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K filed with the SEC on February 12, 2026. There have been no significant changes in estimates in the quarter ended June 30, 2026 that would require disclosure nor have there been any changes to our policies.