10x Genomics, Inc. 10-Q

Item 1. Financial Statements. 10x Genomics, Inc. Condensed Consolidated Balance Sheets (In thousands) September 30, 2021 December 31, 2020 (Unaudited) (Note 1) Assets Current assets: Cash and cash equivalents $ 600,440 $ 663,603 Restricted cash 28 16,567 Accounts receivable, net 78,430 51,208 Inventory 51,141 29,959 Prepaid expenses and other current assets 14,065 13,029 Total current assets 744,104 774,366 Property and equipment, net 142,589 72,840 Restricted cash 8,597 8,474 Operating lease right-of-use assets 60,715 46,983 Goodwill 4,511 — Other non-current assets 30,056 26,678 Total assets $ 990,572 $ 929,341 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 17,037 $ 4,709 Accrued compensation and related benefits 27,182 15,383 Accrued expenses and other current liabilities 46,187 43,453 Deferred revenue 5,505 4,472 Operating lease liabilities 4,464 5,936 Accrued contingent liabilities — 44,173 Total current liabilities 100,375 118,126 Accrued license fee, noncurrent 5,814 11,171 Operating lease liabilities, noncurrent 75,735 57,042 Other noncurrent liabilities 8,427 3,930 Total liabilities 190,351 190,269 Commitments and contingencies (Note 6) Stockholders’ equity: Preferred stock — — Common stock 2 2 Additional paid-in capital 1,644,897 1,544,218 Accumulated deficit ( 844,872 ) ( 805,098 ) Accumulated other comprehensive gain (loss) 194 ( 50 ) Total stockholders’ equity 800,221 739,072 Total liabilities and stockholders’ equity $ 990,572 $ 929,341 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Contents 10x Genomics, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue $ 125,297 $ 71,817 $ 346,960 $ 186,627 Cost of revenue 24,518 14,411 46,493 39,571 Gross profit 100,779 57,406 300,467 147,056 Operating expenses: Research and development 54,582 30,143 149,867 83,670 In-process research and development — 40,637 — 40,637 Selling, general and administrative 62,076 51,549 187,683 146,352 Accrued contingent liabilities — 332 ( 660 ) 956 Total operating expenses 116,658 122,661 336,890 271,615 Loss from operations ( 15,879 ) ( 65,255 ) ( 36,423 ) ( 124,559 ) Other income (expense): Interest income 49 28 157 1,471 Interest expense ( 219 ) ( 397 ) ( 649 ) ( 1,365 ) Other (expense) income, net ( 599 ) 361 ( 807 ) 121 Loss on extinguishment of debt — — — ( 1,521 ) Total other expense ( 769 ) ( 8 ) ( 1,299 ) ( 1,294 ) Loss before provision for income taxes ( 16,648 ) ( 65,263 ) ( 37,722 ) ( 125,853 ) Provision for income taxes 523 585 2,052 1,305 Net loss $ ( 17,171 ) $ ( 65,848 ) $ ( 39,774 ) $ ( 127,158 ) Other comprehensive income: Foreign currency translation adjustment 136 ( 366 ) 244 ( 6 ) Comprehensive loss $ ( 17,035 ) $ ( 66,214 ) $ ( 39,530 ) $ ( 127,164 ) Net loss per share, basic and diluted $ ( 0.15 ) $ ( 0.65 ) $ ( 0.36 ) $ ( 1.28 ) Weighted-average shares of common stock used in computing net loss per share, basic and diluted 110,874,249 101,341,945 109,826,104 99,058,139 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Contents 10x Genomics, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance as of December 31, 2020 108,485,909 $ 2 $ 1,544,218 $ ( 805,098 ) $ ( 50 ) $ 739,072 Issuance of Class A common stock related to equity awards 1,102,618 — 8,546 — — 8,546 Vesting of shares subject to repurchase, including early exercised options — — 42 — — 42 Stock-based compensation — — 16,253 — — 16,253 Net loss — — — ( 11,551 ) — ( 11,551 ) Other comprehensive income — — — — 98 98 Balance as of March 31, 2021 109,588,527 2 1,569,059 ( 816,649 ) 48 752,460 Issuance of Class A common stock related to equity awards 1,151,392 — 16,194 — — 16,194 Vesting of shares subject to repurchase, including early exercised options — — 42 — — 42 Stock-based compensation — — 26,932 — — 26,932 Net loss — — — ( 11,052 ) — ( 11,052 ) Other comprehensive income — — — — 10 10 Balance as of June 30, 2021 110,739,919 2 1,612,227 ( 827,701 ) 58 784,586 Issuance of Class A common stock related to equity awards 797,529 — 6,682 — — 6,682 Vesting of shares subject to repurchase, including early exercised options — — 38 — — 38 Stock-based compensation — — 25,950 — — 25,950 Net loss — — — ( 17,171 ) — ( 17,171 ) Other comprehensive income — — — — 136 136 Balance as of September 30, 2021 111,537,448 $ 2 $ 1,644,897 $ ( 844,872 ) $ 194 $ 800,221 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents 10x Genomics, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance as of December 31, 2019 96,241,596 $ 2 $ 682,494 $ ( 262,367 ) $ ( 46 ) $ 420,083 Issuance of Class A common stock related to equity awards 1,903,612 — 3,283 — — 3,283 Vesting of shares subject to repurchase, including early exercised options — — 122 — — 122 Stock-based compensation — — 6,718 — — 6,718 Net loss — — — ( 21,143 ) — ( 21,143 ) Other comprehensive income — — — — 5 5 Balance as of March 31, 2020 98,145,208 2 692,617 ( 283,510 ) ( 41 ) 409,068 Issuance of Class A common stock related to equity awards 2,113,974 — 8,051 — — 8,051 Vesting of shares subject to repurchase, including early exercised options — — 42 — — 42 Stock-based compensation — — 13,920 — — 13,920 Net loss — — — ( 40,167 ) — ( 40,167 ) Other comprehensive income — — — — 355 355 Balance as of June 30, 2020 100,259,182 2 714,630 ( 323,677 ) 314 391,269 Sale of Class A common stock 4,600,000 — 482,279 — — 482,279 Issuance of Class A common stock related to equity awards 740,794 — 3,920 — — 3,920 Vesting of shares subject to repurchase, including early exercised options — — 42 — — 42 Stock-based compensation — — 13,784 — — 13,784 Net loss — — — ( 65,848 ) — ( 65,848 ) Other comprehensive loss — — — — ( 366 ) ( 366 ) Balance as of September 30, 2020 105,599,976 $ 2 $ 1,214,655 $ ( 389,525 ) $ ( 52 ) $ 825,080 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 Table of Contents 10x Genomics, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended September 30, 2021 2020 Operating activities: Net loss $ ( 39,774 ) $ ( 127,158 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 15,337 10,094 Stock-based compensation expense 69,058 34,357 Loss on disposal of property and equipment 66 — Loss on extinguishment of debt — 1,521 Accretion of discount on term loan — 17 Amortization of right-of-use assets 5,593 3,511 Changes in operating assets and liabilities: Accounts receivable ( 27,216 ) ( 2,654 ) Inventory ( 21,349 ) ( 9,848 ) Prepaid expenses and other current assets ( 1,220 ) ( 3,363 ) Other assets 348 ( 2,574 ) Accounts payable 12,191 ( 3,307 ) Accrued compensation and other related benefits 11,868 ( 1,286 ) Deferred revenue 1,221 898 Accrued contingent liabilities ( 44,173 ) 8,900 Accrued expenses and other current liabilities ( 2,545 ) 9,464 Operating lease liability ( 2,498 ) ( 3,093 ) Other noncurrent liabilities ( 4,085 ) ( 3,202 ) Net cash used in operating activities ( 27,178 ) ( 87,723 ) Investing activities: Acquisition of intangible assets — ( 801 ) Acquisition of business, net of cash acquired ( 5,451 ) — Purchases of property and equipment ( 73,660 ) ( 15,327 ) Net cash used in investing activities ( 79,111 ) ( 16,128 ) Financing activities: Payments on financing arrangement ( 5,028 ) ( 5,846 ) Payments on term loans — ( 31,256 ) Proceeds from issuance of common stock from follow-on public offering, net of issuance costs — 483,047 Issuance of common stock from exercise of stock options and employee stock purchase plan purchases 31,422 15,255 Net cash provided by financing activities 26,394 461,200 Effect of exchange rates on changes in cash, cash equivalents, and restricted cash 316 ( 144 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 79,579 ) 357,205 Cash, cash equivalents, and restricted cash at beginning of period 688,644 476,493 Cash, cash equivalents, and restricted cash at end of period $ 609,065 $ 833,698 Supplemental disclosures of cash flow information: Cash paid for interest $ 1,222 $ 1,670 Cash paid for taxes $ 8,318 $ 224 7 Table of Contents 10x Genomics, Inc. Condensed Consolidated Statements of Cash Flows (Continued) (Unaudited) (In thousands) Nine Months Ended September 30, 2021 2020 Noncash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities $ 12,710 $ 14,183 Right-of-use assets obtained in exchange for new operating lease liabilities $ 19,566 $ 10,883 Contingent consideration payable from business acquisition $ 1,536 $ — Deferred offering costs in accounts payable and accrued expenses and other current liabilities $ — $ 768 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 8 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements o 1. Description of Business and Basis of Presentation Organization and Description of Business 10x Genomics, Inc. (the “Company”) was incorporated in the state of Delaware on July 2, 2012 and is a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biological systems at resolution and scale that matches the complexity of biology. The Company’s integrated solutions include the Company’s Chromium Controller, Chromium Connect and Chromium X Series instruments, which the Company refers to as “instruments,” and the Company’s proprietary microfluidic chips, slides, reagents and other consumables for both the Company’s Visium and Chromium solutions, which the Company refers to as “consumables.” The Company bundles its software with these products to guide customers through the workflow, from sample preparation through analysis and visualization. The Company began commercial and manufacturing operations and selling its instruments and consumables in 2015. The Company is headquartered in Pleasanton, California and has wholly-owned subsidiaries in Canada, China, Denmark, Germany, Netherlands, Singapore, Sweden, the United States and the United Kingdom. Basis of Presentation The accompanying condensed consolidated financial statements, which include the Company’s accounts and the accounts of its wholly-owned subsidiaries, are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The condensed consolidated balance sheets at December 31, 2020 have been derived from the audited consolidated financial statements of the Company at that date. Certain information and footnote disclosures typically included in the Company’s audited consolidated financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position, results of operations, comprehensive loss and cash flows for the periods presented, but are not necessarily indicative of the results of operations to be anticipated for any future annual or interim period. All intercompany transactions and balances have been eliminated. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates. The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the SEC on February 26, 2021 (our "Annual Report"). 2. Summary of Significant Accounting Policies Fair Value of Financial Instruments Cash and cash equivalents are comprised of money market funds and cash which are classified as Level 1 in the fair value hierarchy. As of September 30, 2021 and December 31, 2020, the Company held $ 548.0 million and $ 600.9 million in money market funds, respectively, with no unrealized gains or losses. Revenue Recognition The Company generates revenue from sales of products and services, and its products consist of instruments and consumables. Revenue from product sales is recognized when control of the product is transferred, which is generally upon shipment to the customer. Instrument service agreements, which relate to extended warranties, are typically entered into for one-year terms, following the expiration of the standard one-year warranty period. Revenue for extended warranties is recognized ratably over the term of the extended warranty period as a stand ready performance obligation. Revenue is recorded net of discounts, distributor commissions and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 45 days. Cash received from customers in advance of product shipment or providing services is recorded as a contract liability. The Company’s contracts with its customers generally do not include rights of return or a significant financing component. 9 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements The Company regularly enters into contracts that include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. The transaction price is allocated to each performance obligation in proportion to its standalone selling price. The Company determines standalone selling price using average selling prices with consideration of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, the Company relies upon prices set by management, adjusted for applicable discounts. Net Loss Per Share Net loss per share is computed using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis. Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase. For the calculation of diluted net loss per share, basic net loss per share is adjusted by the effect of dilutive securities including awards under the Company’s equity compensation plans. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. For periods in which the Company reports net losses, diluted net loss per share is the same as basic net loss per share because potentially dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. 3. Acquisition On January 8, 2021 (the "acquisition date"), the Company purchased 100 % of the outstanding shares of Tetramer Shop ApS (“Tetramer Shop”), a privately held company based in Copenhagen, Denmark, for a total cash consideration of $ 8.5 million, net of cash acquired of $ 0.2 million and including $ 1.5 million of estimated fair value of contingent consideration. The contingent consideration is recorded as a liability and is payable upon the successful transfer of Tetramer Shop's technology to the Company within two years of the acquisition date. Tetramer Shop is a life sciences technology company which develops and provides reagents for precise monitoring of antigen-specific T-cells in research and development. The Company acquired Tetramer Shop for its expertise in building empty, loadable major histocompatibility complex (MHC) molecules. The acquisition was accounted for using the acquisition method of accounting, with Tetramer Shop treated as the acquiree. The acquired assets, including identified intangible assets, and liabilities were recorded at their respective fair values with an amount recorded to goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. The fair values assigned to the assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date. Our condensed consolidated statements of income include the financial results of Tetramer Shop subsequent to the acquisition date. Revenue related to Tetramer Shop since the acquisition date was included in our condensed consolidated statements of income and was not material. 10 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements The estimated fair value of assets acquired, including goodwill and intangibles, and liabilities assumed as of the acquisition date were as follows (in thousands): Amount Cash and cash equivalents $ 224 Other current assets 45 Property and equipment, net 38 Tangible assets acquired 307 Accrued expenses ( 555 ) Other current liabilities ( 97 ) Deferred tax liability - non-current ( 1,131 ) Total net tangible assets acquired and liabilities assumed ( 1,476 ) Intangible assets 5,640 Goodwill 4,511 Net assets acquired $ 8,675 The intangible assets as of the acquisition date included (in thousands): Amount Weighted Average Useful Life (in years) Developed technology $ 5,500 10 Customer relationships 140 3 $ 5,640 The fair value of the intangible assets acquired in connection with the acquisition was determined using either the income or replacement cost methodologies. The developed technology and customer relationships will be amortized over ten years and three years , respectively. Identifiable Intangible Assets Valuation of intangible assets involves multiple assumptions. The key assumptions are described below. Developed technology acquired primarily consists of existing technology related to developing reagents for precise monitoring of antigen-specific T cells in research and development, enabling the Company to strengthen its efforts in immunology. The Company valued the developed technology using the multi-period excess earnings method under the income approach. Using this approach, the estimated fair values were calculated using expected future cash flows discounted to their net present values at an appropriate risk-adjusted rate of return. Goodwill The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition was recorded as a non-current asset and is not amortized but is subject to an annual review for impairment. 4. Other Financial Statement Information Inventory Inventory was comprised of the following (in thousands): 11 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 December 31, 2020 Purchased materials $ 25,995 $ 9,930 Work in progress 12,742 9,312 Finished goods 12,404 10,717 Inventory $ 51,141 $ 29,959 Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): September 30, 2021 December 31, 2020 Land $ 35,692 $ — Laboratory equipment and machinery 42,017 30,010 Computer equipment and software 11,844 5,783 Furniture and fixtures 5,647 5,887 Leasehold improvements 52,941 42,068 Construction in progress 38,842 19,594 Total property and equipment 186,983 103,342 Less: accumulated depreciation and amortization ( 44,394 ) ( 30,502 ) Property and equipment, net $ 142,589 $ 72,840 Intangible Assets, Net Intangible assets, net, which are recorded within other assets in the condensed consolidated balance sheets, consisted of the following (dollars in thousands): September 30, 2021 December 31, 2020 Remaining Useful Life in Years Gross Carrying Amount Accumulated Amortization Intangibles, Net Remaining Useful Life in Years Gross Carrying Amount Accumulated Amortization Intangibles, Net Technology licenses 13.0 $ 22,504 $ ( 3,123 ) $ 19,381 13.7 $ 22,504 $ ( 1,973 ) $ 20,531 Developed technology 9.3 5,500 ( 413 ) 5,087 — — — — Customer relationships 3.0 945 ( 280 ) 665 3.9 805 ( 111 ) 694 Trademarks 0.1 204 ( 193 ) 11 0.9 204 ( 142 ) 62 Assembled workforce 4.0 1,128 ( 231 ) 897 4.8 1,128 ( 61 ) 1,067 Total intangible assets, net $ 30,281 $ ( 4,240 ) $ 26,041 $ 24,641 $ ( 2,287 ) $ 22,354 The estimated annual amortization of intangible assets for the next five years is shown below (in thousands): Estimated Annual Amortization 2021 (excluding the nine months ended September 30, 2021) $ 645 2022 2,535 2023 2,506 2024 2,378 2025 2,214 Thereafter 15,763 Total $ 26,041 12 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures and asset impairments, among other factors. Accrued Compensation and Related Benefits Accrued compensation and related benefits were comprised of the following as of the dates indicated (in thousands): September 30, 2021 December 31, 2020 Accrued payroll and related costs $ 3,470 $ 2,506 Employee stock purchase program liability 3,567 1,258 Accrued bonus 12,200 5,058 Accrued commissions 3,001 3,038 Accrued acquisition-related compensation 2,968 2,213 Accrued vacation 1,287 1,035 Other 689 275 Accrued compensation and related benefits $ 27,182 $ 15,383 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities were comprised of the following as of the dates indicated (in thousands): September 30, 2021 December 31, 2020 Accrued legal and related costs $ 3,327 $ 5,704 Accrued license fee 5,999 6,198 Accrued purchase consideration 5,015 4,146 Accrued royalties for licensed technologies 4,143 3,160 Accrued property and equipment 12,515 2,983 Accrued professional services 5,400 3,137 Product warranties 824 399 Customer deposits 962 1,727 Taxes payable 3,300 8,649 Accrued lab supplies 1,875 1,506 Other 2,827 5,844 Accrued expenses and other current liabilities $ 46,187 $ 43,453 Product Warranties Changes in the reserve for product warranties were as follows for the periods indicated (in thousands): Nine Months Ended September 30, 2021 Year Ended December 31, 2020 Beginning of period $ 399 $ 467 Amounts charged to cost of revenue 2,113 796 Repairs and replacements ( 1,688 ) ( 864 ) End of period $ 824 $ 399 13 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Revenue and Deferred Revenue As of September 30, 2021, the aggregate amount of remaining performance obligations related to separately sold extended warranty service agreements, or allocated amounts for extended warranty service agreements bundled with sales of Chromium instruments, was $ 7.3 million, of which approximately $ 5.4 million is expected to be recognized to revenue in the next 12 months, with the remainder thereafter. The contract liabilities of $ 7.3 million and $ 6.2 million as of September 30, 2021 and December 31, 2020, respectively, consisted of deferred revenue related to extended warranty service agreements. Revenue recorded during the three and nine months ended September 30, 2021 included $ 0.9 million and $ 3.4 million, respectively, of previously deferred revenue that was included in contract liabilities as of December 31, 2020. Revenue recorded during the three and nine months ended September 30, 2020 included $ 0.7 million and $ 2.8 million, respectively, of previously deferred revenue that was included in contract liabilities as of December 31, 2019. The following table represents revenue by source for the periods indicated (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Instruments $ 17,121 $ 9,676 $ 45,123 $ 26,108 Consumables 106,117 60,557 296,342 156,149 Services 2,059 1,584 5,495 4,370 Total revenue $ 125,297 $ 71,817 $ 346,960 $ 186,627 The following table presents revenue by geography based on the location of the customer for the periods indicated (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 North America $ 70,228 $ 42,363 $ 187,800 $ 102,356 Europe, Middle East and Africa 25,819 15,497 73,761 40,370 China 19,063 8,689 55,577 27,314 Asia-Pacific (excluding China) 10,187 5,268 29,822 16,587 Total revenue $ 125,297 $ 71,817 $ 346,960 $ 186,627 Revenue for the United States, which is included in North America in the table above, was 55 % and 57 % of consolidated revenue for the three months ended September 30, 2021 and 2020, respectively, and 53 % and 53 % of consolidated revenue for the nine months ended September 30, 2021 and 2020, respectively. 5. Debt In September 2016, the Company entered into a Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank (as amended and restated in February 2018 and as further amended, restated or supplemented from time to time, the “Loan and Security Agreement”), which included a term loan and revolving line of credit. On February 20, 2020, the Company prepaid the remaining balance of the term loan and all associated costs. The final payment of $ 30.5 million included $ 28.3 million for the outstanding principal balance of the term loan, $ 1.8 million for an end of term payment, $ 0.3 million for early termination fees and $ 0.1 million for interest. The prepayment resulted in a loss on extinguishment of debt of $ 1.5 million. The non-accreted portion of the end of term payment, unamortized discounts and early termination fees were included in the calculation of the loss on extinguishment of debt. The revolving line of credit and the Loan and Security Agreement was terminated at the election of the Company on June 18, 2020. Upon termination, the Company incurred termination fees of $ 0.3 million. As of June 18, 2020, there were no balances outstanding under the revolving line of credit. 14 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements 6. Commitments and Contingencies Lease Agreements The Company leases office, laboratory, manufacturing, distribution and server space with lease terms up to 12 years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company to renew or extend the lease. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. For the three and nine months ended September 30, 2021, the Company incurred $ 2.6 million and $ 7.9 million, respectively, of operating lease costs and $ 0.1 million and $ 0.5 million, respectively, of variable lease costs. For the three and nine months ended September 30, 2020, the Company incurred $ 2.1 million and $ 6.1 million, respectively, of operating lease costs and $ 19 thousand and $ 0.2 million, respectively, of variable lease costs. The variable lease cost is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease cost due to the Company’s election to not separate lease and non-lease components. Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2021 and 2020 was $ 4.6 million and $ 5.1 million and were included in net cash used in operating activities in the Company’s condensed consolidated statements of cash flows. Future net lease payments related to the Company’s operating lease liabilities as of September 30, 2021 is as follows (in thousands): Operating Leases 2021 (excluding the nine months ended September 30, 2021) $ 464 2022 9,969 2023 11,637 2024 10,942 2025 11,152 Thereafter 59,746 Total lease payments $ 103,910 Less: imputed interest ( 23,711 ) Present value of operating lease liabilities $ 80,199 Operating lease liabilities, current $ 4,464 Operating lease liabilities, noncurrent $ 75,735 The following table summarizes additional information related to operating leases as of September 30, 2021: September 30, 2021 December 31, 2020 Weighted-average remaining lease term 7.6 years 8.4 years Weighted-average discount rate 5.4 % 4.5 % On November 6, 2020, the Company entered into a Master Lease Agreement ("MLA") to lease additional office building space near the Company's Pleasanton, California headquarters. The Company intends to utilize the leased space of approximately 145,000 square feet to accommodate its future growth requirements. The MLA consists of various lease components expected to commence on various dates between 2021 and 2023 and is expected to terminate on June 30, 2033 with total lease payments over the lease term expected to amount to approximately $ 60.8 million, net of a tenant improvement allowance of approximately $ 10.0 million to be received in 2021 and 2022. Approximately, $ 2.6 million of this allowance has been received as of September 30, 2021. Certain lease components of the MLA commenced on January 1, 2021 and July 1, 2021. Total undiscounted payments for leases commencing in fiscal years 2022 and 2023 will be $ 21.0 million and $ 14.0 million, respectively, with weighted-average expected lease terms of 12 years for 2022 and 11 years for 2023. 15 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements On April 30, 2021, the Company entered into a lease agreement to lease office building space of approximately 22,000 square feet in Stockholm, Sweden to accommodate its future growth requirements. The Company expects the lease term to commence in January 2022 for a five-year term and expects total lease payments over the lease term to amount to approximately $ 5.7 million. The tables above do not include payments, lease term, or discount rates relating to any leases or lease components that have not yet commenced as of September 30, 2021. The Company will determine the classification for each lease component at the individual component's commencement date. All leases and lease components that have not yet commenced are expected to be classified as operating leases. Lease payments for leases not yet commenced as of September 30, 2021 is as follows (in thousands): Lease payments for leases not yet Commenced 2021 (excluding the nine months ended September 30, 2021) $ — 2022 1,054 2023 2,855 2024 4,342 2025 4,179 Thereafter 28,270 Total undiscounted lease payments $ 40,700 Litigation The Company is regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings involving intellectual property disputes, commercial disputes, competition and other matters, and the Company may become subject to additional types of lawsuits, claims, arbitration proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future. The 2021 Bio-Rad Settlement And Patent Cross License Agreement Bio-Rad Laboratories, Inc. (“Bio-Rad”) and the Company were previously engaged in litigation and other proceedings relating to substantially all of the Company’s Chromium products, including the Company’s legacy GEM products and Next GEM products and multiple Bio-Rad products, around the world. On July 26, 2021, the Company entered into a Settlement and Patent Cross License Agreement (the “Bio-Rad Agreement”) with Bio-Rad resolving all outstanding litigation and other proceedings between the two companies across all jurisdictions around the world and dismissing all infringement claims with prejudice. Pursuant to the terms of the Bio-Rad Agreement, Bio-Rad and the Company granted each other a non-exclusive, worldwide, royalty-bearing license to develop products and services related to single cell analysis. The cross license excludes spatial and In Situ products. It also excludes digital PCR products in the case of 10x. The term of the Bio-Rad Agreement is for the life of the licensed patents. The Company and Bio-Rad have agreed not to sue each other on licensed products and licensed services on other patents owned or exclusively licensed by each company. The companies have agreed that each company’s patents are owned by each respective company. Each company shall pay to the other royalties from licensed products and licensed services through 2030. Each company shall pay to the other royalties from licensed products and licensed services through 2030. The Company previously accrued $ 44.8 million in royalties and interest between November 14, 2018 and March 31, 2021 related to sales of the Company’s GEM products as a result of the litigation with Bio-Rad. Pursuant to the Agreement, the Company paid Bio-Rad $ 29.4 million in royalties and interest related to the sales of such GEM products between November 14, 2018 and March 31, 2021. As a result, in connection with the Agreement the Company reversed $ 15.4 million in accrued royalties and interest as a reduction in cost of goods sold and operating expenses in the second quarter of 2021. The Nanostring Action On May 6, 2021, the Company filed suit against Nanostring Technologies, Inc. ("Nanostring") in the U.S. District Court for the District of Delaware alleging that Nanostring's GeoMx Digital Spatial Profiler and associated instruments and reagents 16 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements infringe U.S. Patent Nos. 10,472,669, 10,662,467, 10,961,566, 10,983,113, and 10,996,219. On May 19, 2021, the Company filed an amended complaint additionally alleging that the GeoMx products infringe U.S. Patent Nos. 11,001,878 and 11,008,607. On July 1, 2021, Nanostring filed a motion to dismiss. Briefing is complete and a hearing has been scheduled for November 17, 2021. Discovery has just commenced; no case schedule has been set. For further discussion of the risks relating to intellectual property and our pending litigation, see the section titled “Risk Factors—Risks related to litigation and our intellectual property” under Item 1A below. 7. Capital Stock As of September 30, 2021, the number of shares of Class A common stock and Class B common stock issued and outstanding was 91,255,983 and 20,281,465 , respectively. During the three months ended September 30, 2020 and during the nine months ended September 30, 2021 and 2020, 2,153,783 , 2,400,000 and 47,558,717 shares of Class B common stock, respectively, were converted to shares of Class A common stock upon the election of the holders of such shares. No conversions of Class B common stock to Class A common stock occurred during the three months ended September 30, 2021. 8. Equity Incentive Plans 2019 Employee Stock Purchase Plan A total of 3,084,859 shares of Class A common stock was reserved for issuance under the 2019 Employee Stock Purchase Plan ("ESPP"). The price at which Class A common stock is purchased under the ESPP is equal to 85 % of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. Shares purchased under the ESPP are subject to a one-year holding period following the purchase date. During the nine months ended September 30, 2021 and 2020, 30,980 and 118,218 shares of Class A common stock, respectively, were issued under the ESPP. No shares of Class A common stock were issued under the ESPP during the three months ended September 30, 2021 or 2020. As of September 30, 2021, there were 2,888,340 shares available for issuance in connection under the ESPP. Stock-based Compensation The Company recorded stock-based compensation expense in the condensed consolidated statement of operations for the periods presented as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Cost of revenue $ 878 $ 398 $ 2,183 $ 1,108 Research and development 11,226 5,467 30,162 14,398 Selling, general and administrative 13,846 7,919 36,713 18,851 Total stock-based compensation expense $ 25,950 $ 13,784 $ 69,058 $ 34,357 Restricted Stock Units Restricted stock unit activity for the nine months ended September 30, 2021 is as follows: Restricted Stock Units Weighted-Average Grant Date Fair Value (per share) Outstanding as of December 31, 2020 823,947 $ 80.97 Granted 828,463 184.38 Vested ( 266,602 ) 106.14 Cancelled ( 71,651 ) 118.67 Outstanding as of September 30, 2021 1,314,157 $ 139.00 17 Table of Contents 10x Genomics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Stock Options Stock option activity for the nine months ended September 30, 2021 is as follows: Stock Options Weighted-Average Exercise Price Outstanding as of December 31, 2020 11,860,844 $ 18.86 Granted 363,874 178.40 Exercised ( 2,753,957 ) 10.11 Cancelled ( 263,911 ) 25.00 Outstanding as of September 30, 2021 9,206,850 $ 27.61 9. Net Loss Per Share The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Stock-options to purchase common stock 9,206,850 12,817,142 9,206,850 12,817,142 Shares subject to repurchase 25,000 84,375 25,000 84,375 Contingent restricted shares 236,484 — 236,484 — Restricted stock units 1,314,157 779,296 1,314,157 779,296 Shares committed under ESPP 29,178 39,449 29,178 39,449 Total 10,811,669 13,720,262 10,811,669 13,720,262 18 Table of Contents