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Item 1A. Risk Factors

2023-02-16 compared with 2022-02-18 · 667 added, 620 removed, 712 unchanged (64% of the section changed)

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In addition, you should consider the interrelationship and compounding effects of two or more risks occurring simultaneously.

Also, the impacts of the COVID-19 pandemic may exacerbate the risks described below as well as risks and uncertainties not presently known to us.

Summary Risk Factors

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Risks related to our business and industry:

• Fluctuations in our operating results due to a variety of factors;

• Our ability to generate sufficient revenue, to become free cash flow positive and to achieve and maintain profitability;

• Our ability to generate revenue from recently introduced products;

• Our dependency on research and development spending by research institutions;

• The COVID-19 pandemic and its impact on our customers and suppliers as well as on our operations, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• Our ability to generate sufficient revenue to achieve and maintain profitability;

• Our ability to compete effectively;

• The ability of suppliers to meet our needs and the needs of our customers;

• Fluctuations in our operating results due to a variety of factors;

• Our products are specialized, complex and difficult to manufacture and we could experience production problems;

• Our ability and the ability of our partners to ship and manufacture products to the necessary specifications and quantities, and within necessary timeframes, to meet demand;

• Our dependency on revenue generated from the sale of our Chromium solutions;

• Our ability to effectively manage product transitions and forecast customer demand, including for our Chromium X Series;

• The ability of suppliers to meet our needs and the needs of our customers;

• Our products are specialized, complex and difficult to manufacture and we could experience production problems, including in sourcing raw materials and undetected errors and defects in our solutions;

• Our ability to increase penetration into our existing markets;

• Our ability to develop new products and enhance the capabilities of our existing products;

• Our dependency on revenue generated from the sale of our Chromium solutions;

• Our ability to effectively manage product transitions and forecast customer demand, including for our Chromium X Series;

• The success of our products in achieving and sustaining scientific acceptance;

• Our ability to manage growth and anticipated growth;

• The impact of seasonal fluctuations in our revenue and results of operations.

• Doing business internationally, including in China;

Risks related to our regulatory environment and taxation:

• Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multi-omic information and gene editing;

• Our products could become subject to more onerous government regulation;

• Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers;

• Changes in tax laws or regulations that are applied adversely to us or our customers;

• Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multi-omic information and gene editing.

Risks related to our intellectual property, information technology and data security:

• Our success will depend on our ability to obtain, maintain and protect our intellectual property rights;

• Our solutions contain third-party open source software components.

• Our dependence on certain intellectual property rights that are licensed to us.

Risks related to litigation and our intellectual property:

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• The multi-class structure of our common stock;

• The requirement of our bylaws that the State of Delaware is the exclusive forum for disputes between us and our shareholders.

• The requirement of our bylaws that the State of Delaware is the exclusive forum for substantially all disputes between us and our shareholders.

General risks:

• Our ability to meet our publicly announced guidance or other expectations about our business;

• The volatility of the market price of our Class A common stock.

The summary risk factors described above should be read together with the text of the full risk factors below in this section entitled “ Risk Factors ” and the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC.

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Risks related to our business and industry

Our business currently depends significantly on research and development spending by research institutions and the ability of researchers to access and fully utilize labs and conduct research, a reduction in which could limit demand for our products and materially and adversely affect our business and operating results.

In the near term, we expect that a large portion of our revenue will continue to be derived from sales of Chromium and Visium products, including our instruments and consumables, to research institutions.

As a result, the demand for our products will depend upon purchasing patterns of these customers, the ability of such customers to adequately staff, access and utilize labs and conduct research in light of the COVID-19 pandemic, the research and development budgets of these customers and the ability of such customers to receive funding for research, all of which are impacted by factors beyond our control, such as:

• reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions as well as other impacts stemming from the COVID-19 pandemic, such as reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our instruments and solutions are used;

• our inability or the inability of our customers to source products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers or distribution networks stemming from the COVID-19 pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• changes in our customers' research priorities, including those caused by the COVID-19 pandemic;

Our operating results have in the past fluctuated significantly and may continue to fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.

These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

• the level of demand for our products, which may vary significantly and result in excess capacity expenses, our ability to accurately forecast such demand and our ability to increase penetration in our existing markets and expand into new markets;

• general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors;

• the success of our recently introduced products and new versions of existing products, and our ability to generate revenue for such products, and the introduction of other new products or product enhancements by us or others in our industry;

• risks related to our business in China, including potential impacts of COVID-19, competition or other factors;

• changes in governmental funding of life sciences research and development or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers;

• changes in product mix, particularly from newly introduced products with lower gross margins;

• the volume and mix of our instrument and consumable sales or changes in the manufacturing or sales costs related to our instruments and consumables;

• differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, some of which may be compounded by impacts of the COVID-19 pandemic;

• the timing of our price increases;

• our ability and the ability of our partners to successfully manufacture our instruments and consumables in necessary quantities at necessary quality, including due to the impacts of supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• shortages, delays, production problems, distribution and quality issues with the materials we purchase for manufacturing, which could impact our ability to manufacture and ship our instruments, consumables and related components;

• our inability or the inability of our customers to source our products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• the timing and amount of expenditures that we may incur to acquire, develop or commercialize additional products and technologies or for other purposes;

• our dependence and the dependence of our customers on single source and sole source suppliers for some of the equipment, components and materials used in our products or in conjunction with our products;

• the effects of inflation on us or our customers, manufacturers and suppliers, including increases in the cost of labor and materials;

• our ability to successfully integrate personnel, technology and other assets that we acquire into our company;

• difficulties encountered by our commercial carriers in delivering our instruments or consumables, whether as a result of external factors such as weather, customs or import processes, transportation bottlenecks, port lockdowns or slowdowns or fuel shortages or internal issues such as labor disputes or difficulties hiring and retaining adequate staffing;

• higher than anticipated warranty costs;

• the timing and amount of expenditures (including success fees) related to litigation, as well as the outcomes of and related rulings in the litigation and administrative proceedings which may vary substantially from quarter to quarter;

• the outcome of any current or future litigation or governmental investigations involving us or other third parties;

• changes in customer payment timing trends including potential increases in the days sales outstanding (DSO);

• future accounting pronouncements or changes in our accounting policies;

• expenses related to our facilities and real estate portfolio, including construction projects;

• disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects, including as a result of the COVID-19 pandemic;

• reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions, such as reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in which our instruments and solutions are used;

• the impacts of geopolitical issues, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences on our business operations and on the business operations of our customers, manufacturers and suppliers;

• the other factors described in this “ Risk Factors ” section.

The cumulative effects of the factors discussed above could result in large fluctuations and unpredictability in our quarterly and annual operating results.

As a result, comparing our operating results on a period-to-period basis may not be meaningful.

Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.

If our revenue or operating results fall below the expectations of analysts or investors or below any guidance we may provide, or if the guidance we provide is below the expectations of analysts or investors, the price of our Class A common stock could decline substantially.

Such a stock price decline could occur even when we have met or exceeded any previously publicly stated guidance we may provide.

Our business currently depends significantly on research and development spending by research institutions, a reduction in which could limit demand for our products and materially and adversely affect our business and operating results.

In the near term, we expect that a large portion of our revenue will continue to be derived from sales of Chromium, Visium and Xenium products, including our instruments and consumables, to research institutions.

As a result, the demand for our products will depend upon purchasing patterns of these customers, the ability of such customers to adequately staff, access and utilize labs and conduct research, the research and development budgets of these customers and the ability of such customers to receive funding for research, all of which are impacted by factors beyond our control, such as:

• decreases in funding of research and development;

• changes in, availability of or interruptions to funding or other incentives for our customers, including VAT and import tax exemptions available or potentially available to certain of our customers in China, including administrative or other delays in funding or incentive award processes, changes in the amount of funds or other incentives allocated to different areas of research, changes that have the effect of increasing the length of the funding or incentive award process or the impact of the COVID-19 pandemic on our customers and potential customers and their sources of funding or other incentives;

• macroeconomic conditions and the political climate;

• scientists’ and customers’ opinions of the utility of new products or services;

• changes in our customers' research priorities;

• macroeconomic conditions;

• scientists’ and customers’ opinions of the utility of recently introduced products or services;

• competitor product offerings or pricing;

• risks related to our business in China, including potential impacts from COVID-19, local competitors or other factors:

• changes in, availability of or interruptions to funding or other incentives for our customers, including VAT and import tax exemptions available or potentially available to certain of our customers in China, including administrative or other delays in funding or incentive award processes, changes in the amount of funds or other incentives allocated to different areas of research, changes that have the effect of increasing the length of the funding or incentive award process, or the impact of the COVID-19 pandemic or a resurgence of COVID-19 on our customers and potential customers and their sources of funding or other incentives;

• our inability or the inability of our customers to source products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers or distribution networks, including those that may arise from a resurgence of COVID-19, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• citation of new products or services in published research;

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• differences in budgetary cycles;

• competitor product offerings or pricing;

• market-driven pressures to consolidate operations and reduce costs;

• reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our solutions are used, including those that may arise from a resurgence of COVID-19, including reduced or

delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our solutions are used;

• market acceptance of relatively new technologies, such as ours.

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Additionally, the research of our customers often requires long uninterrupted studies performed on a consistent basis over time.

Reductions in or other difficulties relating to staffing, capacity, lab slowdowns or shutdowns or interruptions in the ability of our customers to complete research projects, including reductions in staffing, capacity, slowdowns or shutdowns or interruptions stemming from the COVID-19 pandemic, could be particularly damaging to these studies, our customers and our business.

The impacts and potential impacts of the COVID-19 pandemic continue to create significant uncertainty for our business, financial condition and results of operations.

The extent of the impacts of the COVID-19 pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market, including the duration and scope of the pandemic, supply chain disruptions, logistics, shipping and other distribution disruptions, operations disruptions, labor shortages, resurgences, local, state, national and global vaccination efforts, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in customer behaviors in response to the pandemic, some of which may be more than just temporary.

Our global operations expose us to risks associated with the COVID-19 pandemic, which has continued to result in challenging operating environments.

COVID-19 continues to affect all of the countries and territories in which our products are developed, made, manufactured, distributed or sold.

COVID-19 mitigation measures, including travel bans and restrictions, quarantines, curfews, shelter in place and safer-at-home orders, business shutdowns, slowdowns and closures, have impacted and continue to impact us, our employees, customers, contract manufacturers, distributors, partners, suppliers and other third parties with whom we do business.

The countries and territories in which our products are developed, made, manufactured, distributed or sold are in varying stages of restrictions, re-opening and closing to address the COVID-19 pandemic.

Certain jurisdictions have begun re-opening only to return to restrictions in the face of increases in new COVID-19 cases.

There remains considerable uncertainty regarding how the effects of the pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages and current and future health and safety measures implemented in response to the pandemic, will impact our business, including whether they will result in further changes in demand for our products, further increases in operating costs (whether as a result of labor shortages, changes or disruptions to supply chains or logistics, shipping and other distribution operations or increases in employee costs, operating costs or otherwise), further impact our ability to perform research and development, manufacturing, and shipping

of our products and other necessary equipment, components and materials, how they will further impact our supply chain and the availability of our products or equipment, components and materials used in conjunction with our products and whether they will result in further reduced availability of air or other commercial transport, port closures or border restrictions or cause other disruptions to logistics, shipping or other distribution operations, each or all of which can impact our ability to make, manufacture, distribute and sell our products.

To date, we have incurred increased costs as a result of COVID-19, including increased expenses related to supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages and implementation of additional measures to ensure the health and safety of our workforce.

In addition, measures that impact our ability to access and utilize our facilities may continue to impact the availability of our employees, some of whom are not able to perform their job functions remotely.

If a significant percentage of our or our partners’ workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions, social distancing requirements or other governmental restrictions or voluntarily adopted practices, our operations will be negatively impacted.

Any sustained interruption in our, our partners’ or other third parties' operations, research and development, labor force, distribution network or supply chain or any significant continuous shortage of products, equipment, components or materials or other supplies as a result of the COVID-19 pandemic or otherwise, including as a result of increased demand for certain products, could materially impair our ability to develop, make, manufacture, distribute or sell our products.

If the operations of our suppliers or our customers' suppliers are impacted by supply chain disruptions, logistics, shipping and other distribution disruptions or labor shortages, we may not be able to source the necessary equipment, components and materials to build or distribute our products in sufficient quantities to meet demand or our customers may not be able to source the equipment, components and materials they need to use our products.

• demand for COVID-19 testing and research has impacted, and may continue to impact, our ability and our customers' ability to utilize facilities and source equipment, components and materials used in our products or in conjunction with our products that are also needed for COVID-19 testing and research;

• shortages of non-10x sequencing consumables has impacted, and may continue to impact, the workflows of our customers and their ability to complete their experiments;

• the storage and distribution of COVID-19 vaccines has impacted, and may continue to impact, the availability of cold storage for our consumables and other components and materials used by us and our customers in connection with our products;

• plastic component shortages, including of pipette tips utilized by our customers to complete their experiments, have impacted, and may continue to impact, the availability of plastic components used by us and our customers in connection with our products;

• competition for shipping and air transport has impacted, and may continue to impact, our ability to timely deliver products to our customers;

• shortages of certain chemicals, oils and beads utilized in our microfluidic chips has impacted, and may continue to impact, our ability to carry a buffer of inventory to safeguard against continuous significant shortages of such materials;

• semiconductor chip shortages have impacted, and may continue to impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products;

• energy shortages and other issues have impacted, and may continue to impact, factory production of upstream components utilized by us or our suppliers;

• natural gas shortages have impacted, and may continue to impact, the availability of dry ice utilized in the storage and distribution of our products.

The risk that we will not be able to source the necessary equipment, components and materials to manufacture our products has led us to carry higher inventory.

Additionally, the risk that we, our suppliers, our customers or other third parties may not be able to source the equipment, components and materials needed to manufacture or use our products may require that we redesign and/or requalify, or attempt to redesign and/or requalify, certain of our products in order to facilitate our customers' experiments, and such attempts to redesign and/or requalify may not be successful.

Compliance with governmental or other measures imposed in response to COVID-19 has caused and will continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines and other penalties, any of which can adversely affect our business.

In addition, while much of our workforce had returned to our offices and resumed onsite work, resurgences of COVID-19 resulted in a return to remote work for our employees.

Having our employees working remotely amplified certain risks to our business and may do so again.

For example, the increase in remote work has increased demand on our information technology resources and systems, increased phishing and other malicious activity

as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic and led to an increase in the number of points of potential exposure, such as laptops and mobile devices, to be secured.

Any failure to effectively manage these risks, including to timely identify and appropriately respond to any security incidents, may adversely affect our business.

Public concern regarding the risk of contracting COVID-19 has and may impact demand from customers.

The ongoing economic impacts and health concerns associated with the pandemic may continue to affect customer behaviors and resurgences of COVID-19 could amplify such impacts.

In addition, changes in customer purchasing patterns may increase demand for our products in one quarter, resulting in decreased customer demand for our products in subsequent quarters.

Spikes in customer demand for our products may make it harder for us to distribute our products in a timely manner.

In addition, some researchers who would be running experiments using our platforms have instead shifted their resources to COVID-19 experimentation.

Furthermore, our growth strategies include capital intensive initiatives, such as significant investments in research and development and the acquisition or licensing of core technologies and associated intellectual property.

The continued economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global capital and credit markets which could impair our ability to access these markets on terms commercially acceptable to us, or at all, and execute our growth strategies.

While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols in an effort to try to mitigate the negative impact of COVID-19 on our employees and our business, there can be no assurance that we will be successful in our efforts or that such efforts may not have detrimental unintended consequences, and as a result, our business, financial condition and results of operations and the price of our Class A common stock may be materially and adversely affected.

Reductions in or other difficulties relating to staffing, capacity, lab slowdowns or shutdowns or interruptions in the ability of our customers to complete research projects, including reductions in staffing, capacity, slowdowns or shutdowns or interrupt ions stemming from a resurgence of COVID-19, could be particularly damaging to these studies, our customers and our business.

Our industry is highly competitive.

If we fail to compete effectively, our business and operating results will suffer.

We face significant competition.

We currently compete with both established and early-stage companies that have introduced products for, among other things, genomics analysis, single cell analysis, spatial analysis and in situ analysis.

There are additional companies, including both early stage and established, that have indicated that they are designing, manufacturing and marketing products to compete with us or that they intend to do so in the future.

Some of these companies may have substantially greater financial and other resources than we do, including larger research and development staff or larger, more established marketing, distribution, service and sales organizations.

In addition, they may have greater name recognition than we do.

Other competitors are in the process of developing novel technologies for the life sciences market which may lead to products that rival or replace our products.

We expect new competitors to emerge and the intensity of competition to increase.

We also face competition from researchers developing their own solutions.

The area in which we compete involves rapid innovation and some of our customers have in the past, and more may in the future, elect to create their own platform or assays rather than rely on a third-party supplier such as ourselves.

This is particularly true for the largest research centers and labs who are continually testing and trying new technologies, whether from a third-party vendor or developed internally.

We also compete for the resources our customers allocate for purchasing a wide range of products used to analyze biological systems, some of which are additive to or complementary with our own but not directly competitive.

Our products may not compete favorably or be successful in the face of increasing competition from products and technologies introduced by our existing competitors, companies entering our markets or developed by our customers internally.

In addition, our competitors may have or will in the future develop products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours or that are able to run comparable experiments at a lower total experiment cost.

Any failure to compete effectively could materially and adversely affect our business, financial condition and operating results.

We may be unable to consistently manufacture our instruments and consumables to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at an acceptable performance level.

Our products are integrated solutions with many different components that work together.

As such, a quality defect in a single component can compromise the performance of the entire solution.

Certain of our consumables are manufactured at our

Pleasanton, California and Singapore facilities using complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures.

Our Chromium and Visium CytAssist instruments are manufactured by our third-party manufacturers at their facilities.

In order to successfully generate revenue from our products, we need to manufacture products that meet our specifications before we allow them to be shipped and to supply our customers with products that meet their expectations for quality and functionality in accordance with established specifications.

In order to ensure we are able to meet these expectations, our Pleasanton, California manufacturing facilities, as well as the facilities of our third-party manufacturers, have obtained International Organization for Standardization (“ISO”) quality management certifications and employ other quality control measures.

On occasion, our customers have experienced quality control and manufacturing defects and may again in the future.

For example, a manufacturing defect in certain of our legacy Chromium Controllers resulted in an unacceptable level of LCD screen failures and we launched a free replacement program in 2018 to allow customers to replace affected LCD screens as a result.

In addition, in the first half of 2023 we plan to move certain of our operations currently located in leased facilities in Pleasanton to a newly constructed facility located in Pleasanton which we own.

We may experience operational delays or difficulties as a result of transitioning operations to our new facility, including if our equipment and materials are harmed or rendered inoperable as a result of the move, which could adversely affect our business, financial condition and results of operations.

Additionally, as we continue to grow and introduce new products, and as our products incorporate increasingly sophisticated technology, it will be increasingly difficult to ensure our products are produced in the necessary quantities without sacrificing quality and in the necessary timeframes.

There is no assurance that we or our third-party manufacturers will be able to continue to manufacture our products so that they consistently achieve the product specifications, quality and volumes that meet our requirements or our customers' expectations.

Certain of the raw materials we use and certain of our consumables have a shelf life, after which their performance is not ensured.

Expiring raw materials could increase our operational costs and cause delays in manufacturing adequate volumes of our products within the timeframes required.

Shipments of defective instruments or consumables to customers may result in recalls and warranty replacements, which would increase our costs, and depending upon current inventory levels and the availability and lead time for additional inventory, could lead to availability issues.

Any future design issues, unforeseen manufacturing problems, such as contamination of our third-party manufacturer's facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third-party suppliers, or failures to strictly follow procedures or meet specifications, may have a material adverse effect on our brand, business, financial condition and operating results and could result in us or our third-party manufacturers losing ISO quality management certifications.

If we or our third-party manufacturers fail to manufacture products without defects that meet our specifications or maintain ISO quality management certifications, our customers might choose not to purchase products from us.

Furthermore, we or our third-party manufacturers may not be able to increase manufacturing to meet anticipated demand or may experience downtime.

In addition, as we increase manufacturing capacity, we will also need to make corresponding improvements to other operational functions, such as our customer service and billing systems, compliance programs and our internal quality assurance programs.

We will also need additional equipment, manufacturing and warehouse space and trained personnel to process higher volumes of products.

We cannot assure you that any increases in scale, related improvements and quality assurance will be successfully implemented or that equipment, manufacturing and warehouse space and appropriate personnel will be available.

As we develop additional products, we may need to bring new equipment online, implement new systems, technology, controls and procedures and hire personnel with different qualifications.

Our ability to increase our manufacturing capacity at our Pleasanton, California and Singapore locations is complicated by the use of our proprietary equipment that is not readily available from third-party manufacturers.

The risk of manufacturing defects or quality control issues is generally higher for new products, whether produced by us or a third-party manufacturer, products that are transitioned from one manufacturer to another, particularly if manufacturing is transitioned or initiated with a manufacturer we have not worked with in the past, and products that are transferred from one manufacturing facility to another.

Our current product roadmap calls for the introduction of new instruments and consumables, which may require that we utilize manufacturers with which we have little or no prior manufacturing experience and the risk of manufacturing defects or quality control issues could increase as a result.

The expansion of our manufacturing capabilities could increase the risk of manufacturing defects or quality control issues in the consumables we manufacture.

We and our third-party manufacturers may not be able to launch new products on time, transition manufacturing of existing products to new manufacturers, transition our manufacturing capabilities to a new location or transition manufacturing of any additional consumables in-house without manufacturing def ects.

An inability to manufacture products and components that consistently meet specifications, in necessary quantities and at commercially acceptable costs will have a negative impac t and may have a material adverse effect on our business, financial condition and results of operations.

We and our customers are dependent on single source and sole source suppliers for some of the equipment, components and materials used in our products and in conjunction with our products and the loss of any of these suppliers could harm our business.

The ability of suppliers to meet our needs and the needs of our customers could be reduced or eliminated by the impacts of the COVID-19 pandemic or other factors.

We do not have long-term contracts with our suppliers for the significant majority of the services, equipment, materials and components we use for the manufacture and delivery of our products.

We also rely on single suppliers for all of our requirements for certain equipment, materials or components.

We also rely on single suppliers for certain equipment, materials and components.

In many cases we do not have long term contracts with these suppliers, and even in the cases where we do, the contracts include significant qualifications that would make it extremely difficult for us to force the supplier to provide us with their services, equipment, materials or components should they choose not to do so.

We are therefore subject to the risk that these third-party suppliers will not be able or willing to continue to provide us with equipment, materials and components that meet our needs, specifications, quality standards and delivery schedules.

Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment, materials and components include shortages, alternative priorities, logistics, shipping or other distribution difficulties, disruption at or affecting our suppliers’ facilities, such as difficulties hiring and retaining adequate staffing, work stoppages or natural disasters, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly with our solutions.

Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment, materials and components include shortages, alternative priorities, logistics, shipping or other distribution difficulties, disruption at or affecting our suppliers’ facilities, such as difficulties hiring and retaining adequate staffing, work stoppages or natural disasters, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly with our solutions.

If we are not able to obtain equipment, materials and components that meet our needs, specifications, quality standards and delivery schedule on satisfactory terms, our business will be harmed.

Any increase in equipment, material and component costs or decrease in availability could reduce our sales and harm our gross margins.

Any increase in equipment, material and component costs or decrease in availability could reduce our sales, harm our gross margins or prevent us from timely delivering our products to our customers.

For example, we depend on a limited number of suppliers for enzymes and amplification mixes used in our consumables.

In some cases, these manufacturers are the sole source of certain types of enzymes and reagents.

In some cases, these manufacturers are the sole source of certain necessary enzymes and reagents.

We do not have long-term contracts with most of these sole source suppliers.

Lead times for some of these components can be several months or more and in the past have been, and in the future could be again, exacerbated due to the COVID-19 pandemic, supply chain disruptions, labor shortages or other factors.

Lead times for some of these components can be several months or more and in the past have been, and in the future could be again, extended due to a resurgence of the COVID-19 pandemic, supply chain disruptions, labor shortages or other factors.

In the event that demand increases, a manufacturing ‘lot’ does not meet our specifications or we fail to forecast and place purchase orders sufficiently in advance, this could result in a material shortage.

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We have not qualified secondary sources for all equipment, materials or components that we source through a single supplier and qualification of a secondary supplier may not prevent future supply issues.

Labor shortages, logistics, shipping or other

distribution operations difficulties or disruption in the supply of equipment, materials or components could impair our ability to sell our products and meet customer demand, and also could delay the launch of new products, any of which could harm our business and results of operations.

Labor shortages, logistics, shipping or other distribution operations difficulties or disruption in the supply of equipment, materials or components could impair our ability to sell our products and meet customer demand, and also could delay the launch of new products, any of which could harm our business and results of operations.

If we were to have to change suppliers, the new supplier may not be able to provide us equipment, materials or components in a timely manner and in adequate quantities that are consistent with our quality standards and on satisfactory pricing terms.

In addition, alternative sources of supply may not be available for equipment or materials.

While we have taken steps to mitigate potential supply chain and transportation infrastructure system issues which may result from the COVID-19 pandemic, the impacts of the COVID-19 pandemic, supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages or other factors may exacerbate the risks described in this risk factor and could cause certain of our suppliers to reduce their ability to meet our or our customers' needs, be unable to operate temporarily or even go out of business permanently.

While we have taken steps to mitigate potential supply chain and transportation infrastructure system issues, including those which may result from a resurgence of COVID-19, the impact of supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages or other factors may exacerbate the risks described in this risk factor and could cause certain of our suppliers to reduce their ability to meet our or our customers' needs, be unable to operate temporarily or even go out of business permanently.

The realization of any of these risks could prevent us from producing, selling or delivering our products, reduce our sales and harm our gross margins or permanently cause a change in one or more of our products that may not be accepted by our customers or cause us to eliminate that product altogether.

In addition, our suppliers or customers may face difficulties in procuring or delivering, or in some cases may be unable to procure or deliver, the equipment, materials or components from their own suppliers necessary to supply us with products, equipment, components or materials or conduct experiments using our solutions.

• demand for COVID-19 testing and research has impacted, and may continue to impact, our ability and our customers' ability to source equipment, components and materials used in our products or in conjunction with our products that are also needed for COVID-19 testing and research;

• shortages of non-10x sequencing consumables has impacted, and may continue to impact, the workflows of our customers and their ability to complete their experiments;

• the storage and distribution of COVID-19 vaccinations has impacted, and may continue to impact, the availability of cold storage for components and materials used by us and our customers in connection with our products;

• competition for shipping and air transport has impacted, and may continue to impact, our ability to timely deliver products to our customers;

• semiconductor chip shortages have impacted, and may continue to impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products;

• energy shortages and other issues have impacted, and may continue to impact, factory production of upstream components utilized by us or our suppliers.

We rely exclusively on commercial carriers to transport our products, including perishable consumables, to our customers in a timely and cost-efficient manner and if these delivery services are disrupted, our business will be harmed.

Our business depends on our ability to quickly and reliably deliver our products and in particular, our consumables, to our customers.

The majority of our consumables are perishable and must be kept below certain temperatures.

As such, we ship our refrigerated consumables on dry ice and only ship such consumables on certain days of the week to reach customers on a timely basis.

Disruptions in the delivery of our products, whether due to hiring difficulties or labor disruptions, fuel shortages, dry ice shortages, bad weather, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandemics including COVID-19, outbreaks and resurgences, terrorist acts or threats or for other reasons could result in delivery delays or our customers receiving consumables that are not fit for usage, and if used, could result in inaccurate results or ruined experiments.

While we work with customers to replace any consumables that are impacted by delivery disruptions, our reputation and our business may be adversely impacted even if we replace perished consumables free of charge.

In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be adversely affected.

In addition, both shipping and air transport has recently been negatively impacted in terms of speed and capacity.

Should our commercial carriers encounter difficulties in delivering our instruments or consumables to customers, including due to impacts stemming from the COVID-19 pandemic, it could adversely impact our ability to deliver our products to our customers, or to recognize revenue for those products and accordingly adversely affect our financial results for that period and such impact could be particularly acute at the end of any financial quarter.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.

These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

• reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions as well as other impacts stemming from the COVID-19 pandemic or other factors, such as reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in which our instruments and solutions are used;

• our inability or the inability of our customers to source our products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers stemming from the COVID-19 pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects as a result of the COVID-19 pandemic;

• the effects of inflation on us or our customers, manufacturers and suppliers, including increases in the cost of labor and materials;

• our ability to successfully integrate new personnel, technology and other assets that we acquire into our company;

• the timing and cost of, and level of investment in, research and development and commercialization activities relating to our products, which may change from time to time;

• the volume and mix of our instrument and consumable sales or changes in the manufacturing or sales costs related to our instruments and consumables;

• the success of our recently introduced products and new versions of existing products and the introduction of other new products or product enhancements by us or others in our industry;

• the timing and amount of expenditures that we may incur to acquire, develop or commercialize additional products and technologies or for other purposes;

• changes in governmental funding of life sciences research and development or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers;

• future accounting pronouncements or changes in our accounting policies;

• the outcome of any current or future litigation or governmental investigations involving us or other third parties;

• general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors;

• higher than anticipated warranty costs;

• expenses related to our facilities and real estate portfolio, including construction projects;

• the impacts of infectious disease, epidemics, pandemics, outbreaks and resurgences, including the effects of the COVID-19 pandemic, on our business operations and on the business operations of our customers, manufacturers and suppliers;

• the other factors described in this “ Risk Factors ” section.

The cumulative effects of the factors discussed above could result in large fluctuations and unpredictability in our quarterly and annual operating results.

As a result, comparing our operating results on a period-to-period basis may not be meaningful.

Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.

Such a stock price decline could occur even when we have met or exceeded any previously publicly stated guidance we may provide.

• competition for shipping and air transport in the past impacted, and in the future may impact, our ability to timely deliver products to our customers;

• energy shortages and other issues in the past impacted, and in the future may impact, factory production of upstream components utilized by us or our suppliers;

• shortages of non-10x sequencing consumables in the past impacted, and in the future may impact, the workflows of our customers and their ability to complete their experiments;

• the storage and distribution of COVID-19 vaccinations in the past impacted, and in the future may impact, the availability of cold storage for components and materials used by us and our customers in connection with our products;

• plastic component shortages, including of pipette tips utilized by our customers to complete their experiments, in the past impacted, and in the future may impact, the availability of plastic components used by us and our customers in connection with our products;

• shortages of certain chemicals, oils and beads utilized in our microfluidic chips in the past impacted, and in the future may impact, our ability to carry a buffer of inventory to safeguard against continuous significant shortages of such materials;

• semiconductor chip shortages in the past impacted, and in the future may impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products.

Our instruments, consumables and related components are specialized, complex and difficult to manufacture.

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We may have quality variations, supply issues, backorders, delays, shortages or production difficulties of needed components and may require components that are difficult to obtain or manufacture in necessary quantities and at necessary quality, in a timely manner or in accordance with regulatory requirements.

Such issues, issues with our manufacturing processes or the manufacturing processes of our third-party manufacturers, shipping issues, inaccurate demand forecasts or other production issues (including issues stemming from the COVID-19 pandemic) could result in our inability to supply our products to our customers, backorders, insufficient inventory, excess inventory, shipping delays, product deficiencies or other operational failures.

For example, the COVID-19 pandemic has disrupted air, sea and other travel in the United States and globally.

Such disruptions could reduce or eliminate our ability to receive components or supply our customers.

If we cannot supply our products to our customers in a timely manner, our customers may delay or cancel their orders.

Furthermore, even if we have inventory, if we do not have adequate inventory of products in the geographic regions in which they are ordered, we may not be able to deliver products to our customers in a timely manner and customers may delay or cancel their orders.

Many other factors could cause production or shipping delays or interruptions, including difficulties in transporting materials, equipment, raw material or other shortages, raw material failures, equipment malfunctions, facility contamination, labor problems, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandemics including COVID-19, outbreaks and resurgences, disruption in utility services, terrorist activities or circumstances beyond our control.

Such issues, issues with our manufacturing processes or the manufacturing processes of our third-party manufacturers, shipping issues, inaccurate demand forecasts or other production issues could result in our inability to produce our products in sufficient volumes to meet demand, supply our products to our customers, backorders, insufficient inventory, excess inventory, shipping delays, product deficiencies or other operational failures.

For example, in the past the COVID-19 pandemic disrupted air, sea and other travel in the United States and globally.

Similar disruptions in the future could reduce or eliminate our ability to receive components or supply our customers.

Many other factors could cause production or shipping delays or interruptions, including difficulties in transporting materials, equipment, raw material or other shortages, raw material failures, spoilage, equipment malfunctions, facility contamination, labor problems, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandem ics such as COVID-19 o utbreaks and resurgences, disruption in utility services, terrorist activities or circumstances beyond our control.

Additionally, we and our third-party manufacturers may encounter problems in hiring and retaining the experienced specialized personnel needed to develop and operate our manufacturing processes or the manufacturing processes of our third-party manufacturers, which could result in backorders, shortages, delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

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We use a broad range of materials and supplies, including metals, chemicals and electronic components, in our products.

A significant disruption in the supply of materials, including disruptions stemming from the COVID-19 pandemic, could decrease

production and shipping levels, materially increase our operating costs and materially adversely affect our profit margins.

Shortages of materials or interruptions in production and transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, conflict, war, civil unrest, acts of terrorism or other interruptions to or difficulties in the employment of labor or transportation that adversely impact equipment, materials and components we require for the production of our products, may adversely affect our ability to maintain production of our products and generate revenue.

A significant disruption in the supply of materials could decrease production and shipping levels, materially increase our operating costs and materially adversely affect our profit margins.

Shortages of materials or interruptions in production and transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences, geopolitical issues, conflict, war, civil unrest, acts of terrorism or other interruptions to or difficulties in the employment of labor or transportation that adversely impact equipment, materials and components we require for the production of our products, may adversely affect our ability to maintain production of our products and generate revenue.

In addition, a significant prolonged increase in inflation could negatively impact the cost of materials and components.

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If we were to experience a significant disruption in the supply of, or prolonged shortage of, critical components from any of our suppliers and could not procure the components from other sources, we would be unable to manufacture our products and to ship such products to our customers in a timely fashion, which would adversely affect our sales, margins and customer relations.

Our products are integrated solutions with many different components that work together.

As such, a quality defect in a single component can compromise the performance of the entire solution.

Certain of our consumables are manufactured at our Pleasanton, California and Singapore facilities using complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures.

In many cases, the consumables we manufacture are bundled with products or components that we source from third parties and assemble, package and perform quality assurance testing at our Pleasanton facilities.

Our Chromium instruments are manufactured by our third-party manufacturers at their facilities.

While customer complaints regarding defects in our products and consumables have historically been low, our customers have experienced quality control and manufacturing defects in the past.

For example, a manufacturing defect in certain of our Chromium Controllers resulted in an unacceptable level of LCD screen failures and we launched a free replacement program in 2018 to allow customers to replace affected LCD screens as a result.

As we continue to grow and introduce new products, and as our products incorporate increasingly sophisticated technology, it will be increasingly difficult to ensure our products are produced in the necessary quantities without sacrificing quality.

There is no assurance that we or our third-party manufacturers will be able to continue to manufacture our products so that they consistently achieve the product specifications and quality that meet our requirements or our customers' expectations.

Certain of our consumables are subjected to a shelf life, after which their performance is not ensured.

Shipment of consumables that effectively expire early or prior to use by our customers due to delivery delays, or shipment of defective instruments or consumables to customers, may result in recalls and warranty replacements, which would increase our costs, and depending upon current inventory levels and the availability and lead time for additional inventory, could lead to availability issues.

Any future design issues, unforeseen manufacturing problems, such as contamination of our or their facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third-party suppliers, or failures to strictly follow procedures or meet specifications, may have a material adverse effect on our brand, business, financial condition and operating results and could result in us or our third-party manufacturers losing ISO quality management certifications.

Furthermore, we or our third-party manufacturers may not be able to increase manufacturing to meet anticipated demand or may experience downtime.

We will also need additional equipment, manufacturing and warehouse space and trained personnel to process higher volumes of products.

As we develop additional products, we may need to bring new equipment online, implement new systems, technology, controls and procedures and hire personnel with different qualifications.

The expansion of our manufacturing capabilities could increase the risk of manufacturing defects or quality control issues in the consumables we manufacture.

Additionally, impacts stemming from the COVID-19 pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages and issues relating to the health and safety of our manufacturing staff or on the global supply chain and transportation infrastructure, may limit our ability to manufacture products and components that meet specifications, in necessary quantities and at commercially acceptable costs and deliver them in commercially acceptable timeframes to our customers.

An inability to manufacture products and components that consistently meet specifications, in necessary quantities and at commercially acceptable costs will have a negative impact and may have a material adverse effect on our business, financial condition and results of operations.

Our industry is highly competitive.

If we fail to compete effectively, our business and operating results will suffer.

We face significant competition.

We currently compete with both established and early-stage companies that design, manufacture and market instruments, consumables and software for, among other applications, genomics, single cell analysis, spatial analysis, in situ analysis and immunology.

We believe our competitors include Becton, Dickinson and Company and Nanostring Technologies, Inc., each of which has products that compete to varying degrees with some but not all of our product solutions, as well as a number of other emerging and established companies.

Many of these companies have introduced products or announced plans to introduce products that compete with our single cell, spatial and future in situ platforms.

Some of our current competitors may enjoy a number of competitive advantages over us, including:

• greater name and brand recognition;

• greater financial and human resources;

• broader product lines;

• larger sales forces and more established distributor networks;

• substantial intellectual property portfolios;

• larger and more established customer bases and relationships;

• better established, larger scale and lower cost manufacturing capabilities.

We also face competition from researchers developing their own solutions.

This is particularly true for the largest research centers and labs who are continually testing and trying new technologies, whether from a third-party vendor or developed internally.

Any failure to compete effectively could materially and adversely affect our business, financial condition and operating results.

We are significantly dependent upon revenue generated from the sale of our Chromium solutions, and in particular our Single Cell Gene Expression solutions.

We currently generate substantially all of our revenue from the sale of our Chromium instruments, which we refer to as “instruments,” and our proprietary microfluidic chips, slides, reagents and other consumables for both our Visium and Chromium solutions, which we refer to as “consumables.” In particular, we are dependent upon revenue generated from sales of our Single Cell Gene Expression consumables.

There can be no assurance that we will be able to design future products, particularly non-Chromium product lines, that will meet the expectations of our customers or that our future products will become commercially successful.

As technologies change in the future for research equipment in general and in genomics solutions specifically, we will be expected to upgrade or adapt our products in order to keep up with the latest technology.

To date we have limited experience simultaneously designing, testing, manufacturing and selling non-Chromium products and there can be no assurance we will be able to do so.

Our sales expectations are based in part on the assumption that sales of our instruments will increase workflows for our future customers and their associated purchases of our consumables.

If sales of our instruments fail to materialize so will the related consumable sales and associated revenue.

Our sales expectations are based in part on the continued success of our existing solutions and the future success of new products we launch.

If our new products fail to achieve sufficient market acceptance or sales of our existing products decrease, our consumables revenue could be materially and adversely impacted.

Our failure to effectively manage product transitions or accurately forecast customer demand could result in excess or obsolete inventory and resulting charges.

Because the market for our products is characterized by rapid technological advances, we frequently introduce new products with improved ease-of-use, improved performance or additional features and functionality.

At times, we pre-announce products and services, in some cases before such products and services have been fully developed or tested, and risk failing to meet expectations when and if such products and services become available.

The risks associated with the introduction of new products include the difficulties of predicting customer demand and effectively managing inventory levels to ensure adequate supply of the new product and avoiding excess supply of the legacy product.

In addition, the COVID-19 pandemic, supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages have made it more difficult to predict customer demand and effectively manage inventory levels for our instruments and consumables and the risk that we will not be able to source the necessary equipment, components and materials to manufacture our products has led us to carry higher inventory.

Further, differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, some of which may be compounded by impacts of the COVID-19 pandemic, could negatively impact our ability to accurately forecast demand.

We may strategically enter into non-cancelable commitments with vendors to purchase materials for our products in advance of demand to take advantage of favorable pricing, address concerns about the availability of future supplies or build safety stock to help ensure customer shipments are not delayed should we experience higher than anticipated demand for materials with long lead times.

During periods of decreased demand, which have occurred and which we expect to continue to occur as a result of the COVID-19 pandemic, these non-cancelable commitments could prevent our related costs from decreasing in proportion to decreases in demand.

Our future success is dependent upon our ability to increase penetration in our existing markets and to maintain and increase the effectiveness of our commercial organization.

We rely exclusively on commercial carriers to transport our products, including perishable consumables, to our customers in a timely and cost-efficient manner and if delivery of our products is disrupted, our business will be harmed.

Our business depends on our ability to quickly and reliably deliver our products and in particular, our consumables, to our customers.

The majority of our consumables are perishable and must be kept below certain temperatures.

As such, we ship our refrigerated consumables on dry ice and only ship such consumables on certain days of the week to reach customers on a timely basis.

Disruptions in the delivery of our products, whether due to hiring difficulties or labor disruptions, fuel shortages, dry ice shortages, bad weather, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandemics such as COVID-19 outbreaks and resurgences, terrorist acts or threats or for other reasons could result in delivery delays or our customers receiving consumables that are not fit for usage, and if used, could result in inaccurate results or ruined experiments.

For example, certain of our customers were negatively impacted by a process breakdown in our logistics cold-chain that resulted in product spoilage which delayed purchases by affected customers, negatively impacting our revenue in 2022.

While we work with customers to replace any consumables impacted by delivery disruptions, our reputation and our business may be adversely impacted if customers receive consumables that are not fit for usage.

In addition, if we are unable to continue to obtain delivery services on commercially reasonable terms, our operating results may be adversely affected.

In addition, in the past both shipping and air transport have been negatively impacted in terms of speed and capacity.

If we cannot supply our products to our customers in a timely manner, our customers may delay or cancel their orders.

Should we or our commercial carriers encounter difficulties in delivering our instruments or consumables to customers , including due to impacts stemming from the COVID-19 pandemic, it could adversely impact our ability to recognize revenue for those products and accordingly adversely affect our financial results for that period and such impact could be particularly acute at the end of any financial quarter.

Our future success is dependent upon our ab ility to increase penetration in our existing customer segments and to maintain and increase the effectiveness of our commercial organization.

Our customer base includes academic, government, biopharmaceutical, biotechnology and other institutions.

Our success will depend upon our ability to increase our market penetration among these customers and to expand our market by developing and marketing new products and new applications for existing products.

Our success will depend upon our ability to increase our penetration among these customers and to expand our opportunity by developing and marketing new products and new applications for existing products.

We regularly introduce new versions of existing products, and our future success will partially depend on our ability to commercialize these products.

As we continue to scale our business, we may find that certain of our products, certain customers or certain markets, including the biopharmaceutical market, may require a dedicated sales force or sales personnel with different experience than those we currently employ in our commercial organization.

As we continue to scale our business, we may find that certain of our products, certain customers or certain segments, including biopharmaceutical or translational segments, may require a dedicated sales force or sales personnel with different experience than those we currently employ in our commercial organization.

Identifying, recruiting and training additional qualified personnel would require significant time, expense and attention.

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Any failure to increase penetration in our existing markets would adversely affect our ability to improve our operating results.

Additionally, potential impacts of the COVID-19 pandemic on hiring and on the health and safety of our employees, customers and partners could decrease the effectiveness of our commercial organization and adversely affect our business and operating results.

Additionally, while some on-site and other in-person sales and marketing and customer service activities previously restricted or eliminated due to COVID-19 have resumed, our commercial organization’s ability to participate in on-site or other

in-person sales and marketing or customer service activities, including participation in trade shows and other in-person events, or on-site installation of our products, has been and continues to be restricted due to the impacts of the COVID-19 pandemic and such activities may be further restricted or eliminated in the future, including due to outbreaks or resurgences.

The effectiveness of our commercial organization may be decreased and our business and operating results may be materially and adversely affected as a result.

We may not be able to develop new products, enhance the capabilities of our existing products to keep pace with rapidly changing technology and customer requirements or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business and operating results.

Our success depends on our ability to develop new products and applications for our technology while improving the performance and cost-effectiveness of our existing products, in each case in ways that address current and anticipated customer requirements.

Such success is dependent upon several factors, including feasibility, competition among potential new products for Company resources, functionality, competitive pricing and integration with existing and emerging technologies.

The development timelines of certain new products may be delayed due to prioritization of other new products, including our forthcoming Xenium platform.

Such success is dependent upon several factors, including feasibility, competition among our products for Company resources, functionality, competitive pricing and integration with existing and emerging technologies.

The development timelines of certain new products may be delayed due to prioritization of other new products.

New technologies, techniques or products could emerge that might offer better combinations of price and performance or better address customer requirements as compared to our current or future products.

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Due to the significant lead time involved in bringing a new product to market, we are required to make a number of assumptions and estimates regarding the commercial feasibility of a new product, including assumptions and estimates regarding the biological analytes that researchers will want to measure, the appropriate method of measuring such analytes, how researchers intend to use the resulting data and the scope and type of data that will be most useful to researchers.

As a result, it is possible that we may introduce a new product that uses technologies or methods of analysis that have been displaced by the time of launch, addresses a market that no longer exists or is smaller than previously thought, targets biological analytes or produces data that provides less utility to researchers than previously thought or otherwise is not competitive at the time of launch.

We anticipate that we will face increased competition in the future as existing companies and competitors develop new or improved products and as new companies enter the market with new technologies.

As a result, it is possible that we may introduce a new product that uses technologies or methods of analysis that

have been displaced by the time of launch, competes with one or more of our other products, addresses an opportunity that no longer exists or is smaller than anticipated, targets biological analytes or produces data that provides less utility to researchers than anticipated or otherwise is not competitive at the time of launch.

We face significant competition from both established and early-stage companies.

Our ability to mitigate downward pressure on our selling prices will be dependent upon our ability to maintain or increase the value we offer to researchers.

The expenses or losses associated with unsuccessful product development or launch activities, or a lack of market acceptance of our new products, could adversely affect our business, financial condition or results of operations.

Because our solutions are used with other products, such as sequencers, to conduct an experiment, we also expect to face competition from these complementary products, either directly or indirectly, as researchers and labs look to reduce the total cost of any given experiment.

For example, if a sequencer manufacturer were successful in vertically integrating their product to provide functionality equivalent to our instruments, they would likely be able to deliver a solution that is capable of running comparable experiments with a total experiment cost that would be significantly less than the cost of running such experiments using our products together with third-party sequencers.

Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or real or perceived problems with sequencing itself or if our products are not compatible with sequencers used by our customers or potential customers, the utility of our products could be significantly impacted.

Because our solutions are used with other products, including third-party sequencers in the case of our Chromium and Visium solutions, to conduct an experiment, we also expect to face competition from these complementary products, either directly or indirectly, as researchers and labs look to reduce the total cost of any given experiment.

For example, if a third-party sequencer manufacturer were successful in vertically integrating their product to provide functionality equivalent to our instruments, they potentially could be able to deliver a solution that is capable of running comparable experiments with a total experiment cost that would be less than the cost of running such experiments using our products together with third-party sequencers.

Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or real or perceived problems with sequencing itself or if our products are not compatible with third-party sequencers used by our customers or potential customers, the utility of our products which are used in conjunction with third-party sequencers could be significantly impacted.

It is critical to our success that we anticipate changes such as these in technology and customer requirements and successfully introduce new, enhanced and competitive technologies to meet our customers’ and prospective customers’ needs on a timely and cost-effective basis.

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Our ability to attract new customers and increase revenue from existing customers also depends on our ability to deliver any enhanced or new solutions to our customers in a format where they can be easily and consistently deployed by most or all users without significant customer service or training.

If our customers believe that deploying our enhanced or new solutions would be overly time-consuming, confusing or technically challenging, or require significant training or retraining, then our ability to grow

our business would be substantially harmed.

We need to create and deliver a repeatable, user-friendly, prescriptive approach to deployment that allows users of all kinds to effectively and easily deploy our solutions, and if we fail to do so, our business and results of operations would be harmed.

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Such developments may involve external suppliers and service providers, making the management of development projects complex and subject to risks and uncertainties regarding timing, timely delivery of required components or services and satisfactory technical performance of such components or assembled products.

We expect that impacts stemming from the COVID-19 pandemic will delay the development of certain of our new life science products as well as new versions of existing products.

If we do not achieve the required technical specifications or successfully manage new product development processes, or if development work is not performed according to schedule, including because of delays in our research and development programs stemming from the COVID-19 pandemic, then such new technologies or products may be adversely impacted and our business and operating results may be harmed.

Undetected errors or defects in our solutions could harm our reputation and decrease market acceptance of our solutions.

Our instruments and consumables, as well as the software that accompanies them, may contain undetected errors or defects due to design, manufacturing, delivery or other issues.

Disruptions or other performance problems with our products or software may adversely impact our customers’ research or business, harm our reputation and result in reduced revenue or increased costs associated with product repairs or replacements.

If that occurs, we may also incur significant costs, the attention of our key personnel could be diverted or other significant customer relations problems may arise.

We may also be subject to warranty claims or breach of contract for damages related to errors or defects in our solutions.

We are significantly dependent upon revenue generated from the sale of our Chromium solutions, and in particular our Single Cell Gene Expression solutions.

We currently generate our revenue from the sale of our instruments and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium platforms, which we refer to as “consumables.” Historically we have

been dependent upon revenue generated from sales of our Chromium solutions, particularly our Single Cell Gene Expression consumables.

There can be no assurance that we will be able to design future products, particularly non-Chromium solutions, that will meet the expectations of our customers or that our future products will become commercially successful.

Our sales expectations are based in part on the continued success of our existing solutions and the future success of new products we launch.

If our new products fail to achieve sufficient market acceptance or sales of our existing products decrease, our consumables revenue could be materially and adversely impacted.

Our failure to effectively manage product transitions or accurately forecast customer demand could result in excess or obsolete inventory and resulting charges.

In addition, in the past supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages have made it more difficult to predict customer demand and effectively manage inventory levels for our instruments and consumables and at times the risk that we will not be able to source the necessary equipment, components and materials to manufacture our products led us, and may again lead us, to carry higher inventory.

Further, differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, could negatively impact our ability to accurately forecast demand.

We may strategically enter into non-cancelable commitments with vendors to purchase materials for our products in advance of demand to take advantage of favorable pricing, address concerns about the availability of future supplies or build safety stock to help ensure customer shipments are not dela yed should we experience higher than anticipated demand for materials with long lead times.

During periods of decreased demand, which in the past have occurred and which may occur again, these non-cancelable commitments could prevent our related costs from decreasing in proportion to decreases in demand.

If our existing and new products fail to achieve and sustain sufficient scientific acceptance, we will not generate expected revenue and our prospects may be harmed.

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If too few researchers describe the use of our products, too many researchers shift to a competing product and publish research outlining their use of that product or too many researchers negatively describe the use or usability of our products in publications, it may drive existing and potential customers away from our products, which could harm our operating results.

Additionally, the ability of researchers to conduct research or publish in peer-reviewed journal publications has been and will continue to be impacted by the COVID-19 pandemic.

For example, we believe COVID-19 has limited and may continue to limit the ability of the research community to connect, collaborate, attend conferences and share best practices.

Further, even though many of our customers are using our instruments and consumables to research and understand COVID-19 and such efforts may result in peer-reviewed journal publications which describe the use of our products, the COVID-19 pandemic may result in life sciences journals prioritizing research related to COVID-19 in lieu of research relating to other fields, such as oncology, where our instruments and consumables have regularly been mentioned.

Any decrease in the frequency at which our instruments and consumables are mentioned in peer reviewed journals, even if only temporarily due to COVID-19, may negatively impact our prospects.

If we do not sustain or successfully manage our growth and anticipated growth, our business and prospects will be harmed.

We have experienced rapid growth in recent periods.

This growth and our anticipated growth will place significant strains on our management, operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business.

We have historically experienced rapid growth and future growth will place significant strains on our management, operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business.

For example, we consummated two acquisitions each in 2018 and 2020 and one more in January 2021, and we intend to continue to make investments that meet management’s criteria to expand or add key technologies that we believe will facilitate the commercialization of new products in the future.

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Further development and commercialization of our current and future products are key elements of our growth strategy.

Developing and launching new products and innovating and improving our existing products have required us to hire and retain additional scientific, sales and marketing, software, manufacturing, distribution and quality assurance personnel.

Developing and launching new products and innovating and improving our existing products

have required us to hire and retain additional scientific, sales and marketing, software, manufacturing, distribution and quality assurance personnel.

As a result, we have experienced rapid headcount growth from 110 employees as of December 31, 2015 to 1,243 employees as of December 31, 2022.

As we have grown, our employees have become more geographically dispersed.

We currently serve thousands of researchers in many countries and plan to continue to expand to new non-United States jurisdictions as part of our growth strategy which will lead to increased dispersion of our employees.

As a public company, our management and other personnel must devote a substantial amount of time towards maintaining compliance with these requirements.

We may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base, including as a result of certain of our employees working from home.

In addition, certain members of our management have not previously

worked together for an extended period of time, do not have experience managing a public company or do not have experience managing a global business, which may affect how they manage our growth.

To effectively manage our growth, we must continue to improve our operational and manufacturing systems and processes, our financial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel.

As our organization continues to grow, and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products, which difficulties may be exacerbated by the impacts of the COVID-19 pandemic.

We may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base, including as a result of certain of our employees working remotely.

In addition, certain members of our management have not previously worked together for an extended period of time, do not have experience managing a public company or do not have experience managing a global business, which may affect how they manage our growth.

To effectively manage our growth, we must continue to improve our operational and manufacturing systems and processes, our financ ial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel.

If we do not successfully manage our anticipated growth, our business, results of operations and growth prospects will be harmed.

Our limited operating history and rapid revenue growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter.

We launched our first product in mid-2015 and have experienced significant revenue growth in recent periods.

In addition, we operate in highly competitive markets characterized by rapid technological advances and our business has, and we expect it to continue, to evolve over time to remain competitive.

Our limited operating history, evolving business and rapid growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter and may increase the risk that we will not continue to grow at or near historical rates.

If we fail to address the risks and difficulties that we face, including those described elsewhere in this “ Risk Factors ” section, our business, financial condition and results of operations could be adversely affected.

We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries.

If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition and results of operations could be materially and adversely affected.

The size of the market for our solutions may be smaller than estimated and new opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our solutions.

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If demand for our current and future solutions are smaller than estimated or do not develop as we expect, our growth may be limited and our business, financial condition and operational results may be adversely affected.

Additionally, impacts stemming from the COVID-19 pandemic have and may continue to limit demand for our solutions for the foreseeable future.

We depend on our key personnel and other highly qualified personnel, and if we are unable to recruit, train, retain and ensure the health and safety of our personnel, we may not achieve our goals.

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Saxonov, our Chief Executive Officer and one of our co-founders, and Dr.

Hindson, our Chief Scientific Officer, President and one of our co-founders, are critical to our vision, strategic direction, culture and products.

Hindson, our Chief Scientific Officer, President and one of our co-

founders, are critical to our vision, strategic direction, culture and products.

Competition for qualified personnel is intense, particularly in the San Francisco Bay Area.

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New hires also require significant training and, in most cases, take significant time before they achieve full productivity.

Our failure to successfully integrate these key personnel into our business could adversely affect our business.

Additionally, some of our employees are working from home due to the COVID-19 pandemic and additional employees may return to remote work in the future.

Because of the challenges of working from home, including collaborating with and managing employees, it may take significant time before our teams can achieve full productivity again, if at all, and it may take significantly longer for new hires to achieve full productivity, if at all.

Our continued growth depends, in part, on attracting, retaining and motivating highly trained sales personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers.

In addition, the continued development of complementary software tools, such as our analysis tools and visualization software, requires us to compete for highly trained software engineers in the San Francisco Bay Area and for highly trained customer service personnel globally.

We also compete for computational biologists and qualified scientific personnel with other life sciences companies, academic institutions and research institutions.

Our failure to successfully integrate our personnel into our business could adversely affect our business.

Additionally, some of our employees work remotely and because of the challenges of working remotely, including collaborating with and managing employees, it may take significant time before our teams can achieve full productivity, if at all, and it may take significantly longer for new hires to achieve full productivity, if at all.

We do not maintain key person life insurance for an y of our employees.

Additionally, we have not entered into fixed term contracts with almost any of our employees and as a result, almost any of our employees could leave our company with little or no prior notice which could harm our business.

Many of our scientific personnel are qualified foreign nationals whose ability to live and work in the United States is contingent upon the continued availability of appropriate visas.

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As a result, changes to United States immigration policies could restrain the flow of technical and professional talent into the United States and may inhibit our ability to hire qualified personnel.

The typical immigration and visa procedures of the United States have been impacted by COVID-19 and may be further impacted in the future, and our current or future employees may be negatively affected by delays, disruptions or changes in United States immigration policies.

Additionally, our current or future employees may be negatively affected by delays, disruptions or changes in United States immigration policies.

Past United States administrations have made restricting immigration and reforming the work visa process a priority and these efforts may adversely affect our ability to find qualified personnel.

We do not maintain key person life insurance for any of our employees nor have we entered into fixed term contracts with almost any of our employees.

As a result, almost any of our employees could leave our company with little or no prior notice and would be free to work for a competitor.

Because of the complex and technical nature of our products and the dynamic market in which we compete, any failure to attract, train, retain and motivate qualified personnel could materially harm our operating results and growth prospects.

Additionally, while we are committed to maintaining a safe workplace and to support our personnel through the COVID-19 pandemic, the health and safety of our personnel may be impacted by COVID-19 and our operating results and growth prospects could be materially harmed as a result.

Further, we may face civil liability if any of our employees contracts COVID-19 while performing his or her job or is otherwise negatively impacted by the COVID-19 pandemic.

Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow.

In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We believe that these metrics are representative of our current business;

however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business grows and as we introduce new products.

With the emerging complexity of our product offerings, we believe pull-through per instrument is less relevant today than in past periods given the expanding breadth of our portfolio, and as such, is not representative of trends in our business.

For example, some of our customers are purchasing Chromium X Series instruments to replace previously purchased Chromium Controllers.

Additionally, certain of our solutions do

not require a Chromium instrument, such as our Visium solution, and forthcoming solutions, such as our Xenium platform which is expected to utilize a separate family of 10x Genomics' instruments and not rely on a Chromium instrument for its workflow.

Our consumables pull-through is also impacted by additional factors including expanding utilization by our existing customers, the rate of new customer acquisition, the ramp of utilization by new customers and the overall mix of “halo” users and their ordering patterns.

As our business, product lines and customer composition have become more complex since adopting this key business metric, we believe that this metric represents an oversimplification of these different drivers and can obscure underlying trends in the business.

Cumulative instruments sold and pull-through per instrument do not accurately reflect information relating to customers who purchase consumables but do not own an instrument.

If our management fails to review other relevant information or change or substitute the key business metrics they review as our business grows and we introduce new products, their ability to accurately formulate financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.

The COVID-19 pandemic may impact historical trends and the comparability of certain of the key business metrics over time.

For example, the COVID-19 pandemic may cause a general decrease in the rate of growth of our instrument sales.

We also compete for computational biologists and qualified scientific personnel with other life sciences companies, academic institutions and research institutions.

This competition affects both our ability to retain key employees and hire new ones.

In August 2022 we conducted a reduction in force in order to decrease costs and maintain a streamlined organization to support the business.

In order to be successful and build our framework for future growth, we must continue to execute and deliver on our initiatives with fewer employees and losses of intellectual capital.

We must also attract, retain, train and motivate key employees including highly qualified management, scientific, manufacturing, sales, marketing and other personnel who are critical to our business.

Additionally, we compete with both companies that may have greater financial resources than we do and early stage companies that promise short-term growth opportunities.

We may not be able to attract, retain, train or motivate qualified employees in the future and our inability to do so could materially harm our operating results and growth prospects.

If our facilities or our third-party manufacturers’ facilities become unavailable or inoperable, our research and development programs could be adversely impacted and manufacturing of our instruments and consumables could be interrupted.

The manufacturing process for our Chromium Controller and Chromium X Series instruments takes place at our third-party manufacturer’s facilities in Singapore and the manufacturing process for our Chromium Connect instrument takes place at our third-party manufacturer’s facilities in Nevada.

The manufacturing process for our instruments takes place at our third-party manufacturers' facilities.

The majority of our consumables are manufactured at our facilities in Pleasanton, California and Singapore using proprietary equipment.

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Our Pleasanton facilities also house the majority of our research and development and quality assurance teams.

Our Chromium Connect is manufactured by our partner at their facility.

Our Chromium and Visium CytAssist instruments are manufactured by our partners at their facilities.

The facilities and the equipment we and our third-party manufacturers use to manufacture our instruments and consumables and that we use in our research and development programs would be costly to replace and could require substantial lead times to repair or replace.

Our facilities in Pleasanton and Singapore are vulnerable to natural disasters and catastrophic events.

For example, our Pleasanton facilities are located near earthquake fault zones and are vulnerable to damage from earthquakes.

Our facilities are vulnerable to other types of disasters, including fires, floods, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, power loss, conflict, war, civil unrest, communications failures and similar events.

For example, our Pleasanton facilities are located near earthquake fault zones and are vulnerable to damage from earthquak es.

Our facilities are vulnerable to other types of disasters, including fires, floods, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences, power loss, conflict, war, civil unrest, communications failures and similar events.

If any disaster or catastrophic event were to occur, our ability to operate our business would be seriously, or potentially completely, impaired.

If our facilities or any of our third-party manufacturers’ facilities become unavailable or understaffed for any reason, including due to the impacts of the COVID-19 pandemic, we cannot provide assurances that we will be able to secure alternative manufacturing facilities with the necessary capabilities and equipment on acceptable terms, if at all.

Further, while we are an essential business that can continue operations under current governmental shelter-in-place measures meant to combat the COVID-19 pandemic, there is no guarantee that we will be able to continue operations at our Pleasanton facilities or other facilities while shelter-in-place or other COVID-19-related measures remain in place or if new shelter-in-place or other COVID-19-related measures are implemented in the future.

Additionally, potential impacts of the COVID-19 pandemic on hiring or on the health and safety of our manufacturing staff could decrease the effectiveness of our manufacturing operations and adversely affect our business and operating results.

If our facilities or any of our third-party manufacturers’ facilities become unavailable or understaffed for any reason, including due to the resurgence of COVID-19, we cannot provide assurances that we will be able to secure alternative manufacturing facilities with the necessary capabilities and equipment on acceptable terms, if at all.

Further, while we are an essential business that continued operations under previously required governmental shelter-in-place measures meant to combat the COVID-19 pandemic, there is no guarantee that we will be able to continue operations at our Pleasanton facilities or other facilities if new shelter-in-place or other restrictive measures are implemented in the future.

Additionally, potential issues with our ability to hire staff or the health and safety of our manufacturing staff, including as a result of a resurgence of COVID-19, could decrease the effectiveness of our

manufacturing operations and adversely affect our business and operating results.

We may encounter particular difficulties in replacing or counterbalancing any unavailability of our Pleasanton staff or facilities given the specialized skills of our team and the specialized equipment housed within our facilities.

The inability to manufacture our instruments and/or consumables, combined with our limited inventory of manufactured instruments and consumables, may result in the loss of customers or harm our reputation, and we may be unable to reestablish relationships with those customers in the future.

The inability to manufacture our instruments and/or consumables, combined with potential limited inventory of manufactured instruments and consumables, may result in the loss of customers or harm our reputation, and we may be un able to reestablish relationships with those customers in the future.

Because certain of our consumables and the raw materials we use to manufacture consumables at our Pleasanton facilities are perishable and must be kept in temperature controlled storage, the loss of power to our facilities, mechanical or other issues with our storage facilities or other events that impact our temperature controlled storage could result in the loss of some or all of such consumables and raw materials and we may not be able to replace them without disruption to our customers or at all.

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If our products become unavailable during the planning process, researchers may use alternative products.

If our research and development programs were disrupted by a disaster or catastrophe, including the COVID-19 pandemic, the launch of new products and the timing of improvements to existing products could be significantly delayed and could adversely

impact our ability to compete with other available products and solutions.

If our research and development programs were disrupted by a disaster or catastrophe or for other reasons, the launch of new products and the timing of improvements to existing products could be significantly delayed and could adversely impact our ability to compete with other available products and solutions.

If our or our third-party manufacturers’ capabilities are impaired, we may not be able to manufacture and ship our products in a timely manner, which would adversely impact our business.

Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

Our limited operating history and rapid revenue growth make it difficult to evaluat e our future prospects and the risks and challenges we may encounter.

We launched our first product in mid-2015 and have historically experienced rapid revenue growth.

In addition, we operate in highly competitive markets characterized by rapid technological advances and our business has, and we expect it to continue, to evolve over time to remain competitive.

We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries.

Costs, delays or other factors related to our facilities and real estate portfolio could adversely impact our business.

We plan to expand our facilities in Pleasanton, California and in other locations where we operate or may operate in the future.

For example, we are currently engaged in a project to construct new facilities on land we own located in Pleasanton, California.

We may expand our facilities in Pleasanton, California and in other locations where we operate or may operate in the future.

For example, we are currently completing construction of a new facility on land we own located in Pleasanton, California.

We believe that maintaining our existing facilities and opening new facilities is necessary to maintain and expand our operations.

Our ability to maintain our existing facilities, build out new or existing facilities and open new operating facilities depends on our ability to identify attractive locations, negotiate leases or real estate purchase agreements and other agreements on acceptable terms, identify and obtain adequate utility and water sources and comply with environmental regulations, zoning laws and other similar factors.

We may not have the level of cash flow or financing necessary to support our expansion strategy.

Additionally, our proposed facilities projects may increase demands on our operational, financial, managerial and administrative resources.

Costs, delays or other factors related to our facilities and real estate portfolio, including our project to construct new facilities on land we own located in Pleasanton, California or any failure to adequately maintain our current facilities, may adversely impact our business results and financial condition.

Undetected errors or defects in our solutions could harm our reputation and decrease market acceptance of our solutions.

Our instruments and consumables, as well as the software that accompanies them, may contain undetected errors or defects when first introduced or as new versions are released.

If that occurs, we may also incur significant costs, the attention of our key personnel could be diverted or other significant customer relations problems may arise.

We may also be subject to warranty claims or breach of contract for damages related to errors or defects in our solutions.

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.

We have incurred significant losses since we were formed in 2012 and expect to incur losses in the future.

We incurred net losses of $58.2 million and $542.7 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had an accumulated deficit of $863.3 million.

We expect that our losses will continue in the near term as we continue to invest significantly in research and development and the commercialization of both new products and improved versions of existing products.

We also expect that our operating expenses will continue to increase as we grow our business.

To date, we have financed our operations principally from the sale of convertible preferred stock, stock option exercises and purchases under our 2019 Employee Stock Purchase Plan, the sale of Class A common stock in our IPO and our September 2020 follow-on offering, revenue from sales of our products and the incurrence of indebtedness.

There can be no assurance that our revenue and gross profit will increase sufficiently such that our net losses decline, or we attain profitability, in the future.

Further, our limited operating history and rapid revenue growth over the last several years make it difficult to effectively plan for and model future growth and operating expenses.

Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control, including general economic, industry and market conditions, customer purchasing decisions, impacts stemming from the COVID-19 pandemic, the impact of market acceptance of our products, future product development, our market penetration and margins and current and future litigation.

Additionally, inflationary pressure could adversely impact our financial results.

Our operating costs have increased, and may continue to increase, due to the recent growth in inflation.

We may not fully offset these cost increases by raising prices for our instruments and consumables, which could result in downward pressure on our margins.

Further, our clients may choose to reduce their business with us if we increase our pricing.

We may never be able to generate sufficient revenue to achieve or sustain profitability and our recent and historical growth should not be considered indicative of our future performance.

Our failure to achieve or maintain growth or profitability could negatively impact the value of our Class A common stock.

Our ability to maintain our existing facilities, build out new or existing facilities and open new operating facilities depends on our ability to identify attractive locations, negotiate leases, subleases, real estate purchase agreements or other agreements on acceptable terms, identify and obtain adequate utility and water sources and comply with environmental regulations, zoning laws and other similar factors.

We may not maintain the level of cash flow or access financing opportunities necessary to support our real estate strategy.

Our facilities projects may increase demands on our operational, financial, managerial and administrative resources.

We may also decide to reduce our real estate portfolio but be unable to do so.

Our real estate leases, which generally obligate us for long periods, subject us to potential financial risk.

For example, our real estate strategy may commit us to leases or other agreements or arrangements requiring us to incur costs for facilities we later determine are unnecessary for our business.

While we have the right to terminate or sublease some of our leases under specified conditions, we may not be able to terminate or sublease certain of our leases if or when we would like to do so.

If we decide or are required to permanently vacate facilities we lease, we are typically required to continue to perform obligations under the applicable leases, which generally include, among other obligations, paying rent and certain expenses for the balance of the lease term, and the performance of any of these obligations may be significant.

When we assign leases or sublease to third parties, or if we vacate facilities we lease, we can

remain liable on the lease obligations for the balance of the term and we could be contingently liable if the assignee does not perform their obligations to us or third parties.

Additionally, if we may decide to sublease certain of our facilities to third parties, we may be unable to find suitable sublease arrangements for leased facilities that we do not wish to occupy ourselves.

Costs, delays or other factors related to our facilities and real estate portfolio ensuing from these and other risks related to our real estate portfolio may adversely impact our business results and financial condition.

If we fail to offer high-quality customer service, our business and reputation could suffer.

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Additionally, we believe our customer service team has a positive influence on recurring consumables revenue.

exceptional customer experience requires significant time and resources from our customer service team.

Potential impacts of the COVID-19 pandemic on the health and safety of our customer service organization could reduce or eliminate our ability to provide an exceptional customer experience.

Additionally, our ability to provide on-site, in-person customer service (including on-site installation of our instruments) has and may continue to be restricted or eliminated due to the impacts of the COVID-19 pandemic.

Therefore, failure to scale our customer service organization adequately or impacts on our ability to provide an exceptional customer experience may adversely impact our business results and financial condition.

Providing an exceptional customer experience requires significant time and resources from our customer service team, and failure to manage our customer service organization adequately or impacts on our ability to provide an exceptional customer experience may adversely impact our business results and financial condition.

Customers utilize our service teams and online content for help with a variety of topics, including how to use our products efficiently, how to integrate our products into existing workflows, how to determine which of our other products may be needed for a given experiment and how to resolve technical, analysis and operational issues if and when they arise.

As we introduce new products such as our Chromium X Series, Chromium Connect, Single Cell Multiome ATAC+Gene Expression solution, Targeted Gene Expression solution, Visium Spatial Proteomics solution, Visium Spatial Gene Expression for FFPE solution and forthcoming Xenium platform and enhance existing products, we expect utilization of our customer service teams to increase.

As we introduce new products and e nhance existing products, we expect utilization of our customer service teams to increase.

In particular, the introduction of new or improved products that utilize different workflows or variations on existing workflows may require additional customer service efforts to ensure customers use such products correctly and efficiently.

While we have developed significant resources for remote training, including an extensive library of online videos, we may need to rely more on these resources for future customer training or we may experience increased expenses to enhance our online and remote solutions, particularly due to the impacts of the COVID-19 pandemic.

If our customers do not adopt these resources, we may be required to increase the staffing of our customer service team, which would increase our costs.

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If these third-party distributors do not provide a high-quality customer experience, our business operations and reputation may suffer.

We believe that these metrics are representative of our current business;

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain positive free cash flow or profitability.

We have incurred significant losses since we were formed in 2012 and expect to incur losses in the future.

We incurred net losses of $166.0 million and $58.2 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we

had an accumulated deficit of $1.0 billion.

We also expect that our operating expenses will continue to increase as we grow our business.

To date, we have financed our operations principally from the sale of convertible preferred stock, stock option exercises and purchases under our 2019 Employee Stock Purchase Plan, the sale of Class A common stock in our initial public offering ("IPO") and our September 2020 follow-on offering, revenue from sales of our products and the incurrence of indebtedness.

There can be no assurance that our revenue and gross profit will increase sufficiently such that our net losses decline, or we become free cash flow positive or attain profitability, in the future.

Further, our limited operating history and rapid revenue growth over the last several years make it difficult to effectively plan for and model future growth and operating expenses.

Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control, including general economic, industry and market conditions, customer purchasing decisions, the impact of market acceptance of our products, future product development, our market penetration and margins and current and future litigation.

Additionally, inflationary pressures could adversely impact our financial results.

Our operating costs have increased, and may continue to increase, due to the recent growth in inflation.

We may not fully offset these cost increases by raising prices for our instruments and consumables, which could result in downward pressure on our margins.

Further, our clients may choose to reduce their business with us if we increase our pricing.

Additionally, changes in our product mix may negatively affect our gross margins.

We may never be able to generate sufficient revenue to achieve or sustain positive free cash flow or profitability and our recent and historical growth should not be considered indicative of our future performance.

Our failure to achieve or maintain growth, positive free cash flow or profitability could negatively impact the value of our Class A common stock.

Investments and acquisitions could disrupt our business, cause dilution to our stockholders and otherwise harm our business.

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Our previous acquisitions and any future transactions could be material to our financial condition and operating results and expose us to many risks, including:

• difficulties integrating acquired personnel, technologies and operations into our existing business;

• diversion of management time and focus from operating our business;

• increases in our expenses and reductions in our cash available for operations and other uses;

• difficulties integrating acquired personnel, technologies and operations into our existing business;

• failure to realize anticipated benefits or synergies from such a transaction;

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• unanticipated liabilities related to acquired real estate or companies, including liabilities related to acquired intellectual property or litigation relating thereto;

• diversion of management time and focus from operating our business;

• possible write-offs or impairment charges relating to acquired businesses;

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Foreign acquisitions, such as our acquisitions of Spatial Transcriptomics Holdings AB, CartaNA AB and Tetramer Shop involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

Even if we identify a strategic transaction that we wish to pursue, we may be prohibited from consummating such transaction due to the terms of future indebtedness we may incur.

Even if we identify a strategic transaction that we wish to pursue, we may be prohibited from consummating such transaction due to the terms of future indebtedness we may incur or due to circumstances outside our control.

Future investments, acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.

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Similarly, our biopharmaceutical customers typically have calendar year fiscal years which also result in a disproportionate amount of their purchasing activity occurring during our fourth quarter.

Our international customers also have different purchasing patterns due to procurement or budgeting cycles, holidays or other factors which may result in a disproportionate amount of their purchasing activity occurring in specific periods.

These factors have contributed, and may contribute in the future, to substantial fluctuations in our quarterly operating results.

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Other fluctuations, including spikes in customer demand for our products in demand for our products, may make it harder for us to distribute our products in a timely manner.

Additionally, impacts of the COVID-19 pandemic could cause unpredictable temporary or permanent fluctuations in seasonal or cyclical variations as in the second quarter of 2020 in which widespread shutdowns caused a significant decrease in our revenue.

Our reliance on distributors for sales of our products in certain geographies outside of the United States could limit or prevent us from selling our products and impact our revenue.

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As such, our distributors may not commit the necessary resources to market our products to the level of our expectations or may choose to favor marketing the products of our competitors.

Further, the ability of our distributors to sell and distribute our products has been and may continue to be impacted by the COVID-19 pandemic.

Further, the ability of our distributors to sell and distribute our products in the past has been, and in the future may be, impacted by the COVID-19 pandemic.

If current or future distributors do not or are unable to perform adequately or if we are unable to enter into effective arrangements with distributors in particular geographic areas, our revenues could be significantly impacted.

Additionally, our business, financial condition and results of operations could be materially and adversely affected if we are unsuccessful in selling directly to customers who previously purchased our products from third-party distributors.

Uncertain economic or social conditions may adversely impact demand for our products or cause our customers, vendors and suppliers to suffer financial hardship, which could adversely impact our business.

Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic or social disruptions.

These disruptions have included and may in the future include a slow-down, recession or inflationary pressures in the general economy, reduced market growth rates, tighter credit markets for us, our suppliers, vendors or customers, a significant shift in government policies, significant social unrest, or the deterioration of economic relations between countries or regions.

Additionally, these and other economic conditions may cause our suppliers, distributors, contractors or other third-party suppliers or manufacturers to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results of operations could be adversely affected.

Inflationary pressures, and changes in foreign currency exchange rates, interest rates and market value of our investments, including marketable securities, could have a significant effect on results.

We, our suppliers and our customers are exposed to inflationary pressure and a variety of market risks, including the effects of increases in energy and raw material prices, foreign currency exchange rates and interest rates.

Such risks are inherently unpredictable and difficult to mitigate.

As a result, significant increases in energy and raw material prices, foreign currency exchange rates or interest rates as well as increased material, freight, logistics, and similar costs could have an adverse effect on our financial condition or results of operations.

For example, interest rates have increased significantly as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets.

Higher government deficits and debt, tighter monetary policy and potentially higher interest rates may drive a higher cost of capital for our business.

Doing business internationally creates operational and financial risks for our business.

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Conducting operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones.

If we fail to coordinate and manage these activities

effectively, our business, financial condition or results of operations could be materially and adversely affected and failure to comply with laws and regulations applicable to business operations in foreign jurisdictions may also subject us to significant liabilities and other penalties.

If we fail to coordinate and manage these activities effectively, our business, financial condition or results of operations could be materially and adversely affected and failure to comply with laws and regulations applicable to business operations in foreign jurisdictions may also subject us to significant liabilities and other penalties.

International operations entail a variety of other risks, including, without limitation:

• currency fluctuations ;

• potentially longer sales cycles and more time required to engage and educate customers on the benefits of our products outside of the United States;

• United States and foreign government trade restrictions, including those which may impose restrictions on the importation, exportation, re-exportation, sale, shipment or other transfer of programming, technology, components and/or services to foreign persons or entities;

• reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property or other legal rights abroad;

• changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers;

• tariffs or other restrictions imposed by the United States on goods from other countries and tariffs or other restrictions imposed by other countries on United States goods, or increases in existing tariffs;

• deterioration of political relations between the United States and China, Russia, the United Kingdom, the European Union, Canada or other nations or political organizations, which could have a material adverse effect on our sales and operations in these countries;

• deterioration of political relations between the United States and China, the United States and Russia or other nations or political organizations, which could have a material adverse effect on our sales and operations in these countries;

• challenges in staffing and managing foreign operations;

• potentially longer sales cycles and more time required to engage and educate customers on the benefits of our products outside of the United States;

• the potential need for localized software, documentation and post-sales support;

• reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property and contract rights abroad;

• complexities associated with managing a third-party contract manufacturer located outside of the United States;

• complexities associated with managing third-party contract manufacturers and suppliers located outside of the United States;

• changes in social, political and economic conditions or in laws, regulations and policies governing foreign trade, manufacturing, development and investment both domestically as well as in the other countries and jurisdictions into which we sell our products, including as a result of the United Kingdom’s exit from the European Union;

• difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays or our inability to sell our products in certain countries;

• natural disasters, infectious diseases, conflict, war, civil unrest, epidemics or pandemics including COVID-19, outbreaks, resurgences or major catastrophic events;

• difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays or our inability to manufacture or sell our products in certain countries;

• natural disasters, infectious diseases, conflict, geopolitical turmoil, war, civil unrest, epidemics or pandemics such as COVID-19 outbreaks or resurgences or major catastrophic events;

• increased financial accounting and reporting burdens and complexities;

• significant taxes or other burdens of complying with a variety of foreign laws, including laws relating to privacy and data protection such as the GDPR and the California Consumer Privacy Act (the “CCPA”).

• higher levels of credit risk and payment fraud and longer payment cycles associated with, and increased difficulty of payment collections from certain international customers;

• significant taxes or other burdens of complying with a variety of foreign laws, including laws relating to privacy and data protection such as the GDPR.

In conducting our international operations, we are subject to United States laws relating to our international activities, such as the Foreign Corrupt Practices Act of 1977, as well as foreign laws relating to our activities in other countries, such as the United Kingdom Bribery Act of 2010.

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Department of Commerce, the United Nations Security Council and other relevant sanctions authorities.

These laws generally prohibit, unless authorized by the relevant authority or otherwise exempt from the regulations, the conduct of business with persons, countries, regions, and governments that are targeted by “sanctions,” including but not limited to persons listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals and Blocked Persons List, and the areas subject to trade embargoes by the United States (currently, Cuba, Iran, Syria, North Korea, and the Crimea region of Ukraine).

including but not limited to persons listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals and Blocked Persons List, and the areas subject to trade embargoes by the United States (currently, Cuba, Iran, Syria, North Korea, and the Crimea region of Ukraine).

Our global operations expose us to the risk of violating, or being accused of violating, these laws and regulations.

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These risks have become increasingly prevalent as we have expanded our sales into countries that are generally recognized as having a higher risk of corruption and sanctions risks.

For instance, we conduct significant sales in Russia annually.

In response to escalating tensions along the Russia-Ukraine border, the U.S.

government has stated it is considering imposing enhanced export controls on certain products and sanctions on certain industry sectors and parties in Russia.

The governments of other jurisdictions

in which we operate, such as the European Union, may also implement sanctions or other restrictive measures against Russia.

These potential sanctions and export controls, as well as any responses from Russia, could adversely impact our operations and negatively impact our business in the region.

For instance, we continue to sell our products through a distributor to research institutions in Russia.

As a result of the crisis in Ukraine both the United States and the European Union have implemented sanctions against certain Russian individuals and entities.

Our business in Russia could expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our securities, including tariffs, economic sanctions and import-export restrictions.

Current geopolitical instability in Russia and Ukraine and related sanctions, including by the U.S.

government, against certain companies and individuals may hinder our ability to conduct business with potential or existing distributors, end-users and vendors in these countries.

While we believe that existing sanctions currently do not preclude us from conducting business with our current end-users, distributors or vendors in Russia, the sanctions may be expanded in the future to restrict us from engaging with them or our supplier agreements or purchase orders, due to the Ukraine crisis, may include terms and conditions that require that we limit or refrain from conducting business in Russia.

Violations of complex foreign and United States laws and regulations could result in fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international growth efforts, our ability to attract and retain employees, our business and our operating results.

Even if we implement policies or procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our distribution partners, our employees, contractors or agents will not violate our policies and subject us to potential claims or penalties.

Our business in China subjects us to unique operational, competitive and regulatory risks.

Our ability to sell our products in China may be impacted by evolving laws and regulations in the U.S.

In addition, increased local competition, trade tensions between the United States and China or weakening economic conditions in China, among other factors, may result in reduced sales, decreased market share, or lower margins for our products in China.

In addition, impacts stemming from COVID-19, including the public health and policy response to COVID-19 in China, may continue to present risks to our business in China.

Certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates the scope of our investments and business conducted within China.

The Chinese government may adopt new regulations that may impact entities operating in China, potentially with little advance notice.

In order to maintain access to the Chinese market, we may be required to comply with significant technical and other regulatory requirements, at times with short notice.

These actions may increase the cost of doing business in China or limit how we may do business in China, which could materially and adversely affect our business.

We are subject to risks associated with COVID-19.

Our global sales and operations expose us to risks associated wi th the COVID-19 pandemic.

Impacts from COVID-19 may adversely affect our operations, supply chains, distribution systems and customer demand, including as a result of impacts associated with preventative and precautionary measures that we, other businesses and governments have taken and may take in the future.

Some of the risks we have experienced and/or may experience in the future as a result of impacts from COVID-19 include:

• a decline in sales activities and customer orders or cancellations of existing orders, depending on the severity and duration of any future COVID-19 outbreaks and the extent of mitigation and containment measures that may be undertaken by governments and businesses;

• supply chain disruptions may result in the lack of raw materials or component shortages, delay in the release of new products or deliveries of products or compressed margins due to an increase in material costs.

Due to these impacts and measures, we may experience significant and unpredictable reductions in demand for our products and our customers may

postpone or cancel their orders.

In addition, our customers' suppliers may not be able to supply products that meet our or our customers' needs due to supply chain disruptions;

• the effectiveness of our sales teams may be negatively impacted by the lack of or reduction in travel resulting in their reduced ability to engage with decision-makers;

• the unanticipated loss or unavailability of key employees due to the COVID-19 outbreaks could harm our ability to operate or execute our business strategy.

We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability;

• remote working, which we, similar to many other companies, implemented in response to the initial outbreak of COVID-19, and which continues to some extent even as COVID-19 outbreaks generally subside, could cause challenges for the effective operation of our internal controls, increase the risk of a security breach of our information technology systems, create data accessibility issues, challenge our ability to innovate and develop new products and improve existing solutions and increase the risk for communication disruptions;

• in addition to travel restrictions, though countries in general have re-opened their borders to U.S.

travelers, in the future, countries may again impose or expand travel restrictions and impose or resume prolonged quarantines if there is a resurgence of COVID-19 cases, which would significantly impact our ability to support our business operations and customers in those locations and the ability of our employees to access their places of work to produce products, or significantly hamper our products from moving through the supply chain.

As a result, given the uncertainty of the evolving nature of the virus, COVID-19 outbreaks may continue and may negatively affect our revenue growth, and it is uncertain how materially COVID-19 will affect our global operations if we experience any one or a combination of these impacts over an extended period of time.

Any of these impacts could have an adverse effect on our business, financial condition and results of operations.

In addition, our ability to raise capital in the future may also be negatively affected.

Public concern regarding the risk of contracting COVID-19 may impact demand from customers.

Economic impacts and health concerns associated with the pandemic may continue to affect customer behaviors and resurgences of COVID-19 could amplify such impacts.

In addition, changes in customer purchasing patterns could increase demand for our products in one quarter, resulting in decreased customer demand for our products in subsequent quarters.

Spikes in customer demand for our products may make it harder for us to distribute our products in a timely manner.

The current economic environment has resulted in volatility in the global capital and credit markets which could impair our ability to access these markets on terms commercially acceptable to us, or at all, and execute our growth strategies and resurgences of COVID-19 could compound this risk.

Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.

Historically, most of our revenue has been denominated in U.S.

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As our operations in countries outside of the United States grow, our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future.

For example, if the value of the U.S.

dollar increases relative to foreign currencies, in the absence of a corresponding change in local currency prices, our revenue could be adversely affected as we convert revenue from local currencies to U.S.

During periods of economic crises, such as fallout from the COVID-19 pandemic, foreign currencies may be devalued significantly against the U.S.

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dollars, but report our results of operations in U.S.

dollars, we also face remeasurement exposure to fluctuations in currency exchange rates, which could hinder our ability to predict our future results and earnings and could materially impact our results of operations.

We do not currently maintain a program to hedge foreign currency exposures.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

Following the United Kingdom’s departure from the European Union ("EU") on January 31, 2020, and the end of the “transition period” on December 31, 2020, the EU and the United Kingdom have entered into a trade and cooperation agreement ("TCA") which governs certain aspects of their future relationship, including ensuring tariff-free trade for certain goods and services.

The TCA provides details on how some aspects of the United Kingdom’s and EU’s relationship will operate going forward, however there are still many uncertainties.

The uncertainty concerning the United Kingdom’s legal, political and economic relationship with the EU since Brexit may be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).

These developments have had, and may continue to have, a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

The illegal distribution and sale by third parties of counterfeit or unfit versions of our products or stolen products could have a negative impact on our reputation and business.

Third parties might illegally distribute and sell counterfeit or unfit versions of our products, which do not meet our rigorous manufacturing, distribution and quality standards.

As we expand our business internationally, we expect to encounter counterfeit versions of our products, particularly our consumables.

A researcher who receives and uses counterfeit consumables could obtain erroneous results, experience failed experiments or potentially damage his or her instrument.

Our reputation and business could suffer harm as a result of counterfeit products sold under our brand name.

In addition, inventory that is stolen from warehouses, plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact our customers’ experiments, our reputation and our business.

The investment of marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.

From time to time, we have and may invest portions of excess cash and cash equivalents in marketable securities.

We have and may invest in liquid, investment-grade marketable securities such as corporate bonds, commercial paper, asset-backed securities, U.S.

treasury securities, money market funds, and other cash equivalents.

We currently, and expect to continue, to follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to liquidity and credit risks which set forth credit quality standards and limit our exposure to any one issuer as well as our maximum exposure to various asset classes.

However, these investments are subject to general credit, liquidity, market and interest rate risks.

We may realize losses in

the fair value of these investments, which could include a complete loss of these investments, which would have a negative effect on our consolidated financial statements.

In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would decrease.

Indebtedness may impair our financial and operating flexibility.

We may incur indebtedness in the future including, for example, in connection with the expansion of our headquarters in Pleasanton.

The debt instruments governing such indebtedness could contain restrictive provisions.

If we incur debt, a portion of our cash flows will be needed to satisfy our debt service obligations.

In the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all.

As a result, we would be more vulnerable to general adverse economic, industry and capital markets conditions in addition to the risks associated with indebtedness described in this risk factor.

Due to our exposure to currencies other than U.S.

dollars, an increase in the value of certain currencies against the U.S.

dollar could increase our costs by increasing labor and other costs that are denominated in local currency.

There can be no assurance that any future hedging activities which are designed to partially offset this impact, will be successful.

In addition, our currency hedging activities, if any, in the future, could themselves be subject to risk.

These could include risks related to counterparty performance under future hedging contracts and risks related to currency fluctuations.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

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Any failure to maintain effective disclosure controls and internal control over financial reporting could materially and adversely affect our business, results of operations and financial condition and could cause a decline in the trading price of our Class A common stock.

The continuing impact of "Brexit" may have a negative effect on our business.

Following a national referendum and subsequent legislation, the United Kingdom formally withdrew from the European Union, commonly referred to as “Brexit,” and ratified a trade and cooperation agreement governing its future relationship with the European Union.

Among other things, the agreement, which became effective in 2021, addresses trade, economic arrangements, law enforcement, judicial cooperation and governance.

Because the agreement merely sets forth a framework in many respects that requires complex additional bilateral negotiations between the United Kingdom and the European Union, significant uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal.

Brexit has had, and may continue to have, a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.