Mason Carrico: Got it. Thanks, Justin, I appreciate it.
Operator: Thank you for your question. Our next question is from the line of Michael Ryskin with Bank of America. Your line is live.
Michael Ryskin: Great. Thanks for squeezing me in guys. I’m going to ask two hopefully quick ones, sort of tidying up some points from earlier. One, on the gross margins and gross profit in the third quarter. I know you guys have said a number of times that the Xenium instrument ramp, but still, the drop off to 62% was steeper than we anticipated. And if I just look at it on a gross profit dollar basis, sequentially, last quarter you guys had $99.6 million, now it’s $95 million. So you got $4 million less gross profit despite the higher revenues and despite Chromium essentially being flat sequentially. So, I’m just trying to do the math on that. Was there some discounting in the quarter, some inventory functions there? Or I just don’t see how it could be – how Xenium could be that dilutive to margins or if something else’s going on? What am I missing here?
Justin McAnear: Yeah. Good question, Mike. When you look both year-over-year and sequentially, maybe I’ll just start with year-over-year and then I’ll get to the sequential piece. But, if you look back to a year ago, and you look at the margin that we had and what we’ve declined to this year. Practically all of that variance is due to Xenium. And so, if you were to exclude Xenium and calculate the gross margin, it would be roughly the same as it was a year ago. And so, then sequentially, there’s also been a mix towards Xenium instruments. There’s been a mix towards more instruments overall. There’s also been a mix to more – higher increases in the service line as well. And so when we install and train on Xenium, that portion gets booked into service, and that’s also lower margin as well.
But nothing – yeah so nothing fundamentally has changed about our cost structure that would be outside of the product mix that we’ve talked about, driven by the increase in Xenium.
Michael Ryskin: Okay. All right. I’ll redo the math again, directionally, no surprise, but just surprised the magnitude. And then follow-up again on the Chromium Consumables. I know you guys have been giving the sort of ex-China or specifically Americas and EMEA number. But sometimes you give the quarter and sometimes you give the year-to-date. So I think my notes got a little mixed up. Did you say that year-to-date, that Americas and EMEA Chromium Consumables is mid-to-high teens. What was it 1Q and 2Q just so we have like the sequential numbers? I’m just trying to see if it accelerated or decelerated as you’ve gone through?
Justin McAnear: Yes. So Mike, we provide that just to give some additional color as far as the regional breakout by product. But year-to-date Chromium overall has been in the low-teens, AMR EMEA. If you look at Chromium Consumables year-to-date, that’s been in the mid-to-high teens. And when you look at Q1 and Q2 this year, it was easier compares to the prior period a year ago. So those rates have increased were higher.
Michael Ryskin: Thank you. I appreciate the clarification. Thanks guys.
Operator: Thanks for your question. Our next question is from the line of Justin Bowers with Deutsche Bank. Your line is live.
Justin Bowers: Hi, good afternoon. So just two quick ones for me. In terms of Xenium, are you starting to see some – repeat customers in the order book there? And then, just taking a step back in the academic landscape, are you starting to see like sort of – can you paint a picture of what sort of new core lab activity is around Single Cell and Spatial more broadly or even regionally? Thank you.
Serge Saxonov: Yeah, Justin. So to the first question on Xenium and whether we’re seeing repeat customers. So that, I mean, the answer is yes, for sure. Relatively speaking, is still very much new customers. That’s what we’re about. That’s where we’re focused to get sales. But we’ve seen multiple instances, and this is always really gratifying when a customer has gotten their instrument. They have run their samples and then after seeing the results from those first front, getting ordering another instrument. And in fact, we’ve seen more examples of that where people would run studies get biological results. And on the basis of that biology go back and buy another Xenium. So, probably the best measure of how something is performing when you see this kind of repeat business from customers.
So very gratifying for us to see. As far as like a demand, just random or core labs, I mean, those generally tend to be fairly consistent. We do see decent adoption with the core labs around the world is kind of puts and takes, some core labs have issues with having enough staff to run experiments and some core labs have sort of other issues. But overall, no major trends to call out here.
Justin Bowers: Appreciate it.
Operator: Thank you for your questions. Our next question is from the line of Rachel Vatnsdal with JPMorgan. Your line is live.
Rachel Vatnsdal: Great. Thank you for taking the questions. And good afternoon. First off, I just want to clarify your comment around the 80 Xenium in this quarter. Was that comment around 80 instruments sold? Or was that more around the number of instruments shipped this quarter? And then you mentioned backlog grew for Xenium. So how long is the backlog at this point?
Justin McAnear: Hi, Rachel, this is Justin. We – yeah, so that’s what we shipped this quarter was over – we shipped over 80 Xenium. We sold over 80 Xenium and we grew the backlog on top of that.
Rachel Vatnsdal: Okay, that’s helpful. And then just on China, can you walk us through how the region trended really throughout the quarter? Also, how has October trended relative to September and the rest of 3Q? And then can you just frame up some potential scenarios for China for 2024 next year? Is it really possible for that region to hold flat without any stimulus support? And that’s it for me. Thank you.
Justin McAnear: As far as how China has trended throughout Q3, I think it came in line generally with what we called out in our last earnings call, when we said that we expected China in Q3 and Q4 to be roughly flat to Q2, and that’s how it came in. Ordering patterns in China just due to the consolidation of volumes through distributors and service providers can be somewhat lumpy. As far as looking at Q4, from the demand signal that we’re seeing, we are calling a decline right now going from Q3 into Q4. But that is mostly driven with our targeted inventory reductions that we’re driving with the service providers. So the actual demand, at least from what we can tell right now is more than we expected our revenues in Q4 would reflect.
Rachel Vatnsdal: Great. And then just frame up on 2024 for China?
