Q2 2024 Twist Bioscience Corp Earnings Call
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Operator: Biosciences Fiscal 2024 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Angela Bitting. SVP of Corporate Affairs. Please go ahead.
Welcome to twist.
Sciences fiscal 2024 second quarter financial results conference call at.
At this time all participants are in a listen only mode.
The speakers presentation there'll be a question and answer session.
I ask a question during the session you will need to press star one on your telephone.
People didn't hear an automated message advisor in your hand. This waste just draw. Your question. Please press star one again.
Please be advised that today's conference is being recorded I would now like to turn the conference over to Angela <unk>.
Angela: As VP of corporate Affairs. Please go ahead.
Angela Bitting: Thank you, operator. Good afternoon, everyone.
Angela: Thank you operator, good afternoon, everyone I'd like to thank all of you for joining us today for twist Biosciences Conference call to review, our fiscal 2024 second quarter financial results and business progress we issued our financial results released after the market and the release is available at our website at www.
Angela Bitting: I would like to thank all of you for joining us today for Twist Bioscience's conference call to review our fiscal 2024 second quarter financial results and business progress. We issued our financial results release after the market, and the release is available on our website at www.twistbioscience.com. With me on today's call are Dr. Emily Leproust, CEO and co-founder of Twist, and Adam Laponis, CFO of
Angela: Dot com.
Speaker Change: With me on today's call are Dr. Emily Laprairie, CEO and co founder of twist and Adam Apollo B S electorate.
Angela Bitting: Emily will begin with a review of our recent progress on Twist Business. Adam will report on our financial and operational performance. Emily will come back to discuss our upcoming milestones and direction. We'll then open the call for questions. We would ask that you limit your questions to only one, and then ask you as a courtesy to others on the call. As a reminder, this call is being recorded.
Emily Marine Leproust: Emily will begin with a review of our recent progress centric business.
Adam Apollo: Adam will report on our financial and operational performance and then we will come back to discuss our upcoming milestones and direction.
Angela Bitting: The audio portion of the presentation will be archived in the investor section of our website and will be available for two weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize in actual results in financial periods, and they are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
Angela: Then open the call for questions. We would ask that you limit your questions to only one and then re queue as a courtesy to others on the call.
Angela: As a reminder, this call is being recorded the audio person will be archived in the investors section of our website and will be available for two weeks.
Angela: During today's presentation, we will make forward looking statements within the meaning of the U S. Federal Securities laws forward looking statements generally relate to future events or future financial or operating performance, our expectations and beliefs regarding these matters may not materialize and actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially.
Angela Bitting: These risks include those set forth in our press release we issued earlier today, as well as those more fully described in our filings with the FEC. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statement except as required by law. We'll also discuss suggested EBITDA, which is a financial measure that does not comply with generally accepted accounting principles.
Angela: From those projected.
Angela: These risks include those set forth in our press release, we issued earlier today as well as those more fully described in our filings with the SEC.
The forward looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward looking statement, except as required by law.
Angela: I'll also discuss adjusted EBITDA, which is a financial measure that does not conform with generally accepted accounting principles.
[noise] formation, maybe calculated differently.
Angela Bitting: This information may be calculated differently than similar non-GAAP data presented by other companies. When reported, a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings document, which can be found on our Investor Relations website at www.twistbioscience.com. With that, I will now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust.
Angela: GAAP data presented by other companies when reported a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings customer, which can be found at our Investor Relations website at Www dot.
Speaker Change: With that I will now turn the call over to our Chief Executive Officer and co founder.
Emily Marine Leproust: Thank you, Angela, and good afternoon everyone. I am thrilled to be here today to share the remarkable achievements and outstanding performance our company has delivered over the past quarter. Our strong results validate the hard work, dedication, and innovative spirit that define our team at Twist. We've made significant strides in executing our growth strategy, increasing our customer base, and driving toward profitability for the business. Our proprietary platform for making synthetic DNA remains at the core of our product portfolio, defines our competitive advantage in all markets, and enables our flywheel for growth and the strong financials we share today.
Angela: <unk>.
Speaker Change: Thank you Angela and good afternoon, everyone.
Speaker Change: I am thrilled to be here today to share the remarkable achievement.
Speaker Change: The company has delivered over the past quarter.
Speaker Change: Strong results validate the hard work dedication and innovative spirit.
Speaker Change: Define a.
Tweaks, we've made significant strides in executing our growth strategy, increasing our customer base and driving towards profitability.
Speaker Change: Our proprietary platform for making 70 DNA remains critical.
Speaker Change: You define as a competitive advantage in all markets and enable our flywheel for growth and the strong financial increase yesterday.
Emily Marine Leproust: Over the course of the second quarter, we continued our robust growth trajectory, increasing revenue 25% year-to-year to $75.3 million, while the third quarter reached a record level of over $93 million. The strong quarter was driven by growth in the authentic biology product line, including expert genes, and bolstered by consistent strength in NGOs. We reported a 41% growth margin for the quarter, an increase of 10 margin points versus the same period last year. We do see put-and-takes in the margin, quarter to quarter, which Adam will discuss in his remarks.
Speaker Change: Over the course of the second quarter, we continued our robust growth trajectory increasing revenue 27.
Speaker Change: Seven five scream at.
Speaker Change: Although for the quarter reached a record level, although Nike streaming.
Speaker Change: The strong quarter was driven by growth in our core clients, including switching and bolster by consistent strength in NGL.
We recorded a 49% gross margin per quarter, an increase of 10 margin points.
Speaker Change: Last year, we do see puts and takes in the margin quarter to quarter, which Adam will discuss in his remarks.
Emily Marine Leproust: That said, over the next several periods, we expect initiatives we are thinking will drive us to a growth margin above 50% by the end of fiscal 2025. To dive deeper into Symbio, revenue increased to $29.8 million, with very strong orders of $44.9 million. Symbio revenue grew 24% year-over-year and 11% sequentially. Orders in Symbio included significant blanket purchase orders, where a customer placed a single blanket order for a large amount and then placed orders against that PO over the course of the next several quarters. Twist receives blanket POs routinely, primarily in the first quarter of the calendar year as budget resets. That said, this level of blanket POs significantly exceeds the prior year.
Adam Apollo: Over the next several periods.
Adam Apollo: We expect the initiatives, we're taking will drive us to a gross margin above 50, because somebody could go.
Adam: Thanks, Bob.
Adam Apollo: So that's the purpose and <unk> revenue increased to $29 8 million with data from all the other $44 9 million.
Adam Apollo: <unk> revenue grew 24% year over year.
Adam Apollo: 11% sequentially.
Speaker Change: Well it doesn't seem that you're including significant blanket purchase all day breakfast in a place a single bank gets out there for a long time and then all those against that to you over the course of the next several quarters twist with his blanket appeals routinely.
Speaker Change: In the first quarter of the calendar year, we said that said this level of breakage exceeds prior year significantly.
Emily Marine Leproust: We believe this increase is due to our diversified product lines, including ExpressGene, and consistent rapid turnaround times, both of which give our customers confidence to commit to Twist for the year. As you know, in late January, we expanded our ExpressGene offering from a limited launch, including about half of our clonal gene volumes, to include all clonal genes. At the time, we began a marketing campaign and outreach to potential customers buying from competitors or making their own genes. So, still relatively early days for X-ray genes.
Speaker Change: We believe this increase is due to our diversified product line, including a switch and consistent rapid turnaround time, both of which give our customers confidence committed suite.
Speaker Change: As you know in late January we expanded our expressjet occurring from a limited launch keeping about health about energy volumes to include all synergies at the time, we began the marketing campaign and outreach to potential customers buying from capital all making balance sheets.
Speaker Change: So still relatively early days for extra gene we are pleased with the progress to date.
Emily Marine Leproust: We are pleased with the progress to date. Keeping in mind that our current quarter, our fiscal third quarter, will be the first quarter that includes all expression offerings, we want to provide a bit more color around the success to date. Approximately 15 percent, one-fifth percent, of Clonal Genes revenue for the second quarter came from X-Ray Genes. As of March 31st, we had received more than 1,600 orders for X-Ray Genes since its launch in November, with more than 700 accounts purchasing X-Ray Genes today. This includes more than 100 Mezzanine accounts specific to X-Ray Genes. We define NetNewAccounts as a new customer organization entirely, or it can be a new shipping address at an existing institution. Both count as NetNewAccounts.
Speaker Change: Keeping in mind that our current quarter.
Speaker Change: Third quarter will be the first full quarter that includes all the friction occurring we want to provide a bit more color around the success to date.
Speaker Change: Our poker ITB 15, one five.
Speaker Change: <unk> revenue for the second quarter came from expert.
Speaker Change: As of March 31st we have received more than 16 100 orders by launching.
Speaker Change: Launched in November with more than 700 accounts that youre seeing at St. Jude.
Speaker Change: This includes more than 100.
Speaker Change: Specific to execute.
Speaker Change: We define net new account as a new customer organization entirely.
Speaker Change: It can be a new shipping address it then existing institution both count.
Emily Marine Leproust: Customers receive x-ray genes in about five to seven days, significantly faster than our standard gene turnaround time for this feed; they pay a premium price for this feed. We vary this premium based on capacity within our large Western-built Oregon facility, a site custom-built for this product line, and a site that allows for expansion to other significant products. Because we make all chronologies on the express timeline, the increase in price premium is fully brought to growth margins.
Speaker Change: Michael.
Speaker Change: Customers receive a fishing and about five to seven days.
Speaker Change: Kathy faster, then I'll turn it up Jim.
Speaker Change: For these paid up into a premium price we varied as premium based on capacity.
Speaker Change: Loft with Oregon.
Speaker Change: Besides kitson Bill for this for a client and a side of the pillow flex can change although CGM products.
Speaker Change: Because of the make all closings on the ex list online the increase in price premium fully drops to gross margin.
Emily Marine Leproust: At the end of February, we began differentiating the premium between academic and industry customers, with industry groups receiving a higher premium, a common practice in the industry. Moving to NGS, we posted another very strong quarter, as revenue grew to $40.8 million, an increase of 40% year-over-year, with $42.5 million in orders. This quarter, strength for the NGS portfolio came from customers who have advanced their assets into clinical studies and become commercial, as well as growth in the smaller NGS customers who are earlier in the development process. Several clinical questionnaires include twists in their asses, and we applaud the incredible progress each is making for patients with rare diseases, cancer detection, early cancer detection, and monitoring of minimal residual.
Speaker Change: At the end of February we began differentiating the premium between academic and industry customer.
Speaker Change: These two groups will be assuming a higher premium the common practice in the industry.
Speaker Change: Moving to NTS, we posted another very strong quarter as revenue grew to $40 eight an increase of.
Speaker Change: 40%.
Speaker Change: With $42 five this quarter.
Speaker Change: <unk> strength for Mcs post hurricane from customers.
Speaker Change: <unk> been step as it into clinical studies and became commercial as well as growth in the smaller lines yet.
Speaker Change: Earlier in the development processes.
Speaker Change: So clinical Justin I'll conclude twist in the asset and we about the incredible progress each is making patients can rapidly cancer detection early cancer detection and monitoring of minimal residual disease.
Emily Marine Leproust: Our panels are incorporated into a number of different, sometimes competitive, tests. And what we see all the time is that providers are adopting these tests. The volume of commercial tests increases with patient adoption, as each test that is run requires three tests. We have customers who are doing very well, leveraging the Twist chemistry advantage, and others who need additional funding to continue scaling. The benefit of our business model is that we have diversified our revenue across many customers and applications, with no single customer accounting for more than 10% of our revenue. In addition, we continue to add smaller accounts that have the potential to grow significantly as the volume of their applications outtakes increases.
Speaker Change: All those are incorporated into our numbers.
Speaker Change: Sometimes competitive stance on whether we see overtime is that providers.
Speaker Change: Is that the volume of commercial pest increases with patient adoption.
Speaker Change: Each test that is required.
Speaker Change: We have customers, who are doing very well leveraging the tweak demonstrate advantage.
Speaker Change: We need additional funding to continue just kidding.
Speaker Change: The benefit of our business model is that we have diversified our revenue across many custom applications with no single customer accounting for more than just on the call Robyn.
Speaker Change: In addition, we continue to add small accounts that have the potential to grow significantly as the volume of the application office rents.
Emily Marine Leproust: Up until this year, our NGS product portfolio has been focused primarily on target enrichment for the analysis of DNA, RNA, and methylation samples. As we have said before, we want to offer our customers a complete workflow solution from the sample to the sequencer. And we are confident that our latest products solidify our leading position in liquid biopsy and MRD while expanding our differentiation within other areas of the workflow. Importantly, we introduced differentiated products to advance science and clinical capability.
Speaker Change: Up until this year, our NGL product portfolio and focus primarily on target enrichment for the analysis of DNA.
Speaker Change: Mitsubishi.
Speaker Change: As we have said before we went to a customer with a complete workflow solution from the sample to the sequent Bill and we are confident that our latest products solidify our leading positions in liquid biopsy and then mountain.
Speaker Change: While expanding our differentiation we can.
Speaker Change: Of the workflow.
Speaker Change: Importantly, we introduce differentiated products, whether in science and clinical capabilities in February we added an incredibly powerful cell free DNA library prep that captures many molecules.
Emily Marine Leproust: In February, we added an incredibly powerful cell-free DNA library prep that captures many molecules that may otherwise be missed in these assays because the sensitivity of a liquid biopsy research asset begins with laboratory preparation. Capturing more molecules can improve the single-to-node ratio and the sensitivity of the test.
Speaker Change: <unk> been missed in these assets.
Speaker Change: Because of the sensitivity of illiquid Betsy Richard as it begins with library prep, capturing more molecule can improve the signal to noise ratio and assessments to be skeptical.
Emily Marine Leproust: We believe our innovative CL-DNA laboratory prep provides an advantage here, and the initial commercial performance is very encouraging. During the quarter, we announced technology early access for a second truly differentiated library prep, the ultra-high throughput library prep kits. We believe this is the highly differentiated product we need to contact customers using microarrays to NGS panels plus sequencing with applications in iBio and genotyping. We believe this is a very large market opportunity, and we expect that these products will drive NGS revenue in the medium to long term as it requires a changed workflow for customers from microarray readers to sequencers.
Speaker Change: We believe our innovative.
Speaker Change: Elaborate provides an advantage here and the initial commercial government very encourage.
Speaker Change: During the quarter when our technology early access points second truly differentiate collaborate the ultra high throughput every cryptic.
Speaker Change: This is the highly differentiated product we need to grow the pistol.
Speaker Change: <unk> also seen microarray to NCS plus sequencing with applications in NGL.
Speaker Change: This is a very large market opportunity and we expect that these products will drive nzf swiftly in the medium to long term as it requires a change the workflow for the kitchen from.
Speaker Change: From Macquarie, we dose two sequences.
Emily Marine Leproust: Separately, for our customers in Europe, we launched a CE Mark portfolio of precision DX products to support the evolving regulatory landscape in that geography. This is our first foray into the regulated market, and we look forward to continued evolution in markets beyond Europe. We believe our experience with regulated products will inform any future product developments driven by FDA's move to regulate laboratory-developed tests, or LDCs, in the US by Pharma. Revenue was 4.7 million, with orders increasing to 5.8 million, and we will continue to deliver on programs for our partners across a spectrum of offerings. Importantly, we expect at least one partner to initiate human studies with an antibody discovered using the Twist platform within the next year.
Speaker Change: So brightly focus certainly in Europe, we don't have a CE mark portfolio of precision TX product to support the evolving regulatory landscape in that geography.
Speaker Change: This is our first full rate the rigorous market and we look forward to continued evolution in markets beyond Europe.
Speaker Change: We believe our exchange related products will inform any future product developments driven by FDA has moved to regulate laboratory developed test or entities in the U S.
Speaker Change: For Biopharma revenue of $4 70 in the us with other increasing to $5 8 million.
Speaker Change: We'll continue to deliver on programs of our partners across the spectrum operate in.
Speaker Change: Importantly, we expect at least one partner to initiate human Sydney is an antibody discovery platform within the next year.
Emily Marine Leproust: For Data Storage, we remain focused on technology development and enablement of the Terabyte Century Archive workflow for early access in Canada 2025. Progress continues, and we see this area of our business as a valuable asset with optionality at multiple points of development. As we looked at margins in fiscal Q1, we reported a strong gross margin driven primarily by mixed and significant MGS revenues. We maintained our margin in the second quarter, beating our guidance by two points with continuous strength in our NGS business as well as expressed gene contribution.
Speaker Change: We remain focused on technology development and enablement of the centrally archive workflow for early access in calendar 2020 plan progress continues and we see this area of our business is a valuable asset with optionality at multiple points.
Speaker Change: As we look at margins in fiscal Q1, we reported a strong gross margin driven primarily by mix and see if we cant Robert.
Speaker Change: We maintain our margin in the second quarter, beating our guidance by two points with continued strength in our NGL business as well as experts in traditional.
Emily Marine Leproust: As we look over the next 18 months, in addition to driving revenue growth, which is the primary driver of margin, we intend to continue to focus on marginal improvement initiatives including product advancement, operational excellence, insourcing, and process optimization. In addition, we're in the process of negotiating contracts with suppliers, and, in some cases, with customers willing to provide volume commitments for fixed premium pricing on ExpressJit. We believe these initiatives, as well as further volume leverage of our fixed costs, enable our ability to improve our margins by several points, and we see a past growth margin north of 50% by the end of fiscal 2025. With that, I turn over the call to Adam to discuss our finances.
Speaker Change: As we look over the next 18 months. In addition to driving revenue growth, which is the primary driver of margin. We intend to continue to focus on margin improvement initiatives, including proteins.
Speaker Change: Operationally excellent in sourcing and process optimization.
Speaker Change: In addition, we are in the process of negotiating contracts with suppliers and in some cases with customers willing to provide broader commitments for fixed premium pricing expertise.
Speaker Change: We believe these initiatives as well as further volume leverage of our fixed costs and enable our ability to improve our margins by several points and we see a path to gross margins north of 50% by the end of quite frankly.
Speaker Change: With that I'll hand over the call to Adam.
Adam Laponis: Thank you, Emily. Revenue for the second quarter increased to $75.3 million, growth of 25% year-over-year and approximately 5% sequentially. Orders increased substantially to $93.2 million, with strong orders driven by significant blanket purchase orders expected to be used over the next three quarters. This includes approximately $21 million for SynBio and $9 million for NGS. As Emily said, gross margin came in higher than expected at 41% for the second quarter of fiscal 2024. During the second quarter, we shipped 2,253.
Speaker Change: Financials.
Adam Apollo: Thank you Emily.
Adam Apollo: Revenue for the second quarter increased to $75 3 million growth of 25% year over year and approximately 5% sequentially.
Adam Apollo: Orders increased substantially to $93 2 million.
Adam Apollo: The strong orders driven by a significant blanket purchase orders expected to be used over the next three quarters. This includes approximately $21 million for sym bio and $9 million for Mcs.
Adam Apollo: Emily said gross margin came in higher than expected at 41% for the second quarter of fiscal 2024.
Adam Apollo: During the second quarter, we shift to 2253 customers.
Adam Laponis: We ended the quarter with cash, cash equivalents, and short-term investments of approximately $293 million. Taking a Deeper Dive into Revenue. Simbio revenue increased to $29.8 million, growth of 24% year over year, with orders increasing to $44.9 million. 193,000 genes in the cortex.
Adam Apollo: We ended the quarter with cash cash equivalents and short term investments of approximately $292 million.
Adam Apollo: Taking a deeper dive into revenue.
Adam Apollo: <unk> revenue increased to $29 8 million growth of 24% year over year with orders increasing to $44 9 million.
Adam Apollo: We shipped.
Adam Apollo: 193000 genes in the quarter.
Adam Laponis: Synthetic genes revenue, which includes both clonal genes, gene fragments, and IgG, increased to approximately $22.4 million, growth of approximately 24% year-over-year. Approximately $15.6 million, or 52% of our Symbio revenue, was from clonal genes, with $2.2 million in revenue coming from expression. Within the SynBioUmbrella, Oil Pool revenue increased to $3.9 million, and DNA Libraries revenue increased to $3.5 million, year-over-year growth of 19% and 25%, respectively. MGS revenue for the second quarter grew to approximately $40.8 million compared to $29 million in the second quarter of fiscal 2023, an increase of 40% year over year.
Adam Apollo: Synthetic genes revenue, which includes both koala genes gene fragments and IGT increased to approximately $22 4 million growth of approximately 24% year over year.
Adam Apollo: Approximately $15 6 million or 52% of our sym bio revenue with requirement genes with $2 2 million in revenue coming from express.
Adam Apollo: Within this environment for all your core revenue increase of $3 9 million and DNA libraries revenue increased to $3 $5 million year over year growth of 19% to 25% respectively.
Adam Apollo: <unk> revenue for the second quarter grew to approximately $40 8 million compared to $29 million in the second quarter of fiscal 2023, an increase of 40% year over year.
Adam Laponis: For the quarter, revenue from our top 10 MGS customers accounted for approximately 36% of revenue. Orders increased to 42.5 million, which we anticipate sets the stage for further NGS growth. We served 558 NGS customers in the quarter, with 138 having adopted our product.
Adam Apollo: For the quarter revenue from our top 10, mgs customers accounted for approximately 36%.
Adam Apollo: Orders increased to $42 5 million, which we anticipate sets the stage with further NGL growth.
Adam Apollo: We served 558 mgs customers in the quarter with 138, having adopted our products.
Adam Laponis: For biopharma, revenue was $4.7 million, with orders increasing to $5.8 million. We had 67 active programs at the end of March 2024, and we started 34 new programs during the quarter. Looking at revenue by industry. Healthcare revenue rose to $40.9 million for the second quarter of 2024, compared to $33.8 million for the same period of fiscal 2023, reflecting the increased uptake of our products by pharma, biotech, and diagnostic companies. Industrial chemical revenue rose to $20.3 million in the second quarter, up from $14.4 million in the same period of fiscal 2023. Strong growth year-over-year
Adam Apollo: For Biopharma revenue was $4 $7 million with orders increasing to $5 $8 million.
Adam Apollo: We had 67 active programs at the end of March 2024, when we started 34 new programs during the quarter.
Adam Apollo: Looking at revenue by industry.
Adam Apollo: Health care revenue rose to $40 9 million for the second quarter of 2024 compared to $33 8 million for the same period of fiscal 2023.
Adam Apollo: Selecting the increased uptake of our products by pharma biotech and diagnostic companies.
Adam Apollo: Industrial chemical revenue rose to $23 million in the second quarter up from $14 4 million in the same period of fiscal 2022.
Adam Laponis: Academic revenue was $13.7 million for the second quarter of 2024, up from $11.1 million in the same period of fiscal 2023, with growth coming from both Symbio and NGS Customs. Looking geographically, America's revenue increased to approximately $45.9 million in the second quarter, compared to $34.9 million in the same period of fiscal 23, a growth of 32% year over year. EMEA revenue rose to $22.3 million in the second quarter versus $18.8 million in the same period of fiscal 2023.
Adam Apollo: Strong growth year over year.
Adam Apollo: Academic revenue was $13 7 million for the second quarter of 2024 up from $11 1 million in the same period of fiscal 2023 with growth coming from both <unk> and <unk> customers.
Adam Apollo: Looking geographically <unk>.
Adam Apollo: Americas revenue increased to approximately $45 $9 million in the second quarter compared to $34 9 million in the same period of fiscal 'twenty three growth of 32% year over year.
Adam Apollo: EMEA revenue rose to $22 3 million in the second quarter versus $18 8 million in the same period of fiscal 2023 growth of 19% year over year.
Adam Laponis: Growth of 19% year-over-year. APAC revenue increased to $7.2 million in the second quarter, compared to $6.5 million in the same period of fiscal 2023, growth of 11% year-over-year. China revenue was $1.4 million, a small percent of our total revenue for the quarter.
Adam Apollo: APAC revenue increased to $7 $2 million in the second quarter compared to $6 5 million in the same period of fiscal 2023 growth of 11% year over year.
Adam Apollo: China revenue was $1 4 million a small percent of our total revenues for the quarter.
Adam Laponis: Our gross margin for the second quarter increased to 41.0%. We saw strength from Express Genes revenue, lifting margins, offset by a contracted SIN by a customer who placed and received a large order within the discount terms in Q2. Our NGS offerings continue to have strong gross margin performance; however, we did see and expect to continue to see puts and takes in the gross margin based on contracted customer mix, where margin fluctuates based on the individual customer orders in a given quarter. Finally, I am encouraged by the enterprise-wide focus on gross margin improvement initiatives, and I also expect these initiatives will take multiple quarters to result in a material impact.
Adam Apollo: Our gross margin for the second quarter increased to 41% we saw strength from express genes revenue lifting margins offset by a <unk>.
Adam Apollo: Contracted sym bio customers, who placed and received a large order within the discount turns in Q2.
Adam Apollo: Our NGF offerings continued to have strong gross margin performance. However, we did see and expect to continue to see puts and takes in our gross margin based on contracted customer mix, where margins fluctuate based on the individual customer orders in a given quarter.
Adam Apollo: Finally, I am encouraged by the enterprise wide focus on gross margin improvement initiatives and also expect these initiatives will take multiple quarters to result in a material impact.
Adam Laponis: In total, operating expenses for the second quarter were $124.2 million compared with $121.8 million in the same period of 2023. Breaking this down, Cost of revenue increased to $44.4 million in the second quarter of 2024 compared with $41.7 million in the same period of fiscal 2023, primarily due to higher product volume as well as increased depreciation and amortization expense, mostly due to the build out of our new manufacturing facility in Wilsonville, Oregon. R&D decreased to $24.1 million compared with $27.4 million in the same period of fiscal 2023, primarily due to a reduction in headcount as well as lab supply.
Adam Apollo: In total operating expenses for the second quarter were $124 $2 million.
Adam Apollo: Compared with $121 $8 million in the same period of 2023.
Adam Apollo: Breaking this down.
Adam Apollo: Cost of revenues increased to $44 $4 million in the second quarter of 2024, compared with $41 7 million in the same period of fiscal 2023, primarily due to higher product volumes as well as increased depreciation and amortization expense, mostly due to the buildout of our new manufacturing facility in Molson Board.
Adam Apollo: R&D decreased to $24 1 million compared with $27 4 million in the same period of fiscal 2023, primarily due to the reduction in head count as well as lab supplies.
Adam Laponis: FG&A was $55.6 million in the second quarter compared with $54 million. The increase was driven largely by stock-based compensation and bonus accrual catch-up as the business is performing above forecast at this time. Operating expenses included approximately $7 million for data storage. Stock-based compensation for the quarter was approximately $13.8 million. Appreciation and amortization were $8.3 million for the quarter.
Adam Apollo: SG&A was $55 6 million for the second quarter compared with $54 million.
Adam Apollo: The increase was driven largely by stock based compensation and bonus accrual catch up as the business is performing above forecast at this time.
Adam Apollo: Operating expenses included approximately $7 million for data storage.
Adam Apollo: Stock based compensation for the quarter was approximately $13 8 million.
Adam Apollo: Depreciation and amortization were $8 3 million for the quarter.
Adam Laponis: The net loss attributable to common stockholders was $45.5 million, or $0.79 per share, for the second quarter of 2024 compared to a net loss of $59.2 million, or $1.04 per share, for the same period of fiscal 2023. Cash flow from operating activities continues to improve, and we are driving the breakeven. For the six months ended March 31, 2024, net cash used in operating activities was $42.4 million, compared to $98.4 million for the equivalent six-month period in 2023. Moving forward, we will also provide adjusted EBITDA, a non-GAAP measure. Reconciliation between the GAAP and non-GAAP financial measures will be included in the earnings document, which can be found on our investor relations website.
Adam Apollo: Net loss attributable to common stockholders was $45 5 million or <unk> 79 per share for the second quarter of 2024.
Adam Apollo: Compared to a net loss of $59 2 million or $1 <unk> per share for the same period of fiscal 2023.
Adam Apollo: Cash flow from operating activities continues to improve and we are driving the breakeven for the six months ended March 31, 2024, net cash used in operating activities was $42 $4 million.
Adam Apollo: Compared to $98 4 million for the equivalent of six month period in 2020.
Adam Apollo: Moving forward, we will also provide adjusted EBITDA and <unk>.
Adam Apollo: non-GAAP measures a reconciliation between the GAAP and non-GAAP financial measures will be included in the earnings deck.
Adam Apollo: Which can be found on our list.
Adam Laponis: Looking back in time, the second quarter of fiscal 2023 adjusted EBITDA loss was approximately $46 million. In the second quarter of fiscal 2024, the adjusted EBITDA loss was approximately $27 million. For the fourth quarter of fiscal 2024, we see a path to an adjusted EBITDA loss of less than $20 million. Terming the Guidance.
Adam Apollo: After relations website.
Adam Apollo: Looking back in time.
Adam Apollo: Second quarter of fiscal 2023, adjusted EBITDA loss was approximately $46 million.
Adam Apollo: For the second quarter of fiscal 2024, adjusted EBITDA loss was approximately $27 million.
Adam Apollo: For the fourth quarter of fiscal 2024, we see a path to an adjusted EBITDA loss of less than $20 million.
Adam Apollo: Turning to guidance.
Adam Laponis: For fiscal 2024, we now expect total revenue to increase by $12 million across the range to approximately $300 million to $304 million, with anticipated growth of 22% to 24% year over year, and an increase in bio revenue of $118 million to $120 million, an increase across the range with year-over-year growth anticipated to be 20% to 22%. MGS revenue of $152-$164 million, an increase of $12 million across the range and anticipated growth of 31-33% year-over-year; biopharma revenue of approximately $20 million, a decrease of $4 million in prior guidance and 13% year-over-year.
Adam Apollo: For fiscal 2024, we now expect total revenue to increase by $12 million across the range to approximately 300 million to $304 million anticipated growth of 22% to 24% year over year.
Adam Apollo: Increase in bio revenue of 118 to 120 million an increase across the range with a year over year growth anticipated to be $20 to 22%.
Adam Apollo: NGL revenue of $152 million to $164 million, an increase of $12 million across the range and anticipated growth of 41% to 33% year over year.
Adam Apollo: Biopharma revenue of approximately $20 million, a decrease of $4 million from prior guidance and 13% year over year.
Adam Laponis: We're increasing our expected gross margin to approximately 41.5 to 42% per year. We are reducing our expected loss from operations before taxes to approximately $183 to $188 million, a decrease compared with prior guidance of $189 to $194 million. CapEx is still projected to be approximately $15 million for fiscal 2024, unchanged from prior guidance.
Adam Apollo: We have increased their expected gross margins of approximately 41, 5% to 42% for the year.
Adam Apollo: We are reducing our expected loss from operations before taxes to approximately $183 million to $188 million.
Adam Apollo: The decrease compared with prior guidance of $189 million to $191 million.
Adam Apollo: Capex is still projected to be approximately $15 million for fiscal 2024 unchanged from prior guidance.
Adam Laponis: We project ending cash with more than $245 million at the end of fiscal 2024. For the third quarter of fiscal 2024, we expect overall revenue of approximately $77 million. SimBioRevenue increasing to approximately $31 million with the full launch of ExpressGene's portfolio. NGS revenue of approximately $41 million on track with our increased annual guidance. Biopharma revenue of approximately $5 million, and gross margin for the third quarter was 41 to 42%. For the fourth quarter, we expect overall revenue in the range of $77 to $80 million. Gross margin for the fourth quarter was 43 to 44%.
Adam Apollo: Project, ending cash of more than $245 million at the end of fiscal 2024.
Adam Apollo: For the third quarter of fiscal 2024, we expect overall revenue of approximately $77 million.
Adam Apollo: Some bio revenue increasing to approximately $31 million with the full launch express James portfolio.
Adam Apollo: <unk> revenue of approximately $41 million on track with our increased annual guidance.
Adam Apollo: Biopharma revenue of approximately $5 million.
Adam Apollo: Gross margin for the third quarter, a 41% to 42%.
Adam Apollo: For the fourth quarter, we expect overall revenue in the range of $77 million to $80 million.
Adam Apollo: Gross margin for the fourth quarter.
Adam Apollo: 43% to 44%.
Adam Laponis: In summary, I am encouraged by the progress in an enterprise-wide focus on financial discipline that I've seen during my first quarter with Twist, which will continue to maintain financial discipline throughout the organization and make progress on a path to profitability. With that, I'll turn the call back to Emil.
Adam Apollo: In summary, I am encouraged by the progress in an enterprise wide focus on financial discipline that I've seen during my first quarter with <unk>.
Adam Apollo: We will continue to maintain financial discipline throughout the organization and make progress on our path to profitability.
Speaker Change: With that I will turn the call back demo.
Emily Marine Leproust: Thank you, Adam. In closing, we are very confident in the continued impact and growth opportunities generated from our proprietary DNA synthesis platform. Our growing customer base, our increasing revenue profile, our defined credit portfolios, and, of course, our exceptional employees positively move the needle for our customers across multiple industries. I often have the privilege of talking to our customers, listening to how they drive groundbreaking scientific investments in wide-ranging fields, from health care to chemicals to academia, ag bio, and more.
Demo: Thank you Ed in closing we are very confident in the continued impact on gross profit is generated from our proprietary units pretzel.
Demo: Growing customer base, increasing revenue profile are defining credit portfolio.
Demo: 600 entry positively move the needle for casinos across multiple industry.
Ed: I also had the privilege of talking to our customers listening to Audi drive groundbreaking scientific advancements in wide ranging fields from health care to chemicals to a kidney.
Emily Marine Leproust: I am very proud that Twist plays an important role in facilitating this work, and we are only getting started. We are enabling our customers to produce proteins that target and destroy cancer cells, to create new diagnostic tools that detect diseases early and accurately, and to make compounds that are more sustainable and also less expensive, to name only a few applications. We manufacture our DNA in two locations, one in California and one in Oregon, with a global commercial and support team to deliver superior service to all of our customers.
Ed: And.
Ed: I am very product tweaks, Cleveland in Portland, Oregon facility.
Demo: And we are only getting started.
Demo: Enabling our customers to purchase put in the target and destroy cancer cells to create new diagnostic tools to detect disease.
Demo: Early and accurate.
Demo: You may compounds that are more sustainable and also less expensive to name only a few applications with manufacturers and in two locations, one in California, and Oregon with a global commercial lines book into deliver superior service to Florida focused.
Emily Marine Leproust: As we look ahead, we are more excited than ever about the vast potential that lies before us. With our cutting-edge technology, world-class teams, and laser-focused strategy, we are poised to capitalize on the immense opportunities that lie ahead in synthetic biology, NGS, biopharma, and data storage. I am incredibly proud of what we have accomplished, and I am confident that our best days are yet to come.
Demo: As we look ahead, we are more excited than ever about the vast potential that lies before us with our cutting edge technology World class team and laser focused strategy, we are poised to capitalize on the immense opportunities that sympathy.
Demo: Synthetic biology, mgs, Biopharma and battery storage.
Demo: Incredibly proud of which we have accomplished and I am confident that our best days are yet to come.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. Also, we ask that you wait for your name and company to be announced before you proceed with your question. Our first question today is from Matt Sykes of Goldman Sachs. Your line is open.
Speaker Change: Let's open up the call for questions.
Speaker Change: No.
Speaker Change: Thank you.
Speaker Change: If you would like to ask a question. Please press star one on your telephone.
Speaker Change: Also we ask that you wait for your name and company to be announced before we proceed with your question. Our first question today is coming from Matt <unk> of Goldman Sachs. Your line is open.
Matthew Carlisle Sykes: Good afternoon, Emily, Adam, and Angela. Congratulations on the quarter. Maybe I could just start out on the margins. You obviously beat gross margins this quarter. It looked like on the back of NGS, but a small contribution from ExpressGenes of like 2.2 million. So I'd expect most of that beat to be from NGS, but as the year progresses and ExpressGenes continues to grow, could you give us a sense for the contribution of margin expansion from ExpressGenes, maybe either providing some expectations for ExpressGenes revenue growth or volumes for the balance of the year and what contribution to margin expansion is already in the guide from ExpressGenes specifically?
Matt: Hi, good afternoon, Adam and Angela and congrats on the quarter, maybe I could just start out on on margins.
Matt: Gross margins this quarter it looks like on the back of Ngls, but a small contribution from express genes of like $2 2 million.
Matt: So I expect most of that beat was from Ngls, but as the year progresses and express genes continuing to grow.
Matt: Just give us a sense for the contribution of margin expansion from express genes, maybe either providing some expectations for expression revenue growth in volumes for the balance of the year and what contribution to margin expansion is already in the guide from express genes specifically.
Adam Laponis: Hey Matt, thanks for the question. This is Adam.
Matt: Hey, Matt Thanks for the question this is Adam.
Adam Apollo: Happy to give you some.
Adam Laponis: I'm happy to give you some of the quantitative on this, and then Emily can jump in with some color as well. First, we are very excited about the Express Tube launch this quarter, and then we remember when we launched it here in late January with the full offering when it was still only a partial quarter. So we expect that Q3 here, which is currently the end of June, will be our first full quarter full of Express Tube.
Adam Apollo: Quantitative on this and then Mike can jump in with some color as well.
Adam Apollo: First of all we are very excited about the express team launched this quarter and then remember when we launched it year in late January.
Adam Apollo: The full offering it would still only a partial quarter. So we expect.
Adam Apollo: Q3 here that we're currently in the empty at the end of June will be our first quarter for Expressjet.
Adam Laponis: Although we have not broken out the exact Express Genes volume in the guide, we do see that contributing to the gross margin sequential improvements we have in our guide, and it did help with the movement we saw this quarter. But we're still in the early days, and we continue to use some of the testing we're doing day to day in terms of the pricing and what we're monitoring and watching. But we have not broken that out in our guide.
Adam Apollo: We have not broken out the exact breakdown.
Adam Apollo: Express genes volume in the guide, we do see that contributing to the gross margin sequential improvements we have in our guide and it did it did help with the movement. We saw this quarter, but we're still early days and we continue to use.
Matt: Some of the testing we're doing day to day in terms of the pricing.
Matt: And what we're monitoring and watching it but we have not broken that out.
Matt: At this point.
Matthew Carlisle Sykes: Got it. And then just on the NGS tools business. Just hearing from some of your competitors in that space that are having some challenges, it seems as if, given your results, you're continuing to take share there. Could you maybe just help us understand for context sort of what the market share opportunity is in the NHS tools business for you, and what is sort of the runway that you have for accelerating growth, either given the market structure, your current penetration in share, and what it could be? Thanks.
Matt: Okay.
Speaker Change: Got it and then just on the <unk> tools business.
Matt: Just hearing from some of your competitors in that space that are having some challenges. It seems as if given your results you are continuing to take share. There could you maybe just help us understand for context sort of what the market share opportunity is and then just tools business for you and what is sort of the runway that you have for accelerating growth there given the market structure your current penetration.
Matt: Asian and share and what it could be.
Matt: Thanks.
Emily Marine Leproust: Thank you, Matt. This is Emily. You're correct that we are definitely taking market share, and it's not an accident.
Matt: Yes. Thank you Matt this is Andy.
Matt: Maybe.
Andy: Youre correct that the <unk> market share.
Emily Marine Leproust: It's based on the innovation that we've built into the product, from the quality of our panel that reduces the cost of sequencing to extending to other applications like RNA and methylation. Also, the fact that we now offer a full workflow solution from the sample to the sequencer. And, finally, and very importantly, us being a supply chain partner to our customers as they grow.
Andy: And it's not an accident and it's based on the.
Andy: The innovation that we've built into the product from the quality of our panel that reduces the cost of sequencing.
Andy: Two.
Andy: Pending to applications RNA and installation.
Andy: The fact that we now offer.
Andy: Bruce workflow solution from sample to sequencer.
Andy: Finally, and very importantly.
Andy: The.
Andy: As being a supply chain partner.
Andy: Well, so I'll give some of.
Emily Marine Leproust: So far, the vast majority of our revenue has come from liquid biopsy applications. And in terms of the market potential for liquid biopsy, it's really big. We are only at the beginning of liquid biopsy adoption. And as the adoption of those tests ramps up, as liquid biopsy, and the W3C market as a whole grows, our goal is to be able to capture about 10% of the cogs of our customers. So we believe that there is a lot of room to grow in liquid biopsy.
Andy: So far the divest majority of.
Andy: The majority of our revenue come from liquid biopsy applications and.
Andy: In terms of the market potential for liquid biopsy.
Andy: It's really big we are only at the at the beginning of <unk>.
Andy: Liquid biopsy adoption and.
Andy: The adoption of those test Rams.
Andy: Liquid biopsy.
Andy: <unk> market as a whole grows.
Andy: Our goal is to be able to capture about 10% of the Cogs.
Andy: All of our customers so.
Andy: We believe the days, there's a lot of room to grow.
Emily Marine Leproust: For the other markets, mRNA, well, it's very early days, but the pilots and the initial tests are encouraging. And then for us, for the capture of the AgBio market that is currently being done on microarrays and where we want to move it to twist blood sequencing, we think that that market alone could be $500 million. So there is a lot of opportunity for us. And again, it's not an excellent space for the differentiation of products and the commercial violence that we deploy.
Andy: In liquid biopsy.
Andy: The other markets.
Andy: Mrna.
Andy: <unk>.
Andy: Well, it's very early days the pilots in the initial test on <unk> and then full so the capture of the AG bio market.
Andy: He is currently being done.
Andy: Micro arrays.
Andy: And where we want to move it to twist. The sequencing, we think that that market alone could be $500 million. So a lot of opportunity for us.
Andy: And.
Andy: And again, it's not that make sense based on the differentiation of the products and the commercial balance that we deploy.
Speaker Change: Great. Thanks, so much.
Operator: Thank you. One moment for our next question, and our next question will be coming from Vijay Kumar of Evercore. Your line is open.
Speaker Change: Thank you our next question.
Speaker Change: And our next question will be coming from Vijay Kumar of Evercore. Your line is open.
Vijay Muniyappa Kumar: Hey guys, thanks for taking my question, and congrats on everything we've printed here. Emily, maybe my first question here on the orders here, that's a big, big number, up 45%. Were there any one-timers, was there any pull-forward, or maybe just characterize the order trends throughout the quarter progressed?
Vijay Muniyappa Kumar: Hey, guys. Thanks for taking my question and congrats on everything looked pretty here.
Vijay Muniyappa Kumar: Maybe my first one here on the on the orders here, that's a big big number up 45%.
Vijay Muniyappa Kumar: Were there any one timers was there any pull forward or maybe just characterize the order trends.
Emily Marine Leproust: Yeah, great, great question. Thank you.
Vijay Muniyappa Kumar: Quarter progress.
Speaker Change: Yes, great Great question. Thank you so.
Speaker Change: I'll put out two types of auto.
Emily Marine Leproust: So, there are two types of orders. Orders that are actionable today, meaning the order, the PO comes with the sequence, and in SynBio, it gets made in five days.
Andy: Although.
Andy: <unk> actually been today, meaning the appeal comes with the sequence.
Emily Marine Leproust: In NGS, it gets made in a few weeks, gets shipped, and we book the revenue. And one thing that was a bit particular this quarter was that we got a bigger number of the second kind of orders, which are blanket PO orders. So, those are orders from customers where they kind of have a budget. And they decide, typically at the beginning of the year, where they're going to spend that budget with which company. And so, the blanket PO gets provided, gives us a sense of the volume that's coming. And then as the researcher designs the sequence that they want, based on the sequence, the other is already there.
Andy: <unk> gets made in five days.
Andy: In NGL gives made in a few weeks get shipped we book the revenue.
Andy: And one thing that was a bit particular this quarter is because we got.
Andy: Bigger number of the second kind of orders, which are blanket orders. So those are the come from customers, where they kind of ABA.
Andy: I have a budget and decide to give you at the beginning of the year, they decide where they're going to spend their budget.
Andy: Which company.
Andy: And so the blankets Yogurts gets provided gives us a sense of volume that's coming.
Andy: And then as the retail show.
Andy: Design.
Andy: The sequence that they want they sent us a sequence the others are already there would produce again ship and book revenue and.
Emily Marine Leproust: We produce, again, ship and book revenue. And so, what happened this quarter was we had more blanket PO orders than we typically have in the first quarter of the calendar year. And I think that's a reflection of the fact that in our first quarter, so in calendar Q4, some customers tested express genes. In our Q2, Canada Q1, more customers tested express genes, and as they received those genes on time, basically, our express genes do what it says on the label.
Andy: And so what happened this quarter.
Andy: We had more blanket appeal, although that we typically have had.
Andy: In the first quarter of the calendar year.
Andy: And.
Andy: I think that's a reflection of the fact that.
Andy: In our first quarter so in calendar Q4.
Andy: Some customers.
Andy: Of tested expressed gene.
Andy: In.
Andy: Q2.
Andy: Kevin calendar Q1, Marcus to mills.
Andy: <unk> and.
Andy: <unk> received those genes on time.
Andy: Weekly.
Andy: All expressed genes do what what it says on the label I think we've.
Emily Marine Leproust: I think we have earned the confidence of those companies, and they've been willing to give us their blanket peer order, meaning they're giving us their confidence that they will order from us in the rest of the year. So I think that's the dynamic that we see. It's a reflection of the strengths of our offering.
Andy: Sure.
Andy: And the confidence of those those companies and they've been willing to.
Andy: To give us.
Andy: They are blanket <unk>, meaning.
Andy: Yes.
Andy: We're confident that they will although from us in the rest of the year. So I think that's the dynamic that we see but we see it as a.
Andy: One of the strengths of our offering.
Adam Laponis: That's fantastic, and then Adam, maybe just back to the question, so you don't think there was anything one-off, these are underlying trends, and is that what's driving the sequential growth margins in the 3Q and the 4Q? That's a pretty meaningful step up in growth margins for Q4.
Andy: That's fantastic and then Adam maybe just back to the question. So you don't think there was anything one off these are underlying trends and if that's what's driving the sequential gross margins in the <unk>, that's a pretty meaningful step up in gross margin for Q4.
Adam Laponis: Hi, this is Adam. It's a great question. I think it's fair to say that this was not a one-time thing, but it also did break from our historical behavior, where sometimes some of our larger customers do put in blanket purchase orders at the beginning of the year. We're seeing a larger volume of that this year. So I think it's a vote of confidence, but it's not something I would expect sequentially to occur every quarter because of the nature of the calendar year.
Andy: Hi, This is Adam that's a great question.
Adam Apollo: I think the it's fair to say that this is not there was not a one time, but it also did rate from our historical behavior.
Adam Apollo: Oftentimes some of our larger customers do put in blanket purchase orders at the beginning of the year, we're seeing a larger volume of that this year.
Adam Apollo: So I think there is there is.
Adam Apollo: It is a vote of confidence and I would expect sequentially to occur every quarter, because the nature of the calendar year.
Adam Laponis: In terms of us moving forward, both in terms of the growth in the business, the increase in the guide of about $12 million in the midpoint from where we were before for the year, as well as the expansion in gross margin, both full year and sequentially, this does play as a tailwind. I think we talk a lot about express genes, and we talk a lot about NGS mix driving the margin, but the number one driver of margin for us is to continue growth and volume.
Adam Apollo: Folks that does that in terms of our best moving forward both in terms of the growth in the business with the increase in the guide of about 12.
Adam Apollo: $12 million and the midpoint up from where we were before for the year as well as the expansion on gross margin both full year and sequentially.
Adam Apollo: Does play as a tailwind I think we talk a lot about express genes and we talk a lot about NGL mix strength in margin, but the number one driver for margin pressure to continue growth in volume.
Vijay Muniyappa Kumar: Fantastic, guys. Thank you. Thank you.
Speaker Change: Fantastic guys. Thank you.
Operator: Thank you. One moment for the next question. And our next question will be from Steve Mah of TD Cal, and your line is open.
Speaker Change: Thank you one moment for the next questions.
Adam Apollo: And our next question will be coming from Steve Moss.
Sean Mclain: Of TD Cowen Your line is open.
Steven Mah: Great, congrats on the quarter and thanks for the questions. I've got a three-part question on ExpressGenes.
Sean Mclain: Great Congrats on the quarter and thanks for the questions.
Sean Mclain: I've got three.
Sean Mclain: Three part question on express genes.
Emily Marine Leproust: So, first, now that you have another quarter of experience, can you give us a sense of the customer feedback on the dynamic pricing? And I know on the last call, you also talked about there being a push by larger accounts wanting to trade the dynamic pricing for a sort of like a fixed subscription-like pricing model. And then, second, can you give us a sense of how the increased marketing effort on ExpressGenes is going? And then, third, on the 100 net new accounts ordering ExpressGenes, what's the profile of that customer? Is it academia, Pharma, Biotech, or Mix? Thank you.
Sean Mclain: First so now that you have another quarter of experience can you give us a sense for the customer feedback on the dynamic pricing.
Speaker Change: I know on the last call you also talked about.
Speaker Change: There is a push by larger accounts wanting to trade.
Sean Mclain: The dynamic pricing floor.
Sean Mclain: Sort of like a fixed subscription pricing model and then second.
Sean Mclain: Can you give us a sense on how the increased marketing effort on express genes.
Sean Mclain: Thats going and then third.
Sean Mclain: On the 100 net new accounts ordering express genes, what's the profile of that customer is that academia pharma biotech or or mix. Thank you.
Emily Marine Leproust: Thank you. Steve, great question. In terms of customer feedback, we haven't had any negative feedback on the premium pricing. I think people understand that we've made a significant investment. The product differentiation is very, very strong. Again, the performance is such that it does what it says on the label. That's all positive.
Speaker Change: Thank you Steve Greg Great question.
Speaker Change: In terms of the customer feedback.
Speaker Change: We haven't had any.
Greg: Negative feedback from the premium pricing I think people understand that.
Speaker Change: We have made at <unk>.
Speaker Change: <unk> the product differentiation.
Greg: You've been a strong again the performance is such that.
Greg: It does what it says on the label for that.
Emily Marine Leproust: And at the same time, several customers would like to have predictability, and so they've been very willing to provide a volume commitment in exchange for a fixed premium price. And some of that was reflected in the strong blanket POs that we have gotten. So I think that's the answer to your first question. Second question: science on the margin.
Speaker Change: Okay.
Speaker Change: That's all put agenda.
Emily Marine Leproust: And at the same time.
Speaker Change: Several customers.
Speaker Change: I would like to have predictability and so they've been very winning.
Speaker Change: To provide the food and commitment in action for.
Speaker Change: Premium pricing in.
Emily Marine Leproust: And some of that was.
Speaker Change: And the strong blanket <unk> that we have which we have good.
Speaker Change: So on your first first question and second question on the margin.
Emily Marine Leproust: So we're not, as Adam mentioned earlier, we're not breaking out margin for exclusion at this time. The one thing that I'll reiterate is whatever is that average premium pricing increase, 100% of that increase drops to the gross margin line. So we anticipate that it will be a component of gross margin improvement over time. And then, last question on the 100 net new accounts. It's a mix, which was really great to see.
Speaker Change: So we're not.
Emily Marine Leproust: Adam mentioned earlier, we are not.
Speaker Change: <unk>.
Emily Marine Leproust: Breaking out margin twice, Virginia at this time, the one thing that I'll reiterate is whatever is that.
Speaker Change: Average premium pricing.
Speaker Change: <unk>.
Speaker Change: The increase.
Speaker Change: 100% of debt increase drops to the gross margin line. So we we anticipate that.
Speaker Change: It will be.
Speaker Change: The component of.
Speaker Change: Gross margin improvement over time.
Speaker Change: And then last question on the 100 net new accounts.
Speaker Change: It's a mix, which is really great to see some very good mix of course.
Emily Marine Leproust: It's a very good mix of, of course, big pharma customers as well as small pharma customers. And not surprising, but very good to see. There are a lot of academic groups that have been testing and ordering and reordering. And obviously, when we look at the average size of an order from a pharma company, it is bigger than from an academic group than from an academic group. But I think I'd say that the majority of the net new accounts were academic groups. And so it's great to see that we're penetrating not only the industrial companies, which would have been more productive, but also the academic ones.
Emily Marine Leproust: Big for my customers.
Speaker Change: As well as smaller from I guess to move in.
Emily Marine Leproust: Not surprising, but very good to see.
Emily Marine Leproust: A lot of academic group.
Speaker Change: I've been I've been.
Emily Marine Leproust: Testing and ordering and reordering and obviously when we look at the average.
Speaker Change: Size of an order from a pharma company it is bigger.
Speaker Change: And then from then.
Speaker Change: And then from an academic group.
Speaker Change: I think I'd say that the majority of the net account where academic groups and so it's great to see that where we're penetrating not only the industrial companies, which would have been.
Speaker Change: More predict but slow academic groups.
Emily Marine Leproust: Okay, good, great. Maybe just a quick follow up on that. Did you mention that you had a different pricing structure for academic versus industry? So yes,
Speaker Change: Okay great.
Emily Leproust: Just a quick follow up on that did you mentioned that you had a different pricing structure for academic versus industry. Thank you.
Emily Marine Leproust: So, yes, in the middle of the quarter, at the beginning, it was the same premium pricing for academic and industry. And then, in the middle of the quarter, we started to have a bifurcation where the premium for academics was not as strong as for industry, which is a standard practice. So I'll say that we are more now in the standard practice than we used to.
Speaker Change: So yes in the middle of the quarter.
Emily Marine Leproust: At the beginning it was the same premium pricing.
Emily Marine Leproust: For academic.
Speaker Change: Industry and then in the middle of the quarter.
Emily Marine Leproust: We started to have a dislocation.
Emily Marine Leproust: Yeah.
Speaker Change: <unk> was not as strong.
Speaker Change: Four.
Emily Marine Leproust: Industry, which is a standard practice, so I'll say that we are more now in the standard of practice.
Speaker Change: Then we used to be.
Speaker Change: Okay, great. Thank you.
Operator: Thank you. One moment while we prepare for the next question, and the next question will be coming from Matt Larew of William Blair. Your line is open.
Emily Marine Leproust: Okay.
Speaker Change: Thank you one moment, while we prepare for the next question.
Operator: Okay.
Operator: And the next question will be coming from Matt Larew.
Matthew Richard Larew: William Blair Your line is open.
Matthew Richard Larew: Hi, this is Madeline Mullman on for Matt Larew. I wanted to touch on biopharma a little bit. I noticed biopharma still was an area that the guide came down on, and I know you've mentioned previously that you were in the process of onboarding your new BD hires. It takes about six months to get fully ramped up. Can you talk a little bit about where the BD hires are in the process, and how much of that ramping up contributed to the change in biopharma guidance?
Operator: Hi, This is model and will then on for Matt Larew.
Matthew Richard Larew: I wanted to touch a little bit on Biopharma I noticed the biopharma.
William Blair: It was an area that the guide came down and I know you've mentioned previously that you are in the process of Onboarding your new BD hires it takes them about six months to get fully ramped can you talk a little bit about where the <unk> are in the process and how much of that ramp and contributed to the change in biopharma guidance.
Emily Marine Leproust: Thank you for the question. We have a full team at this point in terms of headcount, maybe not fully ramped up yet, but we have a full team. I travel quite a bit with that team, and it's very clear that the market is there; there are no market headwinds at all. The technology, the product, and service offering that we have is extremely strong in VIVO, in vitro, and in silico. So in my mind, victory is certain, but the timing, we're still working on it. So we were just doing all the right things.
Speaker Change: Yes. Thank you for the question.
Emily Marine Leproust: <unk>.
William Blair: We have a full team at this point in terms of head count maybe not fully ramped yet.
William Blair: But we have we have a full team.
William Blair: I travel quite a bit with <unk>.
Emily Marine Leproust: That's human.
Emily Marine Leproust: We're clear that the market is there there is no market headwinds at all.
Emily Marine Leproust: The.
Emily Marine Leproust: Yes.
Emily Marine Leproust: The technology, the product and service offering that we have is extremely strong with vivo in vitro and cynical so in my mind.
William Blair: Victory certain.
Emily Marine Leproust: The timing, we're still working on it.
Emily Marine Leproust: Now we're focusing on activity, building the funnels. The orders for this quarter, at $5.8 million, were encouraging. And so now we just have to do it again and grow this business. It is the smallest business of the company. It is right now the business that has the lowest growth, but it has all the characteristics of a very strong business, of a very strong twist business, which is high differentiation of the services. And as we connect with more customers, and convert more customers, I'm very confident that we can do really well.
Emily Marine Leproust: So we were just doing all the right thing malware from casino activity building the funnel.
Emily Marine Leproust: The orders for this quarter at $5 $8 million were encouraging and so now we just have to do it again in <unk>.
Emily Marine Leproust: And grow.
Emily Marine Leproust: <unk> business.
Emily Marine Leproust: It is the business of the company. It is right now the business that that.
Emily Marine Leproust: Has.
Emily Marine Leproust: The lowest.
Emily Marine Leproust: Our growth.
Emily Marine Leproust: But it has all the characteristics of a very strong business.
Emily Marine Leproust: Base from twist business, which is high differentiation of the services and as we.
Emily Marine Leproust: As we connect with more customers convert more customers.
Emily Marine Leproust: I am very confident that we can do really well.
Adam Laponis: Great, thank you. And then I think you said that express genes were 15% of clonal genes revenue for the quarter. Can you give any color on, sort of, on a monthly basis, how express genes as a proportion of clonal genes has trended? And that includes, if you can, this quarter's current quarter as well?
Speaker Change: Great. Thank you and then I think you said the express genes were 15% of clonal genes revenue for the quarter can you give any color on sort of on a monthly basis, how express genes as a proportion of clonal genes has trended and that includes if you can into this quarter with current quarter as well.
Adam Laponis: Sure, this is Adam, and I'm happy to talk about it. I think what we're seeing since launch is that we've seen sequential increases in the express gene, but it isn't pretty much consistently month over month, partly due to the fact that we did the full commercial launch in late January this year. So you expect that natural step up. But there is also the behavior, as Emily mentioned earlier in the call, some of the larger institutional customers when they order, they are high volume. So you know, a couple orders can have an impact, especially early on, but we are seeing a sequential step up month over month. Great! Thank you so much.
Adam Laponis: Sure. This is Adam I'm happy to talk about it I think we're seeing since March we've seen sequential increases in the express gene business pretty much consistently month over month.
Adam Laponis: Partly due to the fact that we did the full commercial launch in late January of this year.
Adam Laponis: That that natural step up.
Adam Laponis: There is also the behavior.
Adam Laponis: You mentioned earlier in the call some of the larger institutional customers when they order they were high volume. So a couple of orders can have an impact, especially early on but we are seeing that sequential step up.
Speaker Change: Great. Thank you so much.
Operator: Thank you. One moment for the next question, and our next question will be coming from Tom Peterson of Beard. Your line is open.
Speaker Change: Thank you.
Thomas Peterson: The next question.
Operator: And our next question will be coming from Tom Peterson of Baird. Your line is open.
Thomas Peterson: Hey everyone, congrats on the quarter and thanks for taking my questions. I just want to start with Express Genes and some of the metrics that you provided here, you know, whether it be percentage of clonal genes or some of these customer conversions or new account wins, you know, how are you defining what medium-term success looks like for the Express Genes offering? And if you could share any sort of targets that you're looking for, you know, over the medium term, I think that'd be helpful.
Thomas Peterson: Hey, everyone congrats on the quarter and thanks for taking my questions.
Thomas Peterson: Just wanted to first start on <unk> and some of the metrics that you provided here, whether it be percentage of funnel jeans or some of these customer conversions or new account win yeah. How are you defining what medium term success looks like for your express genes offering and if you could share any sort of targets that youre looking for.
Thomas Peterson: Over the medium term I think it would be helpful.
Emily Marine Leproust: Thank you. In general, for us, success is the three numbers of revenue, gross margin, and so we do have internal targets for all of the pro clients. But sometimes one of the strengths of the business is the fact that we have a very differentiated, sorry, very diverse type of customers, you know, thousands of them working on very diverse types of applications. And so really, it's all of the above product lines that contribute to great results. And I can be sure that we are pushing the team to leverage not only expressions but all of the highly differentiated products that we have.
Thomas Peterson: Yes.
Thomas Peterson: I think in general for Us.
Emily Marine Leproust: Our success is the three numbers of revenue.
Emily Marine Leproust: Gross margin.
Emily Marine Leproust: And so we do have internal targets for all of the product lines.
Emily Marine Leproust: Hi, I'm one of the strengths of <unk>.
Emily Marine Leproust: Okay.
Emily Marine Leproust: Is the fact that we have a very differentiated.
Emily Marine Leproust: They divest.
Emily Marine Leproust: Type of customers.
Emily Marine Leproust: <unk> of them.
Emily Marine Leproust: Working on the very diverse types of applications.
Emily Marine Leproust: So.
Emily Marine Leproust: Really.
Emily Marine Leproust: It's all of the above product lines that contribute to the.
Emily Marine Leproust: The great results.
Emily Marine Leproust: And I can be sure that we are pushing the team to <unk>.
Emily Marine Leproust: Leverage nothing the explorations with all of the high differentiated products that we have.
Thomas Peterson: Great, that's helpful. And then maybe just one on the gross margin outlook, specifically kind of that 50% plus exit rate by 2025, you know, given the quarterly guide for fiscal 24, how should we think about the cadence to get to that target in fiscal 25, you know, given the fiscal 24 guide?
Speaker Change: Great. That's helpful. And then maybe just one on the gross margin outlook, specifically kind of that 50% exit rate by 2025.
Thomas Peterson: Given the quarterly guide for fiscal 'twenty four accurately you think about the cadence to get to that target in fiscal 'twenty five given the 24 guidance.
Adam Laponis: No, I think it's a great question and it's one where we internally are absolutely excited about the progress we've seen. I think we go back and look at, you know, four quarters ago, we were at a 31% gross margin. To see that grow to 41% over the last four quarters is impressive, and you'll notice it did happen over time, but it's not always perfectly linear. But I think the idea here is we do expect to see those sequential gains continue as we go into 2025.
Speaker Change: No I think that's a great question and it's one where we.
Adam Laponis: We internally are absolutely excited about the progress we've seen I think we can go back and you look at four quarters ago, we were at 31% gross margin to see that grow 41 over the last four quarters.
Adam Laponis: Aggressive Neal noticed it did happen over time, but it's not always perfectly linear but I think the idea here is we do expect to see the sequential gains continue as we go into 2025 and.
Adam Laponis: And we do expect there will be some, you know, it won't be perfectly linear with revenue growth every quarter because some of the initiatives, and I'll use the example of some of the things we're doing with process improvements, you spend the energy to make the process improvement in a given period, but then you may have inventory you need to burn through before you get the advantage of the cost savings and the impact on the P&L. So some of these things will take time, but we are encouraged by both the continued growth in business, as well as the progress on the process improvements we see across the business, so we expect sequential increases throughout 2025.
Adam Laponis: And we do expect also there will be some.
Adam Laponis: It won't be perfectly linear with revenue growth every quarter, because some of the initiatives.
Adam Laponis: Sample some of the things we're doing on process improvements.
Adam Laponis: You'd spend the energy to make the process improvement in a given period, but then you may have inventory you need to burn through before you get the advantage of the cost savings and the impact on the P&L. So some of these things will take time, but we are encouraged by both.
Adam Laponis: Continued growth of the business as well as the progress on the on the process improvements that we see across the business. So that we expect a sequential increase in <unk>.
Thomas Peterson: Thanks again. I appreciate it.
Speaker Change: Thanks again I appreciate it.
Operator: Thank you. One moment for the next question, and our next question will be coming from Poonet. Poon Mah, Puneet Souda, Partners, your line is open.
Speaker Change: Thank you.
Puneet Souda: Next questions.
Operator: Okay.
Puneet Souda: And our next question will be coming from the net.
Operator: Sudan.
Puneet Souda: Thank you.
Puneet Souda: Partners. Your line is open.
Poon Mah: Hi, good afternoon. You have got Michael on for Puneet.
Operator: Hi, Good afternoon, you've got Michael on for Puneet.
Puneet Souda: First question has to do with the regulated diagnostics products you are launching.
Puneet Souda: We thought the FDA published there.
Puneet Souda: Final rule for <unk> kind of curious.
Puneet Souda: Any of the changes affecting your plans for how twisted approaching their diagnostic products.
Michael: My first question has to do with the regulated diagnostics products you're launching. We saw the FDA publish their final rules for LDT. I was kind of curious if any of the changes are affecting your plans for how Twist is approaching their diagnostic products and if anything incremental needs to be done.
Puneet Souda: Anything incremental needs to be done.
Puneet Souda: Thank you that's a great question.
Michael: Great students of those routes.
Speaker Change: John we're quite.
Michael: Encouraged.
Emily Marine Leproust: Yeah, no, thank you. That's a great question. We are great students of those rules. I think, in general, we're quite encouraged by the new rules. They grandfathered in a number of LDTs. Regulation, in general, I think, will probably benefit larger players and maybe reduce fragmentation in the market. And to the extent that we are very well penetrated into those larger players, that's good for us. The new test or the work required to validate the test will probably require more validation, and so that will probably be a tailwind for us.
Michael: With the new rules they are grandfathered in.
Emily Marine Leproust: Mdt's.
Emily Marine Leproust: Regulation in general I think we will probably be.
Emily Marine Leproust: Benefit larger players maybe reduce fragmentation in the market and to the extent that we are very well penetrated into its largest player but that's good for us.
Emily Marine Leproust: The.
Emily Marine Leproust: Then.
Emily Marine Leproust: The new test.
Emily Marine Leproust: Well go out to validate the test will probably require more validation and so that will probably be be a tailwind for us then finally.
Emily Marine Leproust: Then finally, other times, as diagnostic tests need to be modified, it just will be a little bit harder to modify. And one of the things we provide is we make it easier to do the modifications. And so, all in all, I think those rules are probably, in the grand scheme of things, probably beneficial to us. And, as you mentioned, we launched CE Mart products in Europe in the recent past, and while those exact products cannot be ported into the U.S., going through the exercise of launching those products helped us build muscle inside a company that we'll be able to use and leverage in the U.S. with the new regulations.
Emily Marine Leproust: Oh, the times as as Dana stick this needs to be modified just will be a little bit harder to modify one of the things we provide.
Emily Marine Leproust: In the Grand scheme of thing probably beneficial to us.
Emily Marine Leproust: And as you mentioned we launched.
Emily Marine Leproust: CE marked products in Europe.
Emily Marine Leproust: In the recent past and why.
Emily Marine Leproust: <unk> products cannot be bolted into the U S.
Emily Marine Leproust: Going through the exercise of.
Emily Marine Leproust: Launching those products.
Emily Marine Leproust: In the U S with the new regulation.
Michael: Great, thanks. And then my second question has to do with biopharma funding. So we've seen a bit of an uptick in the first quarter. I was curious if you have any views on where that might flow through, maybe some lag time, and if you've seen differences in buying activity between large and small pharma.
Speaker Change: Great. Thanks.
Michael: And then my second question has to do with Biopharma funding. So we've seen a bit of an uptick in the first quarter. I was curious if you have any views on where that might flow through maybe can lag time and if you've seen.
Emily Marine Leproust: I'm not sure we're seeing big differences. I think for us, we're very focused on gaining market share. And the last few years have been kind of our customers broadly have been in a mode of tightness around funding and budget.
Michael: Okay.
Emily Marine Leproust: Be big differences.
Emily Marine Leproust: I think for us.
Emily Marine Leproust: Kind of.
Emily Marine Leproust: Our customers broadly have been in a mode of of tightness around.
Emily Marine Leproust: And because of the high differentiation of our products, we've been able to gain more than our fair share of market shares. So, as we see now, the budgets get a little bit easier. Will we be able to keep doing this, taking more of our fair share? I think I'm encouraged by the performance of the X-ray genes in particular, where, again, it does what it says on the label and is highly differentiated.
Emily Marine Leproust: Gain more than our fair share.
Emily Marine Leproust: In market shares.
Emily Marine Leproust: So as we see now that yes the budgets.
Emily Marine Leproust: Get a little bit easier.
Emily Marine Leproust: Would we be able to to to keep doing this thinking more of our fair share I think.
Emily Marine Leproust: Bridged by the performance of the <unk> in particular.
Emily Marine Leproust: And we also have a number of products that we are planning on launching in the near term, which will enable us to take more of those budgets. And I think the older volume that we had in Q2, which is Canada's Q1, those large blanket orders, it's a good first step in making sure that as the biopharma budget loosens, we'll be in a good position to take advantage of them.
Emily Marine Leproust: Well.
Emily Marine Leproust: Again, it does what it says on the label and it is highly differentiated and we still have a number of products that as well.
Emily Marine Leproust: It's.
Operator: Thank you. This does conclude the Q&A session for today, and I would now like to turn the call over to Emily Leproust for closing remarks. Please go ahead.
Emily Marine Leproust: Thank you for your time and attention today. Our unwavering commitment to pushing the boundaries of innovation has allowed us to unlock new opportunities and drive value for our customers, shareholders, and the broader scientific community, and we will continue on our path toward profitability. We look forward to keeping you apprised of our progress.
Operator: This concludes today's conference call. You may all disconnect.