Q3 2024 Twist Bioscience Corp Earnings Call

Operator: Good day, and thank you for standing by. Welcome to Twist Bioscience's fiscal 2024 third 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 1 1 on your telephone. You will then hear an automatic message advising that your hand is raised. Please note that today's conference call is being recorded. I would now like to turn the conference call over to Angela Bitting, SVP of Corporate Affairs. Please go ahead.

Speaker Change: Good day, and thank you for standing by. Welcome to Twist Bioscience Fiscal 2024 3rd Quarter Financial Results Conference Call. At this time, all participants are on a listen-only mode.

Speaker Change: 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 1 1 on your telephone. You will then hear an automatic message advising your hand is raised.

Speaker Change: Please note that today's conference is being recorded. I would now like to send a conference call over to Angela Bitting, SVP of Corporate Affairs. Please go ahead.

Angela Bitting: Thank you, operator. Good morning, everyone.

Angela Bitting: Thank you, Operator. Good morning, everyone. I would like to thank all of you for joining us today for Twist Bioscience's conference call to review our fiscal 2024 third quarter financial results and business progress.

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 third quarter financial results and business progress. We issued our financial results release before 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 Twist. Dr. Patrick Finn, President and COO of Twist, will join us for the Q&A.

Angela Bitting: We issued our financial results release before market, and the release is available at our website at www.twistbioscience.com.

Speaker Change: With me on today's call are Dr. Emily Leproust, CEO and co-founder of Twist, and Adam Laponis, CFO of Twist.

Angela Bitting: Today, we will discuss our business progress, financial and operational performance, as well as growth opportunities. We will open up the call for questions. We ask that you limit your questions to only one and then requeue as a courtesy to others on the call.

Speaker Change: Dr. Patrick Finn, President and COO of Twist, will join us for the Q&A.

Speaker Change: Today, we will discuss our business progress, financial and operational performance, as well as growth opportunities. We will open up the call for questions. We ask that you limit your questions to only one, and then requeue as a courtesy to others on the call.

Angela Bitting: This call is being recorded, and the audio portion 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, and actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Speaker Change: This call is being recorded and the audio portion 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.

Speaker Change: Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Angela Bitting: These risks include those set forth in the press release we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission. 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 statements except as required by law. We'll also discuss adjusted EBITDA, which is a financial measure that does not conform with generally accepted accounting principles.

Speaker Change: These risks include those set forth in the press release we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission.

Speaker Change: 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 statements except as required by law.

Speaker Change: We'll also discuss adjusted EBITDA, which is a financial measure that does not conform with the generally accepted accounting principles.

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 documents, which can be found on our investor relations website at www.twistbioscience.com. With that, I'll now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust. Thank you, Angela.

Speaker Change: 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 documents, which can be found at our Investor Relations website at www.twistbioscience.com.

Emily Leproust: Thank you, Angela, and good morning everyone. I am pleased to report another record-breaking quarter of revenue growth for 2020. This quarter, we surpassed our revenue, margin, and cash burn targets by employing disciplined execution and operational excellence. We have been diligent in our pursuit to serve our customers, introducing differentiated products that build on our proprietary technology and leveraging our unique competitive advantage to position the company for profitable growth. For the third quarter, we increased revenue 28% year-over-year to $81.5 million, with others coming at... The strong quarter was driven by growth in our synthetic biology product For ThinBio, revenue increased to $33 million with orders of $33.8 million. ThinBio revenue grew 27% year-over-year and 11% sequentially.

Speaker Change: With that, I'll now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust.

Speaker Change: Thank you, Angela, and good morning, everyone. I am pleased to report another record-breaking quarter of revenue growth for Twist. This quarter, we surpassed our revenue, margin, and cash burn targets by employing disciplined execution and operational excellence.

Speaker Change: We have been diligent in our pursuit to serve our customers, introducing differentiated products that build on our proprietary technology and leveraging our unique competitive advantage to position the company for profitable growth.

Speaker Change: For the third quarter, we increased revenue 28% year-over-year to $81.5 million, with others coming at

Speaker Change: 85.3 million dollars. The strong quarter was driven by growth in our synthetic biology product line including XY gene along with robust growth in NGS.

Speaker Change: We reported a 43.3% growth margin for the quarter, an increase of approximately 900 basis points versus 34.4% for a set period last year.

Speaker Change: For SynBio, revenue increased to $33 million with orders of $33.8 million. SynBio revenue grew 27% year-over-year and 11% sequentially.

Emily Leproust: We see growing interest and engagement for our ExpressGenes product line, which together with our expanding portfolio of high-quality, differentiated products built on our Express infrastructure, continues to drive new customer growth and let New York, our express jeans, provide a differentiated and important offering for our customers and potential customers with this offering. We ship clonal genes in five days at a reasonable cost. And we manufacture and ship all X-ray genes from our site just outside of Portland, Oregon, in the US, where we make all of our SynBio products, with the exception of DNA laboratories, which are made in our facility.

Speaker Change: We see growing interest and engagement for our ExpressGenes product line, which together with our expanding portfolio of high-quality, differentiated products built on our Express infrastructure, continues to drive new customer growth and lead new accounts.

Speaker Change: Our express jeans provide a differentiated and important offering for our customers and potential customers. With this offering, we ship clonal jeans in five days at a reasonable cost.

Speaker Change: And we manufacture and ship all X-rays genes from our site just outside of Portland, Oregon, in the U.S., where we make all of our SynBio products, with the exception of DNA libraries, which are made in our South San Francisco site.

Emily Leproust: Importantly, we continue to launch new products that build off of our X-rays, genes, portfolio, and infrastructure. In May, we launched multiplexed gene fragments with direct synthesis of DNA up to 500 bases. This direct synthesis lens, along with pooling of fragments, enables our customers to pursue myriad applications. Some examples include encoding entire viable regions for antibody discovery and encoding entire functional domains of proteins for enzyme engineering, both of which are very useful for parallel screening of AI or ML-generated sequences.

Speaker Change: Importantly, we continue to launch new products that build off of our X-ray genes portfolio and infrastructure.

Emily Leproust: In addition, two important applications of the 500 base pair lens enable customers to encode mRNA sequences for personalized therapy or encode multiple guide RNA sequences within a single fragment for a complex CRISPR screen. These are just four examples of diverse applications for these innovative products that showcase how we augment our processes continuously to drive innovation and new products while expanding our infrastructure. Also building on the XPRESS workflow, in July, we introduced XPRESS antibodies, both FORTRU and HEC293.

Speaker Change: In May, we launch multiplexed chain fragments with direct synthesis of DNA up to 500 base pairs.

Speaker Change: This direct synthesis lens, along with pooling of fragments, enables our customers to pursue myriad applications.

Speaker Change: Some examples include encoding entire variable regions for antibody discovery and encoding entire functional domains of proteins for enzyme engineering, both of which are very useful for parallel screening of AI or ML-generated sequences.

Speaker Change: In addition, two important applications of the 500 base pair lens enable customers to encode mRNA sequences for personalized therapy or encode multiple guide RNA sequences within a single fragment for complex CRISPR screens.

Speaker Change: These are just four examples of diverse applications for these innovative products that showcase how we augment our processes continuously to drive innovation and new products while expanding our infrastructure capacities.

Speaker Change: Also building onto the XPRESS workflow, in July we introduced XPRESS antibodies, both FORTRESSO and EGG293.

Emily Leproust: The two most commonly used cell lines for Antibody Discovery and Optimization, Multiplexed Gene Fragments and XPRESS Antibodies illustrate the benefit of making all of our DNA on the XPRESS timeline, as we do not need to cut the line for particular, In addition to growth for our existing portfolio of products, including X-ray genes.

Speaker Change: The two most commonly used cell lines for the antibody discovery and optimization cycles.

Speaker Change: Multiplexed Gene Fragments and X-ray Antibodies illustrate the benefit of making all of our DNA on the X-ray timeline, as we do not need to cut the line for particular customers.

Emily Leproust: We continue to add products that leverage our rapid manufacturing. These products will target areas of the life science market that we do not serve today and have the potential to expand our share of wallet with existing customers, as well as open up new market opportunities. ExpressGenes continues to perform well, showing ongoing sequential growth that contributes not only to revenue and gross margin expansion but is still a key driver for our ever-increasing net new customers.

Speaker Change: In addition to growth for our existing portfolio of products including X-ray genes, we will continue to add products that leverage our rapid manufacturing.

Speaker Change: These products will target areas of the life science market that we do not serve today and have the potential to expand our share of wallet with existing customers as well as open up new market opportunities.

Speaker Change: X-Rays Genes continue to perform well, showing ongoing sequential growth that contributes not only to revenue and growth margin expansion, but also a key driver for our ever-increasing net new customers.

Emily Leproust: As we indicated at the time of launch, our long-term intent is to convert gene makers into gene buyers, as well as to convert customers from competitors. We expect our market share and the category as a whole to continue to grow as we expand our express offerings. Moving forward, because we continue to add more and more products building on the express infrastructure, we will report all express product revenue in our overall symbiote numbers, primarily for competitive reasons.

Speaker Change: As we indicated at the time of launch, our long-term intent is to convert gene makers into gene buyers, as well as convert customers from competitors.

Speaker Change: We expect our market share and the category as a whole to continue to grow as we expand our express offerings.

Speaker Change: Moving forward, because we continue to add more and more products building on the express infrastructure, we will report all expects product revenue in our overall symbiote numbers, primarily for competitive reasons.

Emily Leproust: Moving to NGS, we posted another very strong quarter, as revenue grew to $43.4 million, an increase of 31% year-over-year, and $46.7 million in orders. Trends in the quarter came primarily from clinical customers, many of whom are in the liquid biopsy and rare disease space. Moving forward, we see continued strength in these areas, as well as several additional avenues of growth. Starting with Minimal Residual Diseases, or MRD, our products generate minimal revenue today.

Speaker Change: Moving to NGS, we posted another very strong quarter as revenue grew to $43.4 million, an increase of 31% year-over-year, and $46.7 million in orders.

Speaker Change: Strength in the Quarter came primarily from clinical customers, many of whom are in liquid biopsy and rare disease spaces.

Speaker Change: Moving forward, we see continuous trends in these areas, as well as several additional avenues of growth.

Emily Leproust: However, we expect revenue to expand a bit in 2025 with more substantial growth beyond 2025, similar to what we have seen with growth coming from liquid biopsy customers in the last year. In MRD, we provide three workflow offerings for customers with the ability to adapt to three distinct types of customer assets. When our customers pursue low-pass whole-genome sequencing for the assay, we offer a unique CFDNA library prep kit that extracts more rare mutations, went on to also elaborate, perhaps, a competitive advantage for this application.

Speaker Change: Starting with Minimal Residual Diseases, or MRD, our products generate minimal revenue today. However, we expect revenue to expand a bit in 2025, with more substantial growth beyond 2025, similar to what we have seen with growth coming from liquid biopsy customers in the last years.

Speaker Change: In MRD, we provide three workflows for customers with the ability to adapt to three distinct types of customer assets.

Speaker Change: When our customers pursue low-pass whole-genome sequencing for the assay, we offer a unique CFDNA library prep kit that extracts more rare mutations when compared to other library preps, a competitive advantage for this application.

Emily Leproust: Second, customers developing tumor agnostic assays use Twist to build a customized target enrichment panel of genes and variants related to a particular type of cancer that applies to all samples. This is similar to the custom target enrichment panels we provide for liquid biopsy. Third, customers are developing two more informed workflows where an assay test for individualized mutations can leverage Twist MRD 500 panels, where we incorporate up to 500 different mutations into an individualized assay at the same speed and cost as a handful of probes produced by our competitors.

Speaker Change: Second, customers developing tumor agnostic assays use Twist to build a customized target enrichment panel of genes and variants related to a particular type of cancer that applies to all samples.

Speaker Change: This is similar to the custom target enrichment panels we provide for liquid biopsy customers.

Speaker Change: Third, Customer Developing Tumor-Informed Workflow.

Speaker Change: where an assay test for individualized mutations can leverage TWiST MRD 500 panels where we incorporate up to 500 different mutations on an individualized assay at the same speed and cost as a handful of probes produced by our competitors.

Emily Leproust: In fact, some customers want many more than 500 mutations, and we have the ability to scale into multiple thousands of variants to meet their needs. Importantly, this third avenue shines a light on Twist's ability to partner with customers to deliver personalized and customized panels rapidly and at scale. We see growth coming from our RNA-seq work. We differentiate our RNA products on key benefits, including the elimination of bias through whole RNA transcription instead of prime bias poly-A transcription. Our RNA solution offers the potential to capture fusions and gene expression that could be missed by other workers.

Speaker Change: In fact, some customers want many more than 500 mutations, and we have the ability to scale into multiple thousands of variants to meet their needs.

Speaker Change: Importantly, this third avenue shines a light on Twist's ability to partner with our customers to deliver personalized and customized panels rapidly and at scale.

Speaker Change: Beyond this, we see growth coming from our RNA-seq workflow.

Speaker Change: We differentiate our RNA products on key benefits including the elimination of bias through whole RNA transcription instead of current biased poly-A transcription. Our RNA solution offers the potential to capture fusions and gene expression that could be missed by other workflows.

Emily Leproust: In addition, it effectively generates results from degraded samples, and our simplified and efficient workflows allow our customers to save time and run more samples on the sequencer in a cost-effective manner. We also see customers expanding beyond our original flagship NGS offering of target enrichment to include our differentiated library prep, build, buffer, UADI, UMI, barcodes, and more when placing orders, expanding our shelf while it was supporting better results for. For Biopharma, revenue increased to $5.1 million with orders of $4.9 million.

Speaker Change: In addition, it effectively generates results from degraded samples, and our simplified and efficient workflows allow customers to save time and run more samples on the sequencer in a cost-effective manner.

Speaker Change: We also see customers expanding beyond our original flagship NGS offering of target enrichment to include our differentiated library prep, bids, buffer, UADI, UMI, barcodes, and more when placing orders, expanding our share of wallets while supporting better results for our customers.

Speaker Change: For biopharma, revenue increased to $5.1 million with orders of $4.9 million.

Emily Leproust: We continue to deliver on programs for our partners across the spectrum of offerings. A few weeks ago, we announced that the first patient has been dosed in a pure biologics clinical study of PBA0405, a fully human IgG1 antibody discovered using Twist Biopharma Solutions' synthetic antibody phage lisp elaborate. This advancement of PBA0405 into human studies validates the potential of our synthetic antibody laboratories to be used to discover antibody candidates for how to treat cancer indications.

Speaker Change: We continue to deliver on programs for our partners across the spectrum of offerings.

Speaker Change: A few weeks ago, we announced that the first patient has been dosed in a pure biologic clinical study of PBA0405, a fully human IgG1 antibody discovered using Twist Biopharma Solutions' synthetic antibody phage list deliveries.

Speaker Change: This advancement of PBA0405 into human studies validates the potential of our synthetic antibody laboratories to be used to discover antibody candidates for how to treat cancer indications. We expect at least one other partner to initiate human studies within the next year.

Emily Leproust: We expect at least one other partner to initiate human studies within the next year. Additionally, during the quarter, we announced a key publication detailing data for the adenosine A2A antibody, which is available for outliers. We continue to work diligently to increase revenue and orders for biopharma, and in this fragmented market, we know our offerings resonate. In addition, the Biopharma Solutions Group provides a spectrum of products and services that fit strategically with our thin bioproducts.

Speaker Change: Additionally, during the quarter, we announced a key publication detailing data for adenosine A2A antibody, which is available for our licensing.

Speaker Change: We continue to work diligently to increase revenue and order for biopharma, and in this fragmented market, we know our offerings resonate. In addition, the Biopharma Solutions Group provides a spectrum of products and services that fit strategically with our thin bioproduct line.

Adam Laponis: We do believe the revenue ramp will take time, and we will continue to analyze and manage the overall business to ensure this group continues to provide value. For data storage, we remain focused on technology development and enablement of the Terabyte Century Archive workflow for early access before the end of 2025. Progress continues, and we see this area of our business as a valuable asset with optionality at multiple points of development.

Speaker Change: We do believe the revenue ramp will take time, and we will continue to analyze and manage the overall business to ensure this group continues to provide value.

Speaker Change: For data storage, we remain focused on technology development and enablement of the Terabyte Century Archive workflow for early access before the end of Canada 2025.

Speaker Change: Progress continues, and we see this area of our business as a valuable asset with optionality at multiple points of development.

Adam Laponis: Turning to operations, we returned a growth margin of 43.3%, exceeding our guidance, and a significant increase of approximately 900 basis points over the same quarter last year. Increased revenue growth was the majority of margin growth, and included contribution from express genes as well as NGS. I'd like to note that while we expect fluctuation in any given quarter due to mix and other adjustments, more than 75% of the revenue growth year-over-year dropped to gross profit for the third quarter of fiscal 2024.

Speaker Change: Turning to operations, we reported a gross margin of 43.3%, exceeding our guidance, and a significant increase of approximately 900 basis points over the same quarter last year.

Speaker Change: Increased revenue growth, a majority of margin growth, and included contribution from express genes as well as NGS mix.

Speaker Change: I'd like to note that while we expect fluctuation in any given core, due to mix and other adjustments, more than 75% of the revenue growth year-over-year dropped to gross profit for the third quarter of fiscal 2024.

Adam Laponis: On average, we expect to continue to see 75 to 80% of revenue growth drop to gross profit moving forward. Looking ahead, we will continue to focus on marginal improvement initiatives, including continuous process improvement, supply chain optimization, operational excellence, and insourcing, and will remain on track to improve our margin by several percentage points with a path to a gross margin north of 50% by the end of fiscal 2025. With that, I'll turn it over to Adam to discuss our financials. Thank you.

Speaker Change: On average, we expect to continue to see 75-80% of revenue growth drop to gross profit moving forward.

Speaker Change: Looking ahead, we will continue to focus on Margin Improvement Initiatives including Continuous Process Improvement, Supply Chain Optimization, Operational Excellence, and Insourcing.

Speaker Change: We remain on track to improve our margin by several percentage points with a path to a gross margin north of 50% by the end of fiscal 2025.

Speaker Change: With that, I refer to Adam to discuss our finances.

Adam Laponis: Thank you, Emily. Revenue for the second quarter increased to $81.5 million, growth of 28% year-over-year and approximately 8% sequentially.

Adam Laponis: Orders were $85.3 million, an increase of 34% year-over-year. While we received blanket purchase orders, as we do every quarter, we saw our order patterns were in line with historical trends.

Adam Laponis: Orders were $85.3 million, an increase of 34% year-over-year. While we received blanket purchase orders, as we do every quarter, we saw order patterns in line with historical trends.

Adam Laponis: As Emily said, gross margin came in higher than expected at 43.3% for the third quarter of fiscal 2024. During the third quarter, we shipped approximately 2,300 customers. We ended the quarter with cash, cash equivalents, and short-term investments of approximately $289.4 million, a reduction of $4 million versus the $293.3 million balance as of March 31st, 2024. Taking a Deeper Dive into Revenue Symbiole revenue increased to $33 million, growing 27% year-over-year, with orders increasing to 33.8 million. We've shipped 212,000 genes in a quarter.

Adam Laponis: As Emily said, gross margin came in higher than expected at 43.3% for the third quarter of fiscal 2024. During the third quarter, we shipped approximately 2,300 customers.

Emily Leproust: We ended the quarter with cash, cash equivalents, and short-term investments of approximately $289.4 million, a reduction of $4 million versus the $293.3 million balance, as of March 31, 2024.

Speaker Change: Taking a deeper dive into revenue.

Speaker Change: Symbiole revenue increased to $33 million, growing 27% year over year, with orders increasing to 33.8 million. We've shipped 212,000 genes in a quarter.

Adam Laponis: Synthetic genes revenue, which includes both clonal genes, gene fragments, and IgG, increased to approximately $24.9 million, growth of approximately 29% year-over-year. Additionally, within the SymBio umbrella, Oligopool revenue increased to $4.2 million, and DNA Library's revenue increased to $3.8 million, year-over-year growth of 12% to 34%, respectively. NGS revenue for the third quarter grew to approximately $43.4 million compared to $33.2 million in the third quarter of fiscal 2023, an increase of 31% year over year.

Speaker Change: Synthetic genes revenue, which includes both clonal genes, gene fragments, and IgG, increased to approximately $24.9 million, growth of approximately 29% year-over-year.

Speaker Change: Within the SymBio umbrella, Oligopool revenue increased to $4.2 million and DNA Library's revenue increased to $3.8 million, year-over-year growth of 12% and 34%, respectively.

Speaker Change: NGS revenue for the third quarter grew to approximately $43.4 million compared to $33.2 million in the third quarter of fiscal 2023, an increase of 31% year-over-year.

Adam Laponis: For the quarter, revenue from our top 10 NGS customers accounted for approximately 39% of NGS revenue; orders increased to 46.7 million, which we anticipate sets the stage for further NGS growth. We served 570 NGS customers in the quarter, with 141 having adopted our product. For biopharma, revenue is $5.1 million, with orders of $4.9 million. We had 61 active programs as of the end of June 2024, and we started 43 new programs during the quarter.

Speaker Change: For the quarter, revenue from our top 10 NGS customers accounted for approximately 39% of NGS revenue. Orders increased to $46.7 million, which we anticipate sets the stage for further NGS growth.

Speaker Change: We serve 570 NGS customers in the quarter, with 141 having adopted our products.

Speaker Change: For biopharma, revenue is $5.1 million, with orders of $4.9 million. We had 61 active programs as of the end of June 2024, and we started 43 new programs during the quarter.

Adam Laponis: In the third quarter, we took an impairment charge of approximately $45 million as we revisited the long-term growth forecast for biopharm, and we believe the outlook has shifted from our original view. We continue to mature as a business development team, and just as our commercial teams for SymBio and MGS took time to accelerate, we are finding that the biopharma team is taking time to perform at the expected level. Looking at revenue by industry,

Speaker Change: In the third quarter, we took an impairment charge of approximately $45 million as we revisited the long-term growth forecast for biofunds, and we believe the outlook shifted from our original view.

Speaker Change: We continue to mature the business development team, and just as our commercial teams for SymBio and MGS took time to accelerate, we are finding that the biopharma team is taking time to reform at the expected level.

Adam Laponis: Healthcare revenue rose 26% to $42.8 million for the third quarter of 2024, compared to $34 million in the same period of fiscal 2023, reflecting the increased uptake of our products by pharma, biotech, and diagnostic companies. Industrial chemical revenue rose 38% to $23.2 million in the third quarter, up from $16.8 million in the same period of fiscal 2023. Strong growth year over year. Academic revenue rose 20% to $14.9 million in the third quarter of 2024, up from $12.4 million in the same period of fiscal 2022. Looking geographically,

Speaker Change: Looking at revenue by industry.

Speaker Change: Healthcare revenue rose 26% to $42.8 million for the third quarter of 2024, compared to $34 million in the same period of fiscal 2023, reflecting the increased uptake of our products by pharma, biotech, and diagnostic companies.

Speaker Change: Industrial chemical revenue rose 38% to $23.2 million in the third quarter, up from $16.8 million in the same period of fiscal 2023. Strong growth. You're green.

Speaker Change: Academic revenue rose 20% to $14.9 million in the third quarter of 2024, up from $12.4 million in the same period of fiscal 2022.

Adam Laponis: America's revenue increased to approximately $51.4 million in the third quarter, compared to $39 million in the same period of fiscal 23, a growth of 32% year over year. The MEA revenue rose to $23.6 million in the third quarter, versus $19.1 million in the same period of fiscal 2023. Growth of 24% year over year. APAC revenue increased to $6.5 million in the third quarter, compared to $5.7 million in the same period of fiscal 23, growth of 15% year over year. China revenue was $1.8 million, a small percentage of our total revenue for the quarter.

Speaker Change: Looking geographically.

Speaker Change: America's revenue increased to approximately $51.4 million in the third quarter, compared to $39 million in the same period of fiscal 23, growth of 32% year-over-year.

Speaker Change: The MEA revenue rose to $23.6 million in the third quarter, versus $19.1 million in the same period of fiscal 2023. Growth was 24% year-over-year.

Speaker Change: APAC revenue increased to $6.5 million in the third quarter, compared to $5.7 million in the same period of fiscal 23. Growth of 15% year-over-year.

Speaker Change: China revenue was $1.8 million, a small percentage of our total revenue for the quarter.

Adam Laponis: Our gross margin for the third quarter increased to 43.3%. We saw strength from Express Genes revenue, lifting margin, offset by a contracted SimBio customer who received a large order within their discounted terms in Q3. Of note, we expect this customer to take a step back in the fiscal 2024 fourth quarter, and we have factored this into our SimBioGuide.

Speaker Change: Our gross margin for the third quarter increased to 43.3%. We saw strength from Express Genes Revenue, lifting margin, offset by a contracted SimBio customer, who received a large order within their discounted terms in Q3.

Speaker Change: Of note, we expect this customer to take a step back in the fiscal 2024 fourth quarter, and we have factored this into our symbiote guidance.

Adam Laponis: Our NGS offerings continue to have strong gross margin performance, and as we said last quarter, we do expect to continue to see puts and takes in our gross margin based on contract and customer mix, or margin fluctuates based on the individual customer orders in the given quarter. While we expect quarterly volatility, on average, we expect 75 to 80 percent of revenue to drop to gross profit for the foreseeable future as we continue our margin initiatives, the primary focus across the executive team and throughout the company.

Speaker Change: Our NGS offerings continue to have strong gross margin performance, and as we said last quarter, we do expect to continue to see puts and takes in our gross margin based on contract and customer mix, or margin fluctuates based on the individual customer orders in the given quarter.

Speaker Change: While we expect quarterly volatility, on average, we expect 75-80% of revenue to drop to gross profit for the foreseeable future as we continue our margin initiatives, the primary focus across the executive team and throughout the company.

Adam Laponis: In total, operating expenses for the third quarter were $170.4 million, which includes the $45 million non-cash impairment, compared with $124.5 million in the same period of 2023, on a non-GAAP basis, excluding stock rate compensation and the Q3 FY24 impairment charge. Operating income was $111.7 million, compared with $110.3 million in the same period of 2023. Breaking this down,

Speaker Change: In total, operating expenses for the third quarter were $170.4 million, which includes the $45 million non-cash impairment charge.

Speaker Change: compared with $124.5 million in the same period of 2023.

Speaker Change: On a nine-gap basics, including stock rate compensation and the Q3 FY24 impairment charge, operating expenses were $111.7 million, compared with $110.3 million in the same period of 2023.

Adam Laponis: Cost of revenue increased to $46.2 million in the third quarter of 2024, compared with $41.8 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 prior year capital investments for the new manufacturing facility in Wilsonville, Oregon, are indeed decreased to $22.5 million compared to $24.5 million in the same period of fiscal 2023, primarily due to the reduction in head FG&A was $56.8 million for the third quarter, compared with $46.1 million in the same period of fiscal 2023.

Speaker Change: Breaking it down.

Speaker Change: Cost of revenue has increased to $46.2 million in the third quarter of 2024, compared with $41.8 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 prior year capital investments for the new manufacturing facility in Wilsonville, Oregon.

Speaker Change: R&D decreased to $22.5 million compared to $24.5 million in the same period of fiscal 2023, primarily due to the reduction in headcount, as well as a decrease in outside services and lab supply.

Speaker Change: SG&A was $56.8 million for the third quarter, compared with $46.1 million in the same period of fiscal 2023. The increase is driven largely by stock-based compensation and bonus accruals that the business is performing above forecast this time.

Adam Laponis: The increase is driven largely by stock-based compensation and bonus accruals because the business is performing above forecast this time, and non-cash impairment charges on biopharma intangibles and other assets of $45 million in the third quarter of fiscal 2024. Operating expenses included approximately $6 million for data storage. Stock-based compensation for the quarter was approximately $13.7 million. Appreciation and amortization were $8.3 million for the quarter.

Speaker Change: Non-cash impairment charges on biopharma, intangibles, and other assets of $45 million in the third quarter of fiscal 2024.

Speaker Change: Operating expenses included approximately $6 million for data storage.

Speaker Change: Stock base compensation for the quarter was approximately $13.7 million.

Adam Laponis: For the third quarter of fiscal 2024, adjusted EBITDA was a loss of approximately $22 million, an improvement of $8 million versus the third quarter of fiscal 2023 and an improvement of $5 million versus the second quarter of fiscal 2024. We ended the quarter with cash, cash equivalents, and short-term investments of approximately $289.4 million, a reduction of $4 million versus the $293 million balance as of March 31st. Our strong cash position was driven by continued strong operational performance, as well as a one-time gain through improvements in accounts receivable collection and other working capital improvements as we continue to evolve our G&A capabilities. Cash flow from operating activities continues to improve, and we are driving break-even.

Speaker Change: Appreciation and amortization were $8.3 million for the quarter.

Speaker Change: For the third quarter of fiscal 2024, adjusted EBITDA was a loss of approximately $22 million, an improvement of $8 million versus the third quarter of fiscal 2023, and an improvement of $5 million versus the second quarter of fiscal 2024.

Speaker Change: We ended the quarter with cash, cash equivalents, and short-term investment of approximately $289.4 million.

Speaker Change: A reduction of $4 million versus the $293 million balance as of March 31st.

Speaker Change: Our strong cash position was driven by continued strong operational performance, as well as one-time gains from improvements in accounts receivable collection and other working capital improvements as we continue to evolve our G&A capabilities.

Adam Laponis: For the nine months ended June 30, 2024, net cash used in operating activities was $48.8 million, compared to $121.8 million for the equivalent nine-month period in 2026. Turning to guidance, for fiscal 2024, we now expect total revenue to increase by $8.5 million at the midpoint of the range to approximately $310 to $311 million. Anticipated growth of approximately 27% year-on-year, and an increase in biorevenue of approximately $121 million, up from previous guidance of $118 to $120 million.

Speaker Change: Cash flow from operating activities continues to improve, and we are driving the break-even. For the nine months ended June 30, 2024, net cash used in operating activities was $48.8 million, compared to $121.8 million through the equivalent nine-month period in 2026.

Speaker Change: Turning to guidance. For fiscal 2024, we now expect total revenue to increase by $8.5 million at the midpoint of the range to approximately $310 to $311 million. Anticipated growth of approximately 27% year-on-year.

Speaker Change: Increase in bio-revenue of approximately $121 million, up from previous guidance of $118 to $120 million. Anticipated year-over-year growth of 23%.

Adam Laponis: Anticipated year-over-year growth of 23%. NGS revenue of $169 to $170 million, an increase of $6 to $7 million across the range, and anticipated growth of 36 to 37% year-over-year. Biopharma revenue of approximately $20 million, consistent with prior guidance. We expect the gross margin to be at the high end of the range and approximately 42% of the year, losses from operations before taxes are expected to be in the range of $227 to $230 million, including the $45 million impairment charge. Losses from operations before taxes are expected to be in the range 182 to 185 million on a non-gap basis, a slight decrease from our previous guidance of 183 to 188. CapEx is projected to be approximately $13 million for fiscal 2024, a decrease of $2 million from prior guidance.

Speaker Change: NGS revenue of $169-$170 million, an increase of $6-$7 million across the range, and anticipated growth of 36-37% year-over-year.

Speaker Change: biopharma revenue of approximately $20 million consistent with prior guidance.

Speaker Change: We expect the gross margin to be at the high end of the range and approximately 42% for the year.

Speaker Change: are expected lost from operations before taxes in the range of $227 to $230 million, including the $45 million impairment change.

Speaker Change: Excluding the impairment charge, loss from operations before taxes is expected to be in the range of $182 to $185 million on a non-GAAP basis. A slight decrease from our previous guidance of $183 to $188 million.

Speaker Change: CapEx is projected to be approximately $13 million for fiscal 2024, a decrease of $2 million from prior guidance.

Adam Laponis: We project ending cash of more than $255 million at the end of fiscal 2024. For the fourth quarter, we expect overall revenue of approximately $82-83 million, an increase from previous guidance of $77-89 million. Gross margin for the fourth quarter was approximately 44 percent, with a high end of the range of previous guidance of 43 to 44 percent, and an adjusted EBITDA loss of $20 million. And we expect gross margin for the fourth quarter of fiscal 2025 to be 50 percent.

Speaker Change: We project ending cash of more than $255 million at the end of fiscal 2024.

Speaker Change: For the fourth quarter, we expect overall revenue of approximately $82 to $83 million, an increase from previous guidance of $77 to $80 million.

Speaker Change: Gross margin for the fourth quarter of approximately 44% at the high end of the range of previous guidance of 43 to 44%.

Speaker Change: Adjusted EBITDA loss of $20 million.

Speaker Change: And we expect gross margin for the fourth quarter of fiscal 2025 to be 50%.

Adam Laponis: We've been working on capacity planning, and we believe that between the manufacturing facilities we have today, the revenue capacity of these facilities can go significantly above the previous estimate of $500 million in revenue. With sustaining levels of capital investment, we believe the capacity for our sites in Oregon and California can deliver over $700 million in revenue per year in the future. This is a very exciting time to be a part of the growth of the company. We will continue to march toward a just and even break even while serving our customers every single day. With that, I'll turn the call back to Emily.

Speaker Change: We've been working on capacity planning and we believe that between the manufacturing facilities we have today, the revenue capacity of these facilities can go significantly above the previous estimate of $500 million in revenue.

Speaker Change: With sustaining levels of capital investment, we believe the capacity for our sites in Oregon and California can deliver over $700 million of revenue per year in the future.

Speaker Change: This is a very exciting time to be a part of the growth of the company. We will continue to march toward a just and even break-even while serving our customers every single day.

Emily Leproust: Thank you, Adam. As we are now in the final quarter of our fiscal year, the momentum continues to grow. We are often asked by investors why our thin bioenergy as a group continues to outperform when others in the space show little to no growth. It begins with our unique platform for writing DNA on a silicon chip. Our team leverages this platform to generate innovative products that meet customer needs. Our platform and products pair very well with our customer prowess, bringing pricing and quality along with the expanding portfolio of products and services.

Speaker Change: With that, I'll turn the call back to Emily.

Emily Leproust: Thank you, Adam. As we are now in the final quarter of our fiscal year, the momentum continues to grow. We are often asked by investors why our thin bioenergy as frog groups continue to outperform when others in the space show little to no growth.

Speaker Change: It begins with our unique platform for writing DNA on the silicon chip. Our team leverages this platform to generate innovative products that meet customer needs. Our platform and products pair very well with our customer prowess, bringing pricing and quality along with the expanding portfolio of products and services.

Emily Leproust: Well these are key to our success. It's truly our twisters who make our vision to improve health and sustainability into a reality. Our strong financial performance quarter after quarter coupled with our expanding portfolio of products and services positions us as well for sustained growth and value creation. Looking ahead, we're excited about the vast potential of our proprietary technology and the transformative impact it is already having across multiple industries. We will continue to drive towards a just-in-time breakeven, fostering profitable growth paths to capitalize on the immense opportunities presented by our proprietary silicon-based synthesis capabilities. With that, let's open up the call to questions.

Speaker Change: Well, these are key to our success. It's truly our twisters who turn our vision to improve health and sustainability into a reality.

Speaker Change: Our strong financial performance quarter after quarter, coupled with our expanding portfolio of products and services positions, is well for sustained growth and value creation.

Speaker Change: Looking ahead, we are excited about the vast potential of our proprietary technology and the transformative impact it is already having across multiple industries. We will continue to drive towards the GCD-Beta breakeven, fostering profitable growth paths to capitalize on the immense opportunities presented by our proprietary silicon-based synthesis capability.

Operator: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1 1 again. Please stand by while we compile the canary roster. And our first question comes from the line of Matthew Sykes with Goldman Sachs. Your line is open.

Speaker Change: With that, let's open up the call for questions. Operator?

Speaker Change: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by while we compile the canary roster.

Speaker Change: And our first question coming from the line of Matthew Sykes with Goldman Sachs, your line is open.

Yvonne: Hi, this is Yvonne for Matt. Congratulations on the strong quarter. For my first question, what are you seeing in the NGS market overall? We've seen from peers that they've noted weakness in the market, but given your strength, are you taking share? And then what has feedback from customers been?

Yvonne: Hi, this is Yvonne for Matt. Congrats on the strong quarter. For my first question, what are you seeing in NGS market overall? We've seen from peers they've noted weakness in the market, but given your strength, are you taking share? And then what has feedback from customers been?

Emily Leproust: Thank you, it's a great question. Like you noted, it's a great quarter; we are definitely taking care of it. I think we've been very focused in our technology development to focus on the first application, first, and then moving to others. And a big bet that we made around the time of the IPO was our focus on methylation and liquid biopsy. And right now, we're seeing the fruit of that investment. We're, in some ways, a little bit overexposed, in a good way, to liquid biopsy.

Speaker Change: Thank you, it's a great question. Like you noted, it's a great quarter, we are definitely taking care. I think we've been very focused in our technology development to focus on the

Speaker Change: First application, first, and then moving to others. And a big bet that we did around the time of the IPO, actually, was our focus on methylation and liquid biopsy. And right now, we're seeing the fruit of that investment. We're, in some ways, a little bit over.

Emily Leproust: And as we have a very dominant technology and the market is growing, we're benefiting from that. And we're very excited that we're trying to do the same thing in other markets. We launched an RNA-seq portfolio that is slow ramping. We mentioned our MRD focus. As I mentioned in my remarks, we don't expect MRD to be a big revenue contributor this year.

Speaker Change: ummm expose in a good way to liquid biopsies as a very dominating technology and the market is growing we're benefiting from that

Speaker Change: And we're very excited that we're trying to do the same thing in other markets. We've launched a RNA-Seq.

Speaker Change: Portfolio. That is a slow ramping. We mentioned our MRD focus.

Speaker Change: As I mentioned in my remarks,

Speaker Change: We don't expect MRD to be a big...

Emily Leproust: However, similarly to liquid biopsy, as we gain customers now, we gain pilots, and as they ramp, we see it as a future opportunity for growth. So, very excited about NGS. I think, again, it's a combination of the commercial strategy we've chosen, as well as a very strong technology that really brings value to our customers, and we're being rewarded for it.

Speaker Change: a Revenue Contributor this year, however, similarly to liquid biopsy.

Speaker Change: As we...

Speaker Change: Again, just to know now, again, pilots and as they ramp.

Speaker Change: we see it as a future

Speaker Change: opportunities for growth. So very excited about NGS.

Speaker Change: I think, again, it's a combination of the commercial strategy we've chosen as well as a very strong technology that really

Emily Leproust: Great. And then given your strong growth and Express Genes, have you been able to unlock the gene makers market at this point? Or is it still mostly growth stemming from market share gains among players that were already outsourcing? And yes, right now, it's still

Speaker Change: brings value to our customers and we're being rewarded for it.

Speaker Change: Great. And then, given your strong growth and expressions, have you been able to unlock the gene makers market at this point, or is it still mostly growth stemming from market share gains among players that were already outsourcing?

Emily Leproust: Yes, right now, it's still mostly buyers that we're converting. However, we're seeing the beginning of conversion. The product does what it says on the tube.

Speaker Change: Yes, right now it's still mostly bios that we're converting. However, we're seeing the beginning of conversion.

Speaker Change: The product does what it says on the tube. There's excitement with it.

Speaker Change: just to move.

Speaker Change: and we are seeing...

Emily Leproust: There's excitement with customers. We are seeing consecutive growth. And so, at the same time, we said that it would take some time. It's a very long tail. But we're very, very pleased with the performance of ExpressGene and the Express infrastructure, which enables us to launch new products.

Speaker Change: [inaudible]

Speaker Change: And so, at the same time, we said that it will take some time, it's a very long tail, but we are very, very pleased with the performance of XpressGene and the Xpress infrastructure, which enables us to launch new products at the same time.

Speaker Change: Great, thank you.

Operator: And our next question coming from the line of... Steven Mah with TDCar when your line is open.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Steven Mah with TDK, when your line is open.

Steven Mah: Thanks, congrats on the quarter, and thanks for the question. So, a couple questions on ExpressGenes. So, now that you have another quarter of market data, can you give us a sense of customer acceptance of the dynamic pricing model and how close you are to optimizing the pricing algorithm to maximize margins? And then, second part of the question, can you give us a sense of the push by larger accounts wanting to trade this, you know, trade a fixed price, sort of in a subscription-like manner versus this dynamic pricing?

unknown: Any of you want to take that question?

Speaker Change: Thanks, congrats on the quarter, and thanks for the questions.

Stephen Ma: So a couple questions on ExpressGenes. So now that you have another quarter of market data, can you give us a sense for

Speaker Change: The customer acceptance of the dynamic pricing model and how close you are to optimizing.

Speaker Change: The Pricing Algorithm to Maximize Margins. And then, second part of the question, can you give us a sense of the push by larger accounts wanting to trade this, you know, trade a fixed pricing sort of in a subscription-like manner versus this dynamic pricing?

unknown: Yes, absolutely. Steve, thanks for the question. The team continues to execute well, you know; the product is doing exactly what it says on the label, which is giving us tremendous confidence taking that forward. And the value proposition is responding across all segments. And so we continue to see good adoption.

Speaker Change: Are you going to take that question?

Speaker Change: Yes, absolutely. Steve, thanks for the question. The team continues to execute well. The product is doing exactly what it says on the label, which is giving us tremendous confidence taking that forward.

Speaker Change: and the value proposition is resonating across all segments and so we continue to see good adoption that's captured by obviously sequential growth in the organization and we do continue to see that the trade of

unknown: That's captured by, obviously, sequential growth in the organization, and we do continue to see the trade of volume for a committed price. So that does continue. It's still very early since launching the product. And this is a product that, you know, is a platform for us, and it's going to be quarter by quarter execution. And again, we continue to see it with sequential growth, and that will continue to be executed into the operation. So customers continue to adopt more shots on goal, and at the price point we have with the scale that we have, it is very, very compelling.

Speaker Change: volume for committed price. So that does continue. It's still very early since launching the product.

Speaker Change: and this is a product that you know is a platform for us and it's going to be quarter-by-quarter execution and again we continue to see it with sequential growth and that will continue as we execute into the opportunity.

Speaker Change: So, customers continue to adopt, you know, more shots on goal at the price point we have with the scale that we have is very, very compelling.

Operator: Thank you. And our next question, coming from the line-up, Madeline Larew, with William Blair, your line is open.

Speaker Change: Thank you. And our next question coming from the line of Madeline with William Blair, your line is open.

Madeline Larew: Hi, Good morning. You know, obviously, a couple quarters into Express Gene, but Emily, you alluded to some newer Express products that were launched, including, most recently, Express Antibodies on show lines. I'm just saying it would be early days there, but in terms of what you're hearing from customers on an Express-type offering for other, obviously, more complex products, I would just be kind of curious to get any early take and any metrics you're tracking around the success of those launches.

Madeline: Good morning.

Speaker Change: You know, obviously, a couple quarters in to express genes, but Emily, you alluded to some newer express products that was launched, including most recently express antibodies on show lines.

Speaker Change: I'm just saying it would be early days there, but in terms of what you're hearing from customers on an express-type offering for other, obviously more complex products, we'd just be kind of curious to get any, you know, your early take and any metrics you're tracking around success of those launches.

Emily Leproust: Yeah, no, thank you for the question. It has always been an infrastructure play. We make clonal genes now in five days, and we always ask our customers, hey, what do you do with the genes? Some customers use them as CRISPR tools, some they use them to express IgG, some they use them to make mRNA for personalized therapy. And we're always looking for ways to add value. And we've had an IgG product line for a while, which was well-received but, at the same time, relatively slow compared to what customers could do themselves.

Speaker Change: Yeah, no, thank you for the question.

Speaker Change: Source the express...

Speaker Change: has always been an infrastructure play.

Speaker Change: We make now clonal genes in five days.

Speaker Change: And we always ask the question to our customers, hey, what do you do with the genes? And...

Speaker Change: Some customers use it as a CRISPR tool, some they use it to express IDGs, some they use it...

Speaker Change: to make mRNA for personalized therapy, and we're always looking for ways to add value. And we've had an ITG product line for a while, which...

Speaker Change: was well-received, and at the same time,

Emily Leproust: And so when we launched the XpressGene, we always knew that we will shortly thereafter launch an XpressIGG because that is what our customers will do and we heard from many of them that they rather have someone else do that work than themselves. And so it's a great opportunity for the customers to free up some of their resources to do other things like the testing of IGG and it's a great thing for us to leverage our infrastructure, um to to do more get more wallet share and be able to to grow our revenue and in addition to launching the Express IDG we also launched a show uh expression uh up until now all of our expression was done in hex slides uh hex cells sorry and uh a lot of our customers were telling us that show will be uh uh well received and so we we keep increasing what we call the flavor of DNAs or protein that that that we that we sell and that really it's one of the the key uh things that are that is enabling us to just reach into uh more applications that are happening in the life science and be able to enable the customers to offload to us more of their work so that they can focus on on on the test.

Speaker Change: was relatively slow compared to what customers could do.

Speaker Change: When we launched the X-Press gene, we always knew that we would shortly thereafter launch an X-Press IgG, because that is what our customers will do, and we heard from many of them that they would rather have someone else.

Operator: Thank you. Now, next question, coming from the line of Luke Sergott with Barclays Hill and the Sulfans.

Speaker Change: It's a great opportunity for the customers to free up some of their resources to do other things like the testing of IgG and it's a great thing for us to leverage our infrastructure.

Speaker Change: ...to market more wallet share and be able to grow our revenues. And in addition to launching the Express IDG, we also launched a CHO expression. Up until now, all of our expression was done in HEC.

Speaker Change: Slides.

Speaker Change: A lot of our customers were telling us that the show would be well received and so we keep increasing what we call the flavor of DNA or protein that we sell.

Speaker Change: And that really is one of the key things that is enabling us.

Speaker Change: to just reach into more applications that are happening in the life science and be able to enable the customers to offload to us more of their work so that they can focus on the testing.

Luke Sergott: Thank you. Now next question, coming from the lineup, Luke Sergott with Barclays, your line is open.

Luke Sergott: Great, thanks. I just wanted to touch on the blanket orders and how those kind of progressed during the quarter. If you guys can quantify... you know, how many you have? And then it's kind of a more long-term or medium-term question: as you progress on these blanket orders, can you give us an idea of what the conversion rate from your legacy order book is? And the fear is that you could have the conversion of the absolute dollar come in faster than the overall order book grows, and this could lead to an air pocket. So just kind of walk us through the different dynamics that you guys are seeing on the blanket.

Luke Sergott: Great, thanks. I just wanted to touch on the blanket orders and how those kind of progress in the quarter, if you guys can quantify.

Luke Sergott: You know how many you had and then it's kind of a more long-term or medium-term question is as you progress on these blanket orders can you give us an idea of what the conversion rate from your legacy order book is and the fear is that

Speaker Change: You could have the conversion of the absolute dollar come in faster than the overall order book growing, and this could lead to an air pocket. So just kind of walk us through the different dynamics that you guys are seeing on the blankets.

Adam Laponis: Hey Luke, this is Adam. Thank you for the question. Happy to talk through it. So just kind of taking a step back, what occurred earlier this year. I mean, obviously, we're extremely excited. We've always had blanket purchase orders in the business. We're extremely excited to see that continue to evolve.

Speaker Change: Hey Luke, this is Adam. Thank you for the question, happy to talk through it. So just kind of taking a step back, what occurred earlier this year, I mean, obviously we're extremely excited. We've always had blanket purchase orders in the business, and we're extremely excited to see that continue to evolve.

Adam Laponis: In Q2 fiscal, for us, I call it the January effect, we did see that step up in blanket purchase orders. I've articulated it as roughly an extra $10 million in blanket purchase orders versus the normal run rate of the business. What we saw here at fiscal Q3 was a much more return to normal in terms of it being a normal historical trend of blanket purchase orders. So a step back from what we saw in that January effect, which, to be fair, I expect the January effect to continue for years forward because it really just shows that customers are committing to Twist long term. In terms of conversion disorders, it's not a matter so much of if.

Speaker Change: In Q2 fiscal for us, or I call it the January effect, we did see that step up in blanket purchase orders. I've articulated it roughly an extra $10 million in blanket purchase orders versus the normal run rate of the business.

Speaker Change: What we saw here in fiscal Q3 was a much more return to normal in terms of it being a normal historical trend of blanket purchase orders, so a step back.

Speaker Change: From what we saw in that January effect, which to be fair, I expect the January effect to continue in years forward because it really just shows that customers are committing to twist long term.

Speaker Change: In terms of comparison of disorders.

Speaker Change: It's not a matter so much of if, we're seeing the conversion rates now are extremely high numbers. It's a matter of timing, and so one of the things that we talk about, you know, our reps aren't incentivized for orders, they're incentivized mainly for revenue.

Adam Laponis: We're seeing extremely high conversion rates now. It's a matter of timing. And so one of the things that we talk about, you know, our reps aren't incentivized for orders. They're incentivized mainly for revenue. So what we see is this is really a lead generation capability and a customer support opportunity. What we really want to do is get the first blanket purchase order and complete it, then go to the next one.

Speaker Change: So what we see is this is really a lead generation capability and a customer support.

Adam Laponis: It's really that more of a signal of a long-term commitment, so we don't see any risk of a revenue air pocket. We've seen sequential growth every quarter in 2024, and we expect that to continue in perpetuity.

Speaker Change: opportunity. What we really want to do is get the first blanket purchase order and complete it and go to the next one. It's really that more of a signal of a long-term commitment. So we don't see any risk of a revenue air pocket. We've seen the sequential growth every quarter in 2024, and we expect that to continue in perpetuity here.

Operator: Thank you. And our next question comes from the line of Vijay Kumar with Evercore SI. Your line is open.

Speaker Change: No, but thanks for the question.

Speaker Change: Thank you. And our next question coming from the line of Vijay Kumar with Evercore SI. Your line is open.

Vijay Kumar: Hey guys, congratulations on the nice print here. Next, one on Q4 and sort of jumping off into Fiscal 25 kind of questions. Adam, you mentioned a blanket order for normal trend levels in the third quarter. Does that imply we need to be a little bit more prudent in Q4 and sort of relate to that? You know, streets modeling about 20% family growth for Fiscal 25. Your comps get harder. Some of your peers have spoken about macro being a little bit tougher and markets being below trend. Any preliminary thoughts on whether the street needs to be a little bit more prudent about the 20% growth for Fiscal 25? Thank you.

Vijay Kumar: Hey guys, congratulations on the nice print here.

Vijay Kumar: Just one on the Q4 and sort of jumping off into FISPA 25 kind of questions.

Vijay Kumar: Adam, you mentioned a blanket order for normal CRIN levels in...

Speaker Change: A third quarter. Does that imply we need to be a little bit more prudent on Q4? And sort of relate to that, you know, streets modeling about 20% family growth for fiscal 25, your comps get harder, some of your peers have, you know,

Speaker Change: spoken about macro being a little bit tougher and markets being below trend. Any preliminary thoughts on whether the street needs to be a little bit more prudent about the 20% growth or fiscal 25? Thank you.

Adam Laponis: Vijay, thanks for the question. And no, it's definitely something we're talking a lot about right now. Internally, we're building our plans for 2025, but let's talk about 2024. I know we just gave the print on the full year guidance and the Q4 guidance. We have a step up across the range in terms of our guidance for the quarter. We're expecting sequential growth across the business, Q3 to Q4. So I think the strength continues and the momentum continues as we're, you know, ending out our fiscal year. I'm not going to give a lot of color on 25.

Speaker Change: Vijay, thanks for the question, and no, it's definitely something we're talking a lot about right now internally as we're building our plans for 2025. So let's talk about 2024. I know we just gave the print on the full year guidance and the Q4 guidance. We have a step up across the range in terms of our guides to the quarter. We're expecting sequential growth across the business.

Speaker Change: Q3 to Q4. So I think the strength continues and the momentum continues as we're, you know, ending out our fiscal year.

Adam Laponis: We're still working through the plans. But I can say, you know, when we are feeling very confident about the business, we expect to see sequential growth continue. And really, what it comes down to is Emily talking to it's the dynamic of we expect to continue to take share. And you know, when we see, you know, low to mid single-digit category growth in certain areas, and we're significantly exceeding that, we don't expect a trend decrease in terms of our sequential growth. We expect that to continue. Obviously, we'll give more color as we get into fiscal 25. Sit down in November. Thanks for the question.

Speaker Change: I'm not going to give a lot of color on 25, we're still working through the plans, but I can say when we are feeling very confident about the business, we expect to see sequential growth continue in the business, and really what it comes down to is, as Emily was talking to, it's the

Emily Leproust: The dynamic of, we expect to continue to take share and, you know, when we see, you know, low to mid single digit category growth in certain areas, and we're significantly exceeding that, we don't expect

Emily Leproust: A trend decrease in terms of our sequential growth. We expect that to continue. Obviously, we'll get more color as we get into fiscal 25 and sit down in November . Thanks for the question.

Operator: Thank you. And our next question comes from the line of Sungjin Nam with Scotiabank. Your line is open.

Emily Leproust: Thank you. And our next question, coming from the line up, Sungjin Nam with Scotia Bank, your line is open.

Sungjin Nam: Hi, thanks for taking the question and congrats on the quarter. Just following up on an earlier question, for your next-in-sequence NGS business, obviously doing well there, but given that there's been kind of capital spending constraints across the NGS players, you know, delays in some large-scale projects, etc., I'm just kind of curious if you're starting to see any improvement with your NGS business. I'm not sure if this gets into the funnel at all.

Sungjin Nam: Hi, thanks for taking the question and congrats on the quarter.

Sungjin Nam: Just following up on an earlier question, for your next-in-sequence NGS business, obviously doing well there, but given that there's been kind of capital spending constraints across the

Speaker Change: the NGS players.

Speaker Change: you know, delays in some large-scale projects, etc. I'm just kind of curious...

Sungjin Nam: And then just, you know, quick follow-up after that, you know, in terms of your liquid biopsy-based business, if you're continuing to see a lot of smaller early-stage players on the market, or, you know, do you feel the market has kind of stabilized to kind of the large players?

Speaker Change: If you're starting to see any images posted, go to your CMS business. I'm not here to scare you or anything.

Speaker Change: at the funnel at all. And then just, you know, quick follow up after that, you know, with in terms of your, for the liquid biopsy based business, if you're continuing to see a lot of smaller early stage players.

Patrick Finn: Thanks for the questions; Paddy here. I think what we're seeing is really the power of our platform in the market segment. I think when budgets are tight, twist value resonates even stronger than anybody else out there, and it really is about maximizing the use of your sequencing platforms. I think that's what we truly enable. And so, therefore, I think that's allowed us to execute well in the opportunity. I think the second part, just continuing to talk about scale and the opportunity to work with new customers, I think it's a feature that's often overlooked in our platform. It scales in many, many directions.

Speaker Change: Thanks for the questions, Paddy here. I think what we're seeing is really the power of our platform in the market segment.

Speaker Change: I think when budgets are tough, twist value resonates even stronger than anybody else out there, and it really is about maximizing the use of your sequencing platforms. I think that's what we truly enable, and so therefore, I think that's allowed us to execute well into the opportunity.

Patrick Finn: For the R&D scientists, they can quickly do work to develop new products, new panels, and then we'll be there with the customers as the new panel or new product scales up towards them, that they're manufacturing or their future goal. So we like our position, and yes, although the market's tough, there's always opportunity to execute. And when you partner that with excellence in commercial execution for every touch point for the customer, then we continue to be optimistic and confident going forward. Coming from the line-up, Subbu Nampi with Guggenheim Securities, you'll understand that, Hey guys, thank you for joining us.

Speaker Change: I think in the second part, just continuing to talk about scale and the opportunity to work with new customers, I think it's a feature that's often overlooked in our platform. It scales in many, many directions. For the R&D scientists, they can quickly do work to develop new product, new panels.

Speaker Change: and then we'll be there with the customers as the new panel or new product scales up towards them and their manufacturing or their future goals.

Speaker Change: So we like our position, and yes, although the market's tough, there's always opportunity to execute into. And when you partner that with excellence in commercial execution for every touchpoint for the customer, then we continue to be optimistic and confident going forward.

Operator: Thank you, and our next question, coming from the lineup, Subbu Nampi with Guggenheim Securities. Your line is open.

Yolanda Selfman: Thank you. Our next question coming from the line of Subbu Nampi with Guggenheim Securities. You're on a cell phone.

Subbu Nampi: Hey guys, thank you for taking my question.

Subbu Nampi: Realizing book-to-bill is an intra-quarter metric. If I have this right, symbiobook-to-bill decreased from 1.5 to 1.0. Is this just seasonality, something else, or the large order you mentioned?

Speaker Change: is it related to China softness and which segment is China revenue most concentrated in? Thank you.

Adam Laponis: Thank you for the question. I'm excited to take it. In terms of book-to-bill, you know, that seasonality of orders that we talked about from the, I'll call it, the January effect, is real, so you're going to see some noise coming there, particularly on the Symbio side of the business, because that's where most of that step-up in blanket purchase orders occurred. And we'd expect that seasonality to continue every year moving forward.

Speaker Change: Thank you for the question, I'm excited to take it.

Speaker Change: In terms of book-to-bill, you know, that seasonality of orders that we talked about from the, I'll call it the January effect is real, so you're going to see some noise coming there, particularly on the SymBio side of the business, because that's where most of that step-up in blanket purchase orders occurred, so we'd expect that seasonality to continue every year moving forward.

Speaker Change: In terms of the China business, and you'll see this in our...

Speaker Change: Q from last quarter, and you'll see it again when we put the printout this quarter. It's less than $2 million of revenue a quarter for us in China. It's relatively stable. Obviously, there's a lot of folks dealing with headwinds, but when it's low to mid-single digits of percent of the business, it's not something we're terribly concerned about. We do see an opportunity long-term, but we aren't seeing significant effects of the headwinds. I will say most of our business in China, it is spread across both sides of Simba Island and NGS, but there's definitely propensity towards the NGS side.

Operator: Thank you. And our next question, coming from the line-up, Puneet Souda with Lyrinc Partners. Your line is open.

Speaker Change: But thanks for the question.

Speaker Change: Thank you.

Speaker Change: And our next question, coming from the line up, Puneet Souda with Lyrinc partner, Ceylon Sopin.

Puneet Souda: Yeah, hi, Emily and team. Thanks for taking my questions. You know, I appreciate the comments that you have on the overall growth with express genes that's in SynBio. You're building more products on top of that and your guide. But, you know, when we look at your guide, it does imply a step down in the fourth quarter for SynBio. You talked about blanket purchase orders last quarter for SynBio, and there was, you know, a significant pickup in those orders last quarter.

Renee Filda: Yeah, hi, Emily and team, thanks for taking my questions.

Puneet Souda: I appreciate the comments that you have on the overall growth with express genes that's in SynBio. You're building more products on top of that and your guide. But when we look at your guide, it does imply a step down in the fourth quarter for SynBio.

Speaker Change: You talked about blanket purchase orders last quarter.

Speaker Change: Instant Bio, and there was, you know, a significant pickup in those orders last quarter, so, I mean, I hear some of the comments are on that, that it is more, going to be more normalized, so just sort of trying to understand, given that backdrop,

Puneet Souda: So, I mean, I hear some of the comments on that, that it is going to be more normalized. So just sort of trying to understand, given that backdrop, why are these blanket purchase orders or the order momentum stepping down so quickly in the quarter? Is there a different pattern you're seeing from the customers or competitive response in the market?

Speaker Change: Why are these blanket purchase orders or the order momentum stepping down so quickly in the quarter? Is there a different pattern you're seeing from the customers or competitive response in the market?

Adam Laponis: Puneet, this is Adam. I'm happy to take the question here, and I think we mentioned it on the pre-record, but really, the dynamic we're seeing this quarter, particularly as we go into Q4, is one particular contracted customer had a pretty significant set of orders and volume in Q2 and Q3. That customer is taking a step down in Q4. It's factored into my guide, and for me, I just don't want to get over my skis in any particular quarter, so we're factoring that in.

Speaker Change: You know, this is Adam. I'm happy to take the question here. And I think we mentioned on the pre-record, but...

Speaker Change: Really the dynamic we're seeing in this quarter, particularly as we go into Q4.

Speaker Change: is one particular contracted customer.

Speaker Change: I had a pretty significant set of orders, volume in Q2 and Q3, that customer is taking a step down in Q4, it's factored into my guide, and for me, I just don't want to get over my skis on any particular quarter, so we're factoring that in. We're seeing sequential growth across the business.

Adam Laponis: We're seeing sequential growth across the business from customers. We're seeing a step up in the total number of customers ordering each quarter. We're also seeing a step up quarter on quarter in the SymBio business in terms of revenue excluding that one customer. So we're feeling pretty good about it, but obviously, given the nature of our base, there will be customers that have challenges, and we're here to support them, but it won't affect the overall growth.

Speaker Change: From customers, we're seeing a step up in the total number of customers ordering each quarter. We're also seeing a step up quarter-on-quarter in terms of in-the-sim biobusiness.

Speaker Change: in terms of the revenue excluding for that one customer. So we're feeling pretty good about it, but obviously given the nature of our base, there will be customers that have challenges and we're here to support them, but it's not gonna affect the overall growth.

Operator: And our next question comes from the line of Tom Peterson with Bear Deal on a cell phone. Everyone.

Speaker Change: Thank you. And our next question coming from the line of Tom Peterson with Bear Deal on a cell phone.

Tom Peterson: Given the guide for the adjusted EBITDA loss of about $20 million here in the fiscal fourth quarter, can you just give us some sense to think about how we should be thinking about the adjusted EBITDA loss in fiscal 2025? You know, what do you expect quarterly improvements off that $20 million figure? And just help us think about pacing on the adjusted EBITDA trajectory.

Tom Peterson: Everyone, congrats on the solid print, and thanks for taking my questions. Maybe just one from me.

Tom Poulsen: Hey everyone, congrats on solid print and thanks for taking my questions. Maybe just one from me. Given the guide for the adjusted EBITDA loss of about $20 million here in the fiscal fourth quarter,

Speaker Change: Can you just give us some sense to think about how we should be thinking of adjusted EBITDA loss in fiscal 2025? What do you expect quarterly improvements off that $20 million figure? And just help us think about pacing on the adjusted EBITDA trajectory.

Adam Laponis: This is Adam. Thanks for the question. And yeah, we're very laser focused on our North Star, the path to profitability. And it's been about six months in the chair for me.

Speaker Change: This is Adam. Thanks for the question. We're very laser focused on our North Star, the path to profitability. It's been for me about six months in the chair now. It's really important as an organization that we're focused on our three key priorities, drive and growth, drive and gross margin, and ensuring that we have that path to profitability without needing to ever go back to the market for a future equity raise. That's been kind of the standing mantra and the charge of the organization. We've been looking at the $20 million adjusted EBITDA loss as an important marker in Q4. We don't see that as a stopping point, but really a jumping off point for continued sequential improvements.

Adam Laponis: Now, it's really important as an organization that we're focused on our three key priorities, driving growth, driving gross margin, and ensuring that we have that path to profitability without needing to ever go back to the market for a future equity raise. That's been kind of the company mantra and the charge of the organization. We've been looking at the $20 million adjusted EBITDA loss as an important marker in Q4.

Adam Laponis: We don't see that as a stopping point but really a jumping off point for continued sequential improvements as we move forward. Again, as I mentioned earlier in the call, we'll spend more time talking about the 2025 guide. But I expect that path to profit focus and that the organizational energy to continue to just be laser focused on that moving forward. So more to come as we get together at the end of the year. Thanks.

Speaker Change: As we move forward, again, I mentioned earlier in the call, we'll spend more time talking about the 2025 guide, but I expect that path to profit focus and that the organizational energy to continue to just be laser focused on that moving forward. So more to come as we get together at the end of the year.

Operator: Thank you. And our next question, coming from the line of... Tom Deborski from New Front Research. ELN is open.

Speaker Change: Thanks.

Speaker Change: Thank you. And our next question coming from the line up.

Tom Deborski: Hi, thanks for taking the question. I'm just going to combine two questions here. So the first one is on biosecure.

Speaker Change: Hi, thanks for taking the question. I'm just going to combine two questions here. So, the first one is,

Speaker Change: Biosphere, and you know we've heard from

Speaker Change: We've heard from academic and pharma customers that there is concern about moving proprietary products for synthesis into China. So whether that's a tailwind for you being based in the United States? And the second question is just on CapEx of $13 billion. Is this approximately the level of maintenance CapEx that you would expect going forward? That's a great thing. Thank you. I'll take the first question. I'll let Adam answer.

Tom Deborski: And, you know, we've heard from both academic and pharma customers that, "Can you hear me? I'm sorry. We can hear you."

Tom Deborski: Okay, sorry. We've heard from academic and pharma customers that, you know, there is concern about moving proprietary products for synthesis into China. And so whether that's a tailwind for you being based in the United States. And the second question is just on CapEx of $13 million. And just, you know, is this approximately the level of maintenance CapEx that you would expect going forward?

Emily Leproust: I'll take the first question. I'll let Adam answer the second question.

Speaker Change: I'll answer the cat expression. On biosecure, we've expressed in the past that, yes, it's probably a geopolitical headwind for our competitors that are not building DNA in the U.S. At the same time, it is hard to predict an act of Congress. So our view is that we will be in the midst of products on their own for scale, quality, price, added features, and so on, the entire user experience.

Adam Laponis: On biosecure, we've expressed in the past that yes, it's probably a geopolitical headwind for our competitors that are not building DNA in the U.S. The entire user experience. So our view is that we will take market share, and we will win. And it is possible that biosecure headwinds for our competitors will accelerate the timeline. We are ready for it, and at the same time, we are very strongly focused on execution and providing the best user experience to our customers. Adam, do you want to take the Capex question?

Speaker Change: The time will come when we will take market share and win, and it is possible that secure headwinds for competitors will accelerate the timeline, we are ready for it.

Speaker Change: and at the same time we are very strongly focused on execution and providing the best user experience to our customers.

Adam Laponis: Absolutely not. No.

Adam Laponis: It's, yeah, we are seeing a pretty light year in CapEx this year so far, where I think we're running just north of $3 million here to date. I do see a potential step up beyond the 13 in 2025 and beyond, but that the modest amount of, I think we got at the beginning of this year closer to 20, you know, so those kind of numbers wouldn't surprise me. That being said, we currently have about $30 to $35 million in depreciation every year. I don't expect that to increase; I expect that to be roughly holding flat or stepping down as we move forward over the long haul.

Adam Laponis: Adam, you want to take the CapEx question? Absolutely, no. And Tom, thanks for the question. Yeah, we're seeing a pretty light year in CapEx this year so far. I think we're running just north of $3 million here to date. I do see a potential step up beyond 13 in 2025 and beyond. But the modest amount of... I think we got at the beginning of this year closer to 20.

Speaker Change: Those kind of numbers wouldn't surprise me. That being said, we currently have about $30 to $35 million a year in depreciation today. I don't expect that to increase, I expect that to be roughly holding flat or stepping down as we move forward over the long haul.

Emily Leproust: Thank you, Adam. And to add to my previous answer, just a quick clarification that Biosecure is actually not focused on DNA synthesis. It's focused on genetic analysis and bioprocessing. There was a letter from the Senate Committee on China asking the FBI to investigate some of our Chinese competitors, so there are some geopolitical headwinds. But to be clear, DNA synthesis itself is not part of Biosecure.

Speaker Change: Thank you, Adam. And to add to my previous answer, just a quick clarification that Biosecure is actually not focused on DNA synthesis. It's focused on genetic analysis.

Speaker Change: and Bioprocessing.

Speaker Change: There was a letter from the Senate Committee on Journalism asking the FBI to investigate

Speaker Change: some of our Chinese competitors. So there is some geopolitical headwinds, but to be clear, DNA synthesis itself is not part of the ACQ at this point.

Emily Leproust: Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Dr. Emily Leproust for any closing remarks.

Speaker Change: Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Dr. Emily Leproust for any closing remarks.

Emily Leproust: 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 product portfolio, and, of course, our exceptional employees positively move the needle for our customers across multiple industries. Thank you.

Speaker Change: 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 defining product portfolio, and of course, our exceptional employees positively move the needle for our customers across multiple industries.

Operator: Ladies and gentlemen, that's it for our conference for today. Thank you for your participation. You may now disconnect.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, that does it for our conference for today. Thank you for your participation. You may now disconnect.