Q4 2024 Twist Bioscience Corp Earnings Call
Speaker Change: Welcome to TWIST Biosciences 2024 fourth 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 automated message advising your hand is raised. To withdraw your question please press star 1 1 again.
Speaker Change: Please be advised that today's conference has been recorded. I would now like to turn the conference over to Angela Bitting, SVP of Corporate Affairs.
Angela Bitting: Thank you, Operator. Good morning, everyone. I would like to thank you for joining us for TWIST Biosciences' conference call to review our Fiscal 2024 Fourth Quarter Financial Results and Business Progress.
Angela Bitting: With me on the call today are Dr. Emily Leproust, CEO and co-founder of Twist, Adam Laponis, CFO of Twist, and Dr. Patrick Finn, President and COO of Twist.
Angela Bitting: Today, we will discuss our business progress, financial and operational performance, as well as growth opportunities. We will then open the call for questions. We ask that you limit your questions to only one, and then re-queue 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.
Angela Bitting: Forward-looking statements generally relate to future events or future financial or operating performance.
Angela Bitting: 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. 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 SEC.
Angela Bitting: The forward-looking statements in this presentation are based on the 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.
Angela Bitting: We'll also discuss adjusted EBITDA, a financial measure that does not conform with generally accepted accounting principles.
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 document, which can be found on the investor section of our website. With that, I will now turn the call over to our CEO and co-founder, Emily Leproust.
Emily Leproust: Thank you Angela and good morning everyone. Today our team delivered a record quarter in revenue and margin growth, ending the year with a strong cash balance. We exceeded our guidance in every metric, including total revenue, gross margin, capital expenditure and ending cash balance.
Emily Leproust: We increased revenue for the 7th quarter in a row, reporting $84.7 million. This is an increase of 27% year-over-year and 4% sequentially. For the year, we reported $313 million in revenue, an increase of 28% over fiscal 2023.
Emily Leproust: Gross margin for the quarter came in ahead of our guidance at 45.1%. For the year, gross margin was 42.6% compared to 36.6% for fiscal 2023, demonstrating the leverage of fixed costs with higher volume, as well as our ongoing commitment to continuous improvement and margin expansion initiatives.
Emily Leproust: Strengths of both the quarter and the year came from our express product portfolio and genes as a whole alongside continued growth in our NGS tools portfolio.
Emily Leproust: We are also seeing positive traction by the farmer. Overall, the business remains strong and we are confident that this momentum will carry us into fiscal 2025.
Emily Leproust: Before we dive into the details of the quarter, it's worthwhile reflecting on our journey since our IPO just over six years ago.
Emily Leproust: During this time, we have been on a strong upward trajectory, growing our customer base, expanding our product portfolio, and capturing market share, all by leveraging our proprietary platform to drive sustainable growth.
Emily Leproust: Our differentiated technology to miniaturize chemistry and manufacture of DNA on silicon provides significant advantages for our customers and for TWIST.
Emily Leproust: Our platform allows us to deliver high-quality products at an affordable price and provide significant sustainability advantages over place-based approaches.
Emily Leproust: Importantly, we also have custom synthesis at unmatched scale, which enables a growing menu of products in different iterations, geared for diverse applications. We have harnessed our innovation engine to strategically and judiciously expand our product portfolio.
Emily Leproust: Today, with our base of more than 3,500 customers across multiple industries, hundreds of SKUs serving a wide range of diverse applications, increasing market share in multiple markets, we are operating with incredible execution and financial discipline.
Emily Leproust: We are now in the final push towards an incredibly important milestone, crossing the threshold of adjusted EBITDA break-even.
Emily Leproust: A disruptive platform has fueled all of our growth to date, and we believe there is tremendous potential for further development built on this technology.
Emily Leproust: Once we reach adjusted EBITDA breakeven, we will be laser-focused on becoming cash flow positive, driving revenue while investing in profitable growth through our innovation engine. Our strategy applies this productive R&D with exceptional operational execution and an on-the-ground understanding of our customers' needs.
Emily Leproust: From the frontline teams to the executive leadership, we have the technical expertise and business acumen that will continue to fuel our next phase of growth as a company.
Emily Leproust: Taking a deeper dive into our results, beginning with SynBio, we have an express portfolio that is differentiated in the industry in terms of price, turnaround time, and ability to deliver at scale. One year ago, we launched our express clonal genes, and over the course of the last year we have added gene fragments, DNA preps, IgG proteins, and this is just the beginning.
Emily Leproust: We have already seen this portfolio bring in new customers and new accounts, taking market shares from competitors.
Emily Leproust: And this product line is accretive to our margin. We see our similar product groups gaining traction and market share.
Emily Leproust: Revenue from the Express Offerings grew quarter over quarter, as did net new accounts coming into TWIFT.
Emily Leproust: Turning to NGS, we saw strong performance driven primarily by customers developing and selling assets for myriad applications, from rare disease and cancer diagnostics to liquid vaccine and beyond.
Emily Leproust: These customers include TWIST target enrichment panels and other TWIST tools in their assays. The revenues from this segment is sticky due to the high switching cost associated with revalidating a test with a different provider.
Emily Leproust: Building on our success in delivering custom-targeted panels quickly, we launched our Minimal Residual Disease offering several years ago. Today, we are seeing significant uptake for tumor-informed MRD panels with thousands of markers.
Emily Leproust: Recall that as customers advance their R&D programs, we benefit as each phase of development for these tests requires more DNA. We expect MRD to follow a similar growth trajectory as liquid biopsy, with substantial revenue anticipated in 2026.
Emily Leproust: By maintaining our frequency agnostic approach, meaning our workflow is compatible with whatever platform our customers prefer, we remain a key partner providing NGS workflows for many different applications beyond liquid biopsy and minimal residual disease.
Emily Leproust: Previously, we have highlighted our collaboration with Illumina, PacBio and Expo Naropo, among others, and last month, Elements announced our inclusion in the Trinity Workflow.
Emily Leproust: Looking at growth moving forward, we continue to see customers adding more sequencing tools including our application focused library probe solution, as well as beads, buffer, UDI, UMI, adapter, enzymes, and more.
Emily Leproust: As we prioritize growth sectors moving to Cisco 2025, one area that we believe is under-appreciated by investors is our ability to develop proprietary end lines.
Emily Leproust: Enzymes play a role in so many workflows across Symbio and GSM biopharma, and in fact, entire companies are dedicated to creating enzymes.
Emily Leproust: A twist, using our proprietary writing platform, we can test thousands of enzyme variations in parallel, going through the design-build-test-learn cycle in a matter of weeks.
Emily Leproust: This rapid iteration allows us to tailor hands-on for specific applications, applying our Simpio platform to develop new products for our customers.
Emily Leproust: In the last several quarters, we have identified the proprietary ligase and incorporated it into a CS DNA library prep kit specific to the liquid biopsy and MRD market. The data shows it outperforms all peer offerings and the feedback has been positive with customers seeing a significant improvement in sensitivity.
Emily Leproust: Though this ligase was developed specifically for this application, customers that pursue whole-genome sequencing can leverage this library-prepped kit without enrichment and see improved results in WGS.
Emily Leproust: Importantly, while this new growth vector allows us to tap into new market opportunities, the development of proprietary laggards resulted in
Emily Leproust: In addition, making our own proprietary end lines is an example of insourcing that reduces our supply chain risk and improves our margin.
Emily Leproust: Turning to biopharma services, our revenue increased quarter over quarter, more importantly, orders increased. For biopharma services, we know that orders convert directly to revenue in three to nine months. We believe this marks the turning point for the biopharma solution group with solid potential to continue to build the service revenue.
Emily Leproust: Validating our work to date, Zomat paid us $50 million in cash for half of the future milestones on royalties as of October 2024. Importantly, we retained half of the upside, which has the potential to be significant in the future. We view the cash today as positive in our drive to adjust the debit at breakeven without accessing the equity market.
Speaker Change: Our data storage team continues to advance development of the technology and recently converted to water-based enzymatic chemistry to synthesize DNA on our CMOS-based chip.
Speaker Change: This change, applied to a terabyte-scale product under development, will mean lower costs and a more sustainable solution.
Speaker Change: Now I'd like to turn the call over to Patti for commentary on some key margin initiatives.
Patti: Thanks, Emily. As we close fiscal 2024, it's remarkable what we've achieved as we remain laser focused on driving to profitability.
Speaker Change: For those of you who have had the pleasure of visiting our sites, you've seen the exceptional automation we have in place today.
Speaker Change: It is through a series of well-executed continuous process improvements, along with software implementation, that we're able to expand our portfolio capabilities and, importantly, our efficiency.
Speaker Change: And while the increase in revenue has, and will continue to have, the largest impact on margin, we are working diligently to hold costs relatively flat while growing revenue.
through well-executed continuous process improvements.
Speaker Change: operational efficiency and a culture focused on operational excellence, we see continued margin growth moving forward.
Speaker Change: A few examples of our increasing efficiency include a new software distribution process that more than doubles the distribution capacity with the same headcount.
Speaker Change: Another example implemented over the last year is a new process for our oligo manufacturing that allows us to double the number of oligos to 16 million oligos per day in the same time and footprint.
Speaker Change: The second example not only increases our efficiency and turnaround time, but also allows us to increase our available revenue capacity.
Speaker Change: Third, we made changes to automate our NGS panel production that resulted in significant savings annually from the reduction of plastic tips and reagents.
which also increases capacity.
These are just three examples, and there are many more.
Speaker Change: Additionally, we're focused on optimizing our supply chain given our increasing volume and purchasing power, consolidating vendors while maintaining second sourcing optionality.
Speaker Change: We believe our commitment to automation and continued operational excellence will allow us to march to 50% gross margin exiting Q4 fiscal 2025 and push beyond.
Speaker Change: Our larger team continues to serve as opportunities for cost and process optimization as we introduce new vectors of profitable growth for TWIST.
Speaker Change: With that, I'll turn the call over to Adam to discuss our financials.
Adam Laponis: Thank you, Patty. Revenue for the fourth quarter increased to $84.7 million, growth of 27% year-over-year, and approximately 4% sequentially.
Adam Laponis: For fiscal 2024, revenue increased to $313 million, growth of 28% year-over-year.
Adam Laponis: Q4 orders were $88.2 million, an increase of 24% year-over-year. Orders for the year were $344.2 million, compared to $263.8 million for fiscal 2023.
Adam Laponis: Starting in Q125, we will focus order disclosures of biopharma solutions given the longer lead time for revenue recognition.
Adam Laponis: For the full business, we will focus both on disclosures and guidance for revenue growth, gross margin expansion, and our path to adjusted EBITDA profitability, which we believe are better indicators of performance.
Adam Laponis: Gross margin came in higher than expected at 45.1% for the fourth quarter of fiscal 2024.
Adam Laponis: During the quarter, we ship to approximately 2,402 bill-to-customers, which we define as having a single billable address that may be multiple labs and or sites.
Adam Laponis: We ended the quarter with cash. Cash equivalents in short-term investments of approximately $276.4 million as of September 30, 2024.
Adam Laponis: Subsequently, in October of 2024, we received $15 million in cash from Zoma for the rights to half of our potential milestone in royalty payments related to selected biopharma programs as of that date.
Adam Laponis: This additional cash is not included in our fiscal 2024 year-end financials.
Adam Laponis: NGS revenue for the 4th quarter grew to approximately $45.5 million compared to $37.1 million in the 4th quarter of fiscal 23, an increase of 23% year-over-year.
Adam Laponis: Orders increased to 46 million, and we see continued sequential growth for NGS in the year ahead.
Adam Laponis: For the quarter, revenue from our top 10 NGS customers accounted for approximately 40% of NGS revenue.
Adam Laponis: For Fiscal 2024, NGS revenue increased to $169.1 million, compared to $123.7 million for Fiscal 2023. Exceptional growth of 37%.
Adam Laponis: We serve 620 NGS customers in the quarter, with 143 having adopted our products.
Adam Laponis: For biopharma, revenue was $5.3 million, with orders of $5.9 million. We had 89 active programs as of the end of September 2024, and we started 68 new programs during the quarter.
For fiscal 2024, revenue was $20.3 million.
Adam Laponis: Looking geographically, America's revenue increased to approximately $52.7 million for the fourth quarter, compared to $43.7 million in the same period of fiscal 2023.
Adam Laponis: The MEA revenue rose to $25.5 million for the fourth quarter versus $17.2 million in the same period of fiscal 23. Growth of 48% year-over-year. For the fiscal year, MEA represented 30% of revenue.
Adam Laponis: APAC revenue increased to $6.5 million in the fourth quarter, compared to $6.1 million in the same period of fiscal 23, growth of 8% year-over-year. APAC accounted for 8% of our revenue.
Adam Laponis: China continues to be a relatively small portion of our revenue at approximately 2% of total revenue for fiscal 2024.
Adam Laponis: Moving down the P&L, a gross margin for the fourth quarter increased to 45.1% and for the fiscal year gross margin increased to 42.6%, an improvement of six margin points versus fiscal 2023.
Adam Laponis: Our express portfolio, the margin initiatives, including those Patty covered earlier, and their commitment to holding overhead and labor costs flat while growing revenue resulted in the margin expansion for both the quarter and the year.
Adam Laponis: Looking toward fiscal 2025, we continue to expect, on average, 75-80% of incremental revenue to drop to the gross margin line.
Adam Laponis: Operating expenses, excluding cost of revenues for the fourth quarter, were $74.3 million, compared with $74.6 million in the same period of 2023, highlighting our focus on holding operating expenses relatively flat while continuing to grow revenue and expand gross margin.
Adam Laponis: Operating expenses included approximately six million dollars for data storage in the fourth quarter.
Adam Laponis: Operating expenses, excluding the cost of revenues for fiscal 2024, were $354 million, including the impairment charge of $45 million in fiscal Q3.
compared with $307 million in fiscal 2023.
looking at our progress and our path to profitability.
Adam Laponis: For the fourth quarter of fiscal 24, adjusted EBITDA was a loss of approximately $17 million, an improvement of $9 million versus the fourth quarter of fiscal 23.
Adam Laponis: For fiscal 2024, adjusted EBITDA was a loss of approximately $93.5 million, an improvement of approximately $54 million versus $147.3 million for fiscal 2023.
Adam Laponis: Cash flow from operating activities continues to improve, and we are driving the adjusted EBITDA break even. For the 12 months ended September 30, 2024, net cash used in operating activities was $64.1 million, compared to $142.5 million for the equivalent 12-month period in 2023.
Adam Laponis: Capital expenditures in Fiscal 24 were $5 million, a reduction of $23 million versus $28 million of CapEx in Fiscal 23.
Adam Laponis: We ended the year with cash, cash equivalents, and short-term investments of approximately $276.4 million versus $289.4 million as of June 30th. A reminder that this does not include the $15 million in cash from Zona.
Turning to Guidance.
Adam Laponis: For fiscal 2025, we expect total revenue of $367 million to $377 million, growth of approximately 17% to 20% year-over-year.
Adam Laponis: and biorevenue of $142 to $146 million, growth of approximately 15 to 18 percent year-over-year.
Adam Laponis: We expect NGS revenue of $204-209 million, growth of approximately 20-24% year-over-year.
Adam Laponis: for biopharma revenue of $21-22 million, growth of approximately 3-8% year-over-year.
Adam Laponis: For Q1 Fiscal 2025, we expect total revenue of approximately $87 million, growth of approximately 22% versus Q1 of Fiscal 2024.
Adam Laponis: SinBio revenue of approximately $34 million, growth of approximately 26% year-over-year.
Adam Laponis: NGS revenue of approximately $48 million, growth of 22% year-over-year, and biopharma revenue of approximately $5 million.
Adam Laponis: For the full year of fiscal 2025, we expect gross margin of approximately 48%, with quarterly sequential improvements and Q4 fiscal 2025 gross margin of 50%.
Adam Laponis: We expect adjusted EBITDA loss of approximately $60 to $65 million for fiscal 2025 and improvement of approximately $30 to $35 million versus fiscal 2024.
Adam Laponis: Q1 fiscal 2025 adjusted EBITDA loss of approximately $20 million, with sequential improvements in subsequent quarters.
Adam Laponis: As a reminder, Q1 contains an additional bump in OPEX due to bonus and promotional payouts.
With that, I'll turn the call back to Emily.
Emily Leproust: Thank you, Adam. As we begin Cisco 2025, we stand at the cusp of a new era for TWIST. The past year has been a testament to the power of combining visionary technology, game-changing products, and the relentless drive to enable our customers' success.
Emily Leproust: We have advanced our product portfolio and grown revenue. More importantly, our commitment to providing cutting-edge solutions empowers our customers to tackle some of the world's most pressing challenges.
Emily Leproust: By delivering precision, efficiency, speed, and scalability in our products and services, we have equipped researchers across myriad industries to pioneer breakthroughs that improve health, promote sustainability, and drive economic growth.
Emily Leproust: We believe that when our customers succeed, we all succeed, creating a ripple effect of positive change that extends globally.
Emily Leproust: Looking ahead, we are more committed than ever to pushing the boundaries of what's possible. We will continue to invest in research and development, employing fiscal discipline to provide products that generate profitable growth.
Emily Leproust: who will continue to focus on delivering value to all of our stakeholders and bring financial discipline to hold firm on our march to address the digital break-even.
Emily Leproust: Before I conclude, I'd like to take a moment to thank our incredible employees, who go above and beyond to serve our customers and each other every single day. It's been a banner year for TWIST, and our employees deserve the recognition for what we have achieved together.
Emily Leproust: Our momentum is building, and we look forward to keeping you apprised of our progress.
Operator.
Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
One moment, please, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Matt Sykes with Goldman Sachs. Your line is now open.
Speaker Change: Good morning, thanks for taking my questions. Maybe just, I'll ask two questions just up front and get back in the queue, but can you just give us an idea for how express genes and new products trended as a portion of the syn-bio mix?
Speaker Change: throughout the course of this year and potentially what it was in Q4. And then secondly, understanding the operational efficiencies that you guys outlined, plus the revenue growth. Adam, could you just give us an idea of OPEX and the trends next year, both for R&D and SG&A and how we should think about phasing of that spend, either in terms of growth versus this year or quarterly phasing next year? Thanks.
Adam, are you on the line?
Adam Laponis: Yeah, absolutely. Matt, great. Thank you. Good morning. Thanks for the question. Excited to be here. I'll start with the second one first, and we'll come back into the first one. In terms of the second one, in terms of phasing, we expect very modest increases. I'll call it inflationary increases in OPEX.
Adam Laponis: A big chunk of it will come in the first quarter as we do our merit annual bonus increases for the year, but it'll be pretty modest increases throughout the balance of the year, fairly in line with what we saw last year.
Thank you.
Speaker Change: Matt, in terms of your first question, you know, in terms of drivers of growth as well as in gross margin, I think Patty hit on some of the really exciting opportunities we have.
Speaker Change: Adam Laponis, Emily Leproust, Emily Leproust, Adam Laponis, Emily Leproust, Emily Leproust,
Thank you. Our next question comes from
Hey guys, thank you for taking my question.
Speaker Change: On the big picture here, post-elections, a lot of questions on NIH budgets and competitive landscape.
Speaker Change: Can you talk about what is your total exposure to NIH budgets and
Speaker Change: I know customers, I think, in the past have asked you on where Twisted is manufacturing your jeans.
Speaker Change: Have you seen any change in comparative behavior as opposed to seeing more share gains?
Speaker Change: Yeah, thank you, Vijay. Good morning. On the NIH, we have a very small exposure. It's probably less than 1%. So actually, it's an opportunity for us to do better there.
Speaker Change: And we know that in the past, any time budgets were constrained, it was an opportunity for us to take market share. Because, again, our brand is high quality at a very, very good price.
Speaker Change: It's going to be an opportunity, I think, for us to lean into that. And then as far as production, yes, 100% of all DNA is made in the U.S. And over the last...
Speaker Change: few quarters there's definitely more question around where is DNA being made and so I think our customers are definitely thinking about their supply chain and it's definitely going to be
Speaker Change: a headwind for our competitors that manufacture outside of the U.S. and I think it's a tailwind for us.
Understood.
and maybe one on the P&L side here.
What is...
Speaker Change: I know related party, there was some confusion related party revenues, what is related party revenue, how much was it in this quarter, in EBITDA guidance, is it implied fourth quarter EBITDA exit rate of, you know, in the minus 10 to minus 13 kind of range?
Speaker Change: I'd be happy to take the question. In terms of related party revenue, it was about 12 million dollars in Q4, relatively in line with legacy. And in terms of EBITDA, what we've said is, you know, 20 million dollars in Q1 with sequential improvement all the way throughout the year and netting out at 60 to 65 for the year. So the range you're talking about are unreasonable.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Sungji Nam with Scotiabank. Your line is now open.
Speaker Change: Hi, thanks for taking the question. Maybe one for Emily. It's great to see the continued partnership across the next-gen sequencing providers that TWIST has. If you look at a lot of these
Speaker Change: next-gen sequencing providers, they're kind of developing these highly innovative solutions in terms of library prep. You mentioned Elements Trinity, and I think Illumina talked about the Constellation Map to Read technology, et cetera. Just kind of curious, kind of net-net,
Speaker Change: What are the, from TWIST's standpoint, do these new innovations provide greater opportunities in terms of
Speaker Change: you know, essentially sales of your product or just kind of curious like how that affects your, you know, I guess overall total revenue opportunities in the future.
Speaker Change: Thanks for the question. We see it as a positive. As the technology advances, there's more focus on quality and performance.
Speaker Change: which is what we provide with our probe, with our enzymes, and now with our own library prep.
Speaker Change: And the other benefit that we have compared to maybe other competitors is the speed at which our R&D works. And so as those technologies evolve, we're able to stay on the bleeding edge.
Speaker Change: and leveraging both our innovation and our commercial execution to grow our revenue.
Speaker Change: Hey guys, thank you for taking my question. Could you elaborate on the different moving parts to the 2025 guide? Which end markets growth are you assuming for NGS growth? Are you baking in any FDA approvals or Medicare reimbursements?
Speaker Change: And could you also provide additional insights into 25 assumptions for the SYN biomarker? And last, what are you assuming express genes to be? Is it all upside, or are you assuming anything in the 48% gross margin target? Thank you for that.
Speaker Change: Thank you for the question. It's a great question and we're kind of looking at the year.
Speaker Change: when we step back and can say first of all how pleased we are with the progress we've made in the seven quarters of sequential growth.
Speaker Change: and revenue, you know, gap gross margin of 850 basis points.
Speaker Change: Now, reduction in GAAP OPEX in Q4 versus prior year, minimal CAPEX for the year. When we look at the second half, we expect to continue to see that our cash for in the back half of this year was only 17 million. It's going to be moved forward. We're only going to expect to see improvements up and down the P&L.
Speaker Change: When I look at the drivers, specifically what was assumed in the modeling, for NGS, we have not assumed an MRD rep, we assume the continued improvement in liquid biopsy, we can see this continued improvement in expanding our customer base.
Speaker Change: and then going down to the Symbio side, we're seeing expansion of the number of net new accounts.
We're seeing expansion continue in express genes.
Speaker Change: and we're seeing that positive uptick already this year. We expect a continuation of that next year. And from where we sit down the P&L and into other areas of business, we do expect to see the continued improvement in gross margin sequentially throughout the year.
Speaker Change: Thank you. Our next question comes from the line of Luke Sergott with Barclays. Your line is now open.
Speaker Change: Great, thanks guys. Can you talk about a little bit about the DNA storage? Is this the Sentry Archive solution? Supposedly, I remember talking about being commercialized either this year, at the end of this year, maybe in the next year, you know.
Speaker Change: The update there on the slides is helpful, but just kind of, are there earnouts associated with this or milestones? You know, who are the early access customers? Any other details you guys can give us on that?
Speaker Change: When we go into it, we need to be competitive with existing technologies that are tape and hard drive.
Speaker Change: chip and a terabyte applications. And so what the team is doing is focusing on that technology development. First, it's a combination of both the chip and the synthesis.
Speaker Change: At this point, we have fully converged on an end-to-message chemistry approach.
Speaker Change: that is deployed for for those chips and the reason for enzymatic
focus is from a point of view of both costs
Speaker Change: and sustainability, that's what we need. So at this point, we're really, really strongly focused on that development.
Speaker Change: And so, therefore, it's a little bit early to speak about...
customer, but the team is making great progress.
Speaker Change: Thank you. Our next question comes from the line of Matt LaRue with William Blair. Your line is now open.
Speaker Change: Good morning. For Adam, of the gross margins study above in the quarter and I think that was despite the top line upside coming from SinBio, so
Speaker Change: I'm just curious if that reflects, you know, a bias towards the express gene relative to your expectations, anything else to think about in terms of the scale of that effect in the future, just maybe help us think about where the gross margin upside came from in the quarter.
Speaker Change: Great question, and I think the in terms of the gross margin upside.
Speaker Change: I've mentioned it before, you know, we see whether it be SynBio now or NGS.
Speaker Change: that 75 to 80 percent of the incremental revenue will drop to gross profit. I think we're seeing that.
play out here in Q4.
I'd say Express Genes was a tailwind.
Speaker Change: as it continues to see sequential improvements quarter-on-quarter. But those are not outsized in any way, shape, or form, but this is more a reflection of as we continue to grow, and we continue to see growth faster than expectations, we're seeing the growth margin fall in line with that growth. I'd also hit on some of the key points.
Speaker Change: that Patti mentioned on the call. There are a number of operational initiatives that we are working on and have been working on in 2024, all of which are adding to the continued improvement gross margin. And we expect to see more of those improvements.
as we go into 2025.
Speaker Change: but the timing of which is a bit uncertain on some of when they'll actually hit the P&L, if you think.
Speaker Change: an improvement that launches in the sixth week of the quarter will be different than one that launches in the tenth week of the quarter. We're no less excited about those improvements, but we will be a bit cautious in the way we look at the timing of when that impact is.
Speaker Change: Thank you. Our next question comes from the line of Puneet Suda with Learink Partners. Your line is now open.
Speaker Change: Yeah, hi guys. Thanks for the questions here. So, first one, I mean, I appreciate you providing the NIH exposure, which is low, but just wondering, just given the
Speaker Change: political situation, and again, HHS appointment, which is not finalized yet, but again, given all of those sort of moving parts and the potential for pressure on pharma and FDA and combined with NIH potential cuts.
Speaker Change: Could you maybe quantify for us how much is your, first of all, pharma and related biotech exposure?
Speaker Change: and sort of what gives you confidence in the 17 to 20% Fiscal 25 Guide. Is that more on taking share? Is it growth in NGS and getting more into diagnostic assays? And is it more in, you know, or is it more SimBio? You know, and then...
If I could ask just a separate question around biopharma.
Speaker Change: I appreciate the settlement deal, but just trying to understand, you know, it's now 6% of your revenue by pharma overall.
Speaker Change: So how core is this business to you? 50% is already, was already part of the deal and you had a leadership change there. One of your leaders of the biopharma divisions left for a competitor. So just wondering how core is this business to you now? Thank you.
Thank you, Vijay.
Maybe I'll start with the second one first. The bioformatein...
Speaker Change: I've always been really great on the science, so we know that when we get an order for a service where we get the target, we're able to leverage the full spectrum of our AI.
in vivo, in vitro.
Speaker Change: So, from a technology point of view, I think we are punching really, really strongly.
We know that commercially, we...
Speaker Change: We've been struggling and so I'm very pleased to see all those that we achieved last quarter. And so it's an NF1, we have to do it again. But in terms of benefits to the broader company, I think maybe there's...
Speaker Change: it's underappreciated how having the service offering from Biopharma is very useful with selling the products that are captured in SynBio because really we go talk to the same customer.
Speaker Change: And we can either offer them a product if they want to do the work in their lab or we can offer them a service if they want to outsource. And so there's that one-two punch that's very useful.
Speaker Change: when we're able to serve both. At the same time, obviously, all the businesses, all the product groups need to pull their weight, and I'm looking forward to...
Speaker Change: the biopharma revenue to go back on the on the upswing.
as far as the
Speaker Change: exposure to biopharma funding. I think we report, we share that our health care exposure
Speaker Change: is about 60% and that both are the SynBio, NGS, and Biopharma product groups.
Speaker Change: And, as you know, there have been several years of biopharma.
Speaker Change: funding pressure and we've done really well and it's no accident that we've been doing well over the last few years.
I'll...
Speaker Change: Our products and services are really differentiated, combined with some commercial violence that we apply when we go sell.
Speaker Change: So I look forward to more of that, and we are quite positive about the future.
Speaker Change: Thank you. Our next question comes from the line of Tom Peterson with Baird. Your line is now open.
Speaker Change: Hey, thanks, everyone. Good morning. Thanks for taking my question. Maybe just quickly from me, I think you mentioned ShareGains on the Symbio side, directly related with the ExpressGenes offering. I mean, can you elaborate on where you're seeing ShareGains here? Is this conversion of DNA makers? Are you seeing?
Speaker Change: share gains elsewhere. And then maybe just quickly a second question. I don't know if I missed this. Did you disclose what you're expecting to spend from an OpEx perspective in 2025 on DNA data storage? Thanks.
Speaker Change: Tom, it's Paddy here. Thank you for the question. I'll take the first part of that. I think with the Express jeans, you know, obviously sequential growth is good, but it's also allowing us to expand downstream and for the customer more broadly into their workflows.
Speaker Change: and so a fast gene enabled us to move down to PrEP, protein IgG works and very positive performance and we think that will continue.
Speaker Change: In terms of data storage, if you look at it on a 2024 basis, we spent, in terms of OPEX, around 25 million dollars on a gap basis. Cash was quite closer to 20 million dollars. We haven't provided specific guidance in terms of where we're going to be in 2025, but I would expect a relatively stable investment profile.
Speaker Change: Thank you, our next question comes from the line of Brendan Smith with TD Cowen your line is now open.
Speaker Change: Hey, this is Joe Atrofsky on for Brendan Smith. Could you just give a little more color on the proprietary enzymes that you mentioned? Sort of why now? Have there been sort of developments that make this the right time to start launching products there? Or was this just sort of a natural next up area to deploy that technology?
Speaker Change: Yeah, thanks for that question. Yeah, basically, it's a wonderful useful platform and the scale of DNA synthesis that we have gives us an unfair advantage to use in the exploration for new enzymes. And we've done very, very well.
Speaker Change: in terms of the products we've made for target enrichment and now as they go into workflows, making proprietary enzymes with interesting features is just another point of differentiation that's well received by the customer.
Speaker Change: So for the first product that Emily mentioned around our ligase, essentially it's right on the twist theme of more efficient use of the sequencer. We label every molecule to get it onto, or most of the molecules, or more of the molecules to get onto the sequencer.
Speaker Change: which really drives efficiency and a good outcome for the customer. And when you look at it, our ability to make differentiated workflows is going to be very important for the customer base going forward. So the timing is good and we like the roadmap of enzymes we've got coming through.
Speaker Change: Thank you. Our next question comes from the line of Thomas DeBoersi with Nefron Research. Your line is now open.
Thomas DeBoersi: Morning. My question just relates to orders and I guess going back to your...
fiscal Q2, you saw a step-up in
Thomas DeBoersi: customer purchase orders with the calendar year beginning. I was just curious, as you look towards 2025,
Thomas DeBoersi: Would you expect a similar dynamic of a step-up in purchase orders with, I guess, the start of the calendar year? And sorry, just to go back to 2024, you know, how you saw in terms of the execution and conversion of orders from those open purchase orders?
Adam Laponis: Tom, this is Adam, and thank you for the question. We're really pleased with how the business is performing. You kind of look at it, you know, as I've been hitting on this.
seven sequential quarters of increased revenue.
Adam Laponis: We are seeing that order pattern with more customers making longer-term commitments to us.
Adam Laponis: and wanting to use different mechanisms that are easier for a procurement perspective.
Adam Laponis: We expect to see sequential growth in both orders and revenue throughout the year, next year.
Adam Laponis: As I mentioned on the call earlier, our commentary and disclosures moving forward on orders will be focusing primarily on biopharma, and we'll really be driving home the forecast and expectation of revenue in our disclosures moving forward in 2025. But we are very pleased with the progress we're seeing and the continued expansion, not just on the order side, but truly on the revenue and up and down the P&R.
Thank you.
Speaker Change: Thank you. Our next question is a follow-up from Matt LaRue with William Blair. Your line is now open.
Speaker Change: Thanks for the follow-up. I'm going to ask two quick ones. The first, a couple questions about NIH. I think historically...
Speaker Change: I guess over the summer you've done some things to make your offering more streamlined in the academic market and just curious how you think that positions you going forward. And then the last one is to clean up Adam's comment there. So, just to confirm going forward, you will not be providing. Orders on bio and I think that's what you're saying, but just confirming. Thanks.
Adam Laponis: Adam, do you want to cover the second question first? Sure, I'll take the second part. I'm confirming that we are going to be focusing our disclosures and orders in the area just in biopharma moving forward for fiscal 2025.
Speaker Change: And thank you, Matt, for the first question. Yes, indeed, we...
Speaker Change: I've been focusing on the workflow, the user experience for the academic to other. So not only do you need to have great products, which we do, they're fast, they're high quality, they're low cost, so it's overall a great value. And then we've also been focused on the user experience.
Speaker Change: the e-commerce and especially the integration of our e-commerce website with the ordering systems of academic institutions.
So you have Arriba, Koopa, Jagger.
500, 600, a few others, and so
Internally, we could be B2B or punch out, but...
So we're working on integrating.
Speaker Change: that link between our e-commerce and the institution. And we've seen for...
as are those first ones rolled out.
The growth.
Speaker Change: revenue that we see in those institutions, the number of net new users from those institutions.
It's really, really positive.
strategy of going after the long tail of customers.
Speaker Change: Thanks for asking. It is definitely something that is top of mind for us.
We think we have a good solution and now it's...
Speaker Change: It's a question of getting those institutions to sign on and hook up with our e-commerce.
Speaker Change: Thank you. Our next question comes from the line of Vijay Kumar with Evercore SI. Your line is now open.
Speaker Change: Hey, thanks for squeezing me back in. Adam, maybe just back on that related party, it's just a term we don't come across with other companies. Can you just give us some flavor on what is this and why does TWIST have to disclose this? Thank you.
Adam Laponis: No, Vijay, happy to. It's pretty benign here in the sense that we have three related parties.
Adam Laponis: in our fiscal 2024, one of which was no longer a related party, is at the end of Q3. All three of the parties are public U.S.-based companies.
Adam Laponis: one of whom are CEOs from the board and one of them is a board member of ours who is the CEO of that company.
Adam Laponis: So we're, you know, we continue to see that business be relatively stable, and we will obviously disclose that in our 10-K and 10-Q, it's an accounting requirement, similar to pretty much every other company out there. Now, again, I appreciate the question, thank you so much.
Speaker Change: Thank you. Our next question comes from the line of Rachel Vattenstall with J.P. Morgan. Your line is now open.
Rachel Vattenstall: Hey, good morning. Thanks so much for taking the questions. Just squeeze one here in on ExpressGenes, kind of a three-parter.
Rachel Vattenstall: But first off, could you just quantify for us how meaningful Express Jeans was this quarter? And then now that you're a bit further into the launch, I was wondering if you can break down for us what the updated pricing premium is for Express Jeans over the past few quarters. And then just lastly, how do you think about contributions from Express Jeans into the targets you laid out for 25 today? Thanks.
Speaker Change: Thank you, Rachel. It's a very important topic for us, and thanks for bringing it up. So, as a step back, as a reminder, now we're not only talking about express genes, but we've actually built on that initial express gene launch to build what we call an express portfolio.
Speaker Change: So you can get expressed fragments, you can get expressed genes, you can get expressed PrEP.
Last quarter, we reported being able to do Express IGG.
where we're able to ship.
ITG protein expressed in show in 13 days.
Speaker Change: So that combination of that expert portfolio is doing a couple of things.
Speaker Change: The first one is boosting our revenue. Again, we are seeing sequential growth from our express portfolio. It's adding net new customers.
Just as a quick clarification.
Speaker Change: Some customers used to be buyers of fragments and they were making their own clonal genes. Well now they can buy it. Or customers who buy clonal genes and then they will make their own PrEP. Now they can buy the PrEP. Or they were buyers of PrEPs and they would make their own IgG. Now they can buy the IgG.
Speaker Change: So that conversion of makers to buyers is happening. And then the last thing that we really, really appreciate
Speaker Change: increased contribution to our margin from the express portfolio. And we've reported now it's multiple quarters in a row where 75% to 80% of our revenue growth dropped to the growth margin line.
SynBio and NNGS.
and thanks to our Express Gene Portfolio. Now it's...
Speaker Change: about the same. And so if there is a new dollar that comes in, it doesn't really matter if it goes into the Symbio line or the MGS line, the benefit to the gross margin line is the same. So going forward, we continue to leverage that portfolio. It's really very much a winner.
Speaker Change: the margin benefit to get us to our goal of getting to a just a bit of break-even without going back to the market.
Speaker Change: Thank you. I would now like to hand the call back over to Emily Leproust for closing remarks.
Emily Leproust: As we close, let me emphasize this. TWIST delivered record-breaking results in fiscal 2024 and we're on a clear trajectory towards profitability and continued long-term growth. Our technology is transforming industries, driving innovation, and delivering value to our customers and shareholders.
Emily Leproust: With momentum at our back, a relentless focus on disruptive innovation and discipline education, we are poised to reach new heights in fiscal 2025. I want to thank our employees, customers, and investors for your trust and partnership as we ride the future together.
Thank you for joining us today.
Emily Leproust: This concludes today's conference call. Thank you for your participation. You may now disconnect.
I'm a little bit nervous.
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