Twist Bioscience Corporation (TWST) Q3 2025 Earnings Call Transcript

Twist Bioscience reported a strong Q3 FY25, achieving record revenue of $96.1 million, an 18% year-over-year increase, alongside a significant gross margin of 53.4%, surpassing its 50% target. The company saw robust growth in its NGS segment, up 27% to $55.3 million driven by clinical diagnostics, while SynBio revenue grew 7% to $35.2 million, with underlying growth exceeding 20% excluding a prior-year one-time order. Adjusted EBITDA loss improved significantly to approximately $8 million. Management highlighted successful product portfolio expansion and a strategic rebalancing towards top-line acceleration after achieving margin goals, narrowing FY25 revenue guidance to $374-$376 million and projecting an adjusted EBITDA loss of $45-$47 million. A key NGS customer's transition to commercial deployment is anticipated to cause a temporary $5 million revenue normalization in Q4, but the company expects continued sequential growth and remains on track for adjusted EBITDA breakeven in FY26.

Analysis

Twist Bioscience reported a strong third quarter for fiscal 2025, demonstrating significant operational leverage and progress toward profitability. The company achieved record revenue of $96.1 million, an 18% year-over-year increase, and a notable gross margin of 53.4%, substantially improving from 43.3% in the prior-year period and surpassing the company's 50% target. This margin expansion, driven by higher volume, favorable mix, and cost controls, has prompted a strategic rebalancing from margin improvement to accelerating top-line growth. The Next-Generation Sequencing (NGS) segment was the primary growth driver, with revenue up 27% to $55.3 million, fueled by demand for commercial diagnostic tests. However, management has guided for a temporary $5 million revenue normalization in Q4 as a key NGS customer transitions to commercial deployment, an event positioned as a precursor to more predictable, multi-year revenue. The Synthetic Biology (SynBio) segment reported 7% growth to $35.2 million, a figure muted by a tough comparison against a large, non-recurring order in the prior year; management noted underlying growth for this segment exceeded 20%. The company is actively pursuing new product introductions and customer acquisition to reignite SynBio's headline growth. With an improved adjusted EBITDA loss of approximately $8 million and a narrowed full-year guidance forecasting roughly 20% revenue growth, Twist is reinforcing its commitment to achieving adjusted EBITDA breakeven by the end of fiscal 2026, supported by a cash position of $250.8 million.

Key Decisions for Investors

• Investors should monitor the temporary $5 million revenue normalization in the NGS segment in Q4 as a key inflection point, as a successful transition by this customer could unlock a more predictable and significant recurring revenue stream in fiscal 2026.
• Evaluate the SynBio segment's performance based on its underlying growth of over 20% (excluding the prior-year one-time order) and its potential for re-acceleration driven by new product launches and customer acquisition, rather than its muted headline growth rate.
• With gross margins now sustainably above 50%, the primary focus should shift to the company's execution on its path to adjusted EBITDA breakeven by Q4 2026, weighing modest OpEx increases against sustained top-line growth.
• Consider the minimal residual disease (MRD) market as a key medium-term catalyst, as multiple clients are expected to launch commercial products in 2026-2027, which could significantly augment NGS revenue growth beyond the current base.