Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Twist Bioscience Corp (TWST, Financial) reported a record-breaking quarter with a 28% year-over-year revenue increase to $81.5 million.
- The company achieved a gross margin of 43.3%, a significant improvement of approximately 900 basis points from the same period last year.
- Strong performance in the synthetic biology (SynBio) product line, with revenue increasing 27% year-over-year to $33 million.
- NGS revenue grew 31% year-over-year to $43.4 million, driven by clinical customers in liquid biopsy and rare disease spaces.
- The company has a robust cash position with approximately $289.4 million in cash, cash equivalents, and short-term investments.
Negative Points
- Operating expenses for the third quarter were $170.4 million, including a $45 million non-cash impairment charge.
- Biopharma revenue was relatively low at $5.1 million, and the company took a $45 million impairment charge due to a revised long-term growth forecast.
- The company reported an adjusted EBITDA loss of approximately $22 million for the third quarter.
- There is a noted dependency on a few large customers, which could pose a risk if these customers reduce their orders.
- The company faces geopolitical headwinds, particularly in China, which could impact future revenue growth.
Q & A Highlights
Q: What are you seeing in the NGS market overall? Are you taking share, and what's the feedback from customers?
A: Yes, we are definitely taking share. Our focus on methylation and liquid biopsy is paying off, and we are seeing strong growth in these areas. We are also expanding into other markets like RNASeq and MRD, which we expect to contribute to future growth. Our technology and commercial strategy are resonating well with customers.
Q: Given your strong growth in Express Genes, have you been able to unlock the gene makers market, or is it mostly from market share gains among existing players?
A: Right now, it's mostly from converting existing buyers, but we are beginning to see some conversion from gene makers. The product is performing well, and we are seeing consecutive growth, although it will take time to fully penetrate this market.
Q: Can you give us a sense of customer acceptance of the dynamic pricing model for Express Genes and how close you are to optimizing the pricing algorithm?
A: The value proposition is resonating across all segments, and we continue to see good adoption. We are still early in the process, but we are seeing sequential growth and customers are adopting more shots on goal at the price point we have.
Q: What are you hearing from customers about the Express Antibodies offering, and how is it performing?
A: The Express product has always been an infrastructure play for us. We are seeing strong interest from customers who prefer to offload some of their work to us. The launch of Express IgG and CHO expression has been well received, and we are expanding into more applications in the life sciences.
Q: How are blanket orders progressing, and what is the conversion rate from your legacy order book?
A: We saw a step-up in blanket purchase orders earlier this year, but Q3 returned to normal historical trends. The conversion rate is high, and we see blanket orders as a signal of long-term commitment from customers. We don't see any risk of a revenue air pocket.
Q: Given the macroeconomic environment, should we be more prudent about Q4 and fiscal 2025 growth expectations?
A: We are confident in our business and expect sequential growth to continue. While we are still working on our 2025 plans, we believe we will continue to take market share and exceed category growth.
Q: Are you seeing any slowdown in the NGS funnel due to capital spending constraints, and what is the state of the liquid biopsy market?
A: Our platform's value resonates even stronger in tough budget environments, and we are executing well into the opportunity. The liquid biopsy market is still growing, and we are seeing a mix of early-stage and large players.
Q: Can you explain the decrease in SynBio book to bill from 1.5 to 1.0? Is it related to China softness?
A: The decrease is due to seasonality and the January effect of blanket purchase orders. Our China revenue is relatively stable and a small percentage of our total revenue, so it's not a significant concern.
Q: Why does the SynBio revenue guide imply a step down in Q4?
A: One contracted customer had significant order volume in Q2 and Q3 but is stepping down in Q4. Excluding this customer, we are seeing sequential growth and an increase in the number of customers ordering each quarter.
Q: How should we think about adjusted EBITDA loss in fiscal 2025?
A: We are focused on our path to profitability and expect continued sequential improvements in adjusted EBITDA. We will provide more details on our 2025 guide at the end of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
