Twist Bioscience Corporation

Good day, and thank you for standing by. Welcome to Twist Bioscience Fiscal 2024 Third Quarter Financial Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I would now like to send a conference call over to Angela Bidding, SVC of Corporate Affairs. Please go ahead.

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. We issued our financial results release before market, and the release is available at our website at www.twistbioscience.com. With me on today's call are Dr. Emily LaPruce, CEO and co-founder of TWIST, and Adam Loponis, CFO of Twist. Dr. Patrick Finn, President and COO of Twist, will join us for the Q&A. 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 re-queue as a courtesy to others on the call. 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 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 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 the generally accepted accounting principles. 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. With that, I'll now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily LaPruce.

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 catchment 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 $85.3 million. The strong quarter was driven by growth in our synthetic biology product line, including X-ray gene, along with robust growth in NGS. We reported a 43.3% growth margin for the quarter, an increase of approximately 900 basis points versus 34.4% for the same period last year. For SynBio, revenue increased to $33 million with orders of $33.8 million. entire revenue grew 27% year-over-year and 11% sequentially. We see growing interest and engagement for our Express Jeans 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 net new accounts. 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. And we manufacture and ship all X-rays 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 libraries, which are made in our South San Francisco site. Importantly, we continue to launch new products that build off of our X-rays genes portfolio and infrastructure. In May, we launched multiplex gene fragments with direct synthesis of DNA up to 500 base pairs. This direct synthesis lens, along with pooling of fragments, enable 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. 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. 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 capacity. Also building onto the Express workflow, in July we introduced Express Antibodies, both Fortro and EC293, the two most commonly used cell lines for the antibody discovery and optimization cycle. Multiplex gene fragments and express antibodies illustrate the benefit of making all of our DNA on the express timeline, as we do not need to cut the line for particular customers. In addition to growth for our existing portfolio of products, including express genes, we will 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. Express Jeans continue to perform well, showing ongoing sequential growth that contributes not only to revenue and gross margin expansion, but also a key driver for our overall increasing net new customers. As we indicated at the time of launch, our long-term intent is to convert jean makers into jean buyers, as well as 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 symbol and others, primarily for competitive reasons. Moving to NGS, we posted another very strong quarter as revenue grew to $43.4 million and increased by 31% year-over-year and $46.7 million in orders. Strength in the quarter came primarily from clinical customers, many of whom are in the liquid biopsy and rare disease spaces. 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. 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. In MRD, we provide three workflows offering for customers with the ability to adapt to three distinct types of customer assays. When our customers pursue low-pass whole genome sequencing for the assay, we offer a unique CFDNA laboratory prep kit that extracts more rare mutations when to also elaborate perhaps a competitive advantage for this application. 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 customers. Third, customers developing tumor-informed workflow where an assay test for individualized mutations can leverage TWIST MRD 500 panels, where we incorporate up to 500 different mutations for an individualized assay at the same speed and cost as a handful of probes produced by our competitors. 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 our customers to deliver personalized and customized panels rapidly and at scale. Beyond this, we see growth coming from our RNA-Seq workflow. We differentiate our RNA products on key benefits, including the elimination of bias through whole RNA transcription and the principle-primed bias poly-A transcription. Our RNA solution offers the potential to capture fusions and gene expression that could be missed by other workflows. 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. We also see customers expanding beyond our original flagship NGS offering of target enrichment to include our differentiated laboratory prep beads buffer, UDI, UMI, barcodes, and more when placing orders, expanding our share of credit while supporting better results for our customers. For Biopharma, revenue increased to $5.1 million with orders of $4.9 million. We continue to develop programs for our partners across a spectrum of offerings. A few weeks ago, we announced that the first patient has been dosed in pure biologics clinical study of PBA0405 a fully human IgG1 antibody discovered using TWIST Biopharma Solutions synthetic antibody phage display libraries. This advancement of PbA0405 into human studies validates the potential of our synthetic antibody libraries to be used to discover antibody candidates for how to treat cancer indications. We expect at least one of our partners to initiate human studies within the next year. Additionally, during the quarter, We announced a key publication detailing data for adenosine A2A antibody, which is available for out-licensing. We continue to work diligently to increase revenue and orders for Biopharma, and in this fragmented market, we know our offering resonates. In addition, the Biopharma Solutions Group provides a spectrum of products and services that fit strategically with our thin bioproduct line. We do believe the revenue ramp will take time, and we look 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 Canada 2025. Progress continues, and we see this area of our business as a valuable asset with optionality at multiple points of development. 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. Increased revenue growth the majority of margin growth and included contribution from X-ray genes as well as NGS mix. I'd like to note that while we expect fluctuation in any given quote 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. 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 margin improvement initiatives, including continuous process improvement, supply chain optimization, operational excellence, and insourcing. 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. With that, I'll turn it over to Adam to discuss our financials.