Hi, everyone. My name is Jayden Rismay from the Life Science Tools and Diagnostics team here at J.P. Morgan. Thank you so much for joining us today. It's my pleasure to introduce Twist Bioscience. Today's session will be 40 minutes, with roughly 20 minutes of presentation, followed by 20 minutes of Q&A. If any of you in the room do have questions, feel free to either submit them via the portal, or you can ping them to me directly. And with that, I'll turn it over to Twist Management Team. Here you go.
Thank you very much for the invitation and the introduction. It's my great pleasure to be here. Start by saying that I will be making some forward-looking statements. So for those of you who are unfamiliar with Twist, we are a company that writes DNA on a silicon chip. So the silicon chip is really the differentiated technology that enables us to miniaturize the chemistry and increase the scale, the throughput, lower the cost of making DNA.
And even though we started with DNA, we have expanded to leveraging that technology to make RNA and protein. And the customer never sees the silicon. What we do is we combine all the products that serve all the application, all the customers at the same time on the same chip. So really, the chip is the key differentiation.
In addition to that, we've layered on advantages on top of that silicon chip, such as a really deep understanding of the market, a culture of innovation at Twist, where we want to be number one in the world, but there's no number two. Now, a technology that is proven at scale, products that are highly differentiated, and we're deploying commercial velocity, such that we are on our way to get to a billion-dollar revenue.
Revenue and growth is very important. We're a growth engine. However, what we want is profitable growth, and so we are very close to our proximate goal of being Adjusted EBITDA break-even, and we'll keep growing after breaking even.
If I look at the financial performance over the last few years on the left, and over the last four quarters on the right, what you can see, of course, we have had great growth, 28% growth last year with $313 million. I'll note that our fiscal year ends in September. And as we grow the revenue, because of our business model, we have been able to increase our gross margin.
And over the last several four quarters or more, 75%-80% of revenue growth drops to the gross margin line. And so we had a gross margin that starts with a 4%. Of course, we're not happy with that. And we've guided that we'll pass Q4 of this year over 50% gross margin. In addition, if you look at the OpEx line in the last three years, we've had very flat OpEx, so we're demonstrating financial discipline.
That's how we get to Adjusted EBITDA break-even. Run the revenue, keep fixed costs fixed, drop 75%-80% to the gross margin line, discipline OpEx, and that's how we go forward. If we double-click over the last quarter since our IPO, you can see, again, strong revenue growth, initially mostly in SynB io and NGS. Later on, I'll share some detail around those product groups.
We've added, over the last few years, a Biopharma service group as well. When we think about growth at Twist, there's two kinds of growth that we're focusing on. The first one is the short-term growth. We've launched product, and we're leveraging our channels, digital and not. There is some political tailwind that we could benefit from, since 100% of our products are made in the U.S.A., and our competitions are mostly based in China.
And we've launched an Express Portfolio of product that has been a great driver of short-term growth. That's great, but sometimes short-term growth is the easy growth. The hard growth is what we call our long-game strategy. We have been very disciplined and, in a sense, courageous in making investment that we know will pay several years down the line.
And from our liquid biopsy investment in 2017 to our portfolio for pharma companies in 2018 to our Factory of the Future that we opened in 2022. And those are investments that have paid off. And we have investment for MRD and microarray conversion that are in the growing stage. And so we have the vision, the grit, the commitment to make long-term investment and play that long-term strategy. Another differentiation that we have with maybe our peers is that we have multiple product groups.
And I'll spend a little bit of time on each of those. But all of those four product groups, they actually stand on the same strong foundation of both proven technology, which is a silicon chip, and a commercial execution that has been exceptional, as we can see from the numbers. And we've executed our innovation roadmap extremely well.
Here I'm showing for each of the product groups some of the innovation and products that we have launched on the top. And then that's not over. At the bottom, you can see that we have a very robust roadmap for future products. And those represent only a fraction of the products that are coming. But that is how we keep delivering growth quarter after quarter, year after year, is by launching highly innovative and highly differentiated products. So far, I've talked about DNA and our innovation DNA is driving growth.
But in addition to that, very recently, we've added one more layer of innovation, and that is around enzymology. And at the start, I'll mention that it's not a huge investment. We've only invested about two FTEs. And our goal is not to be a company that sells enzymes. Our goal is to leverage our ability to make very large amounts of DNA sequences and leverage that ability and our knowledge in high-throughput screening, high-speed screening, to develop our own enzyme.
And it's developing our own enzyme in the context of a workflow. And by doing that, we'll be able to deliver enzyme to the synth bio product line, NGS product line, biopharma product line, DNA data storage product line in a way that enhances the performance of the products and the performance of the applications.
In addition to increased performance, we'll also use this ability to lower our cost and be a positive driver of gross margin. So really, to kind of summarize, I often ask the question, what is the one thing about Twist that makes Twist special, that makes Twist do better than most of its peers? And it's just not one. There's nine on the screen. I'll just touch a few ones. The first one is we start with a really deep understanding of the customer needs.
We make DNA. I'm a DNA chemist. Our CEO is a DNA Chemist. Our CTO is a DNA Chemist. We really understand very deeply the chemistry and biology. The third and fourth is that we have really industrialized and digitized what we are doing.
For our customers, what that means is that if they have scientific ideas, we can, in a way, go digital through e-commerce, we can transform that idea into an order. Then we can use automation to produce whatever flavor of DNA or protein or RNA that they need to deliver it to their lab quickly and cost-effectively. Number six is that we are playing for growth.
As I mentioned, last year, we had $313 million revenue, but we are building the billion-dollar infrastructure that we'll need in a few years. We're doing this with relentless innovation in mind. We are doing hard things. It's great because if it was easy, every competitor would be doing it. That focus on innovation is really what's helping us.
But at the end of the day, last but not least, number nine is really the culture that we've built at Twist that is sometimes overlooked and that's really driving value creation. So I've mentioned growth. So we will grow. And we often get the question of, what kind of capacity do we have? And so today, we are on track to having about $700 million plus of capacity.
And so we are using less than half of our capacity. However, we are growing fast through ourselves. And so we are making sustainable level in investment in CapEx to add more machines, more automation, so that we can grow that capacity without negatively impacting our gross margin.
And by holding our fixed cost fixed over the last few quarters, which we will continue, we have been able to, again, drop 75%-80% of every incremental growth through the gross margin line. So that's really key to Twist. Looking ahead, the next few slides, I'll talk very briefly of each of those four product lines. The first one is synth bio, where we mostly serve pharma companies.
And Academia, there's a lot of application, but it's mostly around drug discovery, around enzyme engineering, around CRISPR. The differentiation that we have on the right is all of the above in terms of speed, cost, scale, quality, customer experience, innovation. And then, in addition to that, we also make our DNA in a way that's more sustainable, thanks to our miniaturization.
On the left, you can see that making a gene the regular way is equivalent to driving a car for 59 miles. And driving a car, making a gene the Twist way, is equivalent to driving a car for 0.092 miles. So if you buy one gene a day, you save your commute away. In terms of how do we grow within synth bio, of course, we add more customers. But once we are with one customer, we see a common pattern, whether it's for biopharma, industrial chemical, academic.
What we see is that we provide product at different levels and value chains. We have genes, clonal genes, prep, IgG. We can even characterize the IgG. And we meet customers where they are. If they want a clonal gene, that's fine. But usually, they buy something, and then they make something else.
And so we have many cases where people used to buy clonal genes, but they will make IgG. And so we've been able to upsell them to IgG so that now they are IgG buyers. Moving to NGS, there we mostly serve diagnostic companies.
There's a wide range of tests that our customers do. It can be a rare disease, can be cancer detection, early cancer detection, therapy selection, can be NIPT, can be MRD. And we sell all the reagents from the sample to the sequencer. And so from a supply chain point of view, if there is something wrong, there is only one neck to choke, and that's mine. And it's a really great selling point. In terms of differentiation, on the right, with synth bio, our differentiation will lead with quality.
The way we make DNA, the way we make the tens of thousands, hundreds of thousands, millions of DNA probes that are needed to do the diagnostic tests, the way we synthesize it, it's more uniform, and that lowers the cost of sequencing. And typically, when a customer switches from a competitor to Twist, their sequencing bill gets cut in half.
And we also offer customization and comprehensive workflow. And on the left, we also have a very sustainable way of making DNA. And in blue, you need 6,000-plus tanker trucks of gasoline to make our probes the old-fashioned way. But using the Twist approach, you only need 2.4 tanker trucks, and the 2.4 dots, the green dots are so tiny, you almost miss them.
In terms of growth, the way it works with our NGS customers, regardless of the application at the bottom from liquid biopsy to NIPT to MRD, it always starts with an R&D pilot. We go head-to-head with our competition. Usually, we win, and then the customers go through verification, validation, clinical studies, and then once they go to commercial ramp, every time their sales team sells a test, a patient gets tested, and some Twist DNA gets used, and so we ramp our revenue with our customers.
In biopharma, it's a slightly different dynamic. There we sell a service, and if you're a pharma customer, you give us a target. We will use the Twist products, and we'll give you a drug. We'll give you a preclinical antibody lead, and to do that, we use in-house in vivo in vitro AI. It's a very unique offering.
It's very rare to have all three under one roof, and for us, the benefit is when we talk to a customer, they could do the work themselves, but if they do the work themselves, they will buy a $100 gene. Maybe they'll buy an IgG, in which case it's $400.
Maybe they'll do a characterization, then it will be $1,000, but if we can sell them a discovery service, then it's a much bigger project that usually starts at $250,000, and so this biopharma service is a great opportunity for us to ramp our revenue, and at this point, we are absolutely focused on the execution. There's a lot more growth we can deliver there, and so the product is great. The customers are happy. We just need to talk to more customers, find more customers, and ramp sales.
I'll say there's also very strategic with synth bio because we talk to the same customer, pharma customer. And either we sell them a product where they do the work themselves, or we sell them a service where we do the work for them. And then last but not least, the fourth product group that we have is storing data in DNA. It's non-commercial at this point.
Right now, we are working on building a terabyte Century Archive. And so what that means is that you'll be able to archive data for 100 years in DNA instead of on tape or hard drive. And the benefit is that it's super dense. It lasts forever. And what we are working on is making sure that the price point is competitive against tape or hard drive.
So stepping back before I conclude for the next few slides, what we do at Twist all comes from the silicon chip. That is the original differentiation that we have. And on the silicon chip, we write oligos. We sell those oligos. We can assemble into genes, assemble in clonal genes, assemble them into IgG. We can assemble them in variant libraries that the synth bio product.
From those libraries, from those IgG in the biopharma solution, we are able to make antibodies either through AI, in vivo, or in vitro. We can characterize it. And then in the green box for NGS, we can amplify those oligos to make panel and then complement them with library prep. So as you can see, everything starts from the silicon chip.
When I come back next year, there will be more products that are being launched, and there'll be more arrows on the chart. It may look complex, but actually, what I really like about this approach is that it's very resilient. We have thousands of customers against hundreds of products and applications. What that means is that we can be very responsive to a customer's need.
From a financial point of view, looking back at FY 2024, top right, $313 million revenue. In Q4, our gross margin was 45%, which was a great improvement over the previous year. We ended the year with $276 million in the bank. Looking ahead in terms of our guidance, we've guided $367 million-$377 million of revenue for the year. Then very importantly, as I mentioned, we have a great focus on driving improvement in gross margin.
We've guided that we'll have 50% gross margin no later than Q4. And we will continue to shrink our losses all the way through Adjusted EBITDA breakeven and beyond. So last slide, looking ahead. Again, we start from understanding the market, leveraging innovation, our technology, strong differentiation in our product line, and the infrastructure that we have built that is scalable and our commercial realignments to deliver growing revenue, growing market share through Adjusted EBITDA breakeven and beyond. Our goal is to be a growth engine and a profitable one. So with that, I think we're just on time. And thank you for your attention. We look forward to the Q&A. Thank you.
Thank you so much. So just starting off, 2024 was a busy year for Twist from an operational standpoint. As you launched Express Genes and saw Factory of the Future become fully operational. So as we look to 25, what milestones should we expect, and what are you most excited about?
Well, I'll start. The milestone is more of the above, right? So we want to grow revenue from the products that have been launched, so take advantage of the differentiation. Our R&D is extremely productive. And the products that they have launched last year are going to enable growth this year. So having a product is only one thing. You need to be good at everything. You need to be great at marketing. We have to be great at sales execution. Once you have the sales, you have to absolutely deliver on time and in full. And so what we want is we want to continue that just amazing execution day in, day out in all the functions.
And then with a look at the future, frankly, we can make our numbers in 2025 without R&D. We have all the products we need for 2025. But the R&D that we're doing now is we're planting the seeds for future growth in 2026 and beyond. And doing all that with that in mind absolute financial discipline, right? It's something that's very important to us. The fact that we've been able to keep OpEx flattish for the last three years shows our commitment to financial discipline. And so the North Star for us is getting to Adjusted EBITDA breakeven without raising any equity.
All right, thank you. And just touching on that, in your presentation, you mentioned approaching the threshold for profitability and the factors contributing to reaching that Adjusted EBITDA breakeven target. Could you provide some insight into the timeline for achieving that target and any color you have on those targets?
Yes. I'm happy to take that one. Thanks for the question. So we provided guidance for 2025 and our last earnings release. We talked about getting to an exit point of 50% gross margin and a continued sequential improvement in revenue every quarter and a full year of $367 million-$377 million in revenue. We're really confident in our guidance, and we see what is driving the path to profitability is that concept that Emily hit on as well already, that about 75%-80% of the dollars from revenue growth dropped to the gross profit line.
And so continuing what we've been doing for the last number of quarters since the launch of Factory of the Future up in Wilsonville, we expect to see that gross margin improvement with the revenue growth in the coming quarters.
All right, perfect. Thank you. And then just on some housekeeping, last quarter, you said that you'd no longer be disclosing orders. Can you just provide some color on what drove that decision? I believe you noted recently that shortening turnaround times was a contributing factor. Can you shed some more detail on that?
No, absolutely. And so when you look back in time, the history of Twist, when we first went out and IPO, it was a fairly long time between the time we booked an order to actually shipping the product. It could be 30 or 60 days even.
With all the improvements we've seen in the last couple of years, particularly with the Express Genes, we're now looking at that book-to-build time lag of about five days. So really, the whole book-to-build ratio concept is less of a valuable indicator of our performance. And so all of us at Twist are focused on the revenue, the gross profit, and the path to profitability.
With our North Star being, we're not going to go back to the equity markets to raise capital in advance of getting to that path of profitability. I think in terms of why make the change now, I think it was that continued improvement just on the Express Genes and knowing that we are past that point where we have a pretty solid book-to-build ratio.
We will still continue to disclose orders for the biopharma business, which has about a 90-day to two-quarter lag in terms of RevRec.
All right, thank you, and then just shifting on to some new administration questions. Considering the concerns around NIH funding, what are your thoughts on academic funding, and what has the feedback been you've been receiving from customers so far?
Yeah, thanks for that, so we've really got very limited exposure to NIH, but it's low single-digit % of our business but frankly, we think, obviously, we can execute into that opportunity a bit more effectively. Either way, in terms of funding, we're excited about the opportunity. If the market's strong and we now focus and drive into the opportunity, I think numbers come out, but on this other side of that, if budgets tighten, Twist Value Proposition resonates stronger than ever before.
It's more shots on goal for your budget. Your cost of your sequencing experiment comes down if you're on the platform. So we're bullish either way, really quite independent of that environment.
Yeah, thank you. And then similarly, just considering the recent Biosecure Act, was it included in the National Defense Act or the Continuing Resolution? And given the potential upside for you if it were to pass, has there been any changes in how customers are managing risk in their supply chains now that the bill's consideration has been delayed?
Yeah, no, thank you for the question. And then so I'll always start by saying that we'll win by winning. So our products, compared to our competitors, they are better, they're faster, they're cheaper, to the extent that the other thing I'll say is that Biosecure, it does not apply to DNA synthesis. It's about biomanufacturing.
It's about genetic analysis, and so even if it passes or it doesn't pass, it does not impact DNA synthesis. However, the talk around Biosecure has really raised the awareness of our customers around their supply chain and where they procure their DNA, and when Biosecure was first introduced, there were some thoughts and discussions about it.
But I'll say that now the majority of our large customers are really thoughtful about, if not switching, at least thinking about their supply chain for DNA, and so it's hard to quantify exactly what part of the growth came from that, but it is definitely a tailwind for us. And to the extent that there are tariffs that are applied when the new administration comes in, that also will be another tailwind for Twist. But to be clear, our products are better. We're going to win by winning.
Thank you. Then just shifting over to SynBio, can you walk us through the traction you've seen with Express Genes launch and the associated gross margins lift? How much of the market is looking for an express product?
Yeah, so we're making steady progress with the Express Genes. I think we're about a year into the launch. First things first, we're pragmatic product people. And so does the product do what it says in the label? And I think we can tick that box. If you want a clonally perfect gene in five days, that's going to happen. The second part is that we have speed at scale. So if you want to buy one gene in five days, it's going to land in five days. If you want 1,000 genes in five days, they're going to land in five days. So we're pleased with that progress.
And that will continue as our operation is ready to take back up the truck in terms of volume. The second part is that speed allows us to move downstream of the gene. So for example, we can then expand essentially along the value chain and take a little bit more wallet share. So that's a prepped product that's now faster than the competition at scale.
And then going further down the value chain for some of our segments, in particular in pharma, to make an IgG to help with antibody discovery, our speed, and again, our speed at scale is incredibly powerful. And I think as market awareness continues to rise, we expect to see continued good traction.
Thank you.
And if I can add one thing.
Of course.
The benefit of that Express Portfolio and the price premium that we've been able to get is that now we have parity in gross margin between the SynBio product line and the NGS product line. In the past, the SynBio product line was lagging a little bit in terms of gross margin. And now we have lifted the overall gross margin of SynBio to be similar. And so every incremental dollar that we get doesn't matter if you come from SynBio or NGS, 75%-80% drop to the gross margin line. And so it's great for us going forward.
Thank you so much. And then just you previously mentioned that you plan to convert academic customers from makers to buyers to increase presence in that market. Can you give us an explanation on how you plan on or what strategies you plan on implementing to increase the presence in the market? And what challenges do you anticipate in penetrating that area?
Yeah, especially for Academia?
Yeah.
Yeah, so in Academia, you're only as good as the numbers say you are, right? And so we only have 20% of our revenue for the company coming from Academia. And that is not an accident in the sense that when we started commercializing, we had so many sales resources available, and we directed our sales resources towards where the money is. That's why people rob banks. That's where the money is. And that was bigger companies. Now that we are doing well there, we're looking at expanding into academia.
What we found is that in Academia, our gene fragments are really popular because they are extremely fast, extremely high quality. However, typically when an academic customer, either a postdoc or a grad student, gets a fragment, the next step for them is to clone. They need it in their vector to do their experiment.
And so we've been trying to upsell them to a cloned gene. And what we found was that when we were as good as everybody else, when we had 10 days turnaround time to make a gene, we found that it was actually difficult to convince academic people because you can get a fragment in two or three days, and then you have to wait seven more days to get the cloned gene. Whereas if you go in the lab and you do it yourself, you can do that in two days.
Even if the gene was free, they will not get the gene because it was too slow. Now with Express Genes, we've hit a nerve, I'll say, with our academic customers where instead of getting fragments and then making their own clone, they can get the clone from us directly in five days, and they don't have to do anything except placing an order on the e-commerce.
That is going really well. People are willing to pay a premium for that. Although what we found is that academic people, compared to industry, are not willing to pay the same premium, and industry people are willing to pay more. In the dynamic pricing, we have bifurcated the premium such that the premium is higher for companies than it is for Academia. But all of it is contributing to our revenue growth and our margin expansion.
All right, thank you. And then I understand, just going to NGS. I understand you have some new products within NGS. Can you speak more about those advancements and how that is driving customer adoption? Could you share which end markets have shown interest in your new NGS products?
Yeah, so when we started, again, we were always very thoughtful in terms of concentrating our effort. We don't want to do everything poorly. We want to do one thing amazing and then expand from there. And so when we launched our NGS product line in 2017, 2018, we couldn't do everything. And so we focused on enabling liquid biopsy. At the time, liquid biopsy was a nascent application.
We saw the potential, and there was a particularly good alignment between our differentiation and what liquid biopsy needed. Now, six-plus years later, obviously, it was the right initial investment. A lot of what we are running in the vast majority of liquid biopsy tests, and we are driving great revenue growth from that. However, when we first launched, we were just selling the panels.
And so what we have done over the years is not only enable the analysis of SNPs and copy number variation and structural rearrangement and methylation, we've lately launched an RNA-seq application. We've also expanded the products so that now we sell all the reagents from the sample to the sequencer.
So we come in the building for the panel, but then we can upsell the customers to selling everything from the buffer, the beads, the enzymes, the adapters, the UMI, UDI, again, everything that you need. And so that workflow has enabled us to upsell, get more reagents to increase the wallet share that we get. But it's also been a great differentiator in performance. And now what we've been doing is when we were looking at what is the next step of that performance enhancement, well, now we are engineering our own enzyme, as I mentioned earlier, just two FTEs, but the enzymes that are best in class.
The first one we've launched is a ligase, where ligation in library prep typically leaves half the molecule behind, which if you're looking for, if you have the need for sensitivity, if you're doing an MRD assay or an early cancer detection assay, you're looking for the lowest limit of detection.
How low can you go in detecting the allelic frequency?
By engineering an enzyme that has 100% ligation efficiency, we've been able to raise that efficiency, again, making us giving more performance in the application as well as better gross margin since it's our own enzyme. Looking ahead to future growth, we've just launched Flex Prep in NGS. Because we looked at how can we expand, and we're doing great in liquid biopsy since our science took over in MRD, but how can we expand? A big expansion opportunity for us is AgBio.
And so, way back when, several years ago, we started looking at how can we launch something that takes over, dominates AgBio. I know the lawyers don't allow me to say dominate. I should say compete effectively in the marketplace. But so, how can we do that? And what we look at first were to be extremely price competitive.
If you're not cheaper than a microarray, you don't even get through the lobby. So we got the price. But then the second is you needed something that was extremely user-friendly and that scaled and automated really well. And we found out that the two blockers in doing NGS on hundreds of thousands of samples is, number one, the normalization. If you have to normalize every grain of tomatoes or every sample of cows that you get, that's extremely expensive and complicated.
We developed an assay, which we called flex prep, where it's self-normalized. Then the second thing is if you have hundreds of thousands of samples, you need 100,000 tips for everything that you do. There's many steps. So that ends up being very hard to automate. What we do is a one-pot normalization, end repair, poly-A tail, and ligation.
As soon as you've ligated the barcode, then we pool 12 samples together. So we divide by 12 the number of tips that you need. Sounds mundane, but actually it's a huge driver of adoption in AgBio. To go back to your question, it's really that we grow in NGS with breadth of application, deep understanding of the workflow and innovation in the enzyme and the workflow to make it as easy, as cheap as possible for our customers to scale.
Great. Thank you. And then shifting over to the Biopharma Market, you mentioned that your commercial business has been met with some challenges. So I would appreciate any color on how you plan to address those based in the Biopharma Market. Thank you.
It's a very good question. Yeah, thanks for that. So we have a fantastic offering in the biopharma segment, whether it's in vivo, in vitro, and AI tools to really enable discovery rapidly. I think we have a real sort of molecular powerhouse under our roof. We have very, very low single-digit % market share. So we're not going to hide behind any headwinds you may see in a funding environment. And quite frankly, that's a commercial execution problem which we own. And so a few quarters ago, we started the process of upgrading the commercial unit and supporting the product offering.
We're now into execution phase and starting to see opportunities fall into that team's remit. Incredibly important product and strategic, really nice strategic fit of this with SynB io business. So we'll continue to invest and we'll continue to improve the outlook for that business over the coming quarters.
Great. Thank you. And then in your presentation, you mentioned you're expecting to launch the early access of a terabyte Century Archive solution by the end of calendar 2025. Are you still anticipating this timeline? And what needs to happen now until then for that to be ready?
Yeah, we're very excited about the data storage opportunity. It's a huge market, $35 billion plus. So it has the potential to make the rest of the company a rounding error. However, to be able to do that, we need, again, in the Twist spirit, we need a highly differentiated, dominant product.
We need to be able to do the terabyte scale archiving at a total cost of ownership that is competitive with tape and hard drive. That's what we're focused on, getting to that price point. Frankly, we're at a point where we are limited with the capital that we have. As management team, the most important decision we have to do is capital allocation.
We are choosing on purpose to fund data storage at a point where it enables us as a company to get to adjusted EBITDA breakeven without raising money. That means that we're somewhat limiting the rate of progress on data storage. If we could invest more, we would be able to accelerate. I think it's the right decision for the company to focus at the company-level adjusted EBITDA breakeven.
Great. Thank you. With that, I think we're out of time. Thank you all for joining us.