Good day. Thank you for standing by. Welcome to Twist Bioscience's Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the call over to Angela Bitting, SVP of Corporate Affairs. Please go ahead.

Thank you, operator. Good morning, everyone. I'd like to thank you for joining us for Twist Bioscience's conference call to review our fiscal 2025 second quarter financial results and business progress. We issued our financial results press release before the market and it is available at our website at www.twistbioscience.com. 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. 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. This call is being recorded. The audio portion will be archived in the Investors 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 US 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 and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forward in our press release we issued earlier today as well as those more fully described in our filings with the SEC. 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, a financial measure that does not conform with 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 the non-GAAP financial measures will be included in our earnings documents, which can be found on the Investors section of our website. With that, I will now turn the call over to our CEO and Co-Founder, Emily Leproust.

Thank you, Angela, and good morning, everyone. As we look across today's global landscape, it's clear that we're operating in a time of accelerated change from policy shifts and trade adjustments to evolving financial markets and structural transitions in healthcare and academia. The world is transforming at an unprecedented pace. At Twist, we are responding proactively. We recognize that such dynamic conditions require both vigilance and vision. We are continuously analyzing the broader environment, identifying not only challenges, but also the strategic opportunities that can strengthen our long-term position. Our approach is grounding in agility, supported by rigorous execution and driven by our commitment to delivering lasting value. Diving into our significant news released this morning, I am very excited to announce that we have spun out DNA data storage as an independent company. The new company called Atlas Data Storage is a pure-play company focused on end-to-end data storage. As many of you know, there are nearly endless applications of synthetic DNA. Since Twist's inception, we have prioritized opportunities where there is a significant market potential and where our technology offers a clear competitive advantage and differentiation. The market for data storage remains large and our technology for this application has been proven. However, since May of 2023, we have intentionally constrained our spending in DNA data storage to keep Twist over investment in this business to less than $25 million annually. Because DNA data storage is a specialized area, the business, customers, team and investors will look different. To drive the commercialization, a dedicated team will be needed, which can be more easily accomplished by a pure-play DNA data storage company. We have now reached a point where we believe increased investment is essential to accelerate development with a significant $155 million investment from our joint venture partners,…

Thanks, Emily. To underscore what Emily said earlier, Twist was intentionally designed to thrive in evolving conditions. Our foundation rests in a diversified strategy, including differentiation in product lines, customer categories and international markets. What that looks like today is we are employing real-time operational agility. We are actively monitoring and refining our commercial and supply chain strategies to ensure continuity, speed and responsiveness across all regions. We are deepening customer relationships. We are engaging closely with customers and partners to reinforce trust in our platform, sustain momentum and even co-create solutions. We are investing judiciously and strategically to ensure we deliver on our innovative road map to continue to expand our reach, our scalability and the long-term competitive positioning of our offerings. We are relentless in driving executional discipline. We're prioritizing quality, efficiency and innovation to maximize value for our customers while improving operational performance. We are optimizing costs to increase our operational leverage across the company, while, in parallel, fueling long-term growth. Automation and scale continued to unlock meaningful cost savings across production while maintaining the highest quality and value as well as R&D velocity for new product introductions. To dive into a specific example that illustrates our focus, for our NGS product line, we know that as our customers begin to launch bespoke MRD assays, we will need additional capacity for this product line. We've been working with many customers over the course of the last few years as we moved from the pilot stage to verification and validation to clinical studies. While some smaller tests are already commercial, we expect others to advance into clinical studies next year and more to be available in the broader commercial market in 2026. We also know that the workflow for this product line must be very fast, incredibly efficient and the highest quality as our customers test literally support life or death decisions. With this input, we used the Twist approach to level up our automation within the same footprint, upgrading hardware and software and leveraging an exceptional engineering and software teams. With a fixed headcount, we increased capacity by about 200% and lowered turnaround time by approximately 20%. In other words, we did what we're known to do. We see the ramp coming, we plan and we prepare so that our customers can count on us consistently and then we execute to ensure we are delivering. Turning to enzyme development. We recently developed a proprietary high fidelity polymerase that we have deployed into select internal SynBio workflows. In addition to reducing supplier dependency, by using this internally developed product in our own manufacturing processes, we enabled enhanced performance and reduced cost. This also opens up differentiated workflow opportunities within our NGS product group they were actively exploring. At this time, I'd like to turn the call over to Adam to discuss our financials.

Thank you, Patty. Revenue for the second quarter of 2025 increased to $92.8 million, growth is 23% year-over-year and approximately 4.6% sequentially. Gross margin came in higher than expected at 49.6%, primarily due to increased revenue, volume leverage and faster-than-anticipated gains in continuous process improvements within operations. SynBio revenue increased to $36 million, growth of 21% over $29.8 million for the second quarter of fiscal '24. NGS revenue for the second quarter grew to approximately $51.1 million, an increase of 25% over $40.8 million for the same period last year. For the quarter, revenue from our top 10 NGS customers accounted for approximately 43% of NGS revenue. We served 610 NGS customers in the quarter with 150 having adopted our products. For Biopharma, revenue was $5.7 million, growth of 21% over $4.7 million for the same period of fiscal 2024. Orders were $6.4 million. We had 95 active programs as of March 31st, 2025 and we started 64 new programs during the quarter. Looking at revenue by industry. Healthcare revenue rose to $52.8 million for the second quarter of '25 compared to $40.9 million in the same period of fiscal '24, an increase of 29% and reflecting the increased uptake of our products by pharma, biotech and diagnostic customers. Industrial Chemical revenue rose to $22.8 million in the second quarter, up 12% from $20.3 million in the same period of fiscal '24. Academic revenue was $16.5 million for the second quarter of '25, up 20% from $13.7 million from the same period of fiscal '24, with growth coming from both SynBio and NGS customers. Looking geographically. Americas revenue increased to approximately $55.2 million in the second quarter, up 20% compared to $45.9 million in the same period of fiscal '24. EMEA revenue rose to $30.6 million in the second quarter…

Thank you, Adam. As you can see, we are not standing still, we are leaning in. We view this environment not just as something to manage through, but the chance to accelerate our impact and strengthen our competitive position. Our leadership team is focused on what we can control. We will make decision backpack data and grounded in a culture that has always defined Twist. We focus on innovation, resilience and customer impact. Our guiding principles of grit, impact, service and trust resonates in this and in any environment. Twist's ability to adjust quickly and operate with discipline gives us an edge of our competitors who are larger and less nimble. Our leadership team is actively prioritizing the variables we can control while tracking global shifts to stay ahead of the curve. We continue to take market share, leveraging our differentiated platform with our customers at the forefront of our attention. Our team, platform and mission remains our greatest asset and we are leveraging all three to support sustainable growth. We know predictabilities on everyone's mind, including all of us at Twist. One thing that gives us confidence moving into the second half of our fiscal year is that we booked more than $100 million of orders in each of the last two quarters. In addition, our sales teams see strength in the funnel and opportunities ahead. Our view of the future is clear and optimistic. Every employee at Twist is aligned around our high-impact goals and empowered by our team committed to scientific advancement and market leadership. We are moving forward with confidence, prepared to withstand volatility and where possible to turn that volatility into opportunity. At this time, let's open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question coming from the line Luke Sergott with Barclays. Your line is now open.

Hey, great. Thanks for the question. And big news on the DNA storage. So I just wanted to kind of figure out what you guys are -- given all the uncertainty around tariffs. What you guys are baking in there from -- within your guide given the kind of how the quarter played out, what you guys are seeing there? And if you're also seeing any demand starting to come over from competitors that manufacture in China? Ultimately this -- the tariff situation serving as a catalyst to push forward what was potential there for BioSecure?

Hey, Luke, this is Adam. Thanks for the question. A couple of comments here. We did see strong share gains in this quarter across the business. Obviously, our team's innovation and our ability to remain nimble in that, react quickly to some of the macro challenges that we highlighted in the call were a big part of this. As I look to the -- what's baked into the guide is, we do see opportunity for upside in our 2025 guidance, up 20% growth at the midpoint, but we never want to be on the wrong side of the guide. With today's announcement on the data storage, we're more focused than we've ever been, and we see that path to profitability, but we also want to be understanding and respectful of the fact that there is uncertainty and we have baked in what we know today around the tariffs. And in terms of the -- we discussed in terms of Q3 and beyond, we know we're lapping some tougher numbers in Q3, where last quarter, year in SynBio, we had a bump in revenue. But the key for us is we're going to win by winning. We view any market disruptions and opportunity to take share. And for the last few years, even with restrained budgets in biotechnology, we were able to take share. We see this similar opportunity today in academic research and really encouraged by the performance in Q2 where we saw 20% growth year-over-year with our academic customers across the board. So we're confident moving forward, but we're also understanding there is uncertainty in the market, but we'll take advantage of that work.

Thank you. And our next question coming from the line of Matt Sykes with Goldman Sachs. Your line is now open.

Hey, good morning. Thanks for taking my questions. Maybe just one on the promotions that you guys are doing at SynBio. I know earlier this year, you rolled out a promotion for academic customers given the stress they're under. And it sounds like if I heard it right, you're broadening that out across the business. So I guess my question would be, one, is that 20% growth you saw in the academic market this quarter partly a result of that promotional activity? And were there any kind of visible market share shifts that were helped by that promotion? And two do you expect a similar kind of dynamic if that is the case for the rest of your customers for SynBio? And how long do you believe that you'll stick with this promotional period? And what are the impacts on gross margins for that? Thank you.

Thank you, Matt. Great question. So one of the reasons why we push for the promotion is really anchored in the performance of the product. When we said that we can ship genes in five to six days, it does what it says on the tube, we do it. And we do it not just for one gene, but we can do it for all of our genes. It's a very, very high throughput. And we saw that there were some confusion worry in the academic field around funding. And so it was a way to do one to punch, one to assist our customers and to making sure that the Express going into more hands. And we believe that's going to help us long-term to convert the academic market where we are still at the beginning of that conversion. So in terms of how long it's going to last, we said it will at least last until, for the next, until the end of our fiscal year. We want to make sure that our customers know that. In terms of impact on margin, I think it's positive. As you know, from the math, if the sales price is 5% lower than average, but your volume increased 10 or more percent, it is positive. And as far as the impact on the quarter, it was not complete impact since we started about midway through the quarter. But at the end of the day, a lot more academic customers are getting their hands on extra genes and getting -- they're seeing the value of it, they're reordering. And so we see it as a win for the customers and a win for us as well.

Thank you. And our next question coming from the line of Subbu Nambi with Guggenheim Securities. Your line is now open. Hey, guys.

Hey, guys. Good morning. Thank you for taking my questions. You have been reporting the percent of NGS revenue from your top 10 customers each quarter. How much of the second half guidance is from these top 10 customers, especially in NGS?

Subbu, this is Adam. Thank you for the question. And if I look at the guidance for NGS, I'd say the -- we expect to see growth from both the existing customers in the top 10 as well as other customers who aren't in the top 10 today. One thing we talk about a lot is it's not always the same top 10 customers every quarter. So we do see a rotation there. We are seeing new customers launching. We haven't baked in any assumed increases for things like MRD in that back half guide. But we do see the top 10 growing at about the same rate as the entire NGS business.

Thank you. And our next question coming from the line of Doug Schenkel with Wolfe Research. Your line is now open.

Good morning. Thanks for taking the question. I want to just dig a little deeper into guidance questions. So the first is on the SpinCo. Are you planning to reinvest some of the spin savings into higher priority R&D initiatives? If we're interpreting guidance right, it seems like that might be the case. So that's the first part. The second is on the MRD launches that you referenced. You talked about customers moving into clinical studies. When would they start to build inventory? And how is that contemplated into guidance? And then the third part is on pacing. Guidance implies about 28% of sales in the fourth quarter at the midpoint. That's a smidge more back-end loaded compared to the last two years. Is there anything to read into that? Thank you.

Hi, Doug. This is Adam here. I'll see if I can hit all three parts. Emily, I need you to help me out a bit because I'll forget them as I start talking. So in terms of the last one first, I think the pacing is -- we've said consistently that we're going to see sequential growth and we feel confident in that growth. When you look at it year-on-year, the impact of growth in both quarters is slower than it was in the front half, but it is seeing that sequential increase and we're seeing that set up nicely in terms of the continued adoption share taking both in SynBio and the growth in our existing and new customers in NGS. Stepping back into the first two questions, if you could repeat them for me, I'd appreciate it, as I said, I knew I forget.

Absolutely. Yes. Sorry to rattle through those so quickly. So the first was on reinvestment of spend savings and R&D initiatives. It looks like that's what you're doing, at least partially a small amount. And then the second was on the MRD launches. You talked about customers moving into clinical studies. I'm just wondering when they would build inventory and how is that contemplated into guidance?

Yes. Great question. So in terms of the launch of Atlas Data Storage, we did raise our adjusted EBITDA at the midpoint about $7 million this quarter. That does reflect most of the savings from not having data storage, which is about a $5 million quarter cash burn in our P&L. So that is contemplated in Q4. In Q3, given the timing of it as well as some transaction-related costs, the impact will be only partial. But we are assuming that most of that savings is dropping to the bottom of the P&L. And then in terms of the MRD, we're not assuming any material launches ramping in the back half of 2026.

Thank you. And our next question coming from the line of Vijay Kumar with Evercore ISI. Your line is now open.

Hey, guys. Thank you for taking my question. I guess just to clarify one on the macro here, Adam or Emily, if you will. On tariffs, are you assuming no impact at all or is there any impact with your offsetting those impacts and sort of sticking to that macro theme, academic and government. Can you just remind us what is US A&G as a percentage of revenues? I think there's a proposal for NIH budgets being down 37%. So are you assuming second half growth to moderate or should that sustain at second quarter levels? Thank you.

Thanks for the question. As far as the tariffs, so obviously, the tariffs are imposed now. Even when the tariffs were not imposed, the vast majority of our products were exempt to any tariffs into Europe. As far as China tariffs, first of all, China is a very small number for us. And similarly, even now, even though there is big tariffs on most US product into China, DNA-related products are exempt as well now. So overall we think that if tariffs are back, it will be more of a headwind for our competitors than for us. And again, as Adam mentioned earlier, we will win by winning. Our products are faster, better, with better scale, with higher quality, better user experience. And so tariffs, in the end, are tailwind for us and the headwind for competition, but we will win by winning. As far as academia, with a very good growth in academia of 20% in the last quarter, sorry, year-over-year. So great growth. We are still massively underpenetrated in academia. So we have -- it's a big opportunity ahead of us. It's a very similar opportunity to what we had experienced over the last few years with Biopharma when Biopharma funding was under pressure. Our product, quality, the value of our products from a quality to cost point of view was just so positive that we've grown significantly. And we think the same opportunity will happen here.

Thank you. And our next question coming from the line of Matt Larew with William Blair. Your line is now open.

Good morning. Maybe just following up on the question on the environment. You referenced a couple of times on the call that the guidance assumes continued share taking in the back half of the year. And clearly this has been a story of share taking for many years, so maybe it's not that unusual, but just the emphasis on that. Can we read into that, that you're observing softer market conditions or softer customer wallets in April versus March and moving on and thus the share taken aspect is more important? Maybe just speak a little bit to what you're seeing broadly for some of your customers, their spend and behavior relative to what you're seeing in terms of your own activity levels with your customers?

Yes. Thank you, Matt. I mean it's a very broad question. As you know, we have a lot of SKUs in many different applications, many different geographies. In terms of academia, for sure, it's clear that there is some pressure in academia. However, in a world with funding pressure, I think we have a very strong value proposition. In NGS diagnostics, we don't have the same dynamic at all. I'll say that liquid biopsy MRV. Broadly genetic testing is doing really well. And so it's a completely different dynamic there. In terms of Biopharma, I think there's a little bit of a continuation of dynamic from the past where they have and they have not in terms of funding. And so for the customers that don't have that have tight funding, we resonate really well. Even with the company that have good funding, they are cautious about budget. And so in this environment where our brand is high quality, high speed and low cost, I think it resonates really well. Plus we've launched a number of new products over the last few quarters to expand our aperture. For instance, FlexPrep, still early days, but it seems to be doing really well in AgBio. Our new library preps are doing great. So overall, yes, there is different and almost macro environment for each of the different markets we serve. But I think that's where we are good at. We are not the one size fits all, right? We are a customization of biology company and we'll meet customers where they are in terms of their funding, what they need. And our products are just based innovation of again speed, quality at very, very competitive, if not leading cost. So I think that makes us, in any environment, we can win, but we adjust and adapt our tactics for each of the products and the markets we serve.

Thank you. And our next question coming from the line of Puneet Souda with Leerink Partners. Your line is now open.

Yes, hi, guys. Thanks for taking my questions. So just a couple here if I could. First, I don't know if you provided the US academic growth. I think you provided the worldwide growth. And what are you assuming in the second half for the US academic growth? On the order side, you had more than $100 million you said in the orders in the last two quarters. Can you elaborate a bit into what is the assumption there? What's growing within that NGS versus SynBio versus other segment? And then was there any pull forward due to tariffs meaning European customers assuming tariffs, retaliatory tariffs? And did you see any impact from that? Thank you.

Yes. So let me start on that with the US academics. We did not disclose the US academics, but we did see strong growth across the board in both NGS and SynBio and we expect the growth to continue in the second half. With orders more than $100 million in the each of the first two quarters, we did see significant growth across all of our platforms SynBio, NGS and Biopharma products and services and we expect that to continue. We did not see any meaningful pull forward from tariffs. We see the demand continuing to grow and we are confident that we'll continue to see sequential share gains in the back half.

Thank you. And our next question coming from the line of Sung Ji Nam with Scotiabank. Your line is now open.

Hi. Thanks for taking the question. Maybe on the US academic one as well. Could you talk about how important is the academic market for the DNA makers market? And in terms of based on all the policy discussions going on, do you have your assumptions in terms of that the Express Gene growth opportunity? Has that changed at all, especially targeting the US academic market? Thank you.

Yes. Thanks. Good question. Look, I think that the value proposition is really starting to resonate. We know there's about a $1.4 billion opportunity to convert the makers into buyers. It's underpinned by economics and speed. From an academic standpoint, in a constrained budget environment, then the Twist value proposition resonates very, very strongly again, either it's more shots on goal. But then secondly, in a situation where you maybe want to focus on higher value research, sending Twist more clonal work to do more cloning and delivering more product to the customer base is actually a very, very favorable offering. So we continue to be very optimistic and bullish looking forward.

Thank you. And our next question coming from the line of Tom Peterson with R.W. Baird. Your line is now open.

Hey, everyone. Congrats on the quarter. Thanks for taking our question. Adam, maybe just a follow-up on the adjusted EBITDA commentary. I appreciate some of the color on the OpEx spend for the DNA Data Storage business. I guess what other assumptions underpin the fiscal '26 adjusted EBITDA breakeven target that you've put out? How should we be thinking about kind of core OpEx growth over the medium term? Thanks.

Tom, thanks for the question, and happy to talk about it. So we did announce that we expect to be adjusted EBITDA positive by the end of fiscal 2026. I think given the Atlas announcement, we can see a clear path to that. What we said previously is that we see continued sequential improvements, not just in revenue and gross margin, but also in adjusted EBITDA moving forward. And that trend will continue. In terms of investment level, what we've talked about in the past is inflationary levels of investment in OpEx across the business. I think we'll see a general trend similar to that moving forward on the path to adjusted EBITDA positive.

Thank you. And our next question coming from the line of Brendan Smith with TD Cowen. Your line is now open.

All right. Great. Thanks for taking the questions, guys. Congrats on all the progress. Kind of piggybacking on that last question. I guess with that adjusted EBITDA breakeven now by the end of next year. I just want to ask maybe how do your expectations for profitability of each revenue segment with this new guidance kind of compare to your prior adjusted EBITDA issuance? And I guess I'm really just wondering if you can give any additional color on where you see the profitability bar for each segment just given all the new product launches and kind of internal initiatives you've implemented since that prior issuance?

Brendan, thank you for the question. And we do look at the business in aggregate as a single segment. But what I've talked about a lot in the past and I think it will continue on average in the future moving forward is as the gross margin continues to expand above 50%, we won't be happy and we want to continue marching. And we see about 75% to 80% of incremental revenue dropping in the gross margin line on all of our product lines across the business. And we'll continue to adapt and adjust the investment levels in the OpEx line to meet the growth that we want to obtain across different products. So we're pretty pleased with all three, seeing the growth and the contribution to the growth and gross margin as well. And I expect that trend to continue beyond just 2025.

Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Dr. Emily Leproust for any closing.

Thank you for your questions and for joining us today. At Twist, we remain committed to transparency, disciplined growth and long-term value creation. We recognize that the world around us is shifting, but our focus is steady. We're executing with purpose, investing in innovation and continuing to build a business designed not just to endure complexity, but to lead through it. We appreciate your continued confidence in our team and our mission, and we look forward to updating you on our progress in the next quarters ahead. Thank you.

Thank you. This concludes today's conference call. Thank you for your participation and you may now disconnect.