Twist Bioscience Corp

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the U.S. Securities and Exchange Commission, or the SEC, on November 21, 2023, or our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. In preparing this MD&A, we presume that readers have access to and have read the MD&A in our Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. In preparing this MD&A, we presume that readers have access to and have read the MD&A in our Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K.

Previous wording

We are an innovative synthetic biology and genomics company that has developed a scalable DNA synthesis platform to industrialize the engineering of biology. The core of our platform is a proprietary technology that pioneers a new method of manufacturing synthetic DNA by “writing” DNA on a silicon chip. We have miniaturized traditional chemical DNA synthesis reactions to write over one million short pieces of DNA on each silicon chip, approximately the size of a large mobile phone. We have combined this technology with proprietary software, scalable commercial infrastructure, and an e-commerce platform to create an integrated technology platform that enables us to achieve high levels of quality, precision, automation, and manufacturing throughput at a significantly lower cost than our competitors. We are leveraging our unique technology to manufacture a broad range of synthetic DNA based products, including synthetic genes, tools for next-generation sample preparation, and antibody libraries for drug discovery and development.

Current wording

We are a leading, rapidly growing synthetic biology company that has developed a disruptive DNA synthesis platform to industrialize the engineering of biology. The core of our platform is a proprietary technology that pioneers a new method of manufacturing synthetic DNA by “writing” DNA on a silicon chip. We have combined our silicon-based DNA writing technology with proprietary software, scalable commercial infrastructure and an e-commerce platform to create an integrated technology platform that enables us to achieve high levels of quality, precision, automation, and manufacturing throughput at a significantly lower cost than our competitors. We have applied our unique technology to manufacture a broad range of synthetic DNA-based products, including synthetic genes, tools for next generation sequencing, or NGS, sample preparation, and antibody libraries for drug discovery and development, all designed to enable our customers to conduct research more efficiently and effectively. Leveraging our same technology, we have expanded our footprint beyond DNA synthesis to manufacture synthetic RNA as well as antibody proteins to disrupt and innovate within larger market opportunities, in addition to discovery partnerships for biologic drugs and developing completely new applications for synthetic DNA, such as digital data storage.

Previous wording

We have built a scalable commercial platform that enables us to serve a diverse customer base in a variety of industries including healthcare, industrial chemicals/materials, academic research, food/agriculture and data storage. To address this diverse customer base, we have employed a multichannel strategy comprised of a direct sales force targeting synthetic DNA customers, international distributors, and an e-commerce platform. Launched in fiscal 2018, our e-commerce platform allows customers to design, validate and place on-demand orders of customized DNA online. This is a key component of our strategy to address and support our diverse and growing customer base, as well as support commercial productivity, enhance the customer experience, and promote loyalty.

Current wording

We believe our products enable a broad range of applications that may ultimately improve health and the sustainability of the planet across multiple industries including healthcare, chemicals/materials, food/agriculture, academic research, and technology. We sell our synthetic DNA and synthetic DNA-based products to a customer base of approximately 3,562 customers annually across a broad range of industries. In order to address this diverse customer base, we employ a multi-channel strategy comprised of a direct sales force targeting synthetic DNA customers, a direct sales force focusing on the NGS market and an e-commerce platform that serves both commercial channels. We employ business development and sales representatives for our biopharma solutions as well. Our easy-to-use e-commerce platform allows customers to design, validate, and place on-demand orders of customized DNA online, and enables them to receive real-time customized quotes for their products and track their order status through the manufacturing and delivery process. This is a critical part of our strategy to address our large markets and diverse customer base, as well as drive commercial productivity, enhance the customer experience, and promote loyalty.

Previous wording

We have grown rapidly and generated revenues of $81.5 million and $63.7 million in the three months ended June 30, 2024 and 2023, respectively, while incurring net losses of $85.6 million and $57.4 million for the three months ended June 30, 2024 and 2023, respectively. Since our inception, we have incurred significant operating losses and have accumulated net deficit of $1,207.3 million. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the success of our existing products and the development and commercialization of additional products in the synthetic biology, biologic drug and data storage industries, including our Express Genes which we launched in the fall of 2023, as well as leveraging our investment in our manufacturing facility in Wilsonville, Oregon.

Current wording

Since our inception, we have incurred net losses each year. Our net losses for the three months ended December 31, 2024 was $31.6 million compared to $43.0 million for the three months ended December 31, 2023. As of December 31, 2024 we have accumulated net deficit of $1,273.5 million and cash, cash equivalents and short-term investments of $270.8 million. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the success of our existing products and the development and commercialization of additional products in the synthetic biology, biologic drug and data storage industries as well as leveraging our investment in our manufacturing facility in Wilsonville, Oregon.

Previous wording

Highlights from three months ended June 30, 2024 compared with three months ended June 30, 2023 include:

Current wording

Financial highlights from three months ended December 31, 2024 compared to the three months ended December 31, 2023 include the following:

Previous wording

•Revenue growth of 28% to $81.5 million from $63.7 million, primarily due to order growth in NGS tools and synthetic genes;

Current wording

•Revenue growth of 24% to $88.7 million from $71.5 million, primarily due to order growth in NGS tools and synthetic genes;

Previous wording

For the three months ended June 30, 2024 and 2023, the number of customers who purchased products from us were approximately 2,300 and 2,200 customers, respectively.

Current wording

The number of customers who purchased products from us were approximately 2,376 and 2,140 customers for the three months ended December 31, 2024 and 2023, respectively.

Previous wording

Revenues increased 28% to $81.5 million for the three months ended June 30, 2024, as compared to $63.7 million for the three months ended June 30, 2023. The increase in revenue reflects growth in NGS tools revenue of $10.2 million and growth in synthetic genes revenue of $5.6 million, including Express Genes product line. The increase in revenue is primarily attributable to our top customers in the healthcare, industrial chemicals/materials, and academic research industries and an increase in customers. The number of our genes shipped in the three months ended June 30, 2024 increased to approximately 212,000 genes compared to approximately 171,000 genes in the three months ended June 30, 2023, an increase of 24%.

Current wording

Revenues increased 24% to $88.7 million for the three months ended December 31, 2024, as compared to $71.5 million for the three months ended December 31, 2023. The increase in revenue primarily reflects growth in NGS tools revenue of $9.2 million and growth in synthetic genes revenue of $6.8 million, including the Express Genes offering, which is primarily attributable to increase in revenues from our customers in the healthcare, industrial chemicals/materials and academic research industries and an increase in the number of customers. The number of our genes shipped in the three months ended December 31, 2024 increased to approximately 205,000 genes compared to approximately 171,000 genes in the three months ended December 31, 2023, an increase of 20%.

Previous wording

Cost of revenues increased 10% to $46.2 million for the three months ended June 30, 2024, as compared to $41.8 million for the three months ended June 30, 2023. The increase is primarily attributable to an increase in material costs of $5.1 million due to higher sales volume. Gross margin increased 895 basis points to 43.3% for the three months ended June 30, 2024 as compared to 34.4% for the three months ended June 30, 2023 mainly due to increase in revenue and the fixed costs being spread over larger revenue base resulting in an increase in gross margin.

Current wording

Cost of revenues increased 8% to $45.9 million for the three months ended December 31, 2024, as compared to $42.5 million for the three months ended December 31, 2023. The increase is primarily attributable to an increase in material costs of $4.6 million due to higher sales volume which was offset by a decrease in depreciation and amortization expense of $1.3 million due to impairment of long-lived assets in fiscal year 2024. Gross margin increased 778 basis points to 48.3% for the three months ended December 31, 2024 as compared to 40.5% for the three months ended December 31, 2023 mainly due to increase in revenue and the fixed costs being spread over a larger revenue base.

Previous wording

Research and development expenses decreased 8% to $22.5 million for the three months ended June 30, 2024, as compared to $24.5 million for the three months ended June 30, 2023. The decrease is primarily due to decreases in personnel costs of $1.2 million, including stock-based compensation expense of $0.9 million due to the reduction of headcount related to the 2023 restructuring plan, outside services costs of $1.3 million and lab supplies costs of $0.4 million. These decreases are partially offset by a lack of grant reimbursement in 2024 where we received $0.8 million in 2023, which are netted against the research and development expenses.

Current wording

Research and development expenses decreased 8% to $21.3 million for the three months ended December 31, 2024, as compared to $23.1 million for the three months ended December 31, 2023. The decrease is primarily due to a decrease in outside service costs of $0.9 million, lab supplies costs of $0.3 million, depreciation and amortization expenses of $0.4 million and personnel costs of $0.2 million.

Previous wording

Interest income decreased 8% to $3.7 million for the three months ended June 30, 2024, as compared to $4.0 million for the three months ended June 30, 2023, resulting from a decrease in cash equivalents and short-term investments balances.

Current wording

Interest income decreased 21% to $3.2 million for the three months ended December 31, 2024, as compared to $4.1 million for the three months ended December 31, 2023, due to lower cash equivalents and short-term investments balance.

Previous wording

We recorded an income tax provision of $0.2 million and $0.6 million for the three months ended June 30, 2024 and June 30, 2023, respectively.

Current wording

We recorded an income tax provision of $0.1 million and $0.1 million for the three months ended December 31, 2024 and December 31, 2023, respectively.

Previous wording

To date, we have financed our operations principally through public equity raises, private placements of our convertible preferred stock, borrowings from credit facilities and revenue from our commercial operations.

Current wording

To date, we have financed our operations principally through public equity raises, private placements of our convertible preferred stock, borrowings from credit facilities and revenue from our commercial operations. At December 31, 2024, we had a balance of $221.4 million of cash and cash equivalents and $49.4 million in short-term investments.

Previous wording

Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs, laboratory and related supplies, legal and other regulatory expenses and general overhead costs and capital expenditures. We had $1.1 million in commitments for capital expenditures as of June 30, 2024.

Current wording

Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs, laboratory and related supplies, legal and other regulatory expenses and general overhead costs and capital expenditures. We had $5.9 million in commitments for capital expenditures as of December 31, 2024.

Previous wording

Net cash used in operating activities was $48.8 million during the nine months ended June 30, 2024 and consisted primarily of a net loss of $174.1 million adjusted for non-cash items including depreciation and amortization expense of $24.8 million, stock-based compensation expense of $38.6 million, impairment of long-lived assets of $44.9 million and a net change in operating assets and liabilities of $16.6 million. The change in operating assets and liabilities was mainly due to decreases in accounts receivable of $11.4 million, inventories of $3.6 million, other non-current assets of $0.5 million, accounts payable of $6.9 million and other liabilities of $1.8 million offset by increases in prepaid expenses of $0.2 million, accrued compensation of $5.9 million and accrued expenses of $4.1 million.

Current wording

Net cash used in operating activities was $21.4 million during the three months ended December 31, 2024 primarily due to a net loss of $31.6 million adjusted for non-cash items including depreciation and amortization expense of $6.4 million, stock-based compensation expense of $12.0 million and a net cash outflow from operating assets and liabilities of $8.2 million. The net cash outflow from operating assets and liabilities was mainly due to an increase in accounts receivable of $4.5 million due to timing of collections, a decrease in accrued compensation of $11.9 million offset by increases in accrued expenses of $3.1 million and accounts payable of $5.7 million. The changes in accrued compensation, accrued expenses, and accounts payable are due to timing of payments to vendors and employees.

Previous wording

Net cash used in operating activities was $121.8 million during the nine months ended June 30, 2023 and consisted primarily of a net loss of $158.4 million adjusted for non-cash items including depreciation and amortization expenses of $20.8 million, stock-based compensation expense of $18.5 million, non-cash lease expense of $1.0 million, change in fair value of contingent consideration of $5.9 million, and a net change in operating assets and liabilities of $1.5 million. The change in operating assets and liabilities was mainly due to increases in inventories of $2.9 million, other non-current assets of $1.1 million and accounts payable of $4.4 million offset by decreases in accounts receivable of $2.5 million, prepaid expenses of $1.9 million, accrued compensation of $0.3 million, accrued expenses of $1.3 million and other liabilities of $1.8 million.

Current wording

Net cash used in operating activities was $23.0 million in the three months ended December 31, 2023 primarily due a net loss of $43.0 million adjusted for non-cash items including depreciation and amortization expenses of $8.2 million and stock-based compensation expense of $11.0 million and a net cash inflow from operating assets and liabilities of $0.5 million. The net cash inflow from operating assets and liabilities was mainly due to decreases in accounts receivable of $8.1 million, inventories of $1.2 million, and other non-current assets of $0.3 million and an increase in accrued expenses of $2.9 million, offset by an increase in prepaid expenses and other current assets of $1.1 million and decreases in accounts payable of $4.2 million, accrued compensation of $5.1 million and other liabilities of $1.5 million.

Previous wording

Net cash used in investing activities was $1.8 million during the nine months ended June 30, 2024, which consisted of the purchases of laboratory property, equipment and computers of $3.1 million offset by the proceeds from the net impact of purchases and maturity of investments of $1.3 million.

Current wording

Net cash used in investing activities was $1.5 million during the three months ended December 31, 2024, which consisted of the purchases of laboratory property, equipment and computers of $2.3 million offset by the proceeds from the net impact of purchases and maturity of investments of $0.7 million.

Previous wording

In the nine months ended June 30, 2023, our investing activities generated net cash of $52.9 million. The net cash was generated primarily from the net impact of purchases, sale and maturity of investments of $78.2 million and purchases of laboratory property, equipment and computers of $25.4 million.

Current wording

In the three months ended December 31, 2023, our investing activities provided net cash of $4.2 million, which was comprised of the proceeds from the net impact of purchases and maturity of investments of $5.7 million, offset by the purchases of laboratory property, equipment and computers of $1.5 million.

Previous wording

Net cash provided by financing activities was $0.5 million in the nine months ended June 30, 2023, which consisted of $2.5 million from proceeds from issuance of shares under the 2018 ESPP and $1.2 million from the exercise of stock options, offset by $3.3 million in repurchases of common stock for income tax withholdings.

Current wording

Net cash provided by financing activities was $17.9 million in the three months ended December 31, 2024, which consisted of $15.0 million from sale of future revenue and $3.0 million from the exercise of stock options.

Previous wording

Net cash provided by financing activities was $3.3 million in the nine months ended June 30, 2024, which consisted of $5.2 million from the exercise of stock options and $2.0 million proceeds from issuance of shares under the 2018 ESPP offset by $4.0 million in repurchases of common stock for income tax withholdings.

Current wording

Net cash used in financing activities was $1.5 million in the three months ended December 31, 2023, which consisted of $2.4 million in repurchases of common stock for income tax withholdings, offset by $1.0 million from the exercise of stock options.

Previous wording

The preparation of our Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States of America requires management to make estimates and judgments that affect the reported amounts in the financial statements and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ significantly from these estimates. A summary of our critical accounting policies and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended September 30, 2023. There were no other material changes to our critical accounting policies and estimates during the nine months ended June 30, 2024 other than the updates to the critical accounting policies and estimates set forth below.

Current wording

The preparation of our Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States of America requires management to make estimates and judgments that affect the reported amounts in the financial statements and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ significantly from these estimates. A summary of our critical accounting policies and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K. There were no changes to our critical accounting policies and estimates during the three months ended December 31, 2024.

Previous wording

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 2, “Summary of significant accounting policies” in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Current wording

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 2, “Summary of significant accounting policies” in Item 1 of Part I of this Form 10-Q.