Twist Bioscience Corporation — Q2 FY2024 Form 10-Q
Reporting period: Fiscal quarter and six months ended March 31, 2024. Financial statements are unaudited. The company develops and sells synthetic DNA products and related tools using its silicon-based DNA synthesis platform.
Financial performance and position
| Metric | Q2 FY2024 | Q2 FY2023 | Six months FY2024 | Six months FY2023 |
|---|---|---|---|---|
| Revenue | $75.3 million | $60.2 million | $146.8 million | $114.4 million |
| Gross profit / margin | $30.9 million / 41% | $18.5 million / 31% | $59.8 million / 41% | $43.3 million / 38% |
| Operating loss | $48.9 million | $61.6 million | $95.9 million | $106.3 million |
| Net loss | $45.5 million | $59.2 million | $88.5 million | $101.0 million |
| Net loss per share, diluted | $0.79 | $1.04 | $1.54 | $1.78 |
| Operating cash flow | Not provided by quarter | Not provided by quarter | $(42.4) million | $(98.4) million |
- Revenue mix, Q2: NGS tools were $40.8 million, synthetic genes $22.4 million, antibody discovery $4.7 million, oligo pools $3.9 million, and DNA libraries $3.5 million. Healthcare represented 54% of revenue.
- Cash and liquidity: At March 31, cash and equivalents were $243.3 million and short-term investments were $50.0 million, totaling $293.3 million. This compares with $336.4 million at September 30, 2023. Six-month cash, cash equivalents and restricted cash declined $43.1 million to $246.2 million.
- Investing and financing cash flows: Six-month investing cash use was $1.1 million, including $2.1 million of property and equipment purchases; financing provided $0.4 million. Operating cash use plus capital expenditures was approximately $44.5 million.
- Debt and obligations: The filing reports no material borrowing balance or material interest expense. Operating lease liabilities were $89.4 million, including $14.6 million current; undiscounted future lease payments totaled $140.9 million.
- Balance sheet: Total assets were $702.8 million, total liabilities $142.7 million, and stockholders’ equity $560.1 million. Accumulated deficit was $1.12 billion.
Changes versus the prior comparable period
- Q2 revenue rose 25%; six-month revenue rose 28%. Management attributed growth mainly to NGS tools and synthetic genes. Genes shipped increased 27% in both the quarter and six-month period.
- Q2 gross margin improved to 41% from 31%, reflecting revenue growth and lower personnel costs, partly offset by higher materials and depreciation. Six-month gross margin increased to 41% from 38%.
- Operating and net losses narrowed in both comparison periods. Six-month operating cash use declined substantially, from $98.4 million to $42.4 million.
- For the six months, R&D expense fell 19%, while SG&A rose 13%. SG&A included higher stock-based compensation; the prior-year comparison included a large stock-compensation credit related to forfeitures and an unachieved acquisition performance condition.
- Antibody discovery revenue declined $2.3 million in Q2 and $5.3 million over six months, partly offsetting growth elsewhere.
Outlook, risks and unusual items
- Management expects losses to continue while investing in product development, manufacturing, sales and marketing. It believes $293.3 million of cash, equivalents and short-term investments will fund operations for at least one year from issuance of the financial statements; no numeric revenue or profitability guidance is provided.
- Management identifies growth, customer adoption, production capacity, turnaround times, cost reductions, commercialization of new products, Wilsonville facility utilization, competition, financing needs and international expansion among key uncertainties.
- A strategic restructuring approved in May 2023 affected approximately 270 employees, about 25% of the workforce, and consolidated synthetic biology production across facilities. The plan was substantially completed in FY2023; $16.2 million of restructuring and related costs were incurred that year.
- Disclosure controls and procedures were deemed ineffective as of March 31, 2024 because a previously identified material weakness in internal control over financial reporting remained unremediated. Management reported additional post-closing procedures and continued remediation efforts.
- A securities class action and related derivative action remain pending. The class action is at a preliminary stage; the company says it cannot assess the likelihood or amount of any loss. The derivative action is stayed pending the class-action motion to dismiss.
- The company has incurred losses since inception and has not generated positive operating cash flow since inception. It states that additional financing may be needed beyond the period its current resources are expected to cover.
Important facts for investors to verify
- Whether revenue growth, particularly in NGS tools and synthetic genes, is sustained and translates into improved operating margins.
- How quickly cash use declines, and whether management’s stated minimum one-year liquidity horizon remains adequate.
- Progress in remediating the material weakness and whether disclosure controls are subsequently judged effective.
- Developments in the securities class action, derivative action, and any related potential financial exposure.
- Execution and returns from the Wilsonville manufacturing investment, and the company’s ability to commercialize new products while managing long-term lease commitments.