Twist Bioscience Corporation (NASDAQ:TWST) is a leading player in the rapidly growing synthetic biology market, leveraging its proprietary DNA synthesis platform to drive innovation across diverse industries. With a strong focus on research and development, the company has established a robust product portfolio spanning synthetic genes, next-generation sequencing (NGS) tools, and biopharmaceutical services, positioning it as a key enabler of cutting-edge scientific advancements.

Financials

In the fiscal year ended September 30, 2023, Twist Bioscience reported annual revenue of $245.1 million, a testament to the strong demand for its innovative solutions. However, the company continued to invest heavily in its growth initiatives, resulting in a net loss of $204.6 million for the year. Despite this, Twist Bioscience's annual operating cash flow and free cash flow stood at -$142.5 million and -$170.3 million, respectively, reflecting the company's commitment to expanding its capabilities and market reach.

The second quarter of fiscal 2024, ended March 31, 2024, saw Twist Bioscience continue its impressive growth trajectory. Revenue for the quarter increased by 25% year-over-year to $75.3 million, driven by strong performance across its key business segments. The company's NGS tools revenue grew by 40% to $40.8 million, while its synthetic biology (SynBio) revenue increased by 24% to $29.8 million. This robust growth was further bolstered by the successful launch of the company's Express Genes offering, which contributed $2.2 million, or 7.4%, to the SynBio revenue during the quarter.

Twist Bioscience's geographic diversification has also been a key strength, with the company reporting revenue growth across all its major regions. The Americas region, which includes the United States, Canada, and South America, saw a 32% year-over-year increase in revenue to $45.9 million. The EMEA (Europe, Middle East, and Africa) region and the APAC (Asia-Pacific) region also experienced strong growth, with revenues rising by 19% and 11%, respectively.

The company's focus on operational excellence has also paid dividends, with Twist Bioscience reporting a gross margin of 41% in the second quarter of fiscal 2024, a significant improvement from the 31% gross margin recorded in the same period of the previous year. This margin expansion was driven by the strong performance of the company's NGS tools business, as well as the initial contribution from the higher-margin Express Genes offering.

Outlook

Looking ahead, Twist Bioscience has provided an updated guidance for fiscal 2024, which includes a $12 million increase in the revenue range to $300 million to $304 million, representing a year-over-year growth of 22% to 24%. The company expects its SynBio revenue to grow by 20% to 22% to $118 million to $120 million, while its NGS revenue is projected to increase by 31% to 33% to $162 million to $164 million. However, the company's Biopharma revenue is expected to decline by 13% to approximately $20 million.

Twist Bioscience's strong performance in the second quarter of fiscal 2024 and its updated guidance for the full year highlight the company's ability to capitalize on the growing demand for its innovative solutions. The successful launch of Express Genes, the continued momentum in the NGS tools business, and the company's geographic diversification have all contributed to its impressive results.

As Twist Bioscience continues to invest in research and development, expand its manufacturing capabilities, and strengthen its commercial operations, the company is well-positioned to maintain its leadership in the synthetic biology market and drive long-term value for its shareholders.

The company's focus on operational efficiency is also evident in its efforts to improve gross margins, with the goal of achieving a gross margin above 50% by the end of fiscal 2025. This, coupled with the company's strong liquidity position, with cash, cash equivalents, and short-term investments of $293 million as of March 31, 2024, provides a solid foundation for Twist Bioscience to execute its growth strategy and navigate any potential market challenges.

Risks and Challenges

However, the company is not without its risks. Twist Bioscience operates in a highly competitive and rapidly evolving industry, where it faces challenges from both established players and emerging startups. The company's ability to maintain its technological edge, expand its customer base, and manage its costs will be crucial in determining its long-term success.

Additionally, the company's reliance on a limited number of large customers, with its top 10 NGS customers accounting for 36% of revenue in the second quarter of fiscal 2024, presents a potential risk. Any disruptions or changes in the business strategies of these key customers could have a significant impact on Twist Bioscience's financial performance.

Conclusion

Despite these challenges, Twist Bioscience's strong track record of innovation, its diversified product portfolio, and its commitment to operational excellence position the company as a compelling investment opportunity in the rapidly growing synthetic biology market. As the company continues to execute on its strategic initiatives and capitalize on the increasing demand for its solutions, investors may find Twist Bioscience's long-term growth prospects particularly attractive.