Conference Transcript - TWST 2026-09-15

Adam Laponis, CFO

Perfect.

Robbie Bamberger, Analyst — Baird

All right. Good afternoon, everyone. My name is Robby Bamberger. I'm a senior research analyst here at Baird covering life sciences and diagnostics. Pleased to be joined by Emily LaProust, who's the co-founder and CEO of TWIST, along with Adam Loponis, who's TWIST CFO. For those less familiar with TWIST, they make DNA to order. They write DNA in a silicon chip rather than in plastic tubes, which lets them synthesize hundreds of thousands of unique sequences at a fraction of the cost. I was able to see this in Wilsonville recently, and it was a really cool, very cool setup in their lab there. But I guess before we get into specific segments of the company, would you mind just giving a quick snapshot of the company, where we are now after FQ3, what went right in the quarter, anything you'd point out to investors?

Emily Leproust, CEO

Thanks for the invitation and the introduction. so yes at Twist we built a technology that miniaturizes the chemistry of making DNA so DNA has four letters A, C, G, T and we have a printer that has four color print heads the A, the C, the G and the T and then we print on silicon chip in the square the size of two iPhones or the new iPhone Duo So, typically, people can synthesize 96 pieces of DNA. And at Twist, because we've miniaturized it, we can make 1 million pieces. So, we are a foundry. And so, that means that the strategy for Twist is to bring more volume on the chip. It's kind of like the concept of a plane. If you fly an empty plane, it's bad. But once the plane is flying, if you can sell an extra seat, that extra seat is basically almost 100% gross margin. And so we have been on a journey to add more and more products, all made from the same chips that serve lots of applications. And so if you look at 2021, the product portfolio, compared to 2026, We've added so many products that are SAM, grew from $2 billion in 2021 to $7 billion in 2026. And it's going to be $13 billion in the future. And we are serving a number of markets. We have, of course, a small part in the academic market. And our big focus is around diagnostic tools, enabling especially cancer diagnostic, but a slow rare disease, as well, so that's our NGS applications division, as well as our DNA synthesis and protein solution division, where there we are serving mostly the therapeutics drug discovery. And so we've had great growth over the last few years, 23% growth in Q3. I think Q3, sorry, Q3, 23% growth in Q3, we just reported it. And then for Q4, I think our implied growth from the guide was 25%. And more than 20% growth for 2026. And as a reminder, our fiscal year ends in September. And a big deal for us that we told investors is we're going to be profitable in Q4. So there's 15 days left and 15 days we are profitable. We need 30 more days to close the books to prove it. But come hail or high water, our goal is to be adjusted with that break-even in Q4.

Robbie Bamberger, Analyst — Baird

That's a great overview. Thank you. Maybe just starting specifically with DSPS, about half the business which makes that synthetic genes to order, revenue grew 39% in FQ3, accelerated from 28% the quarter before. Genes shipped were up 56%, so very fast growth. I guess, what are the major drivers of your growth there? any particular product line or customer class you think you're taking the most share from there?

Emily Leproust, CEO

Yeah, so in DSPS, so it starts with D, which is DNA. DNA is synthesis and protein solution. So that was where we started. And we have many flavors of DNA. You can have it as a pool. You can have it as an array. It can be clonal, non-clonal. So you don't need to know all the details, But basically, it's like Starbucks. There's a million ways to order your coffee. You go on a website at Twist, and there's many ways to order your DNA. And then what has happened is, and especially with AI discovery, people have been coming to us saying, you know what? I get your DNA, but then I have to make a protein. Can you make the protein for us? And so we've been taking the DNA we made and then we'll apply automated and high-throughput ways to express the DNA into proteins. And again, there are many flavors. Some people, they want a Cho expression. Some they want a Heck expression. Some they want a Cell-Free expression. So again, we'll do whatever you want. so that's a very that has been a fast product group for us and then some customers are saying actually I don't want the protein I just want the data can you just analyze this and send us the data so that's what we've been doing where we take the protein we just made and then we take the target that the customers want and we can provide them binding data expressability data developability data data, epitope meaning, so whatever data they want, and then we sell data. So what's happening is maybe when we sold the DNA, maybe we would have gotten $50. When we sold the PrEP DNA, that would have been $100. When we sold the protein, that would have been $200. But now with data, depending on what they want, it can be $300 to $500 of data. So as we go up the value chain and serve people further in drug discovery, we're able to extract more value. And that has been a great source of growth for us.

Robbie Bamberger, Analyst — Baird

So AI-enabled drug discovery has been a huge portion of your potential future growth. And people have been talking about it. Maybe last quarter you talked about the shape of that growth. $25 million last year. 50 million in orders 2026, 100 million next year. I guess what gives you confidence to talk about that 2027 order growth that you're out when historically this has been a little bit shorter cycled, more transactional? So maybe just thinking about 2027 AI growth there.

Emily Leproust, CEO

Yeah, and maybe I can add some context slash clarification. So what we said was in 2025, we had $25 million of orders. And then at the investor day in May, we said that we had visibility that we'd be able to have triple digit percentage growth in 2026. And then in August, because we have more visibility, we believe that we'll be able to do triple percentage growth again in 2027. That visibility comes from us, of course, talking to our customers, but also studying our cohorts. And so our first customers in data, where we sell data, those customers were in the first half of 2025. And we've seen that customer move from a pilot, and then there's a wait time, and then they do a big model building, so that can be multi-million dollars orders. and then there's again a wait time where they're scrunching data and then they come back and they do routine drug discovery this is a target, the sequence, give me the data move on target, sequence, give me the data and that gets again and again and again the users to do AI driven drug discovery it's not model building it's actual discovery and so we've seen the movie before from the customers that were the early cohort And so now, if we get a $100,000 pilot now, we know that in so many months that will turn into millions of dollars of orders. And so we can add up all of that, all of those customers. And the confidence that we have in the number is the confidence that we have in making sure we have the capacity to meet that demand. And so, because the worst thing that could happen for us is a customer comes in, says, I have a $2 million data order, and we can't do it because we've already tied ourselves with 50 other customers. And we want to always be able to say yes to the next data. And you're right that those orders get turned into revenue very quickly. If you want sell-free data, return it in five to seven days. If you want the show data, it's 15 to 20 days. But 20 days is kind of like the upper limit. So it gets converted quickly. But we do have visibility from having the experience with so many customers over more than 18 months now.

Robbie Bamberger, Analyst — Baird

So should we think about that order growth pretty much in line with revenue growth going forward into 2027? That's good to know. And then thinking about Anthropic, I want to spend a little bit of time on that. Recently, Twist was named an independent evaluator chosen to produce AI design proteins for Anthropic at scale. Can you maybe just talk about what Twist is doing for Anthropic there? And then how many designs were made across those 15 targets noted in the press release? And maybe just talk a little bit more about that relationship.

Emily Leproust, CEO

Yeah, and so we're very careful because we have a very strong NDA with Anthropic. So we have to let them speak so we can comment on what they published. And what they published was kind of like a pilot, right? It's a taste of what's possible. So they picked some targets and they designed mini biters. So mini biters are not protein. So they designed thousands of mini biters. And they wanted someone to test the binding of those midi binders against those targets. And so we were able to make the DNA, make the protein, express the protein, and do the SPR data. And that blog reports the SPR data. In the SPR data, there is no developability data. of course a lot of what we sell is SPR plus developability and the portion that was done with TWIST was with clonal DNA expressed to hex cells with SPR if you go on our website you have other choices if you want you can do non-clonal DNA expressed with cell-free and you can use BLI or other data sets. Again, every customer can choose how they want to do their science and we are there to meet them where they are. So you're right, what West published is a small study but it's very powerful. It shows that it works. Their model was able to pick molecules that bind very strongly to the target. And so if you wanted to turn that into a drug, you probably will have to at least extend to a VHH, you probably will have to do some developability testing, but hopefully it's the kind of data that convinces everybody that, yeah, AI River Underdiscovery works. We see it every day, but it's better when a customer publishes the data.

Robbie Bamberger, Analyst — Baird

Yep, that makes sense. And was that anthropic work already inside of your expectations for fiscal 2027 orders, or no comment on that?

Emily Leproust, CEO

No, it's all included.

Robbie Bamberger, Analyst — Baird

It was included already as of last guidance? And then therapeutics revenue grew 49%.

Emily Leproust, CEO

And again, this was a small portion. Yeah, small portion. Small portion.

Robbie Bamberger, Analyst — Baird

Therapeutics revenue line grew 49% last quarter. And it was down 1% sequentially. Can you just help us understand how lumpy that business is? And then what flips that back to that sequential growth in September quarter?

Emily Leproust, CEO

So we had sequential growth in Q3. And then in Q4, we'd get to 20% growth year over year. I don't know if there's anything else you want to...

Adam Laponis, CFO

On the diagnostic side, yes, that's right. On the therapeutic side, I think it was the question. We did see a flat quarter and quarter, but about 49% year over year growth. Obviously, as we talk about the AI drug discovery, the majority of that activity, almost predominantly all that activity, is inside that therapeutics bucket. But we are seeing that continue to ramp over time and a lot of confidence in that.

Robbie Bamberger, Analyst — Baird

That's great. And then would you also mind just talking about the Amazon biodiscovery relationship and how that's driving therapeutics revenue?

Emily Leproust, CEO

So we have a deal with Amazon Biodiscovery, where Amazon Biodiscovery, they did the heavy lifting of putting all of the public AI models together in one space. Because if you are a scientist that wants to use AI, there could be a high activation energy to get going. And so Amazon, they did the hard work. So if you're a researcher, you just go on Amazon, buy some tokens, give them your target, and you're going to be able to leverage all the public AI models to generate some sequences. And so the compute gets done at Amazon. And then you have to test which one is the one that works the way you want. And so we are one of the wet lab option to do the synthesis of the DNA, synthesis of the protein expression, purification, and then the testing. And so for us, we see it as a great way to democratize AI rediscovery and enable new people to get going. And for us, it's a great way to get new customers, aggregate volume, and so, you know, we were made for that kind of work. It's kind of when you're thinking, you hear about the cloud for computers, you know, there's a cloud. What's a cloud? A cloud is a data center, right? The cloud is not in the cloud. It's real brick and mortar that needs real power, real water, real cooling, AC, computer chips inside. Well, we are that cloud for the wet lab of AI, and that drug discovery wet lab happens in Portland, Oregon, and in Boston.

Robbie Bamberger, Analyst — Baird

Awesome. And for pricing, genes shipped grew 56%, while DSPS revenue grew 39%. So implied revenue per gene has come down a little bit. But how much of that is really expressed genes in the academic promotion versus underlying price? And then how should we think about ASPs from here or there?

Emily Leproust, CEO

And so now you have to be very careful with ASP. Actually, frankly, we don't manage ASP. because what's happening is, like you said, there is a lot of gene volume growth. And an oversight portion of that growth is from antibody work. And an antibody is a human gene, and an antibody, on average, is actually small or short. It's about 600 bases, 600 base pairs, so 600 A, C, Gs, and Ts, whereas a typical gene is more like 1,500 bases. And we charge per base. It's a price per base. And so when the business is growing, the human drug discovery part is growing faster, the proportion of the size of a gene, the size of a gene starts to shrink. And so it looks like the ASP is going down, but actually what's happening is the business is ripping in the human drug discovery, but the rest of the business is going well. The academic market, which is typically non-human, that grew 30% as well. We've launched complex genes. So complex genes tends to be longer, tends to have a higher price per base, 12 cents instead of nine. And so, again, we don't want to be measured on ASP, and that's why we actually do not report ASP.

Robbie Bamberger, Analyst — Baird

What we want to be measured on is ramping revenue, on gross margin dollar expansion and then on profitability yep and turning over to ngs revenue grew 12 percent um in line with q2 and you're getting back to 20 in fq4 so i guess what drove revenue this quarter is there way to think about how much of that re-acceleration is from you know customer adoption versus existing customers you know scaling into that commercial production and a great question when you look at our ngs business the predominant amount of volume and revenue is coming from diagnostics and oftentimes those are years in the making so

Adam Laponis, CFO

you go from a customer in the r d development phase to the clinical phase to the commercial phase and we we see that that ramp happening in real time today with a number of our customers so a lot of visibility and a lot of deep relationships there um so when we know we see what's coming we feel really confident in the forecast and we're seeing of those customers continue to ramp I think we had about 8% sequential growth quarter and quarter and we expect to see that sequential growth continue moving forward.

Robbie Bamberger, Analyst — Baird

And then how durable is that you know 20% growth as we head into fiscal 2027?

Adam Laponis, CFO

I don't want to give away guidance here at this point in the year but we are again we recognize and understand and appreciate that the 20% is a marker in terms of growth rates, but we are encouraged by the continued momentum of our customers, and we look forward to giving a lot more detail here in the coming weeks.

Robbie Bamberger, Analyst — Baird

Maybe just thinking a little bit more about NGS, how should we think about a typical account progression from initial product evaluation, then through validation to commercial production? How long does that journey usually take, or is it not the same across customers?

Emily Leproust, CEO

In NGS, if you describe it well, there's an R&D phase where they have an idea for diagnostic assay. There's an R&D phase that starts with a pilot. They come to us and to all of our competitors and they say, those are the regions I want to sequence, give me a protocol that gets me the data for those regions at, frankly, the lowest price point, and also at a workflow that is as convenient as possible, because if you're going to automate a workflow to hundreds of thousands of patients a year, you don't want to do it manually, you want it to be nicely automated. So it starts with a pilot and typically we win because we have such high quality in our DNA that we lower the cost of sequencing. And then once the pilot is won, it goes into scale up. And so that customer sets up the methods in their lab on their automation and we're happy to help them, you know, whichever, you know, they choose Hamilton or Perkin-Elmer or, you know, Jackman, you know, we're going to help them to set up the automation. And then the next step is the validation and verification. And so then that's where the test is, is their test actually predicting the disease state that they're trying to do? Can they prove that they can differentiate normal versus disease. That can bring a lot of revenue to us because it can be 10,000 patients, 20,000, 50,000 patients. It can be a very, very big test. So there's a lot of revenue that happens for us during that validation and verification. And then the test gets launched commercially and typically before commercial launch there's another big bolus of revenue that comes in because they get reagents on the shelf and some customers they choose to order once a month once every six months, once a year and then we wait then there's no revenue for a while because as they ramp they're using the test that they have the reagents they have in the fridge And then once they have used up that relations, that's when they come back to reorder. And so there's an awkward moment between the validation that has big revenue and the test that has fully rent, where there's not much revenue from that customer for us. But that's why we don't really own one customers, we have thousands of customers. And then as there's a direct relationship, the more tests they sell, the more revenue we get because ultimately they need to use some twist reagent for every patient. So that's for assays where every patient gets the same test, for instance, liquid biopsy, rare disease, anything that's tumor agnostic. And then there are some tests that are tumor-informed, like MRD. And actually, that is a different setup for us because those diagnostic companies, they cannot buy ahead a lot of inventory for tumor-informed because they don't know what the test is going to be. And so for there, there's a more direct relationship. One patient, one test. We get the sequence today. So if it's express, we ship tomorrow. If it's not express, we ship in five days. And then we invoice five days later. So there, there's a direct relationship. As the patient count goes up, our revenue goes up five days later.

Robbie Bamberger, Analyst — Baird

Academic and government kind of moving to end markets. It was a nice surprise. FQ3 grew 32% versus 3% the prior quarter, driven by U.S. accounts, with several large customers returning. So despite the noise with NIH, what are you guys seeing among this customer set? How much of the ongoing promotion versus durable customer wins is driving that growth?

Emily Leproust, CEO

So first of all, we're underexposed to academia. I think if you're a twist account manager and you have to go chase $2,000 in academia or $2 million deal with an AI company, your mind may be focused on the bigger deal, so we're slightly underexposed. But we offer extremely high value, especially in an environment where funding is shrinking, number one, and two, shrinking is viable. It's hard to know when you're going to get funded. What we offer as a brand is you get high-quality DNA, you get it fast, and you get it, you know, best price in the industry. And so, well, lower price, but higher quality and fast. So it's extremely high value. So yes, discount always, promotion always helpful, mind share, but what won us that nice growth is as some funding got released, people preferentially twist more and more because of the high value that we bring.

Robbie Bamberger, Analyst — Baird

Moving on to financials, longer term guide. you have doubling revenue by 2031, which implies mid-teens compound growth. That 2026 base is now higher than when you guided at your analyst day. Does that plan now seem a little conservative based off of your initial 2026 guide? And maybe can you give some high-level understanding between DSPS and NGS through 2031?

Emily Leproust, CEO

I think in general, we are a high-growth company. and once we get to adjusted EBITDA break even in Q4 we signal to an investor that we'll self-fund the business and reinvest those profits to drive growth and we have multiple opportunities today we talked about AI discovery, we talked about diagnostics we didn't talk about mRNA personalized cancer therapy, but that's another big growth opportunity for us. We don't talk about animal genotyping, it's not a sexy market, but it's a big growth opportunity for us. And all of those applications, they all come from the same chip, so we are not over-indexed on any one market and that's by design and so yeah I'm glad to hear that it's a conservative plan we are in it to beat and raise and we've had 14 quarters of revenue growth we brought our growth margin from 30% to more than 50% we've seen now that we'll get to 60% gross margin and so we'll keep running the business. But at the end of the day, it's about chip utilization, bringing more volume on the chip. And so as we get more and more applications that need custom DNA to enable that value, that we're going to have volume growth coming to us for a while.

Robbie Bamberger, Analyst — Baird

We have about a minute left. Maybe just capping off, what do you think are the two biggest opportunities for TWiST over the next year or so?

Emily Leproust, CEO

The three, two biggest opportunities. Good with that. I mean, it's AI discovery for sure. It's MRD and then it's mRNA, personalized cancer therapeutics. Those are probably the three big ones. and what we like is they have different time scale and they have different fields so AI discovery we participate in the R&D, the discovery part with mRNA personalized cancer therapy there we participate in the manufacturing every patient who will be part of it could be manufactured on the TWIST platform And then with MRDE, it's a patient gets a bespoke test, but all of those, they require customized DNA at scale.

Robbie Bamberger, Analyst — Baird

Awesome. And I think that's just about all the time we have. So please join me in thanking Emily and Adam and the team from Twist for coming on. Thank you, guys.

Adam Laponis, CFO

Thanks, Robbie.