Twist Bioscience Corporation (TWST) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed strong growth in AI-driven workflows and therapeutics, with sustainable growth potential. Despite some declines in specific segments, the company increased its full-year revenue guidance and expects to achieve adjusted EBITDA breakeven. Management's confidence in gross margin improvement and market expansion further supports a positive outlook. The market cap suggests a moderate reaction, leading to a 'Positive' sentiment rating.
Key Financial Performance
Total Revenue $110.7 million, up more than 19% year-over-year. Growth driven by DNA Synthesis and Protein Solutions (28% growth) and NGS applications (12% growth).
DNA Synthesis and Protein Solutions Revenue $53.3 million, growth of 28% year-over-year. Growth attributed to strength in AI-enabled drug discovery and partnerships like Amazon Bio Discovery.
NGS Applications Revenue $57.4 million, growth of 12% year-over-year and 9% sequentially. Growth driven by top accounts and increasing adoption in oncology diagnostics.
Gross Margin 51.6%, an improvement of approximately 200 basis points year-over-year. Improvement driven by strong revenue growth and investments in new product offerings and manufacturing capacity.
Americas Revenue $64.3 million, growth of 17% year-over-year. Growth attributed to strong performance in the region.
EMEA Revenue $37.3 million, growth of 22% year-over-year. Growth attributed to strong performance in the region.
APAC Revenue $9.1 million, growth of 30% year-over-year. Growth attributed to strong performance in the region.
Therapeutics Revenue $40.8 million, growth of 55% year-over-year. Growth driven by increased uptake of products by large pharma and biotech customers, including AI-enabled discovery.
Diagnostics Revenue $40 million, growth of 14% year-over-year. Growth driven by strong growth from top accounts.
Industry and Applied Revenue $5.8 million, a decrease from $7 million year-over-year. Decline attributed to lower demand in this segment.
Academic Research and Government Revenue $12.8 million, growth of 3% year-over-year. Growth driven by strength in U.S. accounts.
Global Supply Partner Revenue $11.4 million, a decrease from $12 million year-over-year. Decline attributed to order timing.
Adjusted EBITDA Loss of approximately $13.3 million, an improvement of approximately $1.5 million year-over-year. Improvement driven by revenue growth, gross margin expansion, and operating expense discipline.
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Operating Highlights
DNA Synthesis and Protein Solutions: Revenue grew 28% year-over-year, driven by AI-enabled drug discovery. Twist partnered with Amazon Web Services for its AI-powered drug discovery application, providing wet lab services to scientific launch partners like Memorial Sloan Kettering Cancer Center and Johns Hopkins University.
NGS Applications: Revenue grew 12% year-over-year and 9% sequentially, with strong adoption in oncology diagnostics and minimal residual disease (MRD) testing. Twist's target enrichment and library preparation solutions support high sensitivity applications.
B-Body Bispecific Platform: Licensed in February to expand capabilities in bispecifics, a growing modality. Received first orders and has a robust funnel of future opportunities.
Geographic Revenue Growth: Americas revenue grew 17% year-over-year to $64.3 million. EMEA revenue increased 22% to $37.3 million. APAC revenue rose 30% to $9.1 million, with China contributing approximately 1% of total revenue.
Industry Revenue Growth: Therapeutics revenue grew 55% year-over-year to $40.8 million, driven by large pharma and biotech customers. Diagnostics revenue increased 14% to $40 million, with strong growth from top accounts.
Gross Margin Expansion: Gross margin improved to 51.6%, up 200 basis points year-over-year, driven by revenue growth and investments in manufacturing capacity.
Operational Efficiency: Reduced 36 positions to reallocate resources to high-return opportunities, contributing to expected $6 million sequential OpEx improvement in Q4.
AI-Enabled Drug Discovery: Invested early in AI-enabled drug discovery, complementing traditional drug discovery efforts. Partnered with AWS to support AI models for antibody candidate optimization.
Path to Profitability: On track to achieve adjusted EBITDA breakeven in Q4 fiscal 2026 through revenue growth, gross margin expansion, and disciplined operating expense management.
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Risk or Challenges
Litigation Settlement Costs: The company reached an agreement in principle regarding a securities class action for approximately $17.1 million. This settlement, while resolving the issue, has financial implications and could impact cash reserves and operational focus.
Operating Expenses: Operating expenses increased to $95.8 million, reflecting deliberate investments in commercial organization and digital infrastructure. However, these expenses could strain profitability if revenue growth does not offset them.
Cash Reserves: Cash reserves decreased to $171.7 million from $197.9 million, reflecting operating cash usage, CapEx investments, and other expenditures. This decline could limit financial flexibility.
Manufacturing Challenges: Some DNA sequences present manufacturing challenges, such as repeat regions, hairpins, and extreme GC content. This could lead to lost orders if customers choose alternative providers.
Supply Chain and Scalability: As MRD testing scales, operational requirements become more demanding, requiring rapid turnaround and consistent performance. Any disruptions in supply chain or scalability could impact customer satisfaction and revenue.
Geographic Revenue Dependence: China accounts for only 1% of total revenue, indicating limited exposure to this market. This could be a missed growth opportunity or a risk if other regions underperform.
Revenue Growth Dependence: The company’s growth heavily relies on NGS and DNA Synthesis and Protein Solutions. Any slowdown in these segments could significantly impact overall performance.
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Guidance & Outlook
Revenue Guidance for Fiscal 2026: Total revenue is expected to be between $442 million and $447 million, representing growth of approximately 17% to 19%.
Revenue Guidance for Q3 Fiscal 2026: Total revenue is expected to be between $114 million and $115 million, representing growth of approximately 19% year-over-year at the midpoint.
Adjusted EBITDA Breakeven: The company expects to achieve adjusted EBITDA breakeven in the fourth quarter of fiscal 2026.
NGS Growth Expectations: NGS is expected to return to 20% growth by Q4 of fiscal 2026, with sequential growth in the second half of the year.
Operational Efficiency Improvements: The company has implemented cost initiatives, including a reduction of 36 positions, to reallocate resources to high-return opportunities and expects sequential operating expense improvement of $6 million in Q4 of fiscal 2026.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How did AI-driven workflows perform in the quarter relative to internal expectations, and how did they contribute to the updated fiscal guidance?
A:AI-driven workflows performed well, with DSPS growing 28% year-over-year and therapeutics surpassing $40 million for the quarter. AI-driven drug discovery increased the number of sequences analyzed, enabling upselling to data and cell characterization, contributing to the updated fiscal guidance.
Q:What drove the 55% growth in therapeutics in Q2, and is this growth sustainable?
A:The growth was driven by AI-related programs and a broad menu of DNA synthesis options. The growth is sustainable as it is now driven by dozens of accounts rather than a few, and the company is not guiding per product groups but sees broad-based growth potential.
Q:What is the current state of the academic and government end market, and how is the company addressing challenges there?
A:The academic and government end market is under funding pressure, but the company is taking market share by offering premium discounts on Express Genes, enabling academic customers to get better value and speed for their research.
Q:Why was gross margin down sequentially, and what is the outlook for gross margin improvement?
A:Gross margin was down due to deliberate investments in IgG and characterization for AI discovery projects and digital capabilities. The company remains confident in achieving a 52% or better gross margin for the year and expects improvements with new products and workflow automation.
Q:What further investments are planned for automated workflows, and how much of the $25 million in AI project bookings from Q4 has been converted to revenue?
A:Further investments in automated workflows will focus on adding capacity for new DNA synthesis flavors. The $25 million in AI project bookings from Q4 has mostly been converted to revenue, with most of it shipped by Q1.
Q:What drove the increase in full-year revenue guidance, and which areas contributed the most?
A:The increase in full-year revenue guidance was driven by strength in DSPS, with sequential improvements expected in NGS and continued growth in DSPS.
Q:What is the timeline for delivering complex DNA offerings, and what opportunities does this unlock?
A:The company plans to scale complex DNA offerings in the coming quarters, starting with early access for select customers. This unlocks opportunities in nucleic acid therapeutics, plant engineering, and AI-driven projects, addressing previously missed opportunities due to sequence complexity.
Q:How should we think about leverage and EBITDA margin incrementals beyond achieving adjusted EBITDA breakeven in Q4?
A:The company is focused on achieving adjusted EBITDA breakeven in Q4 while maximizing revenue growth. Future leverage and EBITDA margin incrementals will balance sustained growth and market expectations, with more details to be shared at the upcoming Investor Day.
Q:What is the contribution of gene characterization to growth, and how is AI demand evolving?
A:Gene characterization contributed to growth, with an increase in the number of genes used internally to generate data. AI demand is evolving from building models to more frequent, smaller orders as customers turn the crank on their AI-driven drug discovery processes.
Q:What is the run rate for AI orders in FY '26, and how are revenues distributed across oligos, IgG, and analytical data?
A:The outsized growth in therapeutics is predominantly driven by AI discovery work, but specific run rates and revenue breakdowns across oligos, IgG, and analytical data were not disclosed.
Q:What is the outlook for diagnostics and NGS growth for the rest of the year?
A:Diagnostics and NGS are expected to see incremental sequential growth in Q3 and Q4, with at least 20% growth in NGS in Q4 driven by liquid biopsy and MRD customers ramping up.
Q:Review of Unclear Management Responses
A:Management avoided providing specific run rates for AI orders in FY '26 and a detailed revenue breakdown across oligos, IgG, and analytical data. Additionally, they did not disclose the exact contribution of gene characterization to growth, citing competitive concerns.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI drug
Amazon Bio
DNA Synthesis
DNA sequence
DNA synthesis
NGS application
Protein Solutions
Slide
Synthesis Protein
acceptance
action
antibody
approach
capability
characterization
continuum
cost scale
design
drug discovery
gene DNA
gene fragment
hundred thousand
lab
library
model
panel
partner
pool
program
protein solution
sequence set
speed scale
therapeutic
thousand sequence
track
TWST Transcript
Twist Bioscience Corporation (TWST) Q2 2026 Earnings Call Transcript
Positive5-4
The earnings call revealed strong growth in AI-driven workflows and therapeutics, with sustainable growth potential. Despite some declines in specific segments, the company increased its full-year revenue guidance and expects to achieve adjusted EBITDA breakeven. Management's confidence in gross margin improvement and market expansion further supports a positive outlook. The market cap suggests a moderate reaction, leading to a 'Positive' sentiment rating.
Twist Bioscience Corporation (TWST) Presents at Barclays 28th Annual Global Healthcare Conference Transcript
Neutral3-10
Twist Bioscience Corporation (TWST) Q1 2026 Earnings Call Transcript
Positive2-2
The earnings call highlights strong revenue growth, particularly in DNA Synthesis and NGS, driven by AI drug discovery demand and new partnerships. Despite a Q1 EBITDA loss, the year-over-year improvement reflects strategic investments and efficient scaling. The company's raised guidance and confidence in future growth, alongside a solid liquidity position, suggest a positive outlook. However, ongoing investments may moderate margin improvements in the short term. Given the market cap, the stock is likely to react positively, with a 2%-8% increase expected over the next two weeks.
Twist Bioscience Corporation (TWST) Presents at 44th Annual J.P. Morgan Healthcare Conference Transcript
Neutral1-12
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