Twist Bioscience Corp

NASDAQ:TWST

Earnings Call Analysis

Twist Biosciences Reports Record Growth and 2025 Revenue Guidance

Twist Biosciences achieved a remarkable fourth quarter with revenues reaching $84.7 million, a 27% year-over-year increase, and an annual total of $313 million, up 28%. Gross margins exceeded expectations at 45.1% for Q4, up from 36.6% in FY2023, driven by successful product lines like SynBio. The company anticipates total revenue of $357-$377 million for FY2025, representing 17%-20% growth. Additionally, projected gross margins are set to improve to around 48%. With a strong cash position of $276.4 million, Twist is on a steady path towards profitability and significant growth in both SynBio and NGS markets.

Strong Financial Performance and Growth Metrics

Twist Biosciences reported a record revenue of $84.7 million in the fourth quarter, marking a 27% increase year-over-year and a sequential growth of 4%. For the fiscal year 2024, total revenue reached $313 million, an impressive growth of 28% compared to the previous year. Notably, Q4 orders surged to $88.2 million, reflecting a robust 24% increase from the prior year, indicating sustained demand across their product lines.

Diverse Revenue Streams: SynBio, NGS, and Biopharma

The company’s revenue breakdown revealed significant contributions from various segments. SynBio revenue climbed to $33.9 million in Q4, representing a 28% rise year-over-year, while NGS (Next-Generation Sequencing) revenue grew to $45.5 million, a 23% enhancement year-over-year. For the fiscal year 2024, NGS revenue increased significantly to $169.1 million, demonstrating exceptional growth of 37%, bolstered by new customer adoption and strong demand for NGS applications.

Exceptional Improvements in Profitability Metrics

Twist achieved a gross margin of 45.1% for Q4, exceeding expectations and marking a cumulative yearly gross margin of 42.6%, up from 36.6% in fiscal 2023. This margin expansion can be attributed to enhanced operational efficiencies and a commitment to continuous improvement. The company expects gross margins to reach approximately 50% by the end of Q4 fiscal 2025, driven by rising revenues and effective cost management.

Strategic Focus on Operational Efficiency and Automation

Executive leadership highlighted successful efforts in automation and continuous process improvements, which facilitated significant increases in efficiency. For instance, a new production process doubled oligo manufacturing output to 16 million oligos daily without increasing headcount. This operational prowess is crucial for sustaining profit margins while scaling business operations.

Guidance for Fiscal 2025 and Long-term Projections

Looking ahead, Twist provided ambitious guidance for fiscal 2025, forecasting total revenue between $357 million and $377 million, representing a growth rate of approximately 17% to 20% year-over-year. The breakdown includes SynBio revenue expectations of $142 million to $146 million (15% to 18% growth); NGS revenue of $204 million to $209 million (20% to 24% growth); and Biopharma revenue projected at $21 million to $22 million (3% to 8% growth).

Strengthening Balance Sheet and Improving Cash Flow

The financial report highlighted a solid cash position of approximately $276.4 million at the end of the fiscal year, bolstered by a recent infusion of $15 million from a partnership agreement. Adjusted EBITDA losses improved significantly, with a loss of approximately $93.5 million for the year but showing a $54 million improvement over the prior year. The company aims to achieve adjusted EBITDA breakeven in the near future, positioning itself for continued financial stability.

Innovative Product Development and Market Expansions

Twist continues to expand its product portfolio, particularly in the Express Genes segment, which has been pivotal in securing new customers and increasing overall revenues. The Express product offerings have proven to enhance margins and attract clients who previously manufactured their own solutions. The ongoing R&D efforts on proprietary enzymes also promise to strengthen their market position and operational leverage.

Market Dynamics and Competitive Positioning

Amidst changes in the economic landscape and potential NIH budget constraints, Twist remains confidently positioned with its low exposure to such funding (under 1%). This stability, combined with the company's made-in-the-USA manufacturing ethos, provides a competitive edge over international counterparts. The strategic focus on enhancing customer experience through e-commerce is also set to attract more long-tail customers, potentially boosting market share.

Conclusion: A Path Forward

Overall, Twist Biosciences has demonstrated substantial growth across its business segments, improved profitability metrics, and strategic initiatives aimed at operational efficiency and market expansion. By continuing to leverage its competitive advantages and focus on disruptive innovations, the company appears well-positioned for sustained growth and value creation in the coming years.

Earnings Call Transcript 2024-Q4

[Operator]

Welcome to Twist Biosciences 2024 Fourth Quarter Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Angela Bitting, SVP of Corporate Affairs.

[Angela Bitting, executive]

Thank you, operator. Good morning, everyone. I would like to thank you for joining us for Twist Biosciences conference call to review our fiscal 2024 fourth quarter financial results and business progress. We issued our financial results press release area before the market and is available at our website at www.twistbioscience.com. With me on the call today are Dr. Emily Leproust, CEO and Co-Founder of Twist; Adam Laponis, CFO of Twist; and Dr. Patrick Fin, President and COO of Twist.

Today, we will discuss our business progress, financial and operational performance as well as growth opportunities. We will then open the call for questions. [Operator Instructions] This call is being recorded, and the audio portion will be archived in the Investors section of our website and will be available for 2 weeks.

During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today as well as those more fully described in our filings with the SEC. The forward-looking statements in this presentation are based on the information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law. We'll also discuss adjusted EBITDA as a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies. When reported, a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings documents, which can be found on the Investors section of our website. With that, I will now turn the call over to our CEO and Co-Founder, Emily Leproust.

[Emily Leproust, executive]

Thank you, Angela, and good morning, everyone. Today, our team delivered a record quarter in revenue and margin growth, ending the year with a strong cash balance. We exceeded our guidance in every metric, including total revenue, gross margin, capital expenditure and ending cash balance. We increased revenue for the seventh quarter in a row, reporting $84.7 million. This is an increase of 27% year-over-year and 4% sequentially.

For the year, we reported $313 million in revenue, an increase of 28% over fiscal 2023. Gross margin for the quarter came in ahead of our guidance at 45.1%. For the year, gross margin was 42.6% compared to 36.6% for fiscal 2023, demonstrating the leverage of fixed cost with higher volume as well as our ongoing commitment to continuous improvement and margin expansion initiatives.

Trends over the quarter and the year came from our express product portfolio and genes as a whole, alongside continued growth in our NGS tool portfolio. We are also seeing positive traction in biopharma. Overall, the business remains strong, and we are confident that this momentum will carry us into fiscal 2025.

Before we dive into the details from the quarter, it's worthwhile reflecting on our journey since our IPO just over 6 years ago. During this time, we have been on a strong upward trajectory, growing our customer base, expanding our product portfolio and capturing market share, all by leveraging our proprietary platform to drive sustainable growth.

Our differentiated technology to [indiscernible] chemistry and manufacture of DNA and silicon provides significant advantages for our customers and for Twist. Our platform allows us to deliver high-quality products at an affordable price and provide significant sustainability advantages of plate-based approaches. Importantly, we offer custom synthesis at unmet scale, which enables the growing menu of products in different iterations geared for diversification.

We have harness our innovation engine to strategically and judiciously expand our product portfolio. Today, with our base of more than 3,500 customers across multiple industries, hundreds of skis selling a wide range of diversifications, increasing market share in the [indiscernible] market. We are operating with incredible execution and financial discipline. We are now in the final push towards an incredibly important milestone, crossing the threshold of adjusted EBITDA breakeven.

Our disruptive platform has fueled all of our growth to date. We believe there is tremendous potential for further development built on this technology. Once we reach EBITDA breakeven, we will be laser focused on becoming cash flow positive, driving revenue while investing in profitable growth through our innovation engine.

Our strategy applies its proactive R&D with exceptional operational execution and an underground dusting of our customers' need. From the frontline teams to the executive leadership, we have the technical expertise and business acumen that will continue to fuel our next sale of growth as a company.

Taking a deeper dive into our results, beginning with SymBio. We have an express portfolio that is differentiated in the industry in terms of price, turnaround time and ability to deliver at scale. One year ago, we launched our Express clonal genes. And over the course of the last year, we have added Tim Fragrance, protein, and this is just a beginning. We have already seen this portfolio bring in new customers and new accounts taking market share from competitors.

And this product line is accretive to our margin. We see our similar product groups gaining traction and market share. Revenue from the Express offerings grew quarter-over-quarter as did net new accounts coming into Twist.

Turning to NGS. We saw strong performance driven primarily by customers developing and selling assets for myriad applications from rare disease and cancer diagnostics to liquid work and beyond. These customers include Twist target enrichment panels and other Twist tools in their assays.

The revenues from this segment is sticky due to the high switching costs associated with revalidating a test with a different provider. Building on our success in delivering custom targeted panels quickly, we launched our minimal residual disease offering several years ago. Today, we are seeing significant uptake for tumor-informed MRD panels with thousands of markets.

We call that as customers advance their R&D programs. We benefit as each phase of development for this test requirement more DNA. We expect MRD to fill a similar growth trajectory of liquidity with substantial revenue anticipated in 2026. By maintaining our frequency analytic approach, meaning our workforce compatible with whatever platform our customers prefer. We remain a key partner providing NGS workflows for many different applications beyond equity and minimal residual disease.

Previously, we have highlighted our collaboration with Illumina [indiscernible] among others, and last month, Element announced our inclusion in the Trinity workflow. Looking at growth moving forward, we continue to see customers adding more sequencing tools, including our application for car truck solution as well as build buffer [indiscernible].

As we prioritize growth vectors moving into fiscal 2025, one area that we believe it is underappreciated by investors is our ability to develop proprietary enzymes. And then play a role in so many workflows across SynBio and GS Biopharma and in fact, entire companies are dedicated to creating enzymes. At Twist, using appropriately rating platform, we can test thousands of enzyme variations in parallel going through the design build test learn cycle in a matter of weeks.

This rapid deterioration allows us to tailor enzyme for specific applications, applying our SynBio platform to develop new products for our customers. In the last several quarters, we have identified the proprietary [indiscernible] and incorporated it into a CDNA library prep kit specific to the liquid biopsy market. The data shows it outperforms all key offerings and the feedback has been positive with customers seeing a significant improvement in sensitivity.

Though these ages were developed specifically for this application. Customers that pursue walls sequencing can leverage this [indiscernible] result enrichment and see improved results in [indiscernible]. Importantly, while this new growth vector allows us to tap into new market opportunities, the development of our property lags resulted from only 2 R&D employees working for less than 1 year and what we believe will have an incredible ROI.

We intend to pursue several other ins and classes in a structured and disciplined manner to continue providing value to our customers while tapping into new applications. In addition, making our own proprietary enzyme is an example of in-sourcing that reduces our supply chain risk and improve our margin.

Turning to Biopharma Services. Our revenue increased quarter-over-quarter. More importantly, orders increased. For biopharma services, we know that orders convert directly to revenue in 3 to 9 months. We believe this marks a turning point for the biopharma solutions group with solid potential to continue to build the service revenue.

Validating our to up to date, Zoma paid a $50 million in cash for half of the future milestones and royalties as of October 2024. Importantly, we retain half of the upside, which has the potential to be significant in the future. We view the cash today as positive in our drive to adjusted EBITDA breakeven without accessing the equity market.

[indiscernible] team continues to advance development of the technology and recently converted to water-based enzymatic chemistry to synthesize DNA on our CMOS-based chips. This change applied to our terabyte scale product under development will mean lower cost and a more sustainable solution. I'd now like to turn the call over to Paddy for commentary on some key margin initiatives.

[Patrick Finn, executive]

Thanks, Emily. As we close fiscal 2024, it's remarkable what we've achieved as we remain laser-focused on driving to profitability. For those of you who have had the pleasure of visiting our sites, you've seen the exceptional automation we have in place to date. It is through a series of well-executed continuous process improvements along with software implementation that we're able to expand our portfolio capabilities and importantly, our efficiency. And while the increase in revenue has and will continue to have the largest impact on margin, we are working diligently to hold costs relatively flat while growing revenue.

Through well-executed continuous process improvements, operational efficiency and a culture focused on operational excellence, we see continued margin growth moving forward. A few examples of our increasing efficiency include a new software distribution process that more than doubled the distribution capacity with the same headcount.

Another example implemented over the last year is a new process for our oligo manufacturing that allows us to double the number of oligos to 16 million oligos per day in the same time and footprint. The second example not only increases our efficiency and turnaround time, but also allows us to increase our available revenue capacity.

Third, we made changes to automate our NGS panel production that resulted in significant savings annually from the reduction of plastic tips and reagents, which also increases capacity. These are just 3 examples and there are many more. Additionally, we're focused on optimizing our supply chain given our increasing volume and purchasing power, consolidating vendors while maintaining second sourcing optionality.

We believe our commitment to automation and continued operational excellence will allow us to march to 50% gross margin exited Q4 fiscal 2025 and push beyond. Our larger team continues to service opportunities for cost and process optimization as we introduce new vectors of profitable growth for Twist.

With that, I'll turn the call over to Adam to discuss our financials.

[Adam Laponis, executive]

Thank you, Paddy. Revenue for the fourth quarter increased to $84.7 million, growth of 27% year-over-year and approximately 4% sequentially. For fiscal 2024, revenue increased to $313 million, growth of 28% year-over-year. Q4 orders were $88.2 million, an increase of 24% year-over-year.

Orders for the year were $344.2 million compared to $263.8 million for fiscal 2023. Starting in Q1 '25, we will focus order disclosures of biopharma solutions given the longer lead time for revenue recognition. For the full business, we will focus both on disclosures and guidance for revenue growth, gross margin expansion and our path to adjusted EBITDA profitability, which we believe are better indicators of performance.

Gross margin came in higher than expected at 45.1% for the fourth quarter of fiscal 2024. During the quarter, we shipped to approximately 2,402 bill to customers, which we define as having a single billable address that may be multiple labs and/or sites. We ended the quarter with cash, cash equivalents and short-term investments of approximately $276.4 million as of September 30, 2024.

Subsequently, in October of 2024, we received $15 million in cash from Zoma the rights to half of our potential milestone and royalty payments related to select biopharma programs as of that date. This additional cash is not included in our fiscal 2024 year-end financials.

Taking a deeper dive into revenue. SynBio revenue increased to $33.9 million, growth of 28% year-over-year with orders increasing to $36.3 million. For the full year, SynBio revenue increased to $123.5 million compared to $98.2 million in fiscal '23, an increase of 26%.

NGS revenue for the fourth quarter grew to approximately $45.5 million compared to $37.1 million in the fourth quarter of fiscal of '23, an increase of 23% year-over-year. Orders increased to $46 million and we see continued sequential growth for NGS in the year ahead.

For the quarter, revenue from our top 10 NGS customers accounted for approximately 40% of NGS revenue. For fiscal 2024, NGS revenue increased to $169.1 million compared to $123.7 million for fiscal 2023, exceptional growth of 37%. We serve 620 NGS customers in the quarter with 143 having adopted our products.

For Biopharma, revenue was $5.3 million, with orders of $5.9 million. We had 89 active programs as of the end of September 2024. We started 68 new programs during the quarter. For fiscal 2024 revenue was $20.3 million.

Looking geographically, Americas revenue increased to approximately $52.7 million for the fourth quarter compared to $43.7 million in the same period of fiscal 2023, growth of 21% year-over-year. For the fiscal year, the Americas accounted for 62% of revenue.

EMEA revenue rose to $25.5 million for the fourth quarter versus $17.2 million in the same period of fiscal '23, growth of 48% year-over-year. For the fiscal year, EMEA represented 30% of revenue. APAC revenue increased to $6.5 million in the fourth quarter compared to $6.1 million in the same period of fiscal '23, growth of 8% year-over-year.

APAC accounted for 8% of our revenue. China continues to be a relatively small portion of our revenue and approximately 2% of total revenue for fiscal 2024. Moving down the P&L. Our gross margin for the fourth quarter increased to 45.1% and for the fiscal year, gross margin increased to 42.6%, an improvement of 6 margin points versus fiscal 2023.

Our Express portfolio, the margin initiatives, including those Paddy covered earlier and their commitment to holding overhead and labor costs flat while growing revenue resulted in the margin expansion for both the quarter and the year.

Looking towards fiscal 2025, we continue to expect, on average, 75% to 80% of incremental revenue to drop the gross margin line. Operating expenses, excluding cost of revenues for the fourth quarter were $74.3 million compared with $74.6 million in the same period of 2023. Highlighting our focus on holding operating expenses relatively flat while continuing to grow revenue and expand gross margin.

Operating expenses included approximately $6 million for data storage in the fourth quarter. Operating expenses, excluding the cost of revenues for fiscal 2024 was $354 million, including the impairment charge of $45 million in fiscal Q3 compared with $37 million in fiscal 2023.

Looking at our progress and our path to profitability. For the fourth quarter of fiscal '24, adjusted EBITDA was a loss of approximately $17 million, an improvement of $9 million versus the fourth quarter of fiscal '23. For fiscal 2024, adjusted EBITDA was a loss of approximately $93.5 million, an improvement of approximately $54 million versus $147.3 million for fiscal 2023.

Cash flow from operating activities continues to improve and we are driving the adjusted EBITDA breakeven for the 12 months ended September 30, 2024, net cash used in operating activities was $64.1 million compared to $142.5 million for the equivalent 12-month period in 2023.

Capital expenditures in fiscal '24 were $5 million, a reduction of $23 million versus $28 million of CapEx and in fiscal '23. We ended the year with cash, cash equivalents and short-term investments of approximately $276.4 million versus $289.4 million as of June 30. A reminder that this does not include the $15 million in cash from Zone.

Turning to guidance. For fiscal 2025, we expect total revenue of $357 million to $377 million, growth of approximately 17% to 20% year-over-year. SynBio revenue of $142 million to $146 million, growth of approximately 15% to 18% year-over-year. We expect NGS revenue of $204 million to $209 million, growth of approximately 20% to 24% year-over-year.

For biopharma revenue of $21 million to $22 million, growth of approximately 3% to 8% year-over-year. For Q1 of fiscal 2025, we expect total revenue of approximately $87 million, growth of approximately 22% versus Q1 of fiscal 2024. SynBio revenue of approximately $34 million, growth of approximately 26% year-over-year.

NGS revenue of approximately $48 million, growth of 22% year-over-year, and biopharma revenue of approximately $5 million. For the full year of fiscal 2025, we expect gross margin of approximately 48% with quarterly sequential improvements in Q4 fiscal 2025 gross margin of 50%. We expect adjusted EBITDA loss of approximately $60 million to $65 million for fiscal 2025, an improvement of approximately $30 million to $35 million versus fiscal 2024. Q1 fiscal 2025 adjusted EBITDA loss of approximately $20 million with sequential improvement in subsequent quarters.

As a reminder, Q1 contains an additional bump in OpEx due to bonus and promotional payouts. With that, I'll turn the call back to Emily.

[Emily Leproust, executive]

Thank you, Adam. As we begin fiscal 2025, we stand at the cusp of a new era for Twist. The PASI has been a testament to the power of combining the general technology game-changing products under relentless trial to enable our customers' success. We have advanced our product portfolio and grown revenue.

More importantly, our commitment to providing cutting-edge solutions empowers our customers to take some of the world's most pressing challenges. By delivering precision efficiency, speed and scalability in our products and services, we have equipped researchers across myriad industries to pioneer breakthroughs that improve health frostbite and drive economic growth.

We believe that when our customers succeed, we all succeed creating a repo effect of positive change that extends globally. Looking ahead, we are more committed than ever to pushing the binaries of what's possible. We will continue to invest in research and development, employing fiscal discipline to provide products that generate profitable growth.

We'll continue to focus on delivering value to all of our stakeholders, entering financial discipline to hold firm and our march to adjusted EBITDA breakeven. Before I conclude, I'd like to take a moment to thank our incredible employees who go above and beyond to serve our customers and each other every single day. It's been a banner year for Twist, and our employees so a recognition for what we have achieved together. Our momentum is building, and we look forward to keeping you apprised of our progress. Operator?

[Operator]

[Operator Instructions] Our first question comes from the line of Matt Sykes with Goldman Sachs.

[Matthew Sykes, analyst]

Maybe just I'll ask 2 questions just upfront and get back in the queue. But can you just give us an idea for how Express genes and new products trended as a portion of this in bio mix throughout the course of this year and potentially what it was in Q4? And then secondly, understanding the operational efficiencies that you guys outlined, plus the revenue growth. Could you just -- Adam, can you just give us an idea of OpEx and the trends next year both for R&D and SG&A and how we should think about phasing of that spend either in terms of growth versus this year or quarterly phasing next year?

[Adam Laponis, executive]

Yes, absolutely. Matt. Thanks for the question. Excited to be here. I'll start with the second 1 first and we'll come back in to the first one. In terms of the second one, in terms of phasing, we expect very modest increases, I call it inflationary increases in OpEx. A big chunk of it will come in the first quarter as we do our merit annual bonus increases for the year, but it will be pretty modest increases throughout the balance of the year, fairly in line with what we saw last year. Matt, in terms of your first question, in terms of drivers of growth as well as in gross margin. I think Paddy hit on some of the really exciting opportunities we have in terms of the projects that we're driving, but we see that continued sequential improvement in gross margin each of the quarters starting in Q1 and going throughout the year and still reiterating the exit of about 50% gross margins for Q4.

[Operator]

Our next question comes from the line of Vijay Kumar with Evercore ISI.

[Vijay Kumar, analyst]

On the big picture here, post elections, a lot of questions on NIH budgets and -- compared to landscape. Can you talk about what is your total exposure to NIH budgets? And I know customers, I think, in the past have asked you where Twist is manufacturing your genes -- have you seen any change in competitive behavior? Is Twist seeing more share gains?

[Emily Leproust, executive]

Yes. Thank you, Vijay. On the NIH, we have a very small exposure, it's probably less than 1%. So it's an opportunity for us to do better there. And we know that in the past any time, budget were constrained. It was an opportunity for us to take market share. Because again, our brand is high [indiscernible] quit at a very, very good price. So it's going to be an opportunity, I think, for us to lean into that. And then as far as production yes, 100% of our DNA is made in the U.S. And over the last few quarters, there's definitely more question around where is DNA being made. And so I think our customers are definitely thinking about their supply chain, and it's definitely going to be a headwind for our competitors that manufacture outside of the U.S. And it's -- I think it's a tailwind for us.

[Vijay Kumar, analyst]

Understood. And maybe one on the P&L side here. What is -- I know it's related party -- there was some confusion related party of revenues? What is related part of revenue? How much was it in this quarter -- in your EBITDA guidance is the implied fourth quarter EBITDA exit rate of in the minus 10% to minus 13% kind of range?

[Adam Laponis, executive]

Happy to take the question. In terms of related party revenue was about $12 million in Q4, relatively in line with the legacy. And in terms of EBITDA, what we said is $20 million in Q1, the sequential improvement all the way throughout the year and netting out at 60% to 65% for the year. So the range you're talking about are unreasonable.

[Operator]

Our next question comes from the line of Sung Ji Nam with Scotia Bank.

[Sung Ji Nam, analyst]

Maybe one for Emily. Just -- it's great to see the continued partnership across the next-gen sequencing providers that Twist has. As you look at a lot of these next sequencing providers, they are kind of developing these highly innovative solutions in terms of library prep. You mentioned Elements Trinity. And I think Alumina talked about the constellation map tree technology, et cetera. Just kind of curious kind of net-net, what are the -- from Twist's standpoint, do these new innovations provide greater opportunities in terms of essentially sales of your products? Or just kind of curious like how that affects your, I guess, overall total revenue opportunities in the future?

[Emily Leproust, executive]

Yes. Thanks for the question. Yes. I see it as a positive as technology advances and is more focused on quality and performance. And -- which is what we provide with our Pro, with our enzymes and now with our own library prep. And the other benefit that we have compared to maybe the competitor is the speed at which our R&D works. And so as those technologies evolve, we're able to stay on the bleeding edge and leveraging both our innovation and our commercial effication to grow our revenue.

[Operator]

Our next question comes from the line of Subbu Nambi with Guggenheim Securities. .

[Subhalaxmi Nambi, analyst]

Could you elaborate on the different moving parts to the 2025 guide, which end markets growth are you assuming for NGS growth? Are you baking in any FDA rules or Medicare reimbursements? And could you also provide additional insights into '25 assumptions for the SynBio market. And last, what are you assuming Express Genes to be? Is it all upside? Or are you assuming anything in the 48% gross margin target?

[Patrick Finn, executive]

So thank you for the question. No, it's a great question. And as we're kind of looking at the year, kind of a step back and can say first how pleased we are with the progress we've made, 7 quarters of sequential growth in revenue. GAAP gross margin of 850 basis points, reduction in GAAP OpEx in Q4 versus prior year, minimal CapEx for the year. And we look at the second half, we expect to continue to see our cash burn in the back half of this year was only $17 million. I kind of moved forward. We're only going to expect to see improvements up and down the P&L. When I look at the drivers, specifically what we've assumed in the modeling. For NGS, we have not assumed an MRD rep. We assume the continued improvement in liquid biopsy, we can see the improvement, expanding our customer base and then going down to the SynBio side, we're seeing expansion of the number of net new accounts. We're seeing expansion continue in express genes, and we're seeing that positive uptick already this year. We expect the continuation of that next year. And from where we sit down the P&L into other areas of the business. We do expect to see the continued improvement in gross margin sequentially throughout the year.

[Operator]

Our next question comes from the line of Luke Sergott with Barclays.

[Luke Sergott, analyst]

Can you talk a little bit about the DNA storage, I guess, is this the Century archive solution? I suppose to be -- I remember talking about being commercialized at this year at the end of this year, maybe into next year, update there on the slide is helpful. But just kind of are the earn-outs associated with this or milestones? Who are the early access customers? Any other details you guys can give us on that?

[Emily Leproust, executive]

Yes. Thank you, Luke. As you know, the search is a key future vector of growth for us and that the market is really, really big. And when we go into it, we need to be competitive with existing technologies that are taped and hard ride. And so we are fully focused on the terabyte chip and terabyte applications. And so what the team is doing is focusing on that technology development. First, it's a combination of both the chip and the synthesis. And at this point, we fully moved to a fully converged on an enticer approach that that is deployed for those chips. And the reason for enzymatic focus is from a point of view of both cost and sustainability. That's what we need. So at this point, we are really, really strongly focused on that development. And so therefore, it's a little bit early to speak about customer, but the team is making great progress. .

[Operator]

Our next question comes from the line of Matt Larew with William Blair.

[Matthew Larew, analyst]

For Adam, of the gross margins slightly above in the quarter. And I think that's despite the top line upside coming from SynBio. So just curious if that reflects bias towards express gene relative to your expectations? Anything else to think in terms of the scale effect of the future? Just maybe help us think about where the gross margin upside came from in the quarter?

[Matthew Sykes, analyst]

Great question. And I think the -- in terms of the gross margin upside. I've mentioned it before that we see whether it be SynBio now or NGS that 75% to 80% of the incremental revenue will drop to gross profit. I think we're seeing that play out here in Q4. I'd say express genes was a tailwind as it continues to see sequential improvements quarter-on-quarter. But those are not outsized in any way, shape or form, but this is more a reflection of as we continue to grow we continue to see growth faster than expectations. We're seeing the gross margin fall in line with that growth. So I'd also hit on some of the key points that Paddy mentioned on the call, there are a number of operational initiatives that we are working on and have been working on in 2024, all of which are adding to the continued improvement in gross margin. And we expect to see more of those improvements as we go into 2025, but the timing of which is a bit uncertain on some of when they'll actually hit the P&L, if you think an improvement that launches in the sixth week of the quarter will be different than when the launch is in the tenth week of the quarter. We're no less excited about those improvements, but we will be a bit cautious in the way we look at the timing of when that impact is.

[Operator]

Our next question comes from the line of Puneet Souda with Leerink Partners.

[Unknown Analyst]

So first one, I mean, I appreciate you providing the NI exposure which is low, but just wondering, just given the political situation. And again, HHS appointment, which is not finalized yet. But again, given all of those sort of moving parts and the potential for pressure on pharma and FDA and combined with NIH potential cuts, could you maybe quantify for us how much is your, first of all, pharma and related biotech exposure? And sort of what gives you confidence in the 17% to 20% fiscal '25 guide? Is that more on taking share? Is it growth in NGS and getting more into diagnostic assays? And is it more -- or is it more SynBio? And then if I could ask just a separate question around biopharma. I appreciate the Zoma deal. But just trying to understand, it's now 6% of your revenue by pharma overall. So how core is this business to you? 50% was already part of the deal and you had a leadership change there, one of your leaders of the biopharma divisions left work competitors. So just wondering how core is this business to you now?

[Emily Leproust, executive]

Thank you, Vijay. Maybe I'll start with the second one first. The Biopharma team there always been really great on the science. So we know that when we get an order for a service where we get the target, we're able to leverage the full spectrum of in vivo, in vitro technology to give candidate drugs, which -- so from a technology point of view, I think we're punching really, really strongly. We know that commercially, we've been struggling. And so I'm very pleased to see the orders that we achieved last quarter. And so it's an NF1, we have to do it again. But in terms of benefits to the broader company. I think maybe the -- it's underappreciated how having the the service offering from biopharma is very useful with selling the products that are captured in Synbio because really, we go to the same customer -- and we can either offer them a product, if they want to do the work in the lab or we can offer them a service if they want to outsource. And so there is that 1-2 punch that's very useful when we're able to serve both. At the same time, obviously, all the businesses, all the product groups need to pull their weight. But -- and I'm looking forward to the biopharma revenue to go back on the upswing. As far as exposure to biopharma funding think we report. We shared that our health care exposure is about 60%. And that both are the Symbio NGS and biopharma product group. And as you know, there's been several years of biopharma funding pressure, and we've done really well. And it's no accident that we've been doing well over the last few years. It's our products and services are really differentiated combined with some commercial violence that we apply when we go sell. So I look forward to more more of that. And we are quite positive about the future.

[Operator]

Our next question comes from the line of Tom Peterson with Baird.

[Thomas Peterson, analyst]

Maybe just quickly from the I think you mentioned share gains on the SynBio side directly related with the resting offering. I mean can you elaborate on where you're seeing share gain tier is this conversion of DNA makers? Are you seeing share gains elsewhere? And then maybe just quickly a second question -- I don't know if I missed this. Did you disclose what you're expecting to spend from an OpEx perspective in '25 on DNA data stores?

[Patrick Finn, executive]

Tom, it's Paddy here. Thanks for the question. I'll take the first part of that. I think with the express genes, obviously, sequential growth is good, but it's also liking us to expand downstream and for the customer more and more broadly and for the workflow. So a fashion enabled us to move down to preps boingG works very positive performance, and we think that will continue.

[Matthew Sykes, analyst]

In terms of data storage, if you look at it on a 2024 basis, we spent in terms of OpEx, around $25 million on a GAAP basis, cash it closer to $20 million. We haven't provided specific guidance in terms of where we're going to be in 2025. But I would expect a relatively stable investment profile.

[Operator]

Our next question comes from the line of Brendan Smith with TD Cowen.

[Unknown Analyst]

It's [indiscernible] on for Brendan Smith. Could you just give a little more color on the proprietary enzymes that you mentioned, sort of why now? Have there been sort of developments that make this the right time to start launching products there? Or was this just sort of a natural next step area to deploy that technology?

[Emily Leproust, executive]

Yes. Thanks for that question. Yes. Basically, it's a wonderful use of our platform and the scale of DNA synthesis that we have gives us an under advantage to use in the exploration for new enzymes. We've done very, very well in terms of the products we've made for target enrichment and obviously going to workflows, making proprietary enzymes of interesting features. It's just another point of differentiation that's well received by the customer. So the first product that Emily mentioned around our ligase essentially, it's right on the Twist theme more efficient use of the sequencer. We label every molecule to get it on to most of the molecules or more of the molecules to get into the sequencer, which really drives efficiency and a good outcome for the customer. When you look at it, our ability to make differentiated workflows is going to be very important for the customer base going forward. So the timing is good. And we like the road map of enzymes we've got coming through.

[Operator]

Our next question comes from the line of Thomas DeBourcy with Nephron Research.

[Tom DeBourcy, analyst]

My question just relates to orders. And I guess, going back to your fiscal Q2, you saw a step up in customer purchase orders with the calendar year beginning. And I was just curious, as you look towards 2025, would you expect a similar dynamic of a step-up in purchase orders with, I guess, the start of the calendar year? Sorry, just to go back to 2024, how you saw in terms of the execution and conversion of orders from those open purchase orders?

[Adam Laponis, executive]

Tom, this is Adam, and thank you for the question. We're real pleased with how the business is performing. And you kind of look at it as hitting on the 7 sequential quarters of increased revenue. We are seeing that order pattern with more customers making longer-term commitments to us and wanting to use different mechanisms that are easier for a procurement perspective. We expect to see sequential growth in both orders and revenue throughout the year next year. As I mentioned on the call earlier, our commentary and disclosures moving forward on orders will be focusing primarily on biopharma and then we'll really be driving home the forecast and expectation of revenue in our disclosures, we will report in 2025, but we are very pleased with the progress we're seeing and the continued expansion, not just on the order side, but truly on the revenue, up and down the P&L.

[Operator]

Our next question is a follow-up from Matt Larew with William Blair.

[Matthew Larew, analyst]

I have 2 quick ones. The first -- a couple of questions about NIH. I think historically -- or I guess, over the summer, you've done some things to make your offering more streamlined in the academic market. And just curious how you think that positions you going forward? And then does the last years to clean up on Adam's comment there. So just to confirm, going forward, you will not be providing orders on SynBio and NGS, I think that's what you're saying, but just confirming.

[Emily Leproust, executive]

Adam, do you want to cover the second question first?

[Adam Laponis, executive]

Sure. I'll take it. Absolutely. I'll take the second part. I'm confirming that that we are going to be focusing our disclosures and orders in the area just in biopharma moving forward for fiscal '25.

[Emily Leproust, executive]

And thank you, Matt. And for the first question, yes, indeed, we have been focusing on the workflow, the user expense for the economic to order. So not only you need to have great products, which we do, they are fast, they are high equity, a low cost but overall a great value. And then we've also been focused on the user experience with the e-commerce. And especially the integration of our e-commerce website with the ordering systems of academic institutions. So you have [indiscernible] a few others. And so internally, we could it B2B or punch out. But -- so we are working on integrating that link between our e-commerce and the supplier and -- sorry, and the institution. And we've seen for as are those first ones roll out the growth in revenue that we see in the institution, the number of net new users from those institutions is really, really positive. So historically, we've been focused more on the big accounts first. That's been a winning strategy. But now, we're also on the strategy of going after the long tail of customers. So thanks for asking, it's definitely something that is top of mind for us. And we think we have a good solution. And now, it's a question of getting the institution to sign an and hook up with our e-commerce.

[Operator]

Our next question comes from the line of Vijay Kumar with Evercore ISI.

[Vijay Kumar, analyst]

Adam, maybe just back on the related party revenue. It's just -- it's a term, we don't come across with other companies. Can you just give us some flavor on what is this? And why is -- why does Twist have to disclose this? .

[Adam Laponis, executive]

Happy to. And it's pretty benign here in the sense that we have 3 related parties in our fiscal 2024, one of which was no longer related party is at the middle of the -- at the end of Q3. All 3 of the parties are public U.S.-based companies, one of whom our CEO sits on the Board and one of them is a Board member of ours who is the CEO of that company. So we're -- we continue to see that business be relatively stable. And we will obviously disclose that in our 10-K and 10-Q with an accounting requirement similar to pretty much every other company out there. I appreciate the question. Thank you.

[Operator]

Our next question comes from the line of Rachel Vatnsdal with JPMorgan.

[Rachel Vatnsdal Olson, analyst]

Just squeeze one here in on Express Genes, kind of a 3-parter. But first off, could you just quantify for us how meaningful Express Genes was this quarter? And then now that you're a bit further into the launch, I was wondering if you can break down for us what the updated pricing premium is for Express Genes over the past few quarters? And then just lastly, how do you think about contribution from Express Genes into the targets you laid out for '25 today?

[Emily Leproust, executive]

Yes. Thank you, Rachel. It is a very, very important topic for us, and thanks for bringing it up. So as a step back as a reminder, now we're not only talking about express genes, but we've actually built on that initial express launch to build what we call an expert portfolio. So you can get expressed fragments, you can get Express Genes, you can get express prep -- last quarter, we reported being able to do Express IgG, where wherever to ship IgG protein express in so in certain days. So that combination of that X-ray portfolio is doing a couple of things. The first one is boosting our revenue. The -- again, we are seeing sequential growth from our Express portfolio. It's adding net new customers. It's converting makers into buyers. And just as a quick clarification some customers used to be buyers of fragments and they were making their own clonal genes. Well now they can buy it or customers who buy clonal genes and then they will make their own prep. Now they can buy the prep or they were buyers of preps and they would make their own IgG now they can buy the IgG. So that conversion of makers to buy is happening. And then the last thing that we really, really appreciate is the increased contribution to our margin from the Express portfolio. And we've reported now it's multiple quarters in a row where 75% to 80% of our revenue growth dropped to the gross margin line. And in the past, we had a differential in gross margin between SynBio and NGS and thanks to our Express Genes portfolio. Now it's about the same. And so if there is a new dollar that comes in, it doesn't really matter if it goes into the SynBio line or the NGS line, the benefit to the gross margin line is the same. So going forward, we continue to leverage that portfolio. It's really very much a winner. And we look forward to benefiting from the revenue growth that and the margin benefit to get us to our goal of getting to adjusted EBITDA breakeven without going back to the market.

[Operator]

I would now like to hand the call back over to Emily Leproust for closing remarks.

[Emily Leproust, executive]

As we close, let me emphasize this. Twist delivered record-breaking results in fiscal 2024, and we are on a clear trajectory towards profitability and continued long-term growth. Our technology is transforming industries, driving innovation and delivering value to our customers and shareholders. With momentum at our back, a relentless focus on disruptive innovation and disciplined education, we are poised to reach new heights in fiscal 2025. I want to thank our employees, customers and investors for your trust and partnership as we write the future together. Thank you for joining us today.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.