Twist Bioscience Corporation (NASDAQ: TWST)

The spin-out transaction represents a strategic inflection point for Twist, enabling the company to accelerate its path to adjusted EBITDA breakeven by the end of fiscal 2026. By operating as two separate companies, each can pursue focused strategies – Twist continues to execute on its market-leading synthetic DNA platform while Atlas advances DNA data storage technology with dedicated resources.

This transaction structure provides Twist with the best of both worlds: immediate cash benefits to strengthen the balance sheet, continued ownership and royalty upside from DNA data storage’s future success, and the ability to focus entirely on its core business growth. Varun Mehta, founder of Nimble Storage (acquired by HPE), brings significant industry expertise to lead Atlas Data Storage into commercial markets.

Twist’s Q2 fiscal 2025 financial results demonstrated strong execution across all key metrics. Revenue reached $92.8 million, marking the ninth consecutive quarter of sequential growth with an impressive 23% year-over-year increase. This growth was driven by robust performance across all business segments.

The standout achievement was gross margin expansion to 49.6%, an improvement of 8.6 percentage points from Q2 FY2024. This significant improvement reflects the company’s ongoing efficiency initiatives, economies of scale, and strategic pricing actions. Management expects gross margin to exceed 50% by Q4 FY2025, demonstrating confidence in continued margin expansion.

Adjusted EBITDA improved substantially to $(14.8) million from $(26.8) million in the prior year, representing a 45% improvement despite increased investments in R&D and commercial capabilities. The company continues to generate significant cash flow from operations while maintaining a strong cash position of $257.1 million.

Operating expenses increased to $134.4 million from $124.2 million, primarily driven by higher stock-based compensation expense ($20.3 million versus $13.8 million). Despite these investments, the company demonstrated improved operating leverage with the expanding adjusted EBITDA margin.

NGS (Next Generation Sequencing) continued as the largest revenue driver with sales of $51.1 million, growing 25% year-over-year. The segment’s strong performance was driven by increased adoption of FlexPrep™ Ultra-High Throughput Library Preparation Kit and continued demand for target enrichment panels. NGS now represents 55% of total revenue, up from 54% in the prior year.

SynBio (Synthetic Biology) delivered solid growth with revenue of $36.0 million, up 21% year-over-year. The company shipped approximately 227,000 genes in the quarter, representing an 18% increase compared to the prior year. The segment benefited from both increased volume from existing customers and new customer acquisition.

Biopharma remained the fastest-growing segment with revenue of $5.7 million, growing 21% year-over-year. This growth was driven by expanded partnerships in antibody discovery and increased demand for Twist’s capabilities in therapeutics development. The segment continues to demonstrate the company’s ability to penetrate higher value-add applications.

Customer metrics showed healthy expansion with the company shipping to approximately 2,431 customers in Q2 FY2025, up from 2,253 in the prior year. This 8% growth in customer count, combined with higher volume per customer, drives the confidence in continued revenue growth momentum.

Twist demonstrated significant margin expansion in Q2 FY2025, driven by operational efficiencies and scale advantages:

Gross Margin Performance

• 49.6% gross margin achieved, up 8.6 percentage points from Q2 FY2024
• Margin expansion driven by improved manufacturing efficiency and economies of scale
• Targeted gross margin to exceed 50% by Q4 FY2025
• Full year FY2025 gross margin projection increased to ~49.5% from previous guidance of 49.0%

Cost Structure Management

• Research and development expenses of $23.9 million remained relatively flat compared to $24.1 million in the prior year
• SG&A expenses increased to $63.7 million, including $5.3 million higher stock-based compensation
• Operating expenses as percentage of revenue improved to 145% from 165% in the prior year
• Sequential improvements expected in operating leverage through FY2025

Adjusted EBITDA Improvement

• Adjusted EBITDA improved 45% to $(14.8) million from $(26.8) million
• Q3 FY2025 adjusted EBITDA expected at approximately $(13.0) million
• Full year adjusted EBITDA guidance improved to approximately $(48.0) to $(53.0) million from previous $(55) to $(60) million
• Path to adjusted EBITDA breakeven accelerated to end of fiscal 2026

Twist maintains a strong financial position with improved operational efficiency:

• Cash Position: $257.1 million in cash, cash equivalents and short-term investments as of March 31, 2025
• Balance Sheet: Total assets of $595.6 million with strong current assets of $338.4 million
• Liabilities: Total liabilities of $155.5 million, including $15.0 million liability related to sale of future revenue
• Stockholders’ Equity: $440.1 million, providing a robust capital base for operations
• Working Capital: Strong current ratio with current assets exceeding current liabilities by nearly 5x

The Atlas Data Storage spin-out transaction further strengthens Twist’s financial position with immediate cash benefits and future milestone payments, providing additional runway for the company’s accelerated path to profitability.

With the spin-out proceeds and existing cash reserves, Twist is well-positioned to continue investing in R&D and commercial expansion while maintaining financial flexibility to navigate market conditions and pursue strategic opportunities.

Twist continues to strengthen its market position through strategic partnerships and product innovations:

Commercial Partnerships

• Curio Genomics Collaboration: Partnership to accelerate NGS workflow adoption in agrigenomics, combining Twist’s FlexPrep™ kit with Curio’s bioinformatics platform
• High Throughput Solutions: Expanded launch of Twist High Throughput Unique Dual Index Adapter System for large-scale multiplexing
• Customer Engagement: Maintained focus on exceptional customer service and experience

Product Innovation

• Continued development of silicon-based DNA synthesis platform
• Enhancement of library preparation and target enrichment offerings
• Expansion of therapeutic discovery capabilities
• Integration of AI and machine learning for process optimization

Operational Excellence

• Focus on manufacturing efficiency and cost reduction
• Investment in automation and scaling capabilities
• Quality system improvements to support commercial growth

Market Positioning

• Leveraging first-mover advantage in silicon-based DNA synthesis
• Expanding geographic presence and customer base
• Targeting high-growth applications in genomics and therapeutics
• Building brand recognition across life sciences applications

Twist provided encouraging updates to its fiscal 2025 outlook, reflecting improved operational performance and the strategic spin-out benefits:

Full Year FY2025 Updated Guidance

• Total revenue: $372 to $379 million (19% to 21% growth) – unchanged from previous guidance
• SynBio revenue: $144 to $147 million (17% to 19% growth)
• NGS revenue: $205 to $209 million (21% to 24% growth)
• Biopharma revenue: $23 million (13% growth)
• Gross margin: ~49.5% (up from previous 49.0%)
• Adjusted EBITDA: $(48) to $(53) million (improved from $(55) to $(60) million)

Q3 FY2025 Guidance

• Total revenue: $94 to $97 million (15% to 19% growth)
• Adjusted EBITDA: ~$(13.0) million with sequential improvements expected

Long-term Vision

• Adjusted EBITDA breakeven expected by end of fiscal 2026 (accelerated timeline)
• Q4 FY2025 gross margin projected to exceed 50%
• Continued path toward sustainable profitability and positive cash flow

The updated guidance reflects continued execution on operational excellence while benefiting from the strategic value creation through the Atlas Data Storage spin-out. Management’s confidence in accelerating the timeline to profitability demonstrates the improving fundamentals of the core business.