Twist (TWST) Q2 2026 Earnings Call Transcript

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Date

Monday, May 4, 2026 at 8 a.m. ET

Call participants

• Chief Executive Officer and Co-Founder — Emily Leproust
• Chief Financial Officer — Adam Laponis
• President and Chief Operating Officer — Patrick Finn

Takeaways

• Total revenue -- $110.7 million, up 19.3% year over year and marking the 13th consecutive quarter of sequential revenue growth.
• DNA synthesis and protein solutions revenue -- $53.3 million, increasing 28% year over year, with growth driven by AI-enabled drug discovery and traditional discovery workflows.
• NGS applications revenue -- $57.4 million, up 12% year over year and 9% sequentially, led by top account expansion.
• Gross margin -- 51.6%, up 2 percentage points from the prior year period, reflecting higher operating efficiency and selective investment.
• Therapeutics industry revenue -- $40.8 million, representing 55% year-over-year growth, with increased adoption by large pharma and biotech customers using both AI and traditional approaches.
• Diagnostics industry revenue -- $40 million, up 14% year over year and 13% sequentially.
• EMEA revenue -- $37.3 million, growing 22% year over year.
• APAC revenue -- $9.1 million, up 30% year over year, now 8% of total revenue.
• Operating expenses (excluding cost of revenue and litigation) -- $95.8 million, up from $87.6 million in the prior year, reflecting targeted spending in commercial and digital infrastructure.
• Adjusted EBITDA -- Loss of $13.3 million, improved by $1.5 million compared to last year’s second quarter.
• Cash, cash equivalents, and short-term investments -- $171.7 million at quarter-end, down from $197.9 million as of December 31, 2025, primarily due to operating cash usage, CapEx, and the Invenra license/equity event.
• Fiscal 2026 revenue guidance -- Raised to $442 million-$447 million, representing 17%-19% projected growth.
• Q3 revenue guidance -- $114 million-$115 million, implying 19% year-over-year growth at the midpoint.
• AI partnerships -- Leproust stated, “Amazon Web Services announced Twist as a wet lab partner for Amazon BioDiscovery, its AI-powered drug discovery application.”
• Operational efficiencies -- Finn stated production acceptance rates for clonal genes are now at approximately 98.5%, with future targets of 99.5% for clonal genes and 99.9% for all DNA products.
• Litigation resolution -- Laponis disclosed an “agreement in principle regarding the securities class action for approximately $17.1 million.”
• Adjusted EBITDA breakeven target -- Management reiterated expectation to achieve breakeven by the fourth quarter of fiscal 2026.

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Risks

• Leproust acknowledged that when funding is a pressure, academic customers are very cautious with their dollars, and the academic market is currently shrinking, indicating continued macro pressure and contraction in academic and government end markets.
• Laponis signaled that Q2 reflects a deliberate investment, specifically for IgG and characterization for discovery projects, as well as digital capabilities, which temporarily impacts gross margin as these expenses scale.

Summary

Twist Bioscience (NASDAQ:TWST) delivered 19% revenue growth to $110.7 million, driven by continued expansion in DNA synthesis, protein solutions, and NGS applications. The company raised full-year revenue guidance to $442 million-$447 million on sustained demand and reiterated a path to adjusted EBITDA breakeven in the fourth quarter. Strategic partnerships, including a new alliance with Amazon Web Services’ BioDiscovery platform, contributed to customer diversification across therapeutics and diagnostics segments, while robust adoption of AI-driven workflows was highlighted as a primary growth engine.

• Laponis confirmed that APAC accounted for 8% of revenue in the second quarter, signaling further international expansion opportunities outside North America and EMEA.
• Finn introduced a new product acceptance initiative: Twist Bioscience will soon accept a full range of sequences across length and complexity, driving towards accepting approximately 99.5% of clonal genes and 99.9% of all DNA products more broadly.
• Capital deployment reflected continued automation investment, with $7.9 million in CapEx allocated to manufacturing automation and $5 million to the Invenra license and equity event.
• Litigation settlement expenses accounted for $7.2 million in the quarter, net of insurance recoveries.
• Management anticipates stronger sequential growth in NGS revenue during the second half of the year, specifically projecting a return to 20% by Q4.

Industry glossary

• NGS: Next-Generation Sequencing; a high-throughput technique for sequencing DNA and RNA to analyze genomic information.
• Clonal genes: Precisely replicated DNA sequences used as templates for protein expression or further biological applications.
• MRD: Minimal Residual Disease; refers to the small number of cancer cells that can remain following treatment, requiring highly sensitive molecular diagnostic assays for detection.
• Protein solutions: Custom protein production offerings, supporting discovery and characterization in drug development workflows.
• Oligo pools: Complex mixtures of short synthetic DNA sequences manufactured in parallel, enabling high-throughput experimentation.

Full Conference Call Transcript

Dr. Emily Leproust, CEO and Co-Founder of Twist. Adam Laponis, CFO of Twist; and Dr. Patrick Finn, 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. We ask that you limit your questions to only one, and then requeue as a courtesy to others on the call. This call is being recorded. 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 in 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 and 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 Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available 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, a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar not update 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: Thank you, Angela, and good morning, everyone. Twist delivered another strong quarter and extended our track record of consistent execution, posting our 13th quarter of sequential revenue growth. We have outperformed the broader license tools market with a model that scales efficiently and drive increasing value creation. Twist core technology advantage is a semiconductor-based D&A platform that provides a structural advantage in cost, scale and speed that feeds into every product and service we offer. This same platform also enables a highly efficient new product introduction engine, allowing us to rapidly translate customer demand into scalable offerings and continuously expand our portfolio. .

As we increase volume on the silicon chip, we expand our wallet share, accelerate product innovation and further strengthen our competitive advantage. The model works exactly as designed. We have delivered sustained revenue growth, expanded margin above 50%, invested strategically to drive continued return on that investment, and we remain firmly on track to achieve adjusted EBITDA breakeven in the fourth quarter of fiscal 2026. Focusing our results for the second quarter of fiscal 2026, we grew total revenue to $110.7 million, up more than 19% year-over-year. DNA synthesis and Protein Solutions grew 28%, powered by continued strength in AI-enabled drug discovery, NGS applications grew 12% year-over-year and 9% sequentially.

Diving deeper into DNA synthesis and Protein Solutions, we continue to see robust growth. Last month, Amazon Web Services announced Twist as a wet lab partner for Amazon BioDiscovery it's AI-powered drug discovery application. This is an exciting validation of our DNA synthesis, protein solutions and biologics capabilities. In advance of the launch, Twist has been working with AWS team for several months providing web lab services for the applications scientific launch partners, including Memorial Sloan Kettering Cancer Center and the GRAIL Lab adjuncts of Kim Senior City. The objective for researchers using Amazon BioDiscovery is to deploy AI models to design and optimize antibody candidates faster.

We are here to support them with products and services that accelerate that pathway. I think in close contact with our customers. We identified this emerging category of AI near early and invested ahead of the market acceleration with increasing adoption across pharma, drylab and big tech companies. Importantly and on balance, the growth of AI enabled discoveries complements our work with customers pursuing traditional discovery, which remains a robust area of our business. With our lesser approach, our customers for DNA synthesis and Protein solutions are all working through the same fundamental design build test learn cycle. What differs is how they execute against that framework. There is no 1 side fold model.

Edge program is tailored to the customer scientific resources and stage of discovery, but remains constant across every engagement is the foundation Twist silicon platform, which enables cost-effective synthesis of hundreds of thousands of unique sequences in parallel. That unique and [indiscernible] capability is what makes speed at scale possible, no matter where the customer enters the workflow. No 2 orders are identical, so we see consistent patterns in how these campaigns are structured. On Slide 6, to give you some context. One example is our work with Memorial Sloan Ketterings and Amazon, where the team ordered approximately 100,000 specific DNA sequences as a pool labor. This approach is highly efficient and precisely because of how our platform is built.

[indiscernible] DNA can be manufactured electively rather than individually clone and processed, driving on cost of sequence dramatically. And Twist is a unique provider, we can deliver hundreds of thousands of specific sequences pooled at speed and scale. Once there is a pool DNA, either twist out a customer then screens that labor to identify promising candidates selects the most relevant sequences and advance those into individual synthesis, protein expression and characterization. Through interative cycles, this process yields a validated antibody leads. The second model involves customers ordering hundreds to thousands of fragrance and executing downstream workflow internally.

Here again, Twist platform delivers an edge in the ability to synthesize diverse sequence sets quickly and at accessible costs, meaning customer connect for broader design spaces. In these cases, customers [ indiscernible] fragment to clinogenes, express proteins and perform characterization assays within their own laboratories. Others choose to start further downstream, purchasing clonal genes or antibodies and binding proteins, such as ITG SCIB, DHH and others to focus their internal efforts on functional characterization and validation. Even at this entry point, the advantage Twist can stream, the parallel synthesis capabilities underpinning our platform and show the sequences they receive reflect the speed at scale that alternative cannot match.

And we have a growing segment of customers we reliant with as an end-to-end partner. In these engagements, we entered the DNA synthesis cloning construction, protein expression and characterization. Our platform's ability to run large complex sequence sets in paralell, accelerates every stage of that workflow, and we deliver high-quality extent data that enables customers to focus on critical analysis, decision-making and iterative design. We also have a number of customers who give us a biological target and ask us to do all of the work through in vivo, in vitro and our AI/ML discovery approaches.

Across all of these models, cost scales with the scope and complexity of the workflow, ranging from smaller exploratory programs to multimillion dollar discovery efforts. Our role is to provide flexibility across the spectrum. Because our platform was purpose-built for parallel census is at scale, we can make customers where they are, whether they need a pool libraries of hundreds of thousands of sequences or a fully managed core program. We support them their research advances. On Slide 7, you'll see our portfolio for DNA Synthesis and Protein Solutions, serving customers across the vertical continuum. Building on our success in serving therapeutic disco customers in February, we licensed the body-byspecific platform to expand our capabilities in this rapidly growing modality.

We will enable high super discovery in bispecifics, an area that is strictly been limited by scale. We have already received our first orders for this platform with a robust funnel looking forward. Moving to Slide 8 and NGS. Growth reaccelerated in the second quarter. Our NGS Trus business remains a durable and growing part of the portfolio with particular offense in oncology diagnostics. We operate at a critical part in the workflow between the sample and the sequencer, where our products support precision and customization as cap. Our target enrichment and be preparation solutions delivered the uniformity and on-target performance required for high-sensitivity applications.

This is especially relevent in the continuum of cancer care on Slide 9 where we are seeing increasing adoption in commercial diagnostic tests, including issuance molecular or minimal residual disease, or MRD. The applications demand extremely high accuracy and possibility, faster times and our chemistry is well aligned to these requirements. Specifically, on Slide 10, has MRD testing transitions from early clinical adoption into scale deployment across oncology diagnostics the technical and operational requirements become significantly more demanding. These assays are pushing the limit of sensitivity, also requiring detection of Viant at extremely low allele frequencies. That places a premium on panel design as well as the entire flow to ensure uniform coverage and reposability across run.

In this environment, success is on the ability to deliver highly customized target regional panels library preparation enabled by novel and lines as well as the buffer BCDRUMIs and other components optimized for specific indications and evolving clinical needs. Equally important is speed. As these steps move into broader clinical workflows, laboratories and diagnostic developers this rapid or on panel design synthesis enrollment to support asset development panels and commercial scale up. At West, we combine high throughput DNA synthesis with precision, prop design and manufacturing at scale, enabling fast real delivery of customer panels with consistent on car statistics.

That allows our customers to move quickly from development realization commercialization without compromise on data quite and importantly, securing and future-proofing the supply chain. For bespoke, our tumor-informed MRD panels, like all of our NGS panels, this is a consumable-driven workflow that scales with stale volume, supporting recurring revenue as these applications extend. This time, I'd like to turn the call over to Paddy to expand further on our growth initiatives around the product offering.

Patrick Finn: Thank you, Emily. Happy to our fiscal year, the results are strong, and we believe the road ahead is stronger. Everything we do in protein solutions and AI-enabled discovery runs on 1 foundation, our DNA synthesis platform. It's a structural advantage for cost, scale and speed, full stop. And we continue to advance and strengthen this platform to enhance customer experience even more. Today, we accept the vast majority of daily sequences as we know we can manufacture them. We have an algorithm embedded in our e-commerce system to inform a customer immediately if they have uploaded a sequence that may be difficult to manufacture.

Dissipation improves the user experience for customers as some sequences present manufacturing challenges, repeat regions, Herpen extreme GC content. Three years ago, we accepted about 96% of clonal genes. I could manufacture about 97.5% of clonal genes and about 98% of DNA sequences more broadly including oligo pools, DNA libraries, gene fragments. Today, we accept about 97% of clonal genes and can manufacture approximately 98.5% of clonal genes and about 99% of DNA requests more broadly. That's not theoretical capabilities. That's production reality at scale. We routinely deliver clonal genes and fragments up to 5,000 base fares, all the gaps up to 300 basis, novelex-gene fronts up to 500 base payers across a wide range of formats.

If a customer can design it, we are increasingly able to make it. Even as the acceptance rate for DNA sequences remains very high, we recognize that in a single sequence in a larger set does not meet acceptance criteria, customers may choose to route the full set elsewhere. This dynamic highlights a clear opportunity. Continued improvements in acceptance rates can unlock incremental share gains and expand total order capture. On Slide 11, you'll see that we announced this morning that we will soon take a full range of sequences across length and complexity, driving towards accepting approximately 99.5% of chloro genes and 99.9% of all D&A products more broadly.

With constant drive to improve sets us apart and importantly, more sequences accepted means more orders won and we intend to win them. And that matters because this is not a standardized market. Every customer is different. Every order is different. -- breadth drives share gain. It's that simple. In contrast to Twist, the competitive landscape has a pattern, niche players narrow offerings limited reach. That is not how customers operate and it is not how this market has won. We employ a different approach. We anchored our strategy around end applications where performance, scale and execution are the only metrics that matter. Customers do not want to stitch together multiple vendors.

They want 1 partner who can deliver consistently across the workflow. That is where Twist is differentiated. We offer both depth and breadth across the biological continuum from perasynthesis through proteins, biologics and NGS. We support customers increasingly across the entire life cycle of their programs. is how we continue to take share, expand wallet and reinforce our position to leading platforms, serving therapeutics, diagnostics, industrial, academic and government markets. With that, I'll turn it over to Adam to discuss the financials for the quarter.

Adam Laponis: Thank you, . Turning to Slide 12. Q2 is another quarter of consistent execution against the financial model we've laid out. Revenue grew 19.3% year-over-year to $110.7 million, our 13th consecutive quarter of sequential growth. Gross margin expanded to 51.6% versus the prior year, an improvement of approximately 200 basis points, and we remain firmly on track for adjusted EBITDA breakeven in Q4. Let me walk you through the details. On Slide 13, you'll see DNA synthesis and Protein Solutions revenue increased to $53.3 million, growth of 28% year-over-year.

On Slide 14, we show NGS applications revenue for the second quarter grew to approximately $57.4 million compared to $51.1 million in the second quarter of fiscal 2025, an increase of 12% year-over-year and up 9% sequentially, driven by growth in top accounts. For the quarter, revenue from our top 10 NGS applications customers accounted for approximately 39% and of NGS applications revenue. We serve 627 NGS applications customers in the quarter with 174 having adopted our products. Looking geographically on Slide 15. Americas revenue increased to approximately $64.3 million in the second quarter compared to $55.2 million in the same period of fiscal 2025. Growth of 17% year-over-year.

EMEA revenue rose to $37.3 million in the second quarter versus $30.6 million in the same period of fiscal 2025, growth of 22% year-over-year. APAC revenue increased to $9.1 million in the second quarter compared to $7 million in the same period of fiscal '25, an increase of 30% year-over-year. APAC accounted for 8% of our revenue in the second quarter. China continues to be a relatively small portion of our revenue at approximately 1% of total revenue for the second quarter of fiscal 2020. Looking at revenue by industry on Slide 16.

I Therapeutics revenue rose to $40.8 million for the second quarter of 2026 compared to $26.3 million in the same period of fiscal '25, growth of 55% and reflecting the increased uptake of our products by large pharma and biotech customers in their efforts on therapeutic discovery and including AI-enabled discovery. Diagnostics revenue was $40 million for the second quarter of '26, compared to $35 million in the same period of fiscal 2025, an increase of 14%. Diagnostics revenue grew 13% versus Q1 of fiscal '26 based on strong growth from top accounts. Industry and applied revenue was $5.8 million in the second quarter '26 compared to $7 million in the same period of fiscal 2025.

Academic research and government revenue was $12.8 million for the second quarter of '26 compared to $12.5 million in the same period of fiscal '25, an increase of 3%. And Sequential growth was 5% versus prior quarter, driven by strength in U.S. accounts. Global Supply Partner revenue was $11.4 million in the second quarter of 2026, compared to $12 million in the same period of fiscal 2025, primarily due to order timing. Moving down the P&L on Slide 15. Our gross margin for the second quarter increased to 51.6%, an improvement of 2 margin points versus the same period of fiscal '25.

Market expansion was driven by strong revenue growth and moderated sequentially as we continue to invest in new product offerings and manufacturing capacity that we expect will result in future margin gains as we accelerate growth and implement continuous process improvement. Operating expenses, excluding cost of revenues and litigation settlement costs were $95.8 million for the quarter compared to $87.6 million in the prior year. The increase reflects deliberate investment in our commercial organization and digital infrastructure to support the growth trajectory we are delivering, particularly the 55% growth in therapeutics. These are revenue-generating investments with a clear line of sight to return. We are managing these investments with discipline.

In April, we reduced 36 positions to reallocate resources to our highest return opportunities. Combined with additional cost initiatives underway, we expect these actions to contribute to sequential OpEx improvement of $6 million in Q4 of fiscal '26. Looking at our progress on our path to profitability. For the second quarter of fiscal 2026, adjusted EBITDA was a loss of approximately $13.3 million, an improvement of approximately $1.5 million versus the second quarter of fiscal '25. We have dramatically narrowed that loss through a combination of revenue growth, gross margin expansion and operating expense discipline. We expect the actions we've taken, combined with continued revenue momentum to fully deliver on our targets for Q4.

We reached an agreement in principle regarding the securities class action for approximately $17.1 million. In fiscal Q2, we booked $7.2 million for litigation settlement costs net recoveries as we expect the additional costs to be covered by our insurance. We view this as a positive resolution allowing management to remain fully focused on execution. We ended Q2 with $171.7 million in cash, cash equivalents and short-term investments versus $197.9 million as of December 31, 2025. The Sequential change reflects $17.6 million in operating cash usage, $7.9 million in CapEx as we continue to invest in manufacturing automation and $5 million in cash for the Invenra license and equity event. On Slide 18, turning to guidance.

For fiscal 2026, we expect total revenue of $442 million to $447 million, growth of approximately 17% to 19%. We -- for Q3 of fiscal 2016, we expect total revenue of $114 million to $115 million, growth of approximately 19% year-over-year at the midpoint. As previously discussed, we expect NGS to be the driver of sequential growth in H2 and return to 20% by Q4. We remain confident in our trajectory and continue to forecast reaching adjusted EBITDA breakeven for the fourth quarter of fiscal 2026. With that, I'll turn the call back over to Emily.

Emily Leproust: Thank you, Ed. On Slide 19, as we look ahead, we remain focused on delivering consistent measurable growth designed to scale over time. We see strong momentum across the port fill with continued growth in denseness and protein solutions, increasing adoption in AI-enabled discovery and a return to growth in NGS. We serve large and expanding markets where our platform is increasingly relevant. At the same time, our operating model continues to perform as expected. We have delivered 13th consecutive quarters of sequential revenue growth, expanding gross margins above 50% and maintain a clear path to adjusted EBITDA breakeven in fiscal 2026. What opens this performance is the stability of our platform.

As volume increases, we expand or improve efficiency and generate operating leverage across the business. Our ability to serve a wide range of customer workflows from early discovery through clinical and diagnostic applications provides both resilience and opportunity to capture more value over time. Across the business, we invest with discipline we high return opportunities allocate capital deliberately underlying investments with clear growth drivers. We execute with focus and urgency to drive durable growth and build the company with increasing strategic resent and long-term value creation. With that, we're happy to take your questions. Operator?

Operator: [Operator Instructions] Our first question comes from Mac Etoch with Stephens.

Steven Etoch: Maybe just to start, could you just discuss how AI-driven workflows performed in the quarter relative to your internal expectations? And how the change in the outlook for both of the segments is really contributing to the change in the updated fiscal guidance from here? .

Emily Leproust: Yes. Thanks for the question. Obviously, we're very excited with the performance of the SPS growing 28% year-over-year. And for the therapics category, we cracked the $40 million for the quarter. A lot of companies in the drug discovery field, they tap out at $50 million a year. And now we're way past that. We're almost there every quarter. So obviously, there is the trend throughout the menu. What we see is that customers don't want 1 thing -- and so the NPI engine that we built that creates a lot of options for people to enter as it's been a great driver. And obviously, AI-driven drug discovery has been a big help in that area.

It just increases the number of sequences that people want to look at. If we look sequence before, now with AI, they can get thousands. And so it just increases the overall value of the deals. And a lot of companies don't have the capacity to analyze that number of antibodies. And so it enables us to upscale upsell to data and cell coradiation. So overall, the entire menu is doing well, but hydro discovery has definitely been great sales in -- great wins in our sales.

Operator: Our next question comes from Vijay Kumar with Evercore ISI. .

Vijay Kumar: Congrats on a nice friend. Maybe on the prior question rate related to -- when I look at the up 55% in the second quarter. That's an acceleration from Q1 growth levels. How much of this acceleration was driven by AI-related programs. I think in the past, memory called data characterization genes versus traditional biopharma and when you look at back half, is this 50% kind of growth sustainable when you look at your order book and backlog?

Emily Leproust: That's a great question. Definitely, AI has been a source of strength. Again, the nice thing as people develop more sequences, which have levels of DNA, we can make if they want a pool library of EHS, we can make it if they want. Even for biospecific now we can improve. We can make the flavor of the SG&A on pool. So that's -- so the entry point of whatever they want that broad menu, they're useful. -- but with AI, as I mentioned earlier, there is more need for data characterization. And what has happened is maybe in 2025, there was excitement definitely on our side.

But that excitement came from very few number of accounts and now that we are many quarters into this, now it's dozens of accounts that are driving the growth, right? It's not just a few. And so we can see that is repeatable with the existing account, but we're able to bring more and more people into the fold. And then sometimes, we can enter through AI-driven with discovery, but a lot of those companies are doing both AI-driven drug discovery and traditional drug discovery and the fact that we have a full menu enables us to grow in all areas. So overall, is broad-based. Going forward, we are not guiding per product groups.

I think there's very good growth potential within the business. And we doubled, the raise is double the beat, right? So obviously, there's a lot of confidence. But that confidence is broad-based. And we also share some strong confidence for our NGS business. So the business is reaping. The sales team is confident customers are happy. So we just have to do it again.

Operator: Our next question comes from Doug Schenkel with Wolf Research.

Douglas Schenkel: I want to just cover 2 topics, the academic and government end market and then gross margin. So in A&G, what are you seeing? Are things stabilizing or improving? Just want to get a sense for how things are trending. And are you still running the academic promotion on express genes and kind of building off of that, when do we start to lap the headwinds on price per gene from express gene fragments. I think that's this summer? So I just want to be mindful of that as we're updating our models. And then a quick 1 on gross margin. Gross margin was down nominally sequentially and a little bit light of our model and street models.

That just may be in the noise, but wanted to see if there's anything to call out there.

Emily Leproust: Okay. Yes. So maybe I'll take the first question and Adam will cover the second one. Yes, on academic, definitely that end market is suffering from funding pressures. Our approach is to take market share. And so academic the -- when funding is a pressure, they are very cautious because they are dollars. And so especially, that market is basically shrinking right now. So the fact that we are growing and growing sequentially is definitely a good thing. It shows that our product offering resonates more than the competition. And so right now, we are very happy to extend the premium discount for what that enables economic people to get [indiscernible] genes at the price of standard lens.

And so they get a great value on the DNA they're seeing from us. They're getting great speed. It enables them to go faster and get better at their next brand and knowing that those brands are very competitive. So I think our discount is very well received by those customers. And definitely, the growth there is smaller than for industry segment. but we are taking market share. Adam, you want to cover the gross margin question?

Adam Laponis: No, absolutely. Welcome, everyone. And Q2 definitely reflects a deliberate investment, specifically for IgG and characterization for a discovery projects. as well as our digital capabilities. We remain confident in our 52% or better guide for the year. And this investment is really around adding capacity of people to support the accelerated demand. We see a huge ROI on it. And we also see the path to continuously making improvements on those efforts in new products and returning to a 75% to 80% average drop through on incremental revenue to gross margin, as we move forward and automate workflows.

Operator: Our next question comes from Luke Sergott with Barclays.

Luke Sergott: Just a couple here. I want to follow up on Doug's question there. When you -- Adam, when you're talking about the gross margin improvement and the kind of the automated workflows, like what -- you guys have just built out the new facility. It's pretty state-of-the-art from what you had previously. So talk about further investment or how much more you guys can continue to push that automated workflow. And then I wanted to follow up and ask more on the data characterization of the AI projects. You guys talked about $25 million in bookings in 4Q coming from some of these AI projects.

How much of the revenue in the first 6 months of the year has been converted from that? Or like is that still a majority on the comp?

Emily Leproust: Thanks for the question. So maybe I start with the first one, and you guys are really good to squeezing 2 questions into 1, but [indiscernible]. So on the first one, as you [indiscernible] at the front end and the back end, right? So the front end is a shift. That's where we make the oligos, -- that's where we get the massive advantage. And then after the vials are made, depending on the flavor, it goes to different back-end. So in general, the back end for our GSPS is a different back end for NGS. And then in the [indiscernible] solution, we first make a fragment and then some stop there, they get shipped.

Then we make clonal genes, some stop there, make a chip, and then we make IgG expressions and stop the bigger chip and then some of the agility gets characterized. And so as you can imagine, as we add flavor, we have to add a little bit of automation to add capacity for that new flavor. So it's not a tremendous amount of CapEx. I mean it's significant, but compared to building a new fab from scratch, it's not comparable. And so that's the strategy we've been using is showing the demand from customers and adding a little bit of automation on the back end on the branch that's needed. So that's one.

And then the other thing we've done is we've been automating the automation. And so for those of you that come to our Investor Day you'll see that the giant room, we are now in that 1 room, we've been able to automate the automation and now we'll be able to have multiple times the capacity that we used to have in that room. In terms of your second question around the $25 million of orders that we had last year, those have all been shipped now -- most of that was finished by Q1 and very little impact of that in Q2.

As you remember, one thing that's a key differentiation from us is the speed at which we deliver data. And so some data -- most of the data is delivered 15 to 20 days after we receive the sequence. It's a quick turnaround to book the reps.

Operator: Our next question comes from Subbu Nambi, Guggenheim.

Subhalaxmi Nambi: You increased your full year revenue guidance by more than the magnitude of the Q2 beat. Any specific area or areas which drove the increase, essentially, I'm asking for coverage.

Luke Sergott: Yes. No. What we talked about in the back half, while sequentially, most of the improvements are going to come from NGS -- if you look at the full year guide, you can see that, that implies that the DSPS is really the strength of the raise in the back half. So if you are modeling it out, sequentially, we don't expect anything to go backwards in terms of DSPS. We only expect continued increases in the overall revenue, but at a more modest rate.

And again, it really is dependent upon the pace of us getting new customers into the DSS side and the ability to potentially exceed those expectations will -- is an area of opportunity for us. .

Operator: Our next question comes from Matt Larew with William Blair.

Matthew Larew: I wanted to ask on the complex DNA offering. So what's the time line at which you expect to deliver products sort of in line with the capabilities you described today, what lengths do you expect to be able to get up to in terms of manufacturing? And do you have any sense or could you give us a sense or what the missed opportunity has been a story. You referenced, I think in some cases, losing a whole order because you couldn't make a sequence. So what kind of additional opportunity does this unlock by adding these new capabilities?

Patrick Finn: Matt, it's Paddy here. Thanks for the question. We're pretty excited about the product. I think you could hear from my comments, retinal we accept the vast majority of sequences that come our way across all of the portfolio. And there is a few percentage business or a few percentage points in sequence we don't take, which we see some instances where the customer wants to take that total order somewhere else. The trends that emerging nucleic acid therapeutics and plant engineering and, of course, AI, they have some special needs or special requirements arriving then the sequence complexity. . And so true to auction, we're focused on the customer experience.

Our goal is to create a one-stop shop when you leverage our DNA synthesis platform that can print really high-quality DNA. And just as a reminder, up to approximately $1 billion per ,that gives us super quality, speed and economics of scale, including for complex sequence. And so now with a little bit more optimization throughout the entire workflow, it's going to deliver products best-in-class. So broad sequence acceptance really strong, predictable and transparent performance when you're on the Twist platform to its reliability.

Our platforms industry aligned, it's faster, cheaper, strong best-in-class customer us-- sorry, e-comm user experience, then you've got Twist customer service and support, so that's trained scientists to understand the customer's experiment there to help the customer through any of their challenges. So there's a lot to like with the offering. And we're looking forward to scaling in the coming few quarters. So we're talking about early access start with a sort of classic to make a few customers happy and learn as we grow and you'll continue to see the capability of ramp up as we go through the quarters.

Operator: Our next question comes from Catherine Schulte with Baird.

Catherine Ramsey: Maybe on the margin side, still on target to hit adjusted EBITDA breakeven in the fourth quarter. you've been very prescriptive about gross margin incrementals. I guess as you hit that milestone, how should we think about leverage beyond that point and maybe EBITDA margin incrementals going forward? .

Adam Laponis: Thank you for the question. In terms of where we are today or laser-focused on making sure we cross the adjusted EBITDA positive here while also, at the same time, ensuring the maximum acceleration of revenue growth. So it's really titrating that investment in such a way that we maximize growth rates. As we go forward, we have optionality. We talked about that before. We'll talk about it more in the future. But we're steward to the market, and we understand that our continued path of not going backwards is very important to us and also ensuring that we continue to sustain the accelerated levels of growth. So those will be the 2 focus areas.

And I think we'll spend some more time talking about that at our Investor Day here coming up.

Operator: Our next question comes from Puneet Souda with Leerink Partners.

Unknown Analyst: You have Michael on for Puneet. Congrats on the quarter. I was hoping to get some color on the jeans. So I saw a strong growth in the physical gene shift. Last quarter, you talked about 58% for characterization. I was wondering if you could offer any color on the contribution of gene per productization this quarter? And if you could offer any insight to us on how much of this ad demand is driven by more model building versus the incorporation of AI into your ongoing drug discovery, lead generation work at pharma?

Emily Leproust: Thank you. Great question. We did not share the numbers today. We were trying to straddle the fine line between being as transparent to indisposable and not keeping the competition too much. I'm sure some of them are on the line today. Now what we can say is that it's more, right? So there definitely growth in many genes where internally to generate data that was sold. So definitely, to be definitely the growth there. And the second -- there was a second question. .

Unknown Analyst: Yes. It was around the ability to how much of the growth is coming from making the model .

Emily Leproust: I'm sorry, on the number. Yes, very interesting, actually, -- we're seeing a lot of customers that have shifted while the beginning was bidding model. I think by now, most of them or a lot of them are now turning the crank. And so when they turn to crank, what we see is that the orders maybe each order may be a little bit smaller. So billion model is a big bolus upfront, it's a little bit smaller, but it's more of it. And so we are very pleased to see that people are returning -- and yes, it's working as expected. It's working well. .

Operator: Our next question comes from Brendan Smith with TD Cowen.

Brendan Smith: Maybe just to put a pin in the AI or just questioning here fully. I guess, looking at that $25 million from last year, do you have a sense or can you tell us what kind of run rate you're looking at now for like '26, maybe just with the first half on your belt. And I guess related to that, and within those revenues, I guess, can you give us a sense what the relative breakdown between revs from oligos versus IgG versus analytical data? Just kind of wondering really how much is the area mostly done, kind of further down that funnel or really where they're shaking out?

Patrick Finn: I can start with a little bit of color around how to think about where we're going. If you think about the therapeutics segment as a whole, obviously, the AI discovery is falling in there. And if you look at the outsized growth versus the average of the business, that delta is predominantly AI discovery work. I will say, at times, it's hard to know exactly whether it's a discovery or class of work. We don't always know exactly the number as well as whether it's training or building the models. But pretty strong confidence that the vast majority of at growth in therapeutic advance scope. I want to hand it to a second half.

Operator: Our next question comes from Tom DeBourcy with Nephron Research.

Tom DeBourcy: Diagnostics as a whole and the double-digit growth and also double-digit sequential growth as sort of you had, I guess, projected before. Just as you think about the rest of the year, do you see incremental sequential growth through Q3, Q4? Just thinking about diagnostics customers and their contribution to NGS.

Emily Leproust: Thank you, Tom. Yes, definitely, we are seeing growth. I think we in Q4, we're experiencing at least 1% growth in NGS alone. And it's a good reminder. We talked a lot on the call of our DNA synthesis and protein solution and AI discovery, we love it all. At the same time, it's a good reminder that dollar growth in NGS or dollar growth in DNA synthesis and Protein solution is very similar to us. And so what we are optimizing for as a management team. for revenue growth for the entire business. gross margin above 50% and getting to adjusted EBITDA breakeven.

And so -- and the portfolio of panels that is the library prep that we built in the NGS application group enables us to sustain great growth. We are liquid biopsy customers, our MRD customers ramping and adopting. And so we are very definitely very confident in that part of the business. And we are very much looking forward to return growth -- they were not so long ago, it was flipped where we had 28-ish percent growth in NGS and 12% growth in DNA synthesis and protein solutions, it's going to flip-flop back and forth.

But at the end of the day, what matters to us is the entire business out growth in float into the life science tools industry hopefully, we are unique in the kind of growth that we are being able to post, not just this quarter, but by now certain quarters in a row. So [ $110.7 million ] this quarter and not so long ago, we had $19 million for the entire year, right? So we'll keep doing it. And I think the future is very bright.

Operator: Thank you. There are no further questions. At this time, I'd like to turn the call back over to Emily Leproust for closing remarks.

Emily Leproust: As we wrap up, we look forward to continuing the competition in person at our Investor Day on May 21 in Oregon. This will be an incredible opportunity to go deeper into the drivers behind our performance cleared directly from our customer in Twist across therapy discovery NGS workload and participate in a tool that brings our platform to life. We will also have the chance to engage with members of our management team as we discuss how we are scaling the platform, expanding into new applications and driving long-term value creation. See you there. Thank you.

Operator: Thank you for your participation. You may now disconnect. Good day.

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