Twist Bioscience Corp
NASDAQ:TWST
Earnings Call Analysis
Q1-2024 Analysis
Twist Bioscience Corp
In a robust first quarter of fiscal 2024, the company highlighted significant achievements, marking a 32% year-over-year revenue increase to $71.5 million, driven by continued market penetration and product excellence. A cornerstone of the expansion strategy is the introduction of Express Genes, a swift gene delivery product solidifying the company's competitive edge. This offering commands a premium price, varying from 20% to a whopping 200%, enhancing both customer satisfaction and margins. Customer enthusiasm for this innovation led to an impressive 98% delivery success rate and has the company poised for further market share gains—especially as they now target customers requiring rapid gene provision traditionally made in-house.
The company's SynBio segment soared with a 25% year-over-year revenue growth, and the NGS segment demonstrated remarkable performance, with revenues surging to $39.4 million—a 62% year-over-year leap. Emphasis on diagnostics, clinical trials, and inclusion in customer workflows underlie this success, while a strategy catering to a diversified customer base, including pharma, biotech, and academic institutions, has been pivotal for sustained growth and resilience as evidenced by industrial chemical and academic revenues increases.
With an eye on the future, the company has positioned itself with strategic levers to scale economically, focusing on COGS reduction, in-sourcing opportunities, supplier optimization, and inventory management. These plans, along with minimizing CapEx needs, aim to firm up the gross margin while ensuring they end fiscal 2024 with $245 million in cash, cash equivalents, and investments—a testament to stringent financial discipline and a conscious effort to march towards profitability without relying on market returns.
With its sights firmly set on disrupting the microarray market, the company is investing in product introductions tailored for the liquid biopsy and the research market—identified as new avenues for growth. Yet, the path ahead isn't just about product proliferation; attention is now turning towards operational efficiencies, leaning on process improvements to optimize gross margins. Additionally, the company is gearing up for potential lucrative licensing agreements that, while not factored into current forecasts, present an opportunity for unexpected financial upswings.
Raising its guidance on both revenue and gross margins, the company’s bullish stance is catalyzed by the success of their Express Genes, robust NGS customer engagement, and realization of economies of scale in operations. Innovation remains at the core, with the implementation of express gene services and continuous cost optimization being pivotal for maintaining market leadership and enhancing investor value. The use of silicon chip technology continues to set the company apart, yielding cost benefits and establishing a formidable challenge for competitors to match.
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Welcome to Twist Bioscience Fiscal 2024 First Quarter Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Angela Bitting, Senior Vice President of Corporate Affairs.
Thank you, operator. Good morning, everyone. I'd like to thank all of you for joining us today for Twist Biosciences conference call to review our fiscal 2024 first quarter financial results and business progress. We issued our financial results release this morning, which is available at our website at www.twistbioscience.com.
With me on today's call are Dr. Emily Leproust, CEO and Co-Founder of Twist; and Adam Laponis, CFO of Twist. Emily will begin with a review of our recent progress on Twist businesses. Adam will report on our financial and operational performance. Emily will come back to discuss upcoming milestones and direction. We will then open the call for questions. We would ask that you limit your questions to only one, and then requeue as a courtesy to others on the call.
As a reminder, 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 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 Securities and Exchange Commission.
The forward-looking statements in this presentation are based on 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.
With that, I'll now turn the call over to our CEO and Co-Founder, Dr. Emily Leproust.
Thank you, Angela, and good morning, everyone. It is a very exciting time for Twist, with revenue, margin and market share increasing, new products introduced recently with more to come and growing market for our products, which enable a diversified customer base.
Today, as we report our financial results for the first quarter of fiscal 2024, we will focus on 3 important items that drive our business: revenue growth, margin expansion and financial disciplines track to our path to profitability.
Our entire team at Twist is laser-focused on these initiatives, while simultaneously bringing exceptional products to our customers.
We continue to deliver record revenue and consistent robust growth year-over-year. We expanded market share in both SynBio and NGS, with strong commercial and operational execution across our teams.
We are building a resilient and diversified business, with a portfolio of solutions that stem from our innovative DNA synthesis platform. This allows us to pursue multiple market opportunities simultaneously while mitigating risk.
Several years ago, we established a plan to achieve profitability for the business. We continue to execute against the plan we laid out for ourselves, and we are firing on all cylinders.
Diving into the specifics. Revenue for the first quarter increased significantly to $71.5 million, with others growing to more than $77 million and margin increasing to 40.5%.
Moving into the products area. Revenue for SynBio increased to $26.8 million, with strong orders of $29.2 million. SynBio revenue grew 25% year-over-year, excluding in both periods. GAAP revenues from a key account that was affected by timing of the quarter and expected to return in the current quarter.
In November, we began a limited launch of our Express Genes product, which is our clonal genes delivered faster in 5 to 7 days. I'm pleased to report that as for Q1, 98% of Express Genes ordered have been delivered in the [indiscernible] time frame.
Delivering clonally perfect genes in this time line at scale is an exceptional feat. This performance is driven by our platform, our [indiscernible] and our operations team that implements orders successfully. We are the only [indiscernible] offering that can deliver at scale. If you need one gene or thousands of genes, we can deliver [indiscernible] genes [indiscernible] 5 days.
Importantly, our differentiated express offering allows us to charge a premium price over our standard clonal genes in action for the speed. Customers can choose to order [indiscernible] genes with a turnaround time of 10 days or Express Genes with a turnaround time beginning at 5 days. The premium price for the express offering varies daily and by the capacity available in our manufacturing facility in Wilsonville, Oregon.
To date, we have tested premiums from 20% to as high as 200%. As a reminder, we use the same affecting line for both EAS and stellar genes, so all increased pricing applies directly to margin expansion. Because the manufacturing line is the same, it also means that our capacity has increased, whether we sell gene standard or express. When we launched in November, half of our clonal gene volume qualified for express service. Last week, we announced that the [indiscernible] all clonal genes at all prep scales now qualify for express service. With this expansion, we began a full marketing launch around the Express portfolio, largely using digital marketing tactics to keep the cost of customer acquisition [indiscernible].
We are pleased with the early days of the launch, particularly the balance of uptake between pharma, industrial, chemical and academic customers. The early feedback indicates that this product resonates. We monitor orders daily, and we are seeing the early stage of a revenue ramp.
We consistently observed varying degrees of customer willingness to pay a premium. And daily, we gained valuable insight into pricing sensitivity, geographic nuances, industry-specific trends and account level patterns. Moving forward, this allows the sales team, the potential to proactively secure contract pricing for key accounts in exchange for terms such as volume commitments and fixed premiums, which enables expanded margin as well as predictability for manufacturing.
As of January 30, we have received confirmed interest from several pharma companies, reflecting a positive trajectory.
Up until we turn on our marketing machine last week, our focus was on existing customers. Today, we are targeting new customers who use other providers, and we plan to use our differentiated Express product portfolio to take share from incumbent suppliers. We are earth low targeting customers who currently make their own DNA because they need it quickly. We call the latter group of potential customer DNA makers, and we know that to convert [indiscernible] to DNA buyers, it will take time to change behavior. We also know that we have the product, the channel and the operational capacity to drive a generational change, where ordering genes rather than making genes become the standard operating procedures across the globe.
Moving to NGS. Our revenue increased to $39.4 million. Revenue for the quarter included several large customers reorders, primary diagnostic customers running clinical trials and ramping commercial volumes. For these larger customers, we invested time and energy into the relationship, and we are now included into their workflow.
While the sales cycle for NGS is quite long, we are now seeing the benefit of this long-term investment of our time, as their tests advance the clinical and commercial stages. As a reminder, diagnostic customers, including those pursuing or selling liquid biopsy and minimal residual disease assays, [ choose with ] for their target enrichment solution within their testing workflow, as we serve our customers about half of their downstream sequencing costs. And each sample run by our customers uses some Twist [indiscernible]. So the larger the volume, the more they buy from Twist.
In a constrained macroeconomic environment, our offering provides margin expansion for our customers, and in some cases, our workflow makes a substantive difference in our customers' business liability.
Over the last 2 quarters, we are seeing customers streamlining test, selecting the test within their portfolio that includes a Twist workflow to save downstream sequencing costs and improve their overall COGS.
In addition to larger customers in advanced stages of development and commercial scale up, we see NGS workflow components as an increasing percentage of our NGS revenue. For example, a customer who order the custom target enrichment panel previously may now also order library prep buffers [indiscernible] blocker media, UMIs and more, from Twist as their supplier, expanding our share of wallet being existing accounts.
Our customers appreciate rising their number of suppliers and benefit from our exceptional and responsive customer service and supply chain teams, allowing them to focus on expanding their business. This focus on enabling the workflow between the sample and the sequencer will continue next week during the AGBT conference, when we will introduce several products, bringing truly differentiated solutions for key workflows within specific applications.
Moving forward, we expect revenue growth in NGS to come from increasing commercial adoption of our customers' assets, workflow expansion in existing customer accounts and the acquisition of smaller accounts as well as penetration of the research market through [indiscernible].
Moving to Biopharma. Revenue increased to $5.2 million, with orders coming in at $4.9 million. We were fully staffed on our [indiscernible] commercial team as of November, and we do see green shoots for this business, including 41 new program starts in the quarter. We know that the process of ramping up a sales process that is to full capacity typically takes about 6 months, and we are cautiously optimistic that revenue from Biopharma services will increase steadily in the back half of the year.
In addition, to providing antibody discovery services for our partners, this area of our business builds off of our silicon platform, which enables the ability to create antibody discovery libraries that we can then pair with our in vivo and AI/ML capabilities. There is a strategic fit here as we serve [indiscernible] by the customers who both often buy our offering and biopharma solutions, providing a full and complementary spectrum of offering to our customers and partners.
For [indiscernible] storage, we completed the end-to-end demonstration of the [ Giga by Century Archive ] workflow. This was an internal demonstrations designed to refine and validate our workflow, and we succeeded.
We are encouraged by our engineering advancements, and we remain on track to deliver an early access terabyte central archive solutions in 2025.
We continue to believe that the market for data storage provides a large opportunity, and we see this area of our business as a valuable asset with optionality at multiple points of development.
In early January, we welcomed Adam Laponis, to the team as our CFO. Adam brings a wide range of experience in finance and operations from large and smaller companies and is ideally positioned to support our next phase of growth.
With that introduction, I'll turn it over to Adam to discuss our financials.
Thank you, Emily. Revenue for the first quarter increased to $71.5 million, growth of 32% year-over-year and approximately 7% sequentially.
Orders increased to $77.5 million and gross margin was 40.5% for the first quarter of fiscal 2024. We served a total of 2,140 customers during the first quarter and ended the quarter with cash, cash equivalents and short-term investments of approximately $311.1 million. When we talk about cash moving forward, we will be talking about cash, cash equivalent and short-term investments.
Taking a deeper dive into revenue. SynBio revenue increased to $26.8 million, growth of 24% year-over-year, with orders increasing to $29.2 million. Synthetic genes revenue, a primary growth driver for SynBio, increased to $19.7 million, growth of 22% year-over-year. We shipped approximately 171,000 genes during the quarter.
Within the SynBio umbrella, Oligo Pools revenue increased to $4.2 million and libraries revenue increased to $2.9 million, year-over-year growth of 13% and 60%, respectively. Growth in SynBio across all product lines was driven primarily by health care customers.
NGS revenue for the first quarter grew to approximately $39.4 million compared to $24.4 million in the first quarter of fiscal 2023, an increase of 62% year-over-year. For the quarter, revenue from our top 10 customers accounted for approximately 44% of revenue. Orders increased to $43.3 million, setting the stage for further NGS growth. We served 538 NGS customers in the quarter, with 135 having adopted our products.
For Biopharma, revenue increased to $5.2 million, with orders coming in at $4.9 million. We had 69 active programs as of the end of December 2023, and we started 41 new programs during the quarter. The total number of completed programs as of December 31 was 843, with 69 including milestones and/or royalties.
Looking at revenue from [indiscernible]. Healthcare revenue rose to $40.9 million for the first quarter of 2024 compared to [ $30 ] million for the same period in fiscal 2023, reflecting the increased uptake of our products by pharma, biotech and diagnostic companies.
Industrial chemical revenue rose to [ $16.3 ] million in the first quarter, up from [ $16.3 ] million in the same period of fiscal 2023, steady growth year-over-year.
Academic revenue was $13.8 million for the first quarter of 2024, up from $10 million in fiscal '23, with growth coming from both SynBio and NGS customers.
Looking geographically, Americas revenue increased to approximately $44 million from the first quarter compared to $33.6 million in the same period of fiscal '23, growth of 31% year-over-year. EMEA revenue rose to $21.2 million in the first quarter versus [ $16.3 ] million in the same period of 2023, growth of 30% year-over-year. APAC revenue increased to $6.3 million in the first quarter compared to $4.3 million in the same period for fiscal '23, growth of 48% year-over-year.
Our gross margin for the first quarter increased to 40.5%, driven by large NGS orders in the quarter, higher mix of NGS and some pricing lift for SynBio from Express Genes.
In total, operating expenses for the first quarter were $118.5 million compared with $98.9 million in the same period for 2023.
Breaking this down. Cost of revenues increased to $42.5 million in the first quarter of 2024 compared with $29.4 million in the same period of fiscal 2023, primarily due to higher product volume and personnel costs, as well as increased depreciation and amortization expenses.
R&D decreased to $23.1 million compared with $31.2 million in fiscal 2023, primarily due to the reduction in head count as well as lab supply.
SG&A was $52.8 million for the first quarter compared with $42.3 million. The increase was driven largely by an increase in stock-based compensation, as the comp for Q1 FY '23 included a significant reversal of stock-based compensation, resulting from employee stock forfeitures related to the [ Abveris ] acquisition, offset by pre-commercialization costs included in the Q1 fiscal '23 but not in Q1 fiscal '24, as we have launched the Oregon manufacturing site.
Operating expenses included approximately $8 million for data storage. Stock-based compensation for the quarter was approximately $11 million.
Depreciation and amortization were $8.2 million for the quarter compared with $5.3 million for the same period of 2023.
Net loss attributable to stockholders was $43 million or $0.75 per share for the first quarter of 2024 compared to a net loss of $41.8 million or $0.74 per share for the same period of fiscal 2023.
Turning to guidance. We are updating specific metrics that we intend to use moving forward. For fiscal 2024, we now expect total revenue to increase by $3 million across the range to approximately $288 million to $293 million, anticipated growth of 18% to 20% year-over-year.
SynBio revenue of $114 million to $117 million, an increase of $1 million across the entire range and year-over-year growth anticipated to be 16% to 19%.
NGS revenue of $150 million to $152 million, an increase of $3 million in the range and anticipated growth of 21% to 23% year-over-year.
Biopharma revenue of approximately $24 million, a decrease of $1 million from the prior guidance and growth of approximately 3% year-over-year.
We are increasing our expected gross margin of approximately 40% to 41% for the year. Loss from operations guidance before taxes of approximately $189 million to $194 million compared with prior guidance of $180 million to $188 million, as we invest in G&A capabilities to continue to scale our business.
CapEx is projected to decrease by $5 million to approximately $15 million for fiscal '24. No change in our projected ending cash of approximately $245 million at the end of fiscal 2024.
For the second quarter of fiscal '24, we expect overall revenue of approximately $70 million to $71 million. SynBio revenue increasing to approximately $28.5 million, with the full launch of Express Genes' portfolio. NGS revenue of $37 million to $38 million, as we see larger accounts reordering in the second half of the year, on track with our increased annual guidance. Biopharma revenue of $4.5 million. Gross margin of 39%, primarily due to mix shift.
In summary, we continue to maintain financial discipline throughout the organization and make progress on our path to profitability. I joined Twist about a month ago. I couldn't be more excited about where we are going. This is a talented and determined mission-driven team that understands the value we bring to our customers.
Our focus on driving revenue growth, margin expansion and maintaining financial discipline will continue as we leverage our capabilities of supply chain management, manufacturing excellence and of course, delighting our customers.
With that, I'll turn the call back to Emily.
Thank you, Adam. When going to our fiscal year, we continue to see momentum in our SynBio and NGS groups. With a diversified customer base, a robust product portfolio that provides significant appreciation from competitors, growing market opportunities and committed employees, we are executing on the plan we laid out to drive the profitability for the business.
Going back to the 3 initiatives at Twist. First, we expect to grow revenues through Express Genes and SynBio and grow revenue in NGS with customer expansion as well as new product introductions. Keep your eye out for launches next week during the AGBT conference. For biopharma solutions, we will focus on increasing the number of IT programs and program start as well as signing new [indiscernible] customers.
Second, to expand our margin, we plan to continue dynamic pricing for Express Genes and SynBio. As we increase the number of [indiscernible] ship, our margin also increases, given the factory is fully functional and staffed. We will also focus on leveraging our increased volume with our supply chain to drive efficiencies at scale.
On the corporate side, in addition to driving revenue growth and increasing contribution margin for our products, we identified key initiatives that we expect to pursue over the course of the next 18 months that we believe will have a meaningful impact on COGS selling. This includes in-sourcing opportunities, products and packaging, alternative workflows and many more. We are excited about these opportunities to increase our gross margin further.
And third, we remain diligent in our commitment to financial discipline, renewing our commitment to end fiscal 2024 with $245 million in cash, cash equivalents and short-term investments. Overall, we are executing on an aggressive objective to become a profitable company. We continue to execute effectively on our past profitability and look forward to keeping you apprised of our progress.
With that, let's open the call for questions. Operator?
[Operator Instructions] Our first question comes from [ Matt Sykes ] with Goldman Sachs.
Congrats on the quarter. Could you talk about the volume and mix of Express Genes in the quarter? Just given the mid-November launch and limited marketing for a period during the quarter, how do you see Express Genes contributing to margin expansion for the full year?
Thank you, Matt. Maybe I will start. So -- there's really 2 phases. The first phase is the mid-November launch till the launch last week and then the second phase is now.
So in the first phase, the volume was basically fully focused on existing customers, and we've seen really good pickup actually both biopharma and academic customers, so that's quite exciting. You see that both of our target markets have been testing the products and experiencing the great performance of the product and reordering. So that was the mix then.
It's a bit too soon to say about the second phase. As you know, the second phase, the goal is to continue having existing customers use the product, which deliver great value for them and improve gross margin for us. But the big drive for us now is to bring net new customers on to the platform and deliver revenue growth and margin growth.
So Q2 -- sorry, Q3 will be the first clean quarter, where it will have the full marketing launch for the entire quarter. We are already in Q2. And so therefore, Q3 would be the first clean quarter where we'll have the full quarter expense of Express Genes. And what we expect is as the year progresses, we'll have more penetration into those new net new customers, and then we'll start to see the benefit of Express Genes on gross margin.
Got it. And then just 2 quick follow-ups. Could you just talk about this? I know you're focused on existing customers. But could you just talk about the split in the quarter of gene buyers versus gene makers for Express Genes? And then just do you think the digital marketing will be enough to drive growth? Or do you plan on augmenting that with additional marketing efforts over the course of the year?
Yes. So I think we basically have [ 1 week and half ] of trying to convert buyers into makers. So I would say that right now, for all intents and proposes. All of the volume so far has been DNA buyers. So it's very early innings for DNA makers. We're now at the [indiscernible].
And in terms of digital marketing, it is our strategy to reach small customers, so Tier 3, Tier 4 customers. However, in addition to that, we have our sales team that has been engaged for now years with top accounts. They are also working on converting big accounts towards Express Genes. And as mentioned in my remarks, we've had some initial success in getting level of interest to convert to Express Genes both for big accounts as well.
So it's going to be all hands on deck, and we want to see growth in both the Tier 1, Tier 2 customers as well as Tier 3, Tier 4.
Our next question comes from Steven Mah with Cowen.
Congrats on the quarter. Maybe just a follow-up to Matt's questions. On the gross margin in the quarter, it's much higher than we had modeled. Was there any impact at all from Express Genes in the quarter? Or was it driven entirely by the scale-up of the factory of the future? Or if not, what kind of drove the gross margin beat? And then could you also then provide your thoughts around the full year guide of 40% to 41%, given you're already at 48.5% in Q1?
You want to take that question, Adam, those questions?
Sure. Happy to. So Steven, I mean I am very encouraged by the record quarter we had in both on the growth and the revenue front as well as the progress we saw in gross margin expansion. I'm also encouraged by the alignment we have across the executive team to focus on gross margin expansion is a key priority, not just as a business priority, but even in our paper performance goals.
So in terms of where we were in Q1, really the biggest driver for the gross margin expansion was the -- some of the large orders we had in NGS, particularly as calendar year-end, we saw a big step-up in those orders. And we're seeing that and when you look at our guidance, you can see that we're going to see that pull back a bit in Q2, and that drove some of the expansion or the most of the expansion in the Q1 numbers.
You also asked kind of how we're thinking about the full year guide. And look, I am confident in the business performance, and we raised the guidance on both the revenue and the gross margin side. But I also recognize, I've been in the role now for less than a month. I don't want to get over my [indiscernible] with overly aggressive guidance. So yes, there's some conservatism in there, but we have included the effects that we're seeing already today on the expansion from SynBio and Express Genes as well as the factory of the future now being fully operational.
Okay. Great. That's helpful. Sorry if I can just sneak one more in. I know you haven't done the full launch of Express Genes yet, but could you tell us what the average premium you guys are getting? I know Emily threw out a range of 20% to 200%. But I'm just wondering if you could give us a sense of the average you're getting right now?
Yes. So we are not able to give a range. As a reminder, the [indiscernible] pricing is strongly based on the capacity in the fab at the time on that day. So we get a lot of benefits beyond that. But the one thing that you can check is that, that pricing daily is public, right? It's on the website. And so anybody can look at what is the pricing right now, again, based on the capacity.
Our next question comes from Vijay Kumar with Evercore ISI.
Congratulations on a nice print here. Maybe my first one here is on the guidance. You guys gave revenues by $3 million. The annual was raised by $3 million. And it looks like more of that came from NGS, but also SynBio was raised. I'm just curious, the bit which is carried through and why, despite comps getting easier, perhaps we should see a more robust growth in 2Q and back half?
Vijay, great question, and I'm happy to give a bit more color on it. In terms of where we are right now, we had a great quarter. So I think I mentioned that in [indiscernible] so we do expect that NGS pullback, particularly in Q2. And I think when you look at the early phases of the SynBio and Express Genes, it is going positively, but it's really early days.
And again, me being brand new in the job, I don't want to get ahead of my [indiscernible] on that in the full year guide. We'll keep you posted on progress as the year continues on both fronts. But yes, I feel pretty good that the full year guidance raised both on the top and the margin side.
Fantastic. And then my follow-up is on the gross margin guidance here. When I look at the sequential ramp. What is the primary driver from the Q1 to the Q2 step down of 39%? And I think the annual guidance implies your back half [indiscernible] step back to 41% from 2Q. Is there anything specific that's going on in 2Q? Maybe just walk us through the cadence?
No, no, it's a great question. So it's really more of a fact in Q1. We got a pretty substantial sequential lift from the higher NGS mix. We are actually expecting that to pull back slightly in Q2, as the mix shifts more towards SynBio. And so we'll see that. But I think as the year progresses and we see more the customers switching to the full quarter of Express Genes and the NGS business continue to expand, we feel pretty confident in the back half guide as well.
Fantastic.
Our next question comes from Luke Sergott with Barclays.
Can you -- I want to start talking about first on the increase in the OpEx spend. I know that you've always talked about growing at slower than your revenue growth, but just incremental step-up through here throughout the year, like where is that investment going? And is it just to fill more commercialization on the Express Genes. Can you just give us some color?
I'm happy to step in on that one. And actually, in the G&A line specifically. It's not the incremental ends on infrastructure, particularly around some of our IT and financial capabilities. It is we're really focused on building out those capabilities right now. So we've made some choices around how we're going to invest in that the scale not only for the current year, but future years depend as well.
Okay. That's helpful. And then you talked about like some of the early learnings from the elasticity that from the dynamic pricing. Talk about any trends that you're seeing there, from types of orders or customers or how that's kind of pacing out? And where the dynamic pricing is really starting to contribute to the margin, if it's going to create any lumpiness or anything throughout the year?
Yes. Thank you. That's a good question. So we have been -- now that we have a good number of debt assets, we've been deeply looking into the price sensitivity response care. So looking at the access, what is the capacity of the day ends, what is the premium of the day, and on the way access, what is the percentage of customers that have that chose to purchase Express.
And we actually see quite a -- what you will expect as a response curve. So at very low or a high percentage of premium, you see a situation. And then if you kind of a linear response in between. So it's an incredible view into the price sensitivity that our customers have.
And we are also able to see, by geography and by industry types. So for instance, biopharma versus academic academia, what kind of price sensitivity they have. So obviously, we are going to refine our model over time. But yes, it's quite encouraging to see that the outcome is what you will expect and then will be from there.
Our next question comes from Matt Larew with William Blair.
First question here is for Adam. Just going back to [indiscernible] question on some of the SG&A investments you referenced sort of on the IT and financial capability side. Are these what you view as kind of the only set of meaningful investments, Adam, that need to be made? Or are there multiple layers over the course of a couple of years? And sort of within that context, how do these investments or future investments affect the goal to get to adjusted EBITDA breakeven on the core business by the end of fiscal '24?
No, Matt. I think the -- great question. And I think a couple of comments here. In terms of the focus of the business and the priorities, it's very clear to me, and it's been clear and hopefully in our commentary as well that the priority is around revenue growth, market expansion and that cash management. So we're never in a place where we need to go back to the markets for an equity raise in the future. And so that path to profitability is very much a key part of everything we're doing and how I'm thinking about it.
I haven't provided the exact timing, and I'm not giving guidance on when we'll get to profitability, but I am saying that confidence in we won't be coming back to the market.
And in terms of the investments, again, I'm going to lean on the fact that it is [ Week 3, ] I'm still getting my bearings and I think about it pretty carefully right now is I don't want to make any major changes in investment strategy, and that's not what we're looking to do here. I want to make sure you continue to see progress.
And if you think about areas like supply chain, for example, where the teams are laser-focused on driving out costs throughout the system and supplier consolidation, in-sourcing, inventory optimization. All of these things are getting easier as we continue to scale and we gain leverage, so that the focus and momentum is on that. And I want to make sure we're balancing that any investment with those savings over time.
So my goal is very much still to keep a tap on any expansion in the SG&A investment by making sure we're pacing any incremental investments with the savings we're driving in other areas of the business. Hopefully, that provides clarity.
Yes, if that's helpful. And then Emily, you referenced some potential new products being launched next week. And the question would be you obviously have quite a bit of knowledge about what purchasers of DNA want and increasingly sort of what they're willing to pay for. As you think about moving into areas like RNA synthesis, maybe Express RNA, what do you know about what RNA customers might value differently than DNA customers? How are you sort of assessing sort of the key attributes of what those products would need to look like relative to DNA? And maybe if you could extend that even things like proteins, IgG, et cetera?
Yes. Thank you, Matt. So I spent a lot of time with customers. And I think there are 2 primary questions and then a bunch of secondary ones. The primary questions with customers are always when and how much? It's always when will I get it? And how much it cost? And then after that, there is a number of secondary questions around quality and support and packaging. And so there are some product features that you need to have. For instance, quality in order to be in business. But assuming that those are met is always about speed and cost. And that is really well with the Twist brand that we are making. We've always have been really good at cost, and that comes from the silicon chip that gives us an advantage. By using less reagents, we're able to have a lower cost base than our competitors. So we've always been really good on the cost side.
Historically, I would say, up until late 2022, were not great on speed. We are probably on par with others. But now that we've made the investment in the speed is really becoming the second strengths that we have, and we'll keep leveraging that brand.
So when you think it is very high-quality products, very great customer experience and we can customize any packaging delivery schedule that you want. And that's all great. But most importantly, it's going to be fast. There may be a great price to enable your -- the science, you're going to get more shots on goal. And that means that we'll get all your budget because you chose us exclusively.
Our next question comes from Catherine Schulte with Baird.
Maybe first on NGS. I guess what's driving the sequential decline in your second quarter guidance? Are there any onetimers in the first quarter? I think you mentioned some large orders. So is there just any way to quantify those?
Yes -- maybe I'll jump in. So you -- one of the -- one of the numbers we report is the percent revenue in NGS that comes from top 10 customers. And as you can see, it is a very meaningful number. And so when you have a number of big customers, it can be a little bit lumpy quarter-over-quarter. Year-over-year, it's fine, but quarter-over-quarter, it can be lumpy.
As you remember, Q1 of last year was kind of the opposite situation where some big customers had delayed taking shipment. And so the solution for us is let's go find more lumps, right? So we are going to -- we are pushing on adding more and more of those top accounts. And over time, since we'll smooth over.
So we have great confidence for our view for the year. And at the same time, we are there to serve our customers. And if some of those customers want shipment early or later, we always accommodate the their needs to make sure that customer satisfaction is as high as possible.
Okay. And then maybe on CapEx, there was a pretty decent step down versus your prior guide on a percentage basis. Can you just talk through what projects are either being pushed out or just where those savings are coming from?
This is Adam. And I'm happy to take that one, Emily. And if I look at it, just as we went through after 1 quarter in our budget, we were seeing some favorability in that. We haven't stopped to the projects we were initially starting. It's just purely a reality of, as you refine the numbers, we're seeing a lower need for CapEx.
I think the key message here in -- Wilsonville came online really fully for the first time in Q1 of this fiscal year. So even the depreciation for that, we still have a small step-up as we get into Q2 on that. But we're really excited about the capacity that brings. And I'm sure there will be minor things to continue to expand the capabilities and efficiency of the site, but we're really focused on optimizing where we are this year.
Okay. Great.
Our next question comes from Puneet Souda with Leerink Partners.
Sorry if I missed that. This is Puneet from Leerink. First question maybe for Adam. I mean your orders increased by almost $6.5 million sequentially, but your guide is only up by the beat. Maybe just could you talk a little bit about where these orders are coming from sort of in terms of customer type, NGS, SynBio, maybe just talk to us about that.
And then the level of conservatism you have that you talked about, maybe, Adam, just help us understand the level of conservatism that you have versus the step down that we are seeing in NGS in the second half? And then I have a follow-up for Emily.
No, Puneet. I'm happy to help provide additional color, and thank you for the question. I mean if I look at the first part of it, there's always going to be a dynamic as I'm learning this business, that the orders don't always translate in the same period to revenue. There's a natural delay, particularly on both large NGS customers who put in large POs for multi-period, as well as we have on the biopharma side customers who have multi-period POs over many quarters. So typically, the revenue comes in over the next 3 to 6 months after we get the order.
From that perspective, I don't expect all the Q1 orders to turn into revenue in Q2, but I do expect them to convert as we progress throughout the year and potentially even in '25, given some of the nature of the type of orders.
In terms of where we are and what's driving the guide, I will be really clear. I have a lot of confidence in the progress we're seeing. I mean, you don't come out of a record quarter in revenue without confidence. I see the team firing on all cylinders, whether it be from the Express Genes and SynBio or beyond the progress we're making on the NGS front with new customers. So I'm very confident in the guide we're giving, but I'm also -- I said it before, it's early days for me. So I don't want to get over my skis in any element of it. So hopefully, that clarifies.
Our next question comes from Sung Ji Nam with Scotiabank.
Congrats on the quarter. Just one question. On the NGS segment, great to see, obviously, continued strength there, especially from the top customers. But as you look at the sales funnel, just kind of curious, is it pretty much the usual setback? Or are you seeing kind of more new diversified customer leads, especially with the product launches like [ RNA-Seq ]?
Yes. Thank you. Great question. So definitely, that has been the focus of our new product introduction. We launched RNA-Seq last summer and the purpose is to expand into the research market. You'll see at the AGBT next week that we'll have products focused on strengthening our position in liquid biopsy. [indiscernible] so, we are very interested in converting the microarray market to NGS, and that has not gone as fast as we have wanted. And so there will be more product introduction squarely focused on going after that market with really best-in-class tools.
So I would expect in terms of market expansion, continuation of our efforts around academia and [indiscernible] bio. I think those are 2 additional growth opportunity for us in addition to, I think, the great performance we've been having in liquid biopsy and MRD.
So over time, -- right now, a lot of our success in NGS is riding the -- or enabling, I'll say, the liquid market. But I'm quite -- we are quite focused on expanding to other markets such as [indiscernible] bio and academia.
Our next question comes from Rachel Vatnsdal with JPMorgan.
So first up, I just want to ask on biopharma. You mentioned that you're in discussions for antibody out-licensing. So can you spend a minute talking about that opportunity and how meaningful these licensing deals can potentially be? And also just what's the time line in terms of when can we expect to see any headlines related to those deals?
[indiscernible] , it's a good question. So for context, just as a quick reminder, the main effort of our biopharma business is to sell a service, where customers give us a target and we use our AI in vivo, in vitro tools to deliver a preclinical asset for them. So that's the main thrust of our effort. In the past, we also spend some internal R&D dollars to our own assays. And we now have maybe a dozen of assets that we think are valuable. We've stopped stop spending internal R&D dollars to advance them. And now we're in discussion with partners to license them -- those out.
As you know, biopharma licensing deals can be lengthy. And so -- and at the same time, I think the bottom line for me is we are not expending significant cash to pursue those licensing deals, and those licensing deals are not in the forecast. So there will be nice upside when they happened.
Great. And then just -- yes, sorry, go ahead.
No, go ahead. Go ahead.
Sorry, I thought you were saying something. Then just as my follow-up, you mentioned some of these cost actions to impact COGS over the next 18 months. So can you just walk us through the levers that you're pulling from that cost action perspective? And then how much of that is already contemplated within guidance right now for those cost actions for the year?
And so great question. So we're really taking advantage of the up-leveling of the management team that we've done over the last few quarters. We have a great new VP of Ops, a great VP of Supply Chain. And now as a company that is growing in a market that is not, we have a nice profile with our suppliers. We have an opportunity to have a choice of in-sourcing some of the products. We have the opportunity to consolidate vendors. And so we're really we are really exercising our muscle with our supplier to make sure that we get the best target costing over time to benefit our gross margin.
In addition, when we launched our Express Genes, we really turn over a lot of stones in our processes, and we've seen a lot of opportunities where we can swap out reagents, we can shorten kid steps and that has given us opportunities in the future to [indiscernible] in on the process -- processes that we have and tweak some of the regions to take cost out.
So that takes time to realize. But at the same time, we see the opportunity, and we'll do the work to get the best gross margin outcome. And I say it's a natural evolution of our maturation as a company. The first step was always let's have the best product possible. And we had a natural advantage with the silicon chip where we always had the cost advantage.
But now that we have the best product out there, we can focus maybe a little bit less on new product introduction and a bit more on continuous process improvements, to start taking costs out and get better and better at gross margins. So hopefully, that helps.
Our next question comes from Puneet Souda with Leerink Partners.
Yes. Just wanted to follow up on a broader question around Express Genes. What's your expectation for a competitive response on Express Genes or these fast genes? I mean it's a great strategy to manufacture it all at once and deliver it right away or later and modulate your pricing accordingly. But just thinking about the industry overall for Oligos, how do you think about the sort of the competitive response would be from the competitors and the sort of the defensibility you have to that competitive response. I appreciate that.
So the way I think about it is -- our competitors have been in business way longer than we have, right? And so we really have optimized all of their policies in the [indiscernible] plate. And there's not much more they can do.
What we have is really the advantage of the silicon chip that gives us a tremendous advantage. And then we've built the back end around it to make at scale Express Gene. And so at this point, we're the only company that can make all of their gene fast. And I think it's going to be a very, very difficult -- it would be a very difficult task for our competitors to try to match it.
So we'll see with the responses, but we are ready. We think we have an absolute great, great product in terms of its great [indiscernible], its customer experience, speed and actually even great pricing. And so we provide [indiscernible] value to our customers. As we look forward, we'll see anybody on the playground, any [indiscernible], anytime.
Indeed, a playground.
There are no further questions. I'd like to turn the call back over to Emily for any closing remarks.
Thank you very much. So in closing, we reported a record quarter, and our product portfolio continues to resonate with our customers. We introduced the full Express Genes portfolio last week, and we have more product launches planned for the next week at AGBT.
As we move forward, we'll continue to focus on revenue growth, margin expansion and financial disciplines to drive our past profitability.
We look forward to seeing some of you at AGBT or conferences in the March time frame. Thank you very much.
Thank you for participating in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a great day.