10-Q 1 twst-20240331.htm 10-Q twst-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38720
twst-20211231x10q004.jpg
Twist Bioscience Corporation
(Exact Name of Registrant as Specified in its Charter)

Delaware46-2058888
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)

681 Gateway Blvd, South San Francisco, CA 94080
(Address of principal executive offices and zip code)
(800) 719-0671
(Registrant’s telephone number, including area code)

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockTWSTThe Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
  Emerging growth company


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the Registrant’s common stock outstanding as of April 29, 2024, was 58,225,999.



TWIST BIOSCIENCE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS



1

Forward-looking statements
This Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, or Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to, among other matters, plans for product development and licensing to third parties, plans and timeframe for the commercial development of DNA data storage capabilities, expectations regarding market penetration, anticipated customer conversions to our products, plans to expand in the international markets, and identification and development of potential antibody candidates. Forward-looking statements are also identified by the words “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” and variations of such words and similar expressions. You should not rely upon forward-looking statements as predictions of future events. Such statements are based on management’s expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results, events or circumstances to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include:
our ability to increase our revenue and our revenue growth rate;
our ability to accurately estimate capital requirements and our needs for additional financing; our estimates of the size of our market opportunities;
our ability to increase DNA production, reduce turnaround times and drive cost reductions for our customers;
our ability to effectively manage our growth;
our ability to successfully enter new markets and manage our international expansion;
our ability to develop and commercialize additional products in the synthetic biology, biologic drug and data storage industries, including our Express Genes product;

our ability to leverage our investment in our manufacturing facility in Wilsonville, Oregon;

our ability to protect our intellectual property, including our proprietary DNA synthesis platform;
costs associated with defending intellectual property infringement and other claims;
the effects of increased competition in our business;
our ability to keep pace with changes in technology and our competitors;
our ability to successfully identify, evaluate and manage any future acquisitions of businesses, solutions or technologies;
the success of our marketing efforts;
a significant disruption in, or breach in security of our information technology systems and resultant interruptions in service and any related impact on our reputation;
our ability to attract and retain qualified employees and key personnel;
the effects of natural or man-made catastrophic events or public health emergencies;
the effectiveness of our internal controls;
changes in government regulation affecting our business;
uncertainty as to economic and market conditions and the impact of adverse economic conditions; and
other risk factors included under the section titled “Risk factors” contained in Item 1A of our Annual Report on Form 10-K filed with the SEC on November 21, 2023, our Quarterly Report on Form 10-Q filed with the SEC on February 2, 2024 and this Quarterly Report on Form 10-Q.

2

You should not rely upon forward-looking statements as predictions of future events. Such statements are based on management’s expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results, events or circumstances to differ materially from those expressed or implied in our forward-looking statements.
Readers are urged to carefully review and consider all of the information in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission, or SEC. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this filing or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
When we use the terms “Twist,” “Twist Bioscience,” the “Company,” “we,” “us” or “our” in this report, we are referring to Twist Bioscience Corporation and its consolidated subsidiaries unless the context requires otherwise. Sequence space and the Twist logo are trademarks of Twist Bioscience Corporation. All other company and product names may be trademarks of the respective companies with which they are associated.



3

PART I. Financial information

Item 1. Financial statements

Twist Bioscience Corporation
Condensed Consolidated Balance Sheets (unaudited)
(In thousands except per share data)March 31,
2024
September 30,
2023
Assets  
Current assets: 
Cash and cash equivalents $243,348 $286,470 
Short-term investments49,99449,943
Accounts receivable, net35,99344,064
Inventories30,37632,063
Prepaid expenses and other current assets12,15811,716
Total current assets$371,869 $424,256 
Property and equipment, net121,339131,830
Operating lease right-of-use assets63,66671,531
Goodwill85,81185,811
Intangible assets, net51,89854,483
Restricted cash, non-current2,8682,811
Other non-current assets5,3955,681
Total assets$702,846 $776,403 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $7,703 $14,052 
Accrued expenses14,51310,754
Accrued compensation25,21425,818
Current portion of operating lease liability14,62114,896
Other current liabilities5,4397,803
Total current liabilities$67,490 $73,323 
Operating lease liability, net of current portion74,80479,173
Other non-current liabilities421475
Total liabilities $142,715 $152,971 
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, $0.00001 par value —100,000 and 100,000 shares authorized at March 31, 2024 and September 30, 2023, respectively; 58,162 and 57,557 shares issued and outstanding at March 31, 2024 and September 30, 2023, respectively
$ $ 
Additional paid-in capital1,682,4731,657,222
Accumulated other comprehensive income(660)(756)
Accumulated deficit(1,121,682)(1,033,034)
Total stockholders’ equity$560,131 $623,432 
Total liabilities and stockholders’ equity$702,846 $776,403 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Twist Bioscience Corporation
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

Three months ended
March 31,
Six months ended
March 31,
(In thousands, except per share data)2024202320242023
Revenues [1]
$75,302 $60,180 $146,800 $114,423 
Operating expenses:
Cost of revenues$44,420 $41,669 $86,955 $71,111 
Research and development24,14927,37947,24958,621
Selling, general and administrative55,62253,965108,46296,289
Change in fair value of contingent considerations and holdbacks (1,196) (5,331)
Total operating expenses$124,191 $121,817 $242,666 $220,690 
Loss from operations$(48,889)$(61,637)$(95,866)$(106,267)
Interest income3,9413,4648,0616,504
Interest expense(2)(3)
Other income (expense), net(199)(305)(230)(462)
Loss before income taxes$(45,147)$(58,480)$(88,035)$(100,228)
Income tax provision(345)(676)(465)(752)
Net loss attributable to common stockholders$(45,492)$(59,156)$(88,500)$(100,980)
Other comprehensive loss:
Change in unrealized gain (loss) on investments(57)647771,516
Foreign currency translation adjustment(38)7319438
Comprehensive loss(45,587)(58,436)(88,404)(99,026)
Net loss per share attributable to common stockholders—basic and diluted$(0.79)$(1.04)$(1.54)$(1.78)
Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted57,77956,77757,63756,608
[1] During the three and six months ended March 31, 2024, the Company generated revenues from related parties totaling of $3.2 million and $5.6 million, respectively. During the three and six months ended March 31, 2023, the Company generated revenues from related parties totaling $2.2 million and $2.6 million, respectively.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

Twist Bioscience Corporation
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

Three months ended March 31, 2024
Common
stock
Additional
paid-in
capital
Accumulated
Other
comprehensive
loss
Accumulated
deficit
Total
stockholders'
equity
(In thousands)SharesAmount
Balances as of December 31, 202357,779$ $1,666,797 $(565)$(1,076,190)$590,042 
Vesting of restricted stock units229$— $— $— $— $— 
Exercise of stock options691,3171,317
Issuance of shares under the employee stock purchase program1242,0472,047
Repurchases of common stock for income tax withholding(39)(1,535)(1,535)
Stock-based compensation13,84713,847
Other comprehensive income(95)(95)
Net loss(45,492)(45,492)
Balances as of March 31, 202458,162$ $1,682,473 $(660)$(1,121,682)$560,131 

Three months ended March 31, 2023
Common
stock
Additional
paid-in
capital
Accumulated
Other
comprehensive
income
Accumulated
deficit
Total
stockholders'
equity
(In thousands)SharesAmount
Balances as of December 31, 202256,645$ $1,617,174 $(609)$(870,240)$746,325 
Vesting of restricted stock units198$— $— $— $— $— 
Exercise of stock options22250250
Issuance of shares under the employee stock purchase program1322,5372,537
Repurchases of common stock for income tax withholding(64)(1,262)(1,262)
Issuance of shares from business acquisition1724,0924,092
Stock-based compensation10,42610,426
Other comprehensive income720720
Net loss(59,156)(59,156)
Balances as of March 31, 202357,105$ $1,633,217 $111 $(929,396)$703,932 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


6

Six months ended March 31, 2024
Common
stock
Additional
paid-in
capital
Accumulated
Other
comprehensive
loss
Accumulated
deficit
Total
stockholders'
equity
(In thousands)SharesAmount
Balances as of September 30, 202357,557$ $1,657,222 $(756)$(1,033,034)$623,432 
Impact of ASU 2016-13 adoption (Note 2)$— $— $— $(148)$(148)
Vesting of restricted stock units489
Exercise of stock options1272,2682,268
Issuance of shares under the employee stock purchase program1242,0472,047
Repurchases of common stock for income tax withholding(135)(3,960)(3,960)
Stock-based compensation24,89624,896
Other comprehensive income9696
Net loss(88,500)(88,500)
Balances as of March 31, 202458,162$ $1,682,473 $(660)$(1,121,682)$560,131 

Six months ended March 31, 2023
Common
stock
Additional
paid-in
capital
Accumulated
Other
comprehensive
income
Accumulated
deficit
Total
stockholders'
equity
(In thousands)SharesAmount
Balances as of September 30, 202256,523$ $1,619,644 $(1,843)$(828,416)$789,385 
Vesting of restricted stock units322$— $— $— $— $— 
Exercise of stock options58853853
Issuance of shares under the employee stock purchase plan1322,5372,537
Repurchases of common stock for income tax withholding(102)(2,261)(2,261)
Issuance of shares from business acquisition1724,0924,092
Stock-based compensation8,3528,352
Other comprehensive income1,9541,954
Net loss(100,980)(100,980)
Balances as of March 31, 202357,105$ $1,633,217 $111 $(929,396)$703,932 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



7

Twist Bioscience Corporation
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended
March 31,
(in thousands) 20242023
Cash flows from operating activities
Net loss$(88,500)$(100,980)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization16,47512,320
Non-cash lease expense503586
Stock-based compensation24,8447,934
Change in fair value of acquisition consideration(5,331)
Other non-cash adjustments293578
Changes in assets and liabilities:
Accounts receivable, net7,401(8,050)
Inventories1,687(606)
Prepaid expenses and other current assets(420)(1,591)
Other non-current assets3091,206
Accounts payable(5,725)(4,211)
Accrued expenses3,8592,893
Accrued compensation(539)(2,702)
Other liabilities(2,583)(404)
Net cash used in operating activities$(42,396)$(98,358)
Cash flows from investing activities
Purchases of property and equipment$(2,109)$(20,877)
Purchases of investments(28,966)(50,434)
Proceeds from maturity of investments30,000105,500
Net cash (used in) provided by investing activities$(1,075)$34,189 
Cash flows from financing activities
Proceeds from exercise of stock options$2,268 $855 
Proceeds from issuance of common stock under employee stock purchase plan2,0472,536
Repurchases of common stock for income tax withholding(3,960)(2,261)
Net cash provided by financing activities$355 $1,130 
Effect of exchange rates on cash, cash equivalents and restricted cash$51 $341 
Net decrease in cash, cash equivalents, and restricted cash(43,065)(62,698)
Cash, cash equivalents, and restricted cash at beginning of period289,281380,259
Cash, cash equivalents, and restricted cash at end of period$246,216 $317,561 
Supplemental disclosure of cash flow information
Income taxes paid, net of refunds339137
Non-cash investing and financing activities
Property and equipment additions included in accounts payable and accrued expenses$49 $1,747 
Issuance of common stock in connection with the business acquisition$ $4,092 
Tenant improvement allowance capitalized in property and equipment$2,719 $ 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

Twist Bioscience Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
1. The Company
Twist Bioscience Corporation (the Company) was incorporated in the state of Delaware on February 4, 2013. The Company is a synthetic biology company that has developed a disruptive DNA synthesis platform. DNA is used in many applications across different industries: industrial chemicals/materials, academic, healthcare and food/agriculture. The Company’s fiscal year ends on September 30.
The core of the Company’s platform is a proprietary technology that pioneers a new method of manufacturing synthetic DNA by “writing” DNA on a silicon chip. The Company has combined this technology with proprietary software, scalable commercial infrastructure and an e-commerce platform to create an integrated technology platform that enables the Company to achieve high levels of quality, precision, automation, and manufacturing throughput at a significantly lower cost than its competitors. The Company is leveraging its unique technology to manufacture a broad range of synthetic DNA-based products, including synthetic genes, tools for next generation sample preparation, and antibody libraries for drug discovery and development.
The Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by companies in this industry. These risks include, but are not limited to, the uncertainty of availability of additional financing, market acceptance of its products, the ability to retain and attract new customers, and the uncertainty of achieving future profitability.
The Company has generated net losses in all periods since its inception. As of March 31, 2024, the Company had an accumulated deficit of $1,121.7 million and has not generated positive cash flows from operations since inception. Losses are expected to continue as the Company continues to invest in product development, manufacturing, and sales and marketing.
As of March 31, 2024, the Company had cash and cash equivalents and short-term investments of $293.3 million, which the management believes will be sufficient to fund operations for at least one year from the issuance of these consolidated financial statements. However, if the Company needs to obtain additional financing to fund operations beyond this period, there can be no assurance that it will be successful in raising additional financing on terms which are acceptable to the Company.
If the Company requires but is unable to obtain additional funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

2. Summary of significant accounting policies
Basis of presentation and use of estimates
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the Annual Report on Form 10-K) filed with the Securities and Exchange Commission on November 21, 2023. The condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the condensed consolidated financial statements. The condensed consolidated balance sheet at September 30, 2023 is derived from audited consolidated financial statements but does not include all disclosures required by GAAP. The operating results for the three and six months ended March 31, 2024 are not necessarily indicative of the results expected for the full year ending September 30, 2024 or any interim period.
The presentation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company’s unaudited
9

condensed consolidated financial statements include its wholly owned subsidiaries. All intercompany balances and accounts are eliminated in consolidation.
The following table provides a reconciliation of the Company’s cash and cash equivalents and non-current portion of restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash shown in the Company’s condensed consolidated statements of cash flows:

(in thousands)March 31,
2024
September 30,
2023
Cash and cash equivalents$243,348 $286,470 
Restricted cash, non-current2,868 2,811 
Total cash, cash equivalents and restricted cash$246,216 $289,281 

Restricted cash represents cash held at financial institutions that are pledged as collateral for stand-by letters of credit for lease commitments and is included in non-current assets.
Significant accounting policies
There have been no material changes in the accounting policies from those disclosed in the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K other than disclosed below.
Allowance for Credit Losses
The Company maintains an allowance for credit losses for expected uncollectible accounts receivable and contract assets, which is recorded as an offset to accounts receivable or contract assets and provisions for credit losses are recorded in general and administrative expense in the consolidated statements of income. Under the application of Accounting Standards Codification (“ASC”) Topic 326-20, Financial Instruments—Credit Losses (“ASC 326”), the allowance for current expected credit losses is based on a review of customer accounts and considers historical credit loss information that is adjusted for current economic and business conditions and anticipated future economic events that may impact collectability. In developing its expected credit loss estimate, the Company evaluated the appropriate grouping of accounts receivable and contract assets based upon its evaluation of risk characteristics, including consideration of region and industries of the customers. The allowance for credit losses is reviewed on a quarterly basis to assess the adequacy of the allowance. Allowance for credit losses was $0.7 million as of March 31, 2024.

Short-term investments
The Company invests in various types of securities, including United States government, commercial paper, and corporate debt securities. The Company classifies its investments as available-for-sale and records them at fair value based upon market prices at period end. For available-for-sale debt securities in an unrealized loss position, the Company evaluates whether a current expected credit loss exists based on available information relevant to the credit rating of the security, current economic conditions and reasonable and supportable forecasts. The allowance for credit loss is recorded in other income (expense), net, on the consolidated statements of income, not to exceed the amount of the unrealized loss. Any excess unrealized loss other than the credit loss is recognized in accumulated other comprehensive income or loss in the stockholders' equity section of the consolidated balance sheets. The cost of securities sold is based on the specific identification method and realized gains and losses are included in other income (expense), net. Dividend and interest income are recognized when earned. The Company may sell these securities at any time for use in current operations. There was no allowance for credit losses relating to the short-term investments recognized as of March 31, 2024.

Revenue
The Company had contract assets of $2.7 million and contract liabilities of $2.5 million as of March 31, 2024. The Company had contract assets of $2.8 million and contract liabilities of $3.0 million as of September 30, 2023. For the three and six months ended March 31, 2024, the Company recognized revenue of $0.9 million and $2.2 million, respectively, from the amount that was included in the contract liability balance at the beginning of each period. For the three and six months ended March 31, 2023, the Company recognized revenue of $1.4 million and $2.7 million, respectively, from the amount that was included in the contract liability balance at the beginning of each period. In addition, for all periods presented, there was no revenue recognized in a reporting period from performance obligations satisfied in previous periods. The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of March 31, 2024 was $5.9 million. The Company expects to recognize revenue over the next twelve months relating to performance obligations unsatisfied as of March 31, 2024.
10

Based on the nature of the Company's contracts with customers, which are recognized over a term of less than 12 months, the Company has elected to use the practical expedient whereby costs to obtain a contract are expensed as they are incurred.

The Company states its revenues net of any taxes collected from customers that are required to be remitted to various government agencies. The amount of taxes collected from customers and payable to governmental entities is included on the balance sheet as part of “Accrued expenses and other current liabilities.”

Recent accounting pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Company considered the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be not applicable to the Company’s consolidated financial position and results of operations.
Recent accounting pronouncements adopted
In June 2016, FASB issued ASU No. 2016-13 “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments” and has since modified the standard with several ASUs (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets. The ASU replaced previous incurred loss impairment guidance and established a single expected credit losses allowance framework for financial assets carried at amortized cost. It also eliminated the concept of other-than-temporary impairment and requires credit losses related to certain available-for-sale debt securities to be recorded through an allowance for credit losses. On October 1, 2023, the Company adopted this standard using a modified retrospective approach, which requires a cumulative-effect adjustment to the opening balance of retained earnings to be recognized on the date of adoption and, accordingly, recorded a net increase of $0.1 million to accumulated deficit as of the beginning of fiscal 2024. In connection with the adoption of Topic 326, the Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivable.

Recently issued accounting pronouncement not yet adopted
In December 2023, the FASB issued ASU No. 2023-09 "Income Taxes (Topic 740)". The amendments in this ASU require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update are effective for annual periods beginning after December 15, 2024. The standard is not expected to have a material impact to the Company's condensed consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-08 "Segment Reporting (Topic 280)". The amendments in this ASU improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The standard is not expected to have a material impact to the Company's condensed consolidated financial statements.
The Company has evaluated other recently issued accounting pronouncements and has concluded that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
3. Fair value measurement
The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
11

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk in its assessment of fair value.
The following table sets forth the cash and cash equivalents, short-term investments and equity securities as of March 31, 2024:
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Cash and cash equivalents$243,348 $— $— $243,348 
Short-term investments:
U.S. government treasury bills50,002 11 (19)49,994 
Non-current assets - investment in equity securities3,711   3,711 
Total$297,061 $11 $(19)$297,053 
The following table sets forth the cash and cash equivalents, short-term investments and equity securities as of September 30, 2023:
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Cash and cash equivalents$286,470 $— $— $286,470 
Short-term investments:
Corporate bonds14,918  (29)14,889 
U.S. government treasury bills35,111  (57)35,054 
Non-current assets - investment in equity securities3,711   3,711 
Total$340,210 $ $(86)$340,124 

As of March 31, 2024, financial assets and liabilities measured and recognized at fair value are as follows:

(in thousands)Level 1Level 2Level 3Fair value
Assets    
Money market funds$213,232 $ $ $213,232 
U.S. government treasury bills49,994   49,994 
Non-current assets - investment in equity securities  3,711 3,711 
Total$263,226 $ $3,711 $266,937 
Total financial liabilities $ $ $ $ 

12

As of September 30, 2023, financial assets and liabilities measured and recognized at fair value are as follows:

(in thousands)Level 1Level 2Level 3Fair value
Assets    
Money market funds$245,654 $ $ $245,654 
Corporate bonds 14,889  14,889 
U.S. government treasury bills35,054  35,054
Non-current assets - investment in equity securities  3,711 3,711 
Total financial assets$280,708 $14,889 $3,711 $299,308 
Total financial liabilities$ $ $ $ 

Contractual maturities of all the investments, as of March 31, 2024, were less than 12 months. The Company does not intend to sell the money market funds and short-term investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The Company's short-term investments have been in a continuous unrealized loss position for less than 12 months. Accrued interest receivable balances included in the prepaid expenses and other current assets within the condensed consolidated balance sheets were $1.1 million and $1.2 million as of March 31, 2024 and September 30, 2023, respectively. As of March 31, 2024, the gross unrealized losses on short-term investments are related to market interest rate changes and not attributable to credit.

During 2021 and as amended in 2022, the Company entered into convertible promissory note agreements with a privately held company (“Borrower”) pursuant to which the Company agreed to loan to the Borrower $3.5 million in a series of loan installments, evidenced by a convertible promissory note having a maturity date of May 1, 2023 (“Convertible Note”). The Convertible Note included an option to convert the Convertible Note into the Borrower’s equity at the Borrower’s next round of equity financing, and accrued interest at a rate of 4% per annum. In April 2023, the Company exercised the option and the Borrower issued to the Company ordinary shares which represent a 15% equity interest. As of March 31, 2024, the Company’s equity investments were categorized as Level 3 within the fair value hierarchy.
The equity investment held by the Company is a VIE, but the Company is not the primary beneficiary. The Company does not have the power to direct the activities that most significantly impact the economic performance of the investee. The Company’s maximum exposure to loss from this VIE consist of an equity investment of $3.7 million. Equity investments held by the Company lack readily determinable fair values and therefore the securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar equity securities of the same issuer. The Company reviews the carrying value of its equity investments for impairment whenever events or changes in business circumstances indicate the carrying amount of such asset may not be fully recoverable. Impairments, if any, are based on the excess of the carrying amount over the recoverable amount of the asset. There were no such impairments during the three months ended March 31, 2024 and March 31, 2023.
As of March 31, 2024 and September 30, 2023, there were no financial liabilities categorized as level 3 within the fair value hierarchy. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

The following table provides a reconciliation of beginning and ending balances of the Level 3 financial assets during the three months ended March 31, 2024:

(in thousands)Equity investmentsTotal
Balance as of September 30, 2023
$3,711 $3,711 
Change in fair value
Additions during the year
Balance as of March 31, 2024
$3,711 $3,711 

4. Balance sheet components
Inventories consist of the following:

13

(in thousands)March 31,
2024
September 30,
2023
Raw materials$21,788 $27,024 
Work-in-process2,8141,113
Finished goods5,7743,926
$30,376 $32,063 
There is no consigned inventory balance as of March 31, 2024 and September 30, 2023.
Property and Equipment, net consists of the following:
(in thousands) March 31,
2024
September 30,
2023
Laboratory equipment$106,791 $104,508 
Furniture, fixtures and other equipment3,468 3,484 
Vehicles129 85 
Computer equipment3,120 3,103 
Computer software8,903 5,507 
Leasehold improvements60,023 57,271 
Construction in progress3,436 8,528 
$185,870 $182,486 
Less: Accumulated depreciation (64,531)(50,656)
$121,339 $131,830 
As of March 31, 2024, the construction in progress mainly represents equipment costs and software development costs. For the three and six months ended March 31, 2024, the total depreciation expense was $7.0 million and $13.9 million, respectively. For the three and six months ended March 31, 2023 the total depreciation expense was $5.7 million and $9.9 million, respectively.

The other current liabilities consist of the following:
(in thousands)March 31,
2024
September 30,
2023
Income and other taxes payable$2,105$4,374
Contract liabilities2,5422,999
Other current liabilities792430
$5,439 $7,803 
5. Goodwill and intangible assets
There were no changes to the carrying value of goodwill during the six months ended March 31, 2024.
The goodwill balance is presented below:

(in thousands)March 31, 2024September 30, 2023
Balance at beginning of period/year$85,811 $85,811 
Balance at end of period/year $85,811 $85,811 

The intangible assets balances are presented below:

14

March 31, 2024
(in thousands, except for years)Weighted average
Amortization period
in years
Gross
carrying
amount
Accumulated
amortization
Net book
value
Developed Technology15$50,020 $(9,266)$40,754 
Customer Relationships1115,210 (4,267)10,943 
Tradenames & Trademarks3900 (699)201 
Total finite-lived intangible assets$66,130 $(14,232)$51,898 

September 30, 2023
(in thousands, except for years)Weighted average
Amortization period
in years
Gross
carrying
amount
Accumulated
amortization
Net book
value
Developed Technology15$50,020 $(7,636)$42,384 
Customer Relationships1115,210 (3,461)11,749 
Tradenames & Trademarks3$900 $(550)$350 
Total finite-lived intangible assets$66,130 $(11,647)$54,483 

Total amortization expense related to finite-lived intangible assets was $1.3 million for the three months ended March 31, 2024 and $1.3 million for the three months ended March 31, 2023. Total amortization expense related to finite-lived intangible assets was $2.6 million for the six months ended March 31, 2024 and $2.7 million for the six months ended March 31, 2023.
6. Commitments and contingencies
Legal proceedings
The Company may be subject to litigation, claims and disputes in the ordinary course of business. There is an inherent risk in any litigation or dispute and no assurance can be given as to the outcome of any claims.

Securities Class Action
On December 12, 2022, a putative securities class action lawsuit captioned Peters v. Twist Bioscience Corporation, et al., Case No. 22-cv-08168 (N.D. Cal.) (“Securities Class Action”) was filed in federal court in the Northern District of California (“Court”) against the Company, its Chief Executive Officer, and its Chief Financial Officer (the “Defendants”) alleging violations of federal securities laws. The Securities Class Action’s claims are based in large part on allegations made in a report issued on November 15, 2022 by Scorpion Capital (“Scorpion Report”) concerning, among other things, the Company’s DNA chip technology and accounting practices. The initial complaint filed in the Securities Class Action alleges that various statements that the defendants made between December 13, 2019 and November 14, 2022 were materially false and misleading in light of the allegations in the Scorpion Report. The plaintiff who initiated the lawsuit sought to represent a class of shareholders who acquired shares of the Company’s common stock between December 13, 2019 and November 14, 2022 and sought damages as well as certain other costs. On July 28, 2023, the Court appointed a new plaintiff, not the original plaintiff who filed the case, as lead plaintiff in the case and appointed a new law firm as lead counsel. On October 11, 2023, the lead plaintiff filed an amended complaint. The amended complaint is purportedly brought on behalf of all persons other than the Defendants who acquired the Company’s securities between December 20, 2018 and November 15, 2022. The amended complaint alleges that certain statements regarding, among other things, the Company’s DNA products and accounting practices were false and misleading.
This case remains in the preliminary stage. Given the inherent uncertainty of litigation and the legal standards that must be met, including class certification and success on the merits, the Company cannot express an opinion on the likelihood of an unfavorable outcome or on the amount or range of any potential loss. The Company and the other defendants intend to vigorously defend themselves against the claims asserted against them, and filed a motion to dismiss the amended complaint on December 6, 2023, which the Court has taken under submission.

Derivative Action

15

On September 25, 2023, a shareholder derivative suit captioned Shumacher vs. Leproust et al., No. 1:23-cv-01048-UNA, was filed in the United States District Court for the District of Delaware against directors of the Company and an employee (the “Derivative Action”). The suit is based on substantially the same allegations in the Securities Class Action and seeks to recover, on behalf of the Company, damages to the Company arising from, among other things, the Securities Class Action. On November 13, 2023, the parties to the Derivative Action entered into a stipulation staying the Derivative Action pending resolution of the anticipated motion to dismiss the defendants have filed in the Securities Class Action.

Indemnifications
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend the indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. From time to time, the Company has entered into indemnification agreements with its directors and officers that requires it to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by law. The Company also has directors’ and officers’ insurance.
Leases
The Company leases certain of its facilities under non-cancellable operating leases expiring at various dates through 2044. The Company is also responsible for utilities, maintenance, insurance, and property taxes under these leases. The Company's lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as well as payments for common-area-maintenance and administrative services. The Company often receives customary incentives from its landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. The Company does not have any material financing leases.
Certain leases include options to renew or terminate at the Company’s discretion. The lease terms include periods covered by these options if it is reasonably certain the Company will renew or not terminate. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.
Supplemental balance sheet information related to the Company’s operating leases as of March 31, 2024 is as follows:

(in thousands)March 31,
2024
Assets: 
Operating lease right-of-use asset$63,666 
Current liabilities:
Current portion of operating lease liabilities$14,621 
Noncurrent liabilities:
Operating lease liabilities, net of current portion$74,804 

Future minimum lease payments under all non-cancelable operating leases that have commenced as of March 31, 2024 are as follows:

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(in thousands)Operating
leases
Years ending September 30: 
Remainder of 2024
$7,336 
202514,814
202613,885
20278,371
20288,471
Thereafter88,014
Total minimum lease payments$140,891 
Less: imputed interest(51,466)
Total operating lease liabilities$89,425 
Less: current portion(14,621)
Operating lease liabilities, net of current portion$74,804 

The statement of cash flows for the six months ended March 31, 2024 include changes in right-of-use assets and operating lease liabilities of $7.9 million and $4.6 million, respectively. For the six months ended March 31, 2023, changes in right-of-use assets and operating lease liabilities were $4.3 million and $3.7 million, respectively.
During the three and six months ended March 31, 2024, operating lease expense was $3.9 million and $7.9 million, respectively. Cash payments for amounts included in the measurement of operating lease liabilities were $3.6 million and $7.3 million for the three and six months ended March 31, 2024, respectively. During the three and six months ended March 31, 2023, operating lease expense was $4.1 million and $8.2 million, respectively. Cash payments for amounts included in the measurement of operating lease liabilities were $4.0 million and $7.6 million for the three and six months ended March 31, 2023, respectively. As of March 31, 2024, the weighted-average remaining lease term was 15.3 years and the weighted-average discount rate was 6.5%.
7. Related party transactions
During the three months ended March 31, 2024 and 2023, the Company purchased raw materials from a related party in the amount of $1.5 million and $1.5 million, respectively. During the six months ended March 31, 2024 and 2023, the purchases of raw materials from a related party were $2.8 million and $3.5 million, respectively. During the three and six months ended March 31, 2024, the Company had revenues from the related party in the amount of $3.2 million and $5.6 million, respectively. During the three and six months ended March 31, 2023, the Company generated revenues from the related party totaling $2.2 million and $2.6 million, respectively. As of March 31, 2024, payable balances and receivable balances with the related party were $0.3 million and $1.0 million, respectively. Receivable balances with the related party were $1.7 million as of September 30, 2023. Payable balances with the related parties were immaterial as of September 30, 2023.

8. Income taxes
In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date profit or loss, adjusted for discrete items arising in that quarter. For the three and six months ended March 31, 2024, the Company recorded provisions for income taxes of $0.3 million and $0.5 million, respectively. For the three and six months ended March 31, 2023, the Company recorded provisions for income taxes of $0.7 million and $0.8 million, respectively.

9. Common stock
As of March 31, 2024, the Company had reserved sufficient shares of common stock, with a par value of $0.00001 per share, for issuance upon exercise of outstanding stock options. Each share of common stock is entitled to one vote. The holders of shares of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors.

10. Stock-based compensation
The Company grants stock-based awards, consisting of stock options and restricted stock, to its employees, certain non-employee consultants and certain members of its board of directors. The Company measures stock-based compensation
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expense for restricted stock and stock options granted to its employees and directors on the date of grant and recognizes the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. The Company measures stock-based compensation expense for restricted stock and stock options granted to non-employee consultants on the date of grant and recognizes the corresponding compensation expense of those awards over the period in which the related services are received. The Company adjusts for actual forfeitures as they occur.
2018 Equity Incentive Plan

On September 26, 2018, the board of directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”) as a successor to the 2013 Stock Plan (the “2013 Plan”). Any shares subject to outstanding awards under the 2013 Plan that are canceled or repurchased subsequent to the 2018 Plan’s effective date are returned to the pool of shares reserved for issuance under the 2018 Plan. Awards granted under the 2018 Plan may be non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance units.

Inducement Equity Incentive Plan

On August 22, 2023, the board of directors adopted an inducement equity incentive plan (the “Inducement Plan”). The maximum aggregate number of shares that may be issued under the Inducement Plan is 700,000 of the Company's common stock. The Inducement Plan permits the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares. The shares issuable under the Inducement Plan are registered pursuant to a registration statement on Form S-8 filed with the Securities and Exchange Commission on August 25, 2023.

Restricted Stock Units

Restricted stock consists of restricted stock unit awards (“RSUs”) which have been granted to employees and non-employee directors. The value of an RSU award is based on the Company’s stock price on the date of grant. Employee grants generally vest over four years and non-employee director grants generally vest over one year. Forfeitures of RSUs are recognized as they occur. The shares underlying the RSU awards are not issued until the RSUs vest. Upon vesting, each RSU converts into one share of the Company’s common stock.

Activity with respect to the Company’s restricted stock units during the six months ended March 31, 2024 was as follows:

(in thousands, except per share data)SharesWeighted average grant date fair value per share
Nonvested shares at September 30, 20231,620$40.73 
Granted1,28124.49
Vested/Issued(382)40.37
Forfeited(148)44.98
Nonvested shares at March 31, 20242,371$31.78 

As of March 31, 2024, there was $69.6 million of total unrecognized compensation cost related to these awards that is expected to be recognized over a weighted average period of 2.7 years. The total grant date fair value of RSUs awarded during the six months ended March 31, 2024 was $31.4 million.
Performance Stock Units
Performance stock unit awards (“PSUs”) granted to certain employees will vest upon achievement of operational milestones related to the Wilsonville facility, and to Company executives will vest upon achievement of revenue, gross profit and cash balance metrics as determined by the board of directors, and to certain non-employee consultants will vest upon achievement of operational milestones. Stock compensation expense for PSUs is recorded over the vesting period based on the grant date fair value of the awards and probability of the achievement of specified performance targets. The grant date fair value is equal to the closing share price of the Company’s common stock on the date of grant. For employees, PSUs generally vest over a one to three-year service period following the grant date, provided that the recipient is a Company employee at the time of vesting and the performance targets applicable to each award are achieved. For non-employees, PSUs generally vest over a one to three-year service period following the grant date, provided that the performance targets applicable to each award are achieved. The percentage of PSUs that vest will depend on the achievement of specified performance targets at the end of the performance period and can range from 0% to 150% of the number of units granted. Any PSUs that are unvested at the end of the performance period are forfeited. Forfeitures of PSUs are recognized as they occur.
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Activity under the PSUs during the six months ended March 31, 2024 is summarized below:

(in thousands, except per share data)SharesWeighted average grant date fair value per share
Nonvested shares at September 30, 2023932$36.82 
Granted61518.60
Vested/Issued(84)80.67
Forfeited(33)35.40
Nonvested shares at March 31, 20241,430$26.44 

As of March 31, 2024, the unrecognized compensation costs related to these awards was $23.2 million based on the maximum achievement of the performance targets. The Company expects to recognize those costs over a weighted average period of 1.5 years. The total grant date fair value of PSUs awarded during the six months ended March 31, 2024 was $11.4 million.

Options
Options are generally granted to employees and were granted to non-employee directors until FY 2020. Stock options entitle the holder to purchase, at the end of the vesting term, a specified number of shares of Company common stock at an exercise price per share equal to the closing market price of the common stock on the date of grant. Stock options have a contractual life from the date of the grant and a vesting schedule as established by the board of directors. The maximum term of stock options granted under the 2018 Plan is 10 years and the awards generally vest over a four-year period. Forfeitures of options are recognized as they occur. The fair value of each service based stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company has not granted any stock options during the three and six months ended March 31, 2024 or 2023.

Options activity during the six months ended March 31, 2024 is summarized below:

(in thousands, except per share data)SharesWeighted average exercise price per shareWeighted average remaining contractual term (years)Aggregate intrinsic value
Outstanding at September 30, 20232,119 $24.18 5.25$6,715 
Forfeited(107)37.22— — 
Exercised(127)17.88— 1,661 
Outstanding at March 31, 20241,885  $23.87 4.68$24,249 
Nonvested at March 31, 20249 95.367.03 
Exercisable at March 31, 20241,876 $23.52 4.66$24,249 
As of March 31, 2024, the unrecognized compensation costs related to these awards was $0.5 million. The Company expects to recognize those costs over a weighted average period of 1.2 years. The Company did not grant any options during the six months ended March 31, 2024.
Performance Stock Options
On September 1, 2020, the board of directors approved the implementation of a revised annual equity award program for executive officers, senior level employees and consultants to be granted as performance-based stock options ("PSOs") under the 2018 Plan. The PSOs issued to executive officers and senior level employees vested in prior years. The number of PSOs ultimately earned under the awards to a consultant is calculated based on the achievement of certain operational milestones. The maximum term of performance stock options granted under the 2018 Plan is 10 years for both employees and non-employees. The awards generally vest over a two-year period for executive officers and senior level employees. Awards to non-employees generally vest over a five-year period.

The provisions of the PSOs are considered a performance condition, and the effects of that performance condition are not reflected in the grant date fair value of the awards. The Company used the Black-Scholes method to calculate the fair value at the grant date without regard to the vesting condition and will recognize compensation cost for the options that are expected to vest. Forfeitures of PSOs are recognized as they occur. The Company reassesses the probability of the performance condition at each reporting period and adjusts the compensation cost based on the probability assessment. As
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of March 31, 2024, the Company determined that 30,000 shares are expected to vest based on the probability of the performance condition that will be achieved under this equity award program.

Activity under the PSOs during the six months ended March 31, 2024 is summarized below:

(in thousands, except per share data)SharesWeighted average exercise price per shareWeighted average remaining contractual term (years)Aggregate intrinsic value
Outstanding at September 30, 2023289$60.82 7.37$ 
Nonvested at September 30, 202330$31.29 8.57$ 
Exercisable at September 30, 202325964.24 7.23 
Forfeited(12)$67.85 — $— 
Exercisable at March 31, 2024247$64.07 6.74$136 
Nonvested at March 31, 20243031.29 8.0791 
Outstanding at March 31, 2024277$60.53 6.88$227 

As of March 31, 2024, the unrecognized compensation costs related to these awards was $0.2 million. The Company expects to recognize those costs over a weighted average period of 1.1 years.

Total stock-based compensation expense/(credit) recognized was as follows:

Three months ended
March 31,
Six months ended
March 31,
(in thousands)2024202320242023
Cost of revenues$1,049 $1,469 $1,973 $2,612 
Research and development3,3763,0906,2147,508
Selling, general and administrative9,3995,70016,657(2,186)
Total stock-based compensation$13,824 $10,259 $24,844 $7,934 

During the three and six months ended March 31, 2023, stock-based compensation decreased primarily as a result of departing employee share forfeitures, and a stock-based credit related to a business combination due to non-achievement of a performance condition. An immaterial amount of stock-based compensation was capitalized to inventories attributable to employees who support the manufacturing of the Company's products for the three and six months ended March 31, 2024 and 2023. An immaterial amount of stock-based compensation was capitalized to property and equipment related to capitalized software development costs for the three and six months ended March 31, 2024. The stock-based compensation of $0.2 million and $0.4 million was capitalized to property and equipment related to the capitalized software development costs for the three and six months ended March 31, 2023.

2018 Employee Stock Purchase Plan
On September 26, 2018, the board of directors adopted the 2018 Employee Stock Purchase Plan (the "2018 ESPP"). The number of shares reserved for issuance under the 2018 ESPP upon approval was 275,225 shares of the Company’s common stock, and it increases automatically on the first day of each fiscal year, following the fiscal year in which the 2018 ESPP became effective, by a number equal to the least of 249,470 shares, 1% of the shares of common stock outstanding at that time, or such number of shares determined by the Company’s board of directors. The number of shares reserved for issuance at March 31, 2024 was as follows:

(In thousands)Shares
available
Outstanding at September 30, 2023
539
Additional shares authorized249
Shares issued during the period(124)
Outstanding at March 31, 2024
664

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Subject to any plan limitations, the 2018 ESPP allows eligible service providers (through qualified and non-qualified offerings) to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods begin in February and August of each year, except the initial offering period which commenced with the initial public offering in October 2018 and ended on August 20, 2019.
Unless otherwise determined by the board of directors, the Company’s common stock will be purchased for the accounts of employees participating in the 2018 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period. During the three and six months ended March 31, 2024 ESPP expenses of $0.5 million and $0.8 million, respectively was recognized. During the three and six months ended March 31, 2023, activity under the 2018 ESPP was immaterial.

401(k) Savings Plan

During 2018, the Company adopted a 401(k) savings plan for the benefit of its employees. In January 2022, the Company modified its plan to include an employer matching contribution. The Company is required to make matching contributions to the 401(k) plan equal to 50% of the first 6% of wages deferred by each participating employee. The Company incurred expenses for employer matching contributions of $0.7 million and $1.4 million for the three and six months ended March 31, 2024, respectively. The Company incurred expenses for employer matching contributions of $0.7 million and $1.4 million for the three and six months ended March 31, 2023, respectively.

Abveris Acquisition
At September 30, 2022, management determined that the achievement of the performance condition relating to the equity awards granted in connection with the Abveris acquisition awards was probable, and cumulative stock-based compensation expense of $9.9 million was recognized during the year ended September 30, 2022. At December 31, 2022, management determined that the performance condition was not achieved, and therefore the cumulative stock-based compensation expense recognized to date was reversed, resulting in a reduction of stock compensation expense of $9.9 million in the three months ended December 31, 2022.
11. Net loss per share attributable to common stockholders
The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders:

Three months ended
March 31,
Six months ended
March 31,
(in thousands, except per share data)2024202320242023
Numerator:
Net loss attributable to common stockholders$(45,492)$(59,156)$(88,500)$(100,980)
Denominator:
Weighted average shares used in computing net loss per share, basic and diluted57,77956,77757,63756,608
Net loss per share attributable to common stockholders, basic and diluted$(0.79)$(1.04)$(1.54)$(1.78)

The potentially dilutive common shares that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive for the periods presented are as follows:

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Three and six months ended
March 31,
(in thousands)20242023
Shares subject to options (including performance options) to purchase common stock2,1622,636
Unvested restricted stock units and performance stock units 3,8012,632
Shares subject to employee stock purchase plan77135
Total6,0405,403

12. Geographic, product and industry information
The table below sets forth revenues by geographic region, based on ship-to destinations. Americas consists of the United States of America, Canada, Mexico and South America; EMEA consists of Europe, the Middle East, and Africa; and APAC consists of Japan, China, South Korea, India, Singapore, Malaysia, Australia New Zealand, Thailand and Taiwan.

Three months ended
March 31,
Six months ended
March 31,
(in thousands)2024202320242023
Americas$45,873 $34,925 $89,832 $68,571 
EMEA22,26318,78043,48335,111
APAC7,1666,47513,48510,741
Total$75,302 $60,180 $146,800 $114,423 

The table below sets forth revenues by products.

Three months ended
March 31,
Six months ended
March 31,
(in thousands)2024202320242023
Synthetic genes$22,356 $18,011 $42,083 $34,186 
Oligo pools3,9403,3158,1297,015
DNA libraries3,5312,8266,4704,662
Antibody discovery4,7017,0349,92715,205
NGS tools40,77428,99480,19153,355
Total$75,302 $60,180 $146,800 $114,423 

The table below sets forth revenues by industry.

Three months ended
March 31,
Six months ended
March 31,
(in thousands)2024202320242023
Industrial chemicals/materials$20,264 $14,410 $36,542 $27,985 
Academic research13,72211,12027,49521,135
Healthcare40,93433,76481,81563,777
Food/agricultural3828869481526
Total$75,302 $60,180 $146,800 $114,423 

13. 2023 Restructuring and other costs
On May 3, 2023, the Company’s Board of Directors approved a strategic restructuring plan to reduce costs, build a leaner organization and increase operating efficiencies. The restructuring plan included a reduction in force which affected approximately 270 employees worldwide, representing approximately 25% of the Company’s total workforce. The majority of these employees separated from the Company by September 30, 2023. The reduction in force is subject to local regulatory requirements. Furthermore, as part of the plan the Company removed the duplication of synthetic biology
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production across its South San Francisco, California and Wilsonville, Oregon facilities. The plan was implemented beginning in May 2023 and was substantially completed by the end of fiscal year 2023. Total restructuring and other costs of $16.2 million was incurred by the Company during the year ended September 30, 2023 and included employee severance and related benefit costs of $8.5 million, restructuring and non-restructuring related impairment of property and equipment of $6.8 million, and other costs associated with restructuring of $0.9 million.
* * * * *
23

Item 2. Management’s discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the U.S. Securities and Exchange Commission, or the SEC, on November 21, 2023, or our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. In preparing this MD&A, we presume that readers have access to and have read the MD&A in our Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K.
Overview
We are an innovative synthetic biology and genomics company that has developed a scalable DNA synthesis platform to industrialize the engineering of biology. The core of our platform is a proprietary technology that pioneers a new method of manufacturing synthetic DNA by “writing” DNA on a silicon chip. We have miniaturized traditional chemical DNA synthesis reactions to write over one million short pieces of DNA on each silicon chip, approximately the size of a large mobile phone. We have combined this technology with proprietary software, scalable commercial infrastructure, and an e-commerce platform to create an integrated technology platform that enables us to achieve high levels of quality, precision, automation, and manufacturing throughput at a significantly lower cost than our competitors. We are leveraging our unique technology to manufacture a broad range of synthetic DNA based products, including synthetic genes, tools for next-generation sample preparation, and antibody libraries for drug discovery and development.
Additionally, we believe our platform will enable new value-added opportunities, such as discovery partnerships for biologic drugs, and will enable new applications for synthetic DNA, such as digital data storage. We sell our synthetic DNA and synthetic DNA-based products to a customer base of approximately 3,450 customers annually across a broad range of industries.
We launched the first application of our platform, synthetic genes and oligo pools, in April 2016 to disrupt the gene synthesis market and make legacy DNA synthesis methods obsolete.
We have grown rapidly and generated revenues of $75.3 million and $60.2 million in the three months ended March 31, 2024 and 2023, respectively, while incurring net losses of $45.5 million and $59.2 million for the three months ended March 31, 2024 and 2023, respectively. Since our inception, we have incurred significant operating losses and have accumulated net deficit of $1,121.7 million. To support our growth, we have resized our number of employees and increased investment in our manufacturing capabilities. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the success of our existing products and the development and commercialization of additional products in the synthetic biology, biologic drug and data storage industries, including our Express Genes which we launched in the fall of 2023, as well as leveraging our investment in our manufacturing facility in Wilsonville, Oregon.

For the three months ended March 31, 2024 and 2023, the number of customers who purchased products from us were approximately 2,253 and 2,100 customers, respectively.
Highlights from three months ended March 31, 2024 compared with three months ended March 31, 2023 include:
Revenue growth of 25% to $75.3 million from $60.2 million, primarily due to order growth in NGS tools and synthetic genes;
The number of our genes shipped increased to 193,000 from 152,000; and
The gross profit as a percentage of revenue (gross margin) increased to 41% from 31%.

For the six months ended March 31, 2024, the net cash used in operating activities decreased to $42.4 million from $98.4 million for the six months ended March 31, 2023.
We have built a scalable commercial platform that enables us to reach a diverse customer base in a variety of industries including industrial chemicals/materials, academic research, healthcare, food, agriculture and data storage. To address this diverse customer base, we have employed a multichannel strategy comprised of a direct sales force targeting synthetic DNA customers, international distributors, and an e-commerce platform. Launched in fiscal 2018, our e-commerce platform allows customers to design, validate and place on-demand orders of customized DNA online. This is a key
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component of our strategy to address and support our diverse and growing customer base, as well as support commercial productivity, enhance the customer experience, and promote loyalty.


Financial overview
The following table summarizes certain selected historical financial results:

Three months ended
Six months ended
March 31,March 31,
(in thousands)2024202320242023
Revenues$75,302 $60,180 $146,800 $114,423 
Loss from operations(48,889)(61,637)(95,866)(106,267)
Net loss attributable to common stockholders(45,492)(59,156)(88,500)(100,980)

Revenues
We generate revenue from sales of synthetic genes, oligo pools, NGS tools, DNA libraries and antibody discovery services. Our ability to increase our revenues will depend on our ability to further penetrate the domestic and international markets, generate sales through our direct sales force, distributors and over time from our e-commerce digital platform and launch new products.
Revenues by geography
We have one reportable segment from the manufacturing of synthetic DNA products. The following table shows our revenues by geography, based on our customers’ shipping addresses. Americas consists of United States, Canada, Mexico and South America; EMEA consists of Europe, Middle East and Africa; and APAC consists of Japan, China, South Korea, India, Singapore, Malaysia, Australia, New Zealand, Thailand and Taiwan.

Three months ended March 31,Six months ended March 31,
(in thousands, except percentages)2024% 2023% 2024%2023%
Americas$45,873 61 %$34,925 58 %$89,832 61 %$68,571 60 %
EMEA22,26330 %18,78031 %43,48330 %35,11131 %
APAC7,166%6,47511 %13,485%10,741%
Total revenues$75,302 100 %$60,180 100 %$146,800 100 %$114,423 100 %

Revenues by product
The table below sets forth revenues by product:

Three months ended March 31,Six months ended March 31,
(in thousands, except percentages)2024% 2023% 2024%2023%
Synthetic genes$22,356 29 %$18,011 30 %$42,083 28 %$34,186 30 %
Oligo pools3,940 %3,315%8,129 %7,015 %
DNA libraries3,531 %2,826%6,470 %4,662 %
Antibody discovery4,701 %7,03412 %9,927 %15,205 13 %
NGS tools40,774 54 %28,99448 %80,191 55 %53,355 47 %
Total revenues$75,302 100 %$60,180 100 %$146,800 100 %$114,423 100 %

Revenues by industry
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The table below sets forth revenues by industry:

Three months ended March 31,Six months ended March 31,
(in thousands, except percentages)2024% 2023% 2024%2023%
Industrial chemicals/materials$20,264 27 %$14,410 24 %$36,542 25 %$27,985 24 %
Academic research13,722 18 %11,12019 %27,495 18 %21,13519 %
Healthcare40,934 54 %33,76456 %81,815 56 %63,77756 %
Food/agriculture382 %886%948 %1,526%
Total revenues$75,302 100 %$60,180 100 %$146,800 100 %$114,423 100 %

Product shipments including synthetic genes
Shipments of all products and number of genes shipped in the three months ended March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, and June 30, 2022 were as follows:

Three months ended
March 31,December 31,September 30,June 30,March 31,December 31,September 30,June 30,
(in thousands)20242023202320232023202220222022
Number of genes shipped193171177171152134