Q1 2024 Twist Bioscience Corp Earnings Call
Participants
Angela Bitting; SVP, Corporate Affairs & Chief ESG Officer; Twist Bioscience Corporation
Emily Leproust; CEO & Co-Founder; Twist Bioscience Corporation
Adam Laponis; CFO; Twist Bioscience Corporation
Matt Sykes; Analyst; The Goldman Sachs Group, Inc.
Steven Mah; Analyst; Cowen Group, Inc.
Vijay Kumar; Analyst; Evercore Group L.L.C.
Luke Sergott; Analyst; Barclays Bank PLC.
Matt Larew; Analyst; William Blair & Company, L.L.C.
Catherine Schulte; Analyst; Robert W. Baird & Co. Incorporated.
Puneet Souda
Sung-Ji Nam; Analyst; The Bank of Nova Scotia
Rachel Vatnsdal; Analyst; JPMorgan Chase & Co.
Presentation
Operator
Welcome to Twist Bioscience's fiscal 2024 First Quarter financial results conference call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time. I would like to turn the conference over to Angela Bitting, Senior Vice President of Corporate Affairs.
Angela Bitting
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. 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 re-queue as a courtesy to others on the call. As a reminder, this call is being recorded and the audio portion will be archived in the Investors section of our website and will be available for two.
During today's presentation, we will make forward-looking statements within the meaning of the US federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today as well as those partially described in our filings with the Securities and Exchange Commission. 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.
And with that, I'll now turn the call over to our CEO and Co-Founder, Dr. Emily there, Chris?
Emily Leproust
Thank you, Angela, and good morning, everyone. It is a very exciting time for Twist. Lee's revenue margin and market share, increasing new products introduced recently with more to come and growing market for 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 three important items that drive our business revenue growth, margin expansion and financial discipline to 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 team, 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 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 first quarter increased significantly to $71.5 million, with orders growing to more than $77 million and margin increasing to 40.5%.
Moving to the product 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, you have revenues from a key account that was affected by timing of the quarter and extended to be done in the current quarter.
In November, we began a limited launch of our X. 15 product, which is our clinical teams delivered faster in five to seven days. I'm pleased to report that as for Q1, 98% synthetic genes ordered have been delivered in the Q2 timeframe.
Delivering literally perfect genes in this time. Line at scale is an exceptional feat. This performance is driven by our platform, our Sytner and our operations team that implements order successfully. We are the only extra fulfilling that can deliver at scale if you need one genes or thousands of genes we can deliver client interfacing in as few as five days.
Importantly, our differentiated Express offering allows us to charge a premium price over our standard clonal genes, Nexans for the speed customers can choose to other standards into the turn time of 10 days of extrusions with a turnaround time beginning at five days premium price for the Express offering varies daily and by the capacity available in our manufacturing facility in recent bill, Oregon.
To date, we have tested premiums from 20% to as high as 200%. As a reminder, we use the same FX green line for both Express and Star jeans. 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 Celgene stand out when we launched in November as the folks managing volume qualified for Xpress service.
This week, we announced that the U.S. Really all closings at all prep scales now qualify for Xpress service. With this extension, we began a full marketing launch around the Express portfolio, largely using digital marketing tactics to keep the cost of customer acquisition low. We are pleased with the early days of the launch, particularly the balance of uptake between pharma, industrial, chemical and academic customers. Early feedback indicates that this product resonates. We monitor orders daily and we are seeing the early stage of revenue. We consistently have varying degrees of customer willingness to pay a premium and daily.
We gain 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 excess short-term, such as volume commitments and six premiums, which enables expanding margin as well as create stability for manufacturing.
As of January 30, we have received confirmed interest from several pharma companies reflecting a positive trajectory up until we turned on our marketing machine last week, our focus was on existing customers. Today. We are targeting new customers. We use other providers and we plan to use our differentiated Xpress product portfolio to take share from incumbent suppliers were slow targeting customers who currently make their own DNA because they need it quickly. We called a little group of potential customers, DNA makers, and we know that to convert into nickels to DNA buyers. It will take time to change behavior.
We assume that we have the product, the channel and the operational capacity to drive a generational change. We are altering genes rather than making genes becomes the standard operating procedures across Pablo.
Moving to NGS, our revenue increased to $39.4 million of revenue for the quarter included several large customers reorders, primary domestic customers running clinical trials and ramping commercial volumes for these larger customers. We invested time and energy into the relationship, and we are now including 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 they are test advanced the clinical and commercial stages.
As a reminder, the existing customers, including those two, assuming all selling liquid biopsy and the minimal residual disease assays choose twist for our target enrichment solution, meeting their testing workflow as we save our customers about half of their downstream sequencing costs and each center run by customers using some twist DNA. So the larger the volume, the more they buy from twist in a constrained macroeconomic environment, our offering provides margin extension for our customers. And in some cases, our workflow makes a substantive difference in our customers' business viability.
Over the last two quarters, we have seen Gecina streamlining test selecting the test within their portfolio. That includes the Twist workflow to sell downstream sequencing cost and improve their overall costs. In addition to larger customers in advanced stages of development and commercial scale-up, we see NGS workflow competence as an increasing percentage of our NGS revenue. For example, customers who order the custom target enrichment panel previously may now us or the library prep vessels, these local media and unite and more from twist as their supplier expanding our share of wallet within existing accounts. Our customers appreciate choosing another supplier and benefit from our exceptional and responsive customer service and supply chain teams, allowing them to focus on expanding their business. We 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 the years to come from increasing commercial adoption of our customers' assets well for expansion in existing customer accounts and the acquisition of smaller accounts, as well as the attrition of the research market through Aranesp.
Moving to biopharma, revenue increased to $5.2 million with orders coming in at $4.9 million. We were fully staffed on our commercial team as of November, and we do see green shoots for this business, including 41 new program starts in the quarter. We noted the process of ramping up sales representatives to full capacity typically takes about six 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 of our silicon platform, which enables the ability to create antibody discovery libraries if we can then pair with our in vivo and AI ML capabilities.
There is a strategic fit here as we saw pharma and biotech customers through both of them by offering and biopharma solutions, providing a full and complete about dairy spectrum of offering to our customers and partners for data storage. We've completed the end-to-end demonstration of the gear 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 on early-access terabyte centrally archive solutions in 2025. We continue to believe that the market for the surveys 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 and I put into 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.
Adam Laponis
Thank you, heavily. 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 equivalents 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 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.
Yes, 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 product.
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 for Netherlands. 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 [$15.3 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 in the first quarter compared to $33.6 million in the same period in fiscal 23, growth of 31% year over year. EMEA eevenue 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 that 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.
R&D decreased to $23.1 million compared with $31.2 million in fiscal 2023, primarily due to the reduction in headcount as well as bottom line.
SG&A was $52.8 million for the first quarter, compared with 42.3 million The increase was driven largely by the increase in stock-based compensation as the cost for Q1 FY 23 included a significant reversal of stock-based compensation resulting from employee stock forfeitures related to the out various acquisitions 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 to 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, $4.5 million. Gross margin at 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, supply chain management manufacturing excellence and, of course, delighting our customers.
With that, I'll turn the call back to Emily.
Emily Leproust
Thank you, Adam, for inclusion into our fiscal year. We continue to see momentum in our synbio and NGS groups with a diversified customer base, a reverse flow portfolio that provides significant differentiation from competitors, growing market opportunities and committed employees. We are executing on the plan we laid out to drive to profitability for the business.
Coming back to the three initiatives. First, we expect to grow revenue through express genes in volume or revenue in NGS customers expansion as well as new product introductions. Keep your eye out for launches next week during the AGBT conference for biopharma solutions will focus on increasing the number of active programs and program staff as well as signing new and repeat customers.
Second, to expand our margin, we plan to continue dynamic pricing for ex question in synbio as we increase the number of GeneChip our margin margin 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 of alternative products and packaging, alternative workflows and many more. We are excited about the 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 path to profitability and look forward to keeping you apprised of our progress. Is that a good goal for questions. Operator?
Question and Answer Session
Operator
(Operator Instructions) Matt Sykes, Goldman Sachs.
Matt Sykes
Good morning and thanks for taking my questions. Congrats on the quarter. Could you talk about the volume and mix of Express jeans in the quarter, just given the mid-November launch in limited marketing for a period during the quarter. How do you see express genes contribute to margin expansion for the full year?
Emily Leproust
I think you might know that many of you and I will start so on. There's really two phases. The first stage is the mid-November launch till the last 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 them really good picture by as we've both biopharma and academic has been up for that. That's quite exciting you see that on both of our target markets have been testing the products and experiencing have the great performance of the product and reordering so that that was the the mix then and it's a bit too soon to say.
But the second phase, as you know, the second phase, the goal is to continue having existing customers to use the product, which delivers great value for them and improve gross margin costs. But the big drive for us now is to bring net new customers on to come onto the platform and deliver revenue growth and margin growth. So from Q2 to Q3 will be the first clean quarter where we'll have the full marketing launch for the entire quarter. We are already and in 2Q Q2. And so therefore, Q3 will be the first clean quarter where we'll have the full quarter expense of expecting. And the 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 extra question on gross margin.
Matt Sykes
Got it. And then just two quick follow-ups. Just talking 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 that 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? Thank you.
Emily Leproust
Yes, so I think we basically have one when we do when we can have of trying to convert finance might make you. So I will say that right now for all intents and purposes, some of the volume so far has been DNA buyers. And so it's very early innings. So the engine makers we now have added to them. And in terms of digital marketing. It's a it is our strategy to reach smaller customers, so Tier three, Tier four captive customers. And however, in addition to that, we have our sales team that that has been engaged for now years. We top accounts that are still working on converting big accounts to Orbitz bridging. And as I've mentioned in my remarks, we've had some initial success in getting them is this a level of interest to convert to expansions, both of big accounts as well. So it's going to be down. It's all hands on deck and we want to see growth in both and the Tier one, Tier two customers as well as Tier three Tier four.
Thank you.
Operator
Steven Mah, Cowen.
Steven Mah
Great. Thanks for taking the questions and congrats on the quarter. Maybe just a follow-up to Matt's questions up there in on the gross margin in the quarter, it's much higher than we had modeled that. Was there any impact at all from express trains in the quarter, or was it driven entirely by the scale up of the factory the future? Or if not, what kind of what drove the gross margin be? And then could you also then provide your thoughts around the full year guide of 40% to 41%, given you're already at 40.5% in Q1.
Emily Leproust
Do you want to take that question, Adam? those physicians are happy to.
Adam Laponis
So now, Stephen, I mean, I'm very encouraged by the record quarter we had in both 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 a business priority, but even our pay-for-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, I guess, calendar year end when we saw a big step-up in those orders, and we're seeing that. And if 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 of the most of the expansion in the in the Q1 numbers.
You'd also asked about kind of how we're thinking about the full year guide. And I'm like I'm I am confident that this is 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 skis 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 two of synbio and express genes as well as the factory of the future now being fully operational.
Steven Mah
Okay, great. That's helpful. And sorry, if I can just sneak one more in. I know you haven't done the full launch of the Express Genes yet, but you know, could you tell us what the average premium you guys are getting? I know Emily threw out a range, 20% to 200%, but I'm just wondering if you could give us a sense of the average you're getting right now?
Emily Leproust
you so we are not I mean, we are not able to give a on a range. As a reminder, the the day pricing is strongly based on the capacity and in the fab, but at the time of the day. And so we get a lot of benefits beyond that.
And And the one thing that you can you can check is that that pricing daily is public, so it's on the website and so anybody can can look at what is the pricing right now, again, based on the capacity.
Okay.
Operator
Vijay Kumar, Evercore ISI.
Vijay Kumar
Hey, guys. Thanks for taking my question and congratulations on a nice print here. Maybe up my first one here is on the guidance. You guys built revenues by $3 million, the annual was raised by $2 million, and it looks like more of that came from NGS but also Synbio is raised. And I'm just curious the peak, which is K. two and why despite comps getting easier, perhaps we should see more robust growth in 2Q and back half, BJ and M&M, frankly.
Emily Leproust
Adam?
Adam Laponis
Great. 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 you guys again, I mentioned that in the previous question that we do expect that NGS pullback, particularly in Q2. And I think when you look at the early phases of the synbio expressed gene, it is going positively, but it's really early days. And again, me being brand new in the chair. I don't want to get ahead of my skis on that in the full year guide, we'll keep you posted on progress as the year continues on both fronts. But I'm yes, I feel pretty good that the full year guidance raise both on that on the top and the market side.
Vijay Kumar
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 leased again, step back to 41% from 2Q. Is there anything specific that's going on in 2Q? Maybe just walk us through that cadence.
Adam Laponis
No, no, it's a great question. And so it's really more of a fact in Q1, we got a pretty substantial sequential lift from the higher NGL mix. We're 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 customers switching the full quarter of express genes and the NGS business continues to expand, we feel pretty confident in the back half as well.
Operator
Luke Sergott, Barclays.
Luke Sergott
Great morning. Everybody. Can you still want to start talking about first on the the increase in the OpEx spend? And I know that you've always talked about growing that slower than your revenue growth, but just the incremental step-up through here throughout the year, like where is that investment going in? Because just to feel more more commercialization on the express genes that you can just give us some color.
Adam Laponis
I'm happy to step in on that one next week in the G&A line, specifically, it's not the incremental and additional infrastructure, particularly around some of our IT and financial capabilities on this. We're really focused on building out those capabilities right right now. So we've made some choices around how we're going to invest in that to scale not only for the current year, but future years to come as well.
Luke Sergott
Okay. That's helpful. And then you talked about like some of the early learnings from the elasticity that you from the dynamic pricing. Talk about any trends that you're seeing there from types of orders or customers or and how that's kind of pacing out? And we're the dynamic pricing is really starting to contribute to the to the margin if it's going to create any lumpiness or anything throughout the year?
Emily Leproust
Yes. Thank you. Thank you. That's a great question. So we have been and I know that we have a good number of datasets. We've been deeply looking into the and the price sensitivity response curve. So looking at the excess access, what it. What is the capacity of the debt and what is the premiere of the day? And on the on the y-axis, what is the percentage of customers that have that chose to arm and you purchase a Express and we actually see a quick way to say it what you will expect as a response curve.
So at a very low of a high percentage of firm premium, you see a saturation and then you see kind of no response in between. So it's an incredible view into the on the price elasticity and that that our customers have and we are still able to see by geography and by and industry types, for instance, biopharma versus academia, academia.
What what can ask a question is, did you see the they have. So obviously, we are going to refine our model over time, but it's quite encouraging to see that that the answer there, the outcome is what you would expect and then we'll be from there.
Operator
Matt Larew, William Blair.
Matt Larew
Good morning. First question for Adam. And just going back to David's question on 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 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 2020?
Adam Laponis
No, Matt, I think a great question and I think the a couple a couple of comments here on in terms of the focus of the business and the priorities. It's very clear to me, and it's been clear for and hopefully in our commentary as well. But the priority is around revenue growth, margin expansion and 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 are very much a key part of everything we're doing and how we're thinking about it I haven't provided the exact timing. I'm not giving guidance on when we'll get to profitability on, 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 factors, weak three. I'm still getting my bearings and I think about it pretty carefully right now is on I don't want to make any major changes in investment strategy. That's not what we're looking to do here. I want to make sure we continue to see progress.
And if you think about areas like supply chain, for example, we're the teams are laser focused on driving out costs throughout the system, supplier consolidation, in-sourcing, restaurant inventory optimization. All of these things are getting easier as we continue to scale, we gain leverage so that the focus and momentum on that 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 tab on any expansion, the SG&A investment by making sure we're pacing and the incremental investments with the savings are driving in other areas of the business. Hopefully, that provides clarity, if that's helpful.
Matt Larew
And then, Emily, you referenced some potential new products being launched next week. And so the question is 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, maintenance, Express RNA. What do you know about what RNA customers might value differently than D&A 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 it would you could extend that even things like proteins, IgG, et cetera.
Emily Leproust
And thank you, Matt. And so I spent a lot of time with customers, and I think those are the two of primary questions and then a bunch of secondary ones. The primary questions with customer, as always, and when and how much. But it's always one time point when will they get it and how much will it cost? And then after that, there's a number of secondary questions around liquidity and both of them and packaging.
And so there are some pro features that you need to have, for instance, Kuwaiti in order to be in business, assuming that those are on Ahmed. It's always about speed and cost and know that that it's really when we really well, we do the Tweed brand as well that we are making. We've always 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 and so we've always been really good on the cost side.
Historically, I would say up until now of late 2022 were not great on speed. We are probably on par with others. But now that we've made the investment in speed is really becoming the second on strengths that we have not done and we'll keep leveraging that that brand. So anything twisted. They are high quality product, very great customer experience, and we can customize any packaging deliveries schedule that you want. And and that's all great. But most importantly, it's going to be fast. It may be a great price to enable your your science. You're going to get more shots on goal and them. And that means that we'll get all your budget because you choose us exclusively.
Operator
Catherine Schulte, Baird.
Catherine Schulte
Maybe first on NGS is what's driving the sequential decline in your second quarter guidance. Are there any one-timers in the first quarter? I think you mentioned some large orders, so there just any way to quantify those?
Emily Leproust
Maybe and something for you as one of the reports that one of the number we report is the percentage of revenue NGS that comes from 10 customers. And now 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 is fine, but quarter-to-quarter, it can be lumpy.
As you remember, Q1 of last year was kind of the opposite situation where we have some big customers and they delayed taking shipment. And so the solution for us is, let's go find more labs might. So we are going to we are pushing on adding more and more of those top accounts and over time since we smooth smoother. So we have great confidence for our view for the 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 accommodated their needs to make sure that term customer satisfactions as high as possible.
Catherine Schulte
Okay. And then maybe on CapEx, there's a pretty decent step down versus your prior guide on a percentage basis. Can you just talk through what projects that are either being pushed out or just words savings are coming from?
Adam Laponis
This is Adam, and I'll be happy to take that one. If I look at it, I'm just as we went through after one quarter, their budget, we were seeing some favorable stability in that. And we haven't stopped through the projects we were initially starting. It's just purely a reality. Have you refined the numbers we're seeing 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 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 then we're really focused on line and optimizing where we are this year.
Operator
Puneet Souda, Leerink Partners.
Puneet Souda
Sorry if I missed that, this is to need 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 on 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 kind of conservatism that you have versus the you know, the step down that we are seeing an NGS in the second half. And then I have follow up for Emily.
Adam Laponis
I'm happy to help actually to help provide additional color and thank you for the question on. I mean, if I look at the for the first part of that, you know, there's always going to be a dynamic as I'm learning this business. The orders don't always translate in the same period to revenue there's a natural delay, particularly on both large NGS customers have put in large POs for multi period as well as we have on the biopharm side, customers who have a multi-period POs over many quarters.
So typically, the revenue impact comes in over the next three to six months after we get the get the order. And from that perspective, I don't expect all the Q1 orders to turn into revenue in Q2, but we do expect them to convert as we progress throughout the year and potentially even into 25, given some some of the major deal type orders in terms of in terms of where we are and what's driving the guide, I will be really clear and 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 with without without confidence. And 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 NGL front with new customers.
So I'm very confident in the guide we're giving. But I'm also a and I said before, it's early days for me, so I don't want to get over my skis in any of it. So hopefully that clarifies.
Operator
Thank you. Sung-Ji Nam, Scotiabank.
Sung-Ji Nam
Hi. Thank you and congrats on the quarter on just one question on the NGS segment. It's 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 suspects or are you seeing kind of more new diversified customer leads and especially with the product launches like our legacy?
Emily Leproust
Yes. Thank you for your question. So definitely, that has been the focus of our new product introduction and we launched RNA seek and last lesson learned and the purpose is to expand into the research market. You'll see at AGBT next week that we'll have a product focused on on strengthening our position in liquid biopsy versus slow down. We are very interested in converting the microarray market to NGS, and it has not gone as fast as we wanted and so there will be more product introduction, squarely focused on going after that market with it's really best in class on tools. So we expect in terms of market expansion, a continuation of our efforts around academia and I'd value some home. I think those are two additional growth opportunity for us.
In addition to I think the great performance we've been having in liquid biopsy and MRD. And so the time right now, a lot of our success in NGS is is riding the of enabling LC the liquid market. But quite we're quite focused on expanding towards our market shares at BIO and academia.
Operator
Rachel Vatnsdal, JPMorgan.
Rachel Vatnsdal
Thanks. Good morning and thank you for taking the questions. So first, I just want to ask on biopharma. You mentioned that you're in discussions for anybody outlicensing. 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 where we expect to see any headlines related to those yields?
Emily Leproust
Yes. Thank you, Richard. Good question. So for context, just 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 efforts and in the past with us we'll spend some internal R&D dollars to talk to you about on assays. And then we know of, you know, maybe a dozen of assets that we think are valuable.
And we've stopped I'm spending on internal R&D dollars to advance them. And now we're in discussion with partners to them to license them those out. As you know, biopharma licensing deals can be lengthy. And so I sometimes do I think the bottom line for me is we are not expanding significant cash to us to pursue those licensing deals and or licensing deals are not in the forecast. So they will be will be nice upside when when when they happened.
Rachel Vatnsdal
Great. Thank you. Yes, sorry, go ahead.
Emily Leproust
No, go ahead.
Rachel Vatnsdal
And 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 a cost action perspective? And then how much of that is already contemplated within guidance right now to the cost actions for the year?
Emily Leproust
Well, thank you. 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 few quarters. We have a great new SVP of up to a great variety of supply chain. And and and now as a company that is growing in a market that is not we have a nice profile with our results, our suppliers with an opportunity to have a choice of in-sourcing some of the products we have the opportunity to consolidate vendors. And so we are really and we are really exercising our muscle with our supplier to make sure that that them that we get and the best target costing over time to benefit our gross margin.
In addition, when we launch, our Express Gene. We really turnover a lot of stones in our processes, and we've seen a lot of opportunities where we can add. We can swap out reagents. We can shorten a skid step. And that has given us opportunities in the future to a slow lean on on the process processes that we have and tweak some of the regions to take cost out so that that takes time to realize. And but at the same time, we see the opportunity and we'll do the work to to get the best gross margin outcome.
And I should say it's a natural evolution of our maturation as a company. And the first step was always let's have this product possible and we had a natural advantage with the silicon chip, where we always had the cost advantage that now that we have the best product out there and we can focus maybe a little bit less on new product introduction and a bit more on continuous process improvement to start taking cost out and get better and better at gross margins. So hopefully that, that helps.
Operator
Puneet Souda, Leerink Partners.
Puneet Souda
Thanks again. I just wanted to follow up on on a broader question around express genes and what's your expectation for a competitor response on express genes are 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. Appreciate that.
Emily Leproust
Thank you. And the way I think about it is our competitors have been in business way longer than MDF, right? And so we've really have optimized all of their processes using the next fiscal plate. And I'm now 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 build the back-end around it to to make at scale question and so at this point, we are the only company that can make all of their G. fast and.
And I think that you have a difficult it would be a very difficult task for competitors to tried to match it so on, we will see with the combined with the VM responses, but we are ready and we think we have on an absolute great, great product in terms of its great quality, the customer experience, the speed and actually even great pricing. And so we provide tremendous value to our customers and we look forward, we'll see anybody come on the playground and if I anything need a playground.
Operator
Thank you. There are no further question. I'd like to turn the call back over to Emily for any closing remarks.
Emily Leproust
Thank you very much. So in closing, we reported a record quarter and our proposal 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 will follow along, we'll continue to focus on revenue growth, margin expansion and financial disciplines to drive our path to profitability. We look forward to seeing some of you at AGBT conferences in the March timeframe. Thank you.
Operator
Thank you for participating in today's conference to conclude the program, and you may now disconnect. Everyone have a great day.
