# Twist Bioscience Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Twist Bioscience Corp](/companies/twst.md) (CIK 1581280)
- Form: 10-Q
- Filed: 2024-05-02
- Accepted by EDGAR: May 2, 2024, 16:13 ET
- Period: 2024-03-31
- Accession: 0001628280-24-020014
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1581280/000162828024020014/twst-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1581280/000162828024020014/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $75.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2023-10-01 to 2024-03-31 | $146.8m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $44.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-10-01 to 2024-03-31 | $87.0m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $24.1m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-10-01 to 2024-03-31 | $47.2m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $55.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-10-01 to 2024-03-31 | $108.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$48.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-10-01 to 2024-03-31 | −$95.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $0 | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-10-01 to 2024-03-31 | $0 | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $345.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-10-01 to 2024-03-31 | $465.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$45.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-10-01 to 2024-03-31 | −$88.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.79 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-10-01 to 2024-03-31 | −$1.54 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.79 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-10-01 to 2024-03-31 | −$1.54 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 57,779,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-10-01 to 2024-03-31 | 57,637,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-10-01 to 2024-03-31 | −$42.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-10-01 to 2024-03-31 | $2.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $243.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $371.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $702.8m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $67.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $142.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $560.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,899 characters.

*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 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:

*(in thousands)*

|  | Three months ended March 31, 2024 | 2023 | Six months ended March 31, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| 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% |
| EMEA | 22,263 30% | 18,780 31% | 43,483 30% | 35,111 31% |
| APAC | 7,166 9% | 6,475 11% | 13,485 9% | 10,741 9% |
| 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 pools | 3,940 6% | 3,315 5% | 8,129 6% | 7,015 6% |
| DNA libraries | 3,531 5% | 2,826 5% | 6,470 4% | 4,662 4% |
| Antibody discovery | 4,701 6% | 7,034 12% | 9,927 7% | 15,205 13% |
| NGS tools | 40,774 54% | 28,994 48% | 80,191 55% | 53,355 47% |
| Total revenues | $75,302 100% | $60,180 100% | $146,800 100% | $114,423 100% |

### Revenues by industry

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 research | 13,722 18% | 11,120 19% | 27,495 18% | 21,135 19% |
| Healthcare | 40,934 54% | 33,764 56% | 81,815 56% | 63,777 56% |
| Food/agriculture | 382 1% | 886 1% | 948 1% | 1,526 1% |
| 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:

*(in thousands)*

|  | Three months ended March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Number of genes shipped | 193 | 171 | 177 | 171 | 152 | 134 | 146 | 163 |
| Number of shipments | 20 | 18 | 17 | 17 | 15 | 14(1) | 20 | 15 |

(1) Previously reported number of shipments have been updated to conform to the current period presentation.

### Comparison of the three months ended March 31, 2024 and 2023

### Revenues

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $75,302 | $60,180 | $15,122 | 25% |

In the three months ended March 31, 2024, revenues increased to $75.3 million from $60.2 million in the three months ended March 31, 2023. The increase in revenue reflects growth in NGS tools revenue of $11.8 million, growth in synthetic genes revenue of $4.3 million, growth in oligo pools of $0.6 million and growth in DNA libraries revenue of $0.7 million. This increase was partially offset by a decrease in revenue from antibody discovery of $2.3 million. The growth in NGS tools revenue is primarily attributable to an increase in revenue from our top customers in the healthcare,industrial chemicals/materials and academic research industries. Our synthetic genes revenue grew mainly due to an increase in revenue from our top customers and an increase in customers in the industrial chemicals/materials, academic research and healthcare industries as well as an improved turnaround time inclusive of the full launch of Express Genes. In the three months ended March 31, 2024, we shipped approximately 193,000 genes compared to approximately 152,000 genes in the three months ended March 31, 2023, an increase of 27%. Our oligo pools revenue grew mainly due to an increase in revenue from our top customers in the industrial chemicals/materials industries. Our DNA libraries revenue grew mainly due to an increase in revenue from our top customers in the healthcare and academic research industries.

### Cost of revenues

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $44,420 | $41,669 | $2,751 | 7% |

26

In the three months ended March 31, 2024, cost of revenues increased to $44.4 million from $41.7 million in the three months ended March 31, 2023. The increase is attributable to an increase in material costs of $2.4 million due to higher sales volume, and an increase in depreciation and amortization expense of $1.4 million, primarily due to the ongoing capital investment to increase capacity. This was partially offset by a decrease in personnel costs, including stock-based compensation of $1.2 million due to the reduction of headcount related to the 2023 restructuring plan.

### Research and development expenses

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $24,149 | $27,379 | $(3,230) | (12)% |

In the three months ended March 31, 2024, research and development expenses decreased to $24.1 million from $27.4 million in the three months ended March 31, 2023. The decrease is primarily due to decreases in personnel costs of $1.7 million due to the reduction of headcount related to the 2023 restructuring plan and lab supplies of $2.8 million. The decrease was partially offset by a lack of grant reimbursement in 2024 where we received $1.4 million in 2023, which are netted against the research and development expenses.

### Selling, general and administrative

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative | $55,622 | $53,965 | $1,657 | 3% |

In the three months ended March 31, 2024, selling, general and administrative expenses increased to $55.6 million from $54.0 million in the three months ended March 31, 2023. The increase is primarily due to increases in personnel costs of $6.1 million, including stock-based compensation of $3.8 million, IT services costs of $1.5 million, facilities costs of $1.1 million and marketing expenses of $1.7 million. These increases were partially offset by the decrease in the Wilsonville manufacturing facility pre-commercialization costs of $6.2 million, which was completed when the Wilsonville facility began shipping product in the three months ended March 31, 2023, and a decrease in outside services costs of $2.7 million.

### Change in fair value of contingent consideration and holdbacks

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of contingent consideration and holdbacks | $— | $(1,196) | $1,196 | (100)% |

There was no change in fair value of contingent consideration and holdbacks for the three months ended March 31, 2024 as the contingent consideration and holdbacks liabilities were settled in the prior year. In the three months ended March 31, 2023, we recognized a change in fair value of holdbacks of $1.2 million related to the acquisition of Abveris primarily as a result of the change in fair value of our stock price as of March 31, 2023.

### Interest and other income (expense), net

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $3,941 | $3,464 | $477 | 14% |
| Interest expense | — | (2) | 2 | (100)% |
| Other expense | (199) | (305) | 106 | (35)% |
| Total interest and other income (expense), net | $3,742 | $3,157 | $585 | 19% |

27

In the three months ended March 31, 2024, interest income was $3.9 million compared to $3.5 million in the three months ended March 31, 2023, resulting from increased interest rates on our short-term investments.

### Income tax provision

*(in thousands, except percentages)*

|  | Three months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Income tax provision | $(345) | $(676) | $331 | (49)% |

We recorded an income tax provision of $0.3 million and $0.7 million in the three months ended March 31, 2024 and March 31, 2023, respectively.

### Comparison of the six months ended March 31, 2024 and 2023

### Revenues

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $146,800 | $114,423 | $32,377 | 28% |

In the six months ended March 31, 2024, revenues increased to $146.8 million from $114.4 million in the six months ended March 31, 2023. The increase in revenue reflects growth in NGS tools revenue of $26.8 million, growth in synthetic genes revenue of $7.9 million, growth in oligo pools revenue of $ $1.1 million and growth in DNA libraries revenue of $1.8 million. The increase was partially offset by a decrease in revenue from antibody discovery of $5.3 million. The growth in NGS tools revenue is primarily attributable to an increase in revenue from our top customers in the healthcare, industrial chemicals/materials and academic research industries. Our synthetic genes revenue grew mainly due to an increase in revenue from our top customers and an increase in customers in the industrial chemicals/materials, healthcare and academic research industries, as well as an improved turnaround time inclusive of the full launch of Express Genes. In the six months ended March 31, 2024, we shipped approximately 364,000 genes, compared to approximately 286,000 genes in the six months ended March 31, 2023, an increase of 27%. Our oligo pools revenue grew mainly due to an increase in revenue from our top customers in the industrial chemicals/materials and academic research industries. Our DNA libraries revenue grew mainly due to an increase in revenue from our top customers in the healthcare and academic research industries.

### Cost of revenues

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $86,955 | $71,111 | $15,844 | 22% |

In the six months ended March 31, 2024, cost of revenues increased to $87.0 million from $71.1 million in the six months ended March 31, 2023. The increase is primarily attributable to an increase in material costs of $9.8 million, due to higher sales volume, and an increase in depreciation and amortization expense of $4.1 million primarily due to the ongoing capital investment to increase capacity. The remaining increase is attributable to an increase in personnel costs, including stock-based compensation of $0.9 million and an increase in outside services of $0.8 million.

### Research and development expenses

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $47,249 | $58,621 | $(11,372) | (19)% |

28

In the six months ended March 31, 2024, research and development expenses decreased to $47.2 million from $58.6 million in the six months ended March 31, 2023. The decrease is primarily due to decreases in personnel costs of $7.0 million, including stock-based compensation of $1.3 million, due to the reduction of headcount related to the 2023 restructuring plan, lab supplies of $4.9 million, depreciation expense of $0.4 million, facilities costs of $0.2 million and traveling expenses of $0.2 million. The decrease was partially offset by a lack of grant reimbursement in 2024 where we received $1.9 million in 2023, which are netted against the research and development expenses.

### Selling, general and administrative

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative | $108,462 | $96,289 | $12,173 | 13% |

In the six months ended March 31, 2024, selling, general and administrative expenses increased to $108.5 million from $96.3 million in the six months ended March 31, 2023. The increase is attributable to higher stock-based compensation of $19.2 million, primarily due to the reversal of stock-based compensation expense of $15.9 million in the first quarter of 2023 because of employee stock forfeitures related to an acquisition performance condition not being met and the remaining increase due to stock base awards to existing and new employees . Further, the increase is attributable to an increase in personnel costs of $4.4 million, facilities costs of $2.8 million, IT-related service costs of $2.5 million, marketing costs of $1.9 million and depreciation of $0.8 million. These increases were partially offset by the decrease in the Wilsonville manufacturing facility pre-commercialization costs of $17.4 million, which was completed when the Wilsonville facility began shipping product in the three months ended March 31, 2023, and a decrease in outside services costs of $1.9 million.

### Change in fair value of contingent consideration and holdbacks

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of contingent consideration and holdbacks | $— | $(5,331) | $5,331 | (100)% |

There was no change in fair value of contingent consideration and holdbacks for the six months ended March 31, 2024 as the contingent consideration and holdbacks liabilities were settled in the prior year. In the six months ended March 31, 2023, we recognized a change in fair value of the contingent consideration and holdbacks of $4.9 million and $0.4 million related to the acquisitions of Abveris and iGenomX, as a result of not achieving the Abveris revenue target for calendar year 2022 and a change in fair value of our stock price as of March 31, 2023.

### Interest and other income (expense), net

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $8,061 | $6,504 | $1,557 | 24% |
| Interest expense | — | (3) | 3 | (100)% |
| Other expense | (230) | (462) | 232 | (50)% |
| Total interest and other income (expense), net | $7,831 | $6,039 | $1,792 | 30% |

In the six months ended March 31, 2024, interest income was $8.1 million compared to $6.5 million in the six months ended March 31, 2023, resulting from increased interest rates on our short-term investments.

### Income tax provision

*(in thousands, except percentages)*

|  | Six months ended March 31, 2024 | 2023 | Change% |  |
| --- | ---: | ---: | ---: | ---: |
| Income tax provision | $(465) | $(752) | $287 | (38)% |

We recorded an income tax provision of $0.5 million and $0.8 million in the six months ended March 31, 2024 and March 31, 2023, respectively.

### Liquidity and capital resources

### Sources of liquidity

To date, we have financed our operations principally through public equity raises, private placements of our convertible preferred stock, borrowings from credit facilities and revenue from our commercial operations.

Since our inception on February 4, 2013 and through March 31, 2024, we have received an aggregate of $1,333.7 million in net proceeds from the issuance of equity securities in public offerings and an aggregate of $13.8 million from debt issuances. At March 31, 2024, we had a balance of $243.3 million of cash and cash equivalents and $50.0 million in short-term investments.

### Operating capital requirements

Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs, laboratory and related supplies, legal and other regulatory expenses and general overhead costs and the capital expenditures for our facility expansion including our manufacturing facility located in Wilsonville, Oregon. We had $1.0 million million in commitments for capital expenditures as of March 31, 2024.

### Cash flows

The following table summarizes our sources and uses of cash and cash equivalents:

*(in thousands)*

|  | Six months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(42,396) | $(98,358) |
| Net cash provided by (used in) investing activities | (1,075) | 34,189 |
| Net cash provided by financing activities | 355 | 1,130 |

### Operating activities

Net cash used in operating activities was $42.4 million in the six months ended March 31, 2024 and consisted primarily of a net loss of $88.5 million adjusted for non-cash items including depreciation and amortization expenses of $16.5 million, stock-based compensation expense of $24.8 million, non-cash lease expense of $0.5 million and a net change in operating assets and liabilities of $4.0 million. The change in operating assets and liabilities was mainly due to decreases in accounts receivable of $7.4 million, inventories of $1.7 million, other non-current assets of $0.3 million, accounts payable of $5.7 million, accrued compensation of $0.5 million and other liabilities of $2.6 million offset by an increase in prepaid expenses of $0.4 million and accrued expenses of $3.9 million.

Net cash used in operating activities was $98.4 million in the six months ended March 31, 2023 and consisted primarily of a net loss of $101.0 million adjusted for non-cash items including depreciation and amortization expenses of $12.3 million, stock-based compensation expense of $7.9 million, non-cash lease expense of $0.6 million, change in fair value of contingent consideration and holdbacks of $5.3 million, and a net change in operating assets and liabilities of $13.5 million. The change in operating assets and liabilities was mainly due to an increase in accounts receivable of $8.1 million, inventories of $0.6 million, prepaid expenses of $1.6 million and accrued expenses of $2.9 million offset by a decrease in accounts payable of $4.2 million, other non-current assets of $1.2 million and accrued compensation of $2.7 million.

### Investing activities

In the six months ended March 31, 2024, our investing activities used net cash of $1.1 million, which was comprised of the purchases of laboratory property, equipment and computers of $2.1 million offset by the proceeds from the net impact of purchases and maturity of investments of $1.0 million.

In the six months ended March 31, 2023, our investing activities generated net cash of $34.2 million. The net cash was generated primarily from the net impact of purchases, sale and maturity of investments of $55.1 million and purchases of laboratory property, equipment and computers of $20.9 million.

### Financing activities

Net cash provided by financing activities was $0.4 million in the six months ended March 31, 2024, which consisted of $2.3 million from the exercise of stock options and $2.0 million proceeds from issuance of shares under the 2018 ESPP offset by $4.0 million in repurchases of common stock for income tax withholdings.

Net cash provided by financing activities was $1.1 million in the six months ended March 31, 2023, which consisted of $0.9 million from the exercise of stock options and $2.5 million of proceeds from issuance of shares under the 2018 ESPP, offset by $2.3 million in repurchases of common stock for income tax withholdings.

### Off-balance sheet arrangements

We do not have any off-balance sheet arrangements.

### Contractual obligations and other commitments

Our contractual obligations have not materially changed from those reported in our Annual Report on Form 10-K.

### Critical accounting policies and significant management estimates

The preparation of our Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States of America requires management to make estimates and judgments that affect the reported amounts in the financial statements and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ significantly from these estimates. A summary of our critical accounting policies and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended September 30, 2023. There were no material changes to our critical accounting policies and estimates during the six months ended March 31, 2024.

### Recent issued accounting pronouncements

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 2, “Summary of significant accounting policies” in Item 1 of Part I of this Quarterly Report on Form 10-Q.

## Market risk

As filed, 2,633 characters.

### Interest rate sensitivity

We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents, and marketable securities of $293.3 million and $336.4 million as of March 31, 2024 and September 30, 2023, respectively, which consisted primarily of money market funds and marketable securities, largely composed of investment grade, short to intermediate term fixed income securities.

The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in a variety of securities of high credit quality and short-term duration, according to our board-approved investment policy. Our investments are subject to interest rate risk and could fall in value if market interest rates increase. A hypothetical 10% relative change in interest rates during any of the periods presented would not have a material impact on our condensed consolidated financial statements.

### Foreign currency sensitivity

The majority of our transactions occur in U.S. dollars. However, we do have certain transactions that are denominated in currencies other than the U.S. dollar, primarily the Euro, Chinese Yuan, and British Pound, and we therefore are subject to foreign exchange risk. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of expenses, assets and liabilities primarily associated with a limited number of manufacturing activities.

We do not use derivative financial instruments for speculative trading purposes, nor do we hedge foreign currency exchange rate exposure in a manner that entirely offsets the effects of changes in foreign currency exchange rates. The counterparties to these forward foreign currency exchange contracts are creditworthy multinational commercial banks, which minimizes the risk of counterparty nonperformance. We regularly review our exposure and may, as part of this review, make changes to it.

### Inflation risk

While we have experienced increased operating costs in recent periods, which we believe are due in part to the recent growth in inflation, we do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.

## Controls and procedures

As filed, 4,255 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024, which is the end of the period covered by this Quarterly Report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures to ensure that information required to be disclosed by the Company in reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures were not effective as of March 31, 2024 due to the material weakness in internal control over financial reporting described in Part II, Item 9A of the Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Notwithstanding the material weakness, the Company performed additional analysis and other post-closing procedures to determine its condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

### Previously Identified Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements would not be prevented or detected on a timely basis.

Refer to the management report on internal control over financial reporting in Part II, Item 9A of our Annual Report on Form 10-K for a discussion of the material weakness existing as of September 30, 2023, which continued to exist as of March 31, 2024.

### Remediation Plan of Material Weaknesses

As previously described in Part II, Item 9A of our Annual Report on Form 10-K, we are continuing to enhance our overall control environment and are devoting substantial effort by enhancing our manual and automated controls to remediate the identified material weakness. For a more comprehensive discussion of the remedial measures which are being undertaken to address these material weaknesses, or the Remediation Plan, refer to Part II, Item 9A, “Remediation of Material Weaknesses,” of our Annual Report on Form 10-K.

Additional changes and improvements may be identified and adopted as we continue to evaluate and implement our Remediation Plan. These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that the enhanced control is operating effectively.

### Changes in Internal Control over Financial Reporting

Except for actions taken under the Remediation Plan described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,033 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report on Form 10-K filed with the SEC on November 21, 2023, as updated and supplemented in Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on February 2, 2024, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K, and our Quarterly Report on Form 10-Q filed with the SEC on February 2, 2024. We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC.

Filed May 2, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-020014. Last ingested by Listed: Oct 27, 2026, 16:07 ET. No prices; not investment advice.