Dr. Emily Leproust: Yes. That’s a great question. We — as a guiding principle, we are not subsidizing the research of our customers. And so, we always want to have the fee for service to pay for our work with good margin. And if we can get talent with milestones or royalties, that’s a great benefit. But we are highly focused on making sure that the upfront payment is a fair exchange for the value that we provide. So, I’m not hearing of a pressure on that upfront fee. I think once we are able to have the commercial tenant, be able to articulate the value of what we bring, I think the fee for service is very much in line with the value that our customers perceive we provide.
Operator: Our next question comes from Catherine Schulte with Baird.
Catherine Schulte: I guess, first, going back to fast genes. I think you said you talked about seeing revenue from those in the fiscal first quarter of ‘24. Just based on your conversations with customers, what kind of premium do you think they’ll be willing to pay for a faster turnaround time?
Dr. Emily Leproust: Yes. Thank you, Catherine. It’s a great question. So, what we have seen is definitely they’ll — the passive value of the faster gene is going to be different for academic customers compared to industrial customers. And so probably, actually, I think, for the first time in Twist’s history, there’ll be a different price for academia as there would be for industry, just because industry is willing to pay more for those faster genes. And then in terms of what that premium is going to be, we have set up what we call dynamic pricing, which will enable us to do price discovery with those customers to be able to get the optimal price that maximizes the volume and the gross margin that we can extract. So, we are not quite willing to guide it yet, but we’ve put in place the commercial mechanics to be able to make sure that we do not leave money on the table in those markets. That’s what the dynamic pricing is going to bring us.
Catherine Schulte: And then, you had a nice step-up in gross margin this quarter. Are you still confident in 49% gross margin for fiscal ‘24?
Jim Thorburn: So good question in terms of step-up in gross margin. That reflects a couple of things. One is the initial impact of cost reductions. Second is as we leverage our cost structure as you saw a sequential revenue growth. In terms of outlook for fiscal ‘24, we are focused on getting to adjust EBITDA breakeven. And in terms of — I mean it’s a good question in terms of fast genes. I mean, I’m particularly excited about fast genes launching. It demonstrates the capability of the Factory of the Future would be we get premium pricing. And as we get premium pricing, that’s going to reach our margins. Our long-term focus, I mean, over $500 million of potential annualized revenue based on our capacity at both San Francisco and Factory of the Future. And I mean, as we approach the $500 million, we’re targeting gross margins in the range of 55% to 60%.
Operator: And our next question will come from Rachel Vatnsdal with JP Morgan.
Rachel Vatnsdal: Just one from me today. I wanted to follow up on APAC and China. So last quarter, you guys had flagged that you were starting to see a rebound in the region, but then it looks like revenue stepped down sequentially there this quarter. We’ve heard some concerning updates across the industry out of China. So, I was wondering if you could just walk us through what are you seeing in China and broader APAC? And then how did those orders really trend this quarter? Thank you.
Jim Thorburn: Yes. So, good question. Overall, in terms of — year-over-year, we’re growing in APAC. In China, revenue did step down from our September quarter last year to our December quarter went down to 1.4. We saw a pickup in revenue to approximately $2 million in the March quarter. We saw revenue about $2 million. Clearly, there are issues in China in terms of demand. However, overall, we’re predicting about $7 million for China this year, which is flat with last year. That’s coming in slightly below what we had estimated overall. We had anticipated targeting roughly $9 million this year, but we have seen pickup from Q1, and we are seeing opportunities, and that’s driven by the value of our portfolio. I mean, the major products we’re shipping in China, our NGS and oligo pools, and we’re also seeing some other opportunities emerging.
So, we have a great facility there, and we’ve got a great sales team. And although other people are seeing a sequential decline, revenue is approximately flat from March quarter to June quarter.
Operator: Our next question will come from Matt Larew with William Blair.
Matt Larew: The first question would just be a follow-up to Luke’s around preparation for fast gene launch. Emily, you walked through four key activities that are in play here to get ready for the launch. Maybe as you think about progress to launch and potential upside or key factors to ramp in Q4, maybe stack rank confidence level and progress on those items that you’re targeting? And should we expect contribution in the fourth quarter here given a fall launch, which I think according to my Google search starts September 23rd?
Dr. Emily Leproust: Thank you. Great question. Even if we launch on the first day of fall and it ships in five days, it is possible that there could be some contribution in September, but that’s not what we are looking for. I think the main contribution will start in Q1. In terms of the stack effort that we still have to continue. What we’ve told the team is that we do not want the e-commerce to be the long pole in the tent. And so to the extent that the work in the lab gets done sooner, the e-commerce is going to be ready before that. And so it’s purely what happens in the lab that will drive the timing of the launch. We’ve launched products — many, many products. That’s one of the strengths of Twist is we have many different levels of DNA. And we have a good sense of what needs to be done. We are on track, very optimistic with the things are going and it will be driven by actions in the lab, not by e-commerce.
Matt Larew: Okay. Then, obviously, fast genes sort of the next new product. But in May, you launched an RNA portfolio and last May, you launched IgG. So, just curious what kind of traction you may be seeing with this IgG and perhaps initial feedback or opportunities that you’re seeing with the RNA portfolio?
