{ "docId": "019dd923-622c-750b-8b9a-4b91788fc785", "docSlug": "5fadb686cc03", "documentTitle": "Twist Bioscience (TWST)", "authorId": "58_Scorpion_Capital", "authorName": "Scorpion Capital", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2022-11-15 00:00:00", "orientation": "landscape", "aspectRatio": 1.2941177, "pageNumber": 113, "pageCount": 236, "prevPage": 112, "nextPage": 114, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 6, "notes": "Uses transcript excerpts to build a case for management's over-reliance on margin narrative.", "elementsJson": [ "paragraph", "quote_block" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b9a-4b91788fc785/113", "deckHref": "/decks/019dd923-622c-750b-8b9a-4b91788fc785", "deckJsonHref": "/decks/019dd923-622c-750b-8b9a-4b91788fc785.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b9a-4b91788fc785#slide-113", "components": [ { "bbox": null, "kind": "callout", "text": "We note how often the CFO projects gross margins of 60% or more.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0932-77cf-bfed-27921bf73586", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.5, "x": 0.05, "y": 0.71 }, "kind": "list", "text": "Conference Q&A on Aug 9, 2022 – excerpts from Capital IQ transcript", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6abf0bb8-d409-4187-aa97-4232dd0693b0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.5, "x": 0.05, "y": 0.39 }, "kind": "list", "text": "Q3 2022 earnings call on Aug 5, 2022 – excerpts from Capital IQ transcript", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fd3b9b3e-5faa-487e-a3b6-805b66e6890e", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "gross margin: 60%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-0932-77cf-bfed-2ece2b7ecbd2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.9, "x": 0.05, "y": 0.43 }, "kind": "paragraph", "text": "James M. Thorburn, Twist CFO: Thank you, Emi. We had another good quarter...Gross margin for the quarter was 44.8%... Our gross margin for the quarter was approximately $25.2 million or 44.8% of revenue as compared to 40% in Q3 FY '21 and up from 38.3% in Q2. The increased gross margin reflects the impact of higher revenues in particular higher NGS revenues and thus leveraging our fixed costs.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "669b11a5-42cf-469f-94a0-f6c9b1590215", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.9, "x": 0.05, "y": 0.63 }, "kind": "paragraph", "text": "James M. Thorburn, Twist CFO: ...And as we continue to scale the business we're looking at gross margin range of 55% to 60%. I think it's notable this quarter that we achieved gross margin of 45%...So the setup is extremely strong for us....", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "80e062f6-7763-44b6-be10-293c1d6c3c73", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.9, "x": 0.05, "y": 0.56 }, "kind": "paragraph", "text": "Puneet Souda, SVB analyst: Jim, on gross margin came in strong this quarter. You're guiding to a number that is higher than what we had for the year...And how should we start to think about gross margin cadence here over the next couple of quarters?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8ca07b4d-3320-4cd0-b285-62328b3f5cb1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.9, "x": 0.05, "y": 0.23 }, "kind": "paragraph", "text": "On the last call in August, “gross margin” was mentioned 15 times, and 14 times in the call prior. Both the CEO and CFO repeatedly emphasize gross margin accomplishments, and questions by sell-side analysts indicate a fixation on the issue in the new environment. We note how often the CFO projects gross margins of 60% or more.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "93d21e2d-5af4-4149-9467-0794331876dd", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.9, "x": 0.05, "y": 0.79 }, "kind": "paragraph", "text": "Unknown Analyst: And I guess that's a great point on the margins there. Any way to talk about the long-term margin profile for Twist?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a6e57bb7-c5ef-4606-be55-5e1503f77085", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.9, "x": 0.05, "y": 0.83 }, "kind": "paragraph", "text": "James M. Thorburn: Yes....We're targeting gross margins of 60% in terms of getting to adjusted EBITDA breakeven....", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b84b6b96-b20e-4b76-a8ea-83baec546bd5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.9, "x": 0.05, "y": 0.75 }, "kind": "paragraph", "text": "James M. Thorburn: ...So there's no reason that it should not be a 60-plus percent gross margin business.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "dcbbf8f7-d89d-475f-aee1-3b69724e4c6a", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "Gross margin for the quarter was 44.8%... Our gross margin for the quarter was approximately $25.2 million or 44.8% of revenue as compared to 40% in Q3 FY '21 and up from 38.3% in Q2. The increased gross margin reflects the impact of higher revenues in particular higher NGS revenues and thus leveraging our fixed costs. — James M. Thorburn, Twist CFO", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-0932-77cf-bfed-2adcd3a8f4d4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.2, "x": 0.05, "y": 0.95 }, "kind": "source-note", "text": "Source: Capital IQ transcripts", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "45ef3faf-eb25-41e9-a029-3988ae02779e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.9, "x": 0.05, "y": 0.08 }, "kind": "title", "text": "The centrality of gross margin to Twist’s narrative is apparent during its quarterly earnings calls.", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "eb9d5e1c-3c18-442b-bda4-03c7cfb3ec33", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "a8bccb1d-2c67-4c04-9ac2-eec4de4ad9ac", "evidence": "Contrasting management's aggressive 60% margin guidance against current 44.8% performance to imply misleading narrative.", "confidence": 0.85 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }