Amyris, Inc.

Welcome to the Amherst First Quarter 2021 Financial Results Conference call. This call is being webcast live on the events page of the Investors section of the Amherst website at amherst.com. As a reminder, this call is being recorded. You may listen to a webcast replay of this call by going to the Investors section of Amherst's website. I would now like to turn the call over to Han Kiefenbeld, Chief Financial Officer of Amherst. Please go ahead.

Thank you, Eileen, and good morning and good afternoon, everyone. Thank you for joining us today. With me are John Mello, President and Chief Executive Officer, and Eduardo Alvarez, Chief Operating Officer. This morning, John will provide a business update, Eduardo will share operational performance highlights, and I will review our financial results for the quarter. Please note that on this call, you will hear discussions of non-GAAP financial measures. including, but not limited to, underlying sales revenue, gross margin, cash operating expense, and adjusted EBITDA. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are contained in the financial summary section slides of the accompanying presentation or the press release distributed today, which is available on our website. The current report on Form 8K furnished with respect to our press release is also available on our website as well as on the SEC's website. During this call, we will make forward-looking statements about future events and circumstances, including AMRIS' 2021 outlook, goals, and strategic priorities, as well as market opportunities and growth prospects. These statements are based on management's current expectation, and actual results and future events may differ materially due to risks and uncertainties, including those detailed from time to time in our filings with the Securities and Exchange Commission, including our 10Q for the first quarter of 2021. Amherst disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Before we begin today, I'd like to note that included in our webcast is a slide presentation we will refer to. The slides will also be posted on the investor relations sections of Amherst's website following the call. I'll now turn the call over to John.

Thank you, Hein. Good morning, everyone, and thank you for joining us today. I'll start by providing a business overview. I'll then cover our recent strategic transactions and the acceleration of our market leadership. I'll provide an update on our consumer business and its key growth drivers. And lastly, a few comments regarding the new strategic partnership we announced earlier this week with Ingredion. We've delivered significant value during the first quarter from continued product-related revenue growth and the completion of the second strategic ingredients transaction, resulting in record revenue of $177 million, gross margin of 91%, and significantly positive adjusted EBITDA of $103 million. First quarter product revenue was up 47%, driven by strong consumer revenue growth We further reduced our debt position by 33% to 115 million. And since the close of the first quarter, per our commitment, we completed the third strategic ingredients transaction with an estimated value of 100 million and a successful equity raise of new proceeds of 131 million. All these factors combined significantly improved our capital structure, solidified our liquidity, and provides financial flexibility to accelerate our growth. We believe we are the first company to achieve self-sustainability with strong cash generation from our assets and technology, and we have the balance sheet to continue delivering industry-leading growth and further expand our technology leadership. The role of synthetic biology for our planet is bigger than any one company. The way most things are made and what we live with today is not sustainable. There is a tremendous consumer pull toward clean, natural and sustainably produced products. We are leading this transition to clean chemistry, just like Tesla has led the transition to the electrification of transportation. We are the leaders of biomanufacturing and believe that we have delivered more biomanufactured products than the aggregate of the entire sector. Most companies in our sector do not have the benefit yet of a portfolio of scale and commercialized products. This is their aspiration. Last year alone, we manufactured and sold more bio-based, sustainable products than all of the companies in our sector. This is our clean advantage, and one of the reasons companies like DSM Ingredion, Fermanish, Givadon, L'Oreal, Shiseido, Natura, Estee Lauder, Sumitomo, and many others partner with us to make and supply them clean, biomanufactured material from fermentation. As evidenced by our partnerships, companies seek us out to help transform their supply chains, lower their costs, and meet the needs of their customers for sustainable sources of supply. The competition is the establishment, the suppliers of traditional chemistry. Most of our peer group has promising technology at the lab stage. However, few have been able to demonstrate an ability to convert this into commercialized products that can be produced at industrial scale. We are the biomanufacturing sector leader with a proven business model that we believe has attained self-sustaining growth. We are in a consumer super cycle for beauty and luxury. This is global in nature and a result of mega trends driving a significant acceleration to healthy skin and a deep commitment by the consumer to personal health and wellness. During previous investor calls, we discussed the four areas of growth for our consumer brands. First, new product launches. Second, exclusive formulations and ingredients. Thirdly, expansion of selling doors and square footage space in retail stores. And fourthly, geographical expansion. So far this year, we have added five new brands that address fast-growing market segments in the beauty and personal care space. This includes hair care with JVN and clean color cosmetics with Rose Inc., We are also adding specialty skincare brands, including Terrasana for skincare treatments like acne, and Costa Brazil, a clean luxury skincare brand, as well as EcoFabulous for the Gen Z consumer who's focused on clean, sustainable beauty. We have become the house of billion-dollar brands for clean, sustainable products that are accessible to consumers and deliver the best performance for their health. This is a deep capability that starts with our leading lab-to-market science platform, our clean biomanufacturing, and an award-winning formulation product development team that continues to deliver differentiated products that are loved by our consumers. The future of health, wellness, and beauty is clean, and we are leading this path for consumers. The first quarter was very strong for our consumer business, and this has accelerated into the second quarter. We are at over 4,000 new retail doors for our brands versus our 2021 target of 2,000 doors. Our direct-to-consumer.com business has continued to deliver much better than industry growth, and heading into the second quarter, brick-and-mortar sales have returned with very strong performance. our Sephora sales are now delivering better than pre-COVID growth rates. We are very pleased to benefit from the return to strong retail store buying in luxury and beauty without losing the strong dot-com performance we delivered through the COVID period. Recently, we announced a five-year partnership with Reese Witherspoon as global brand ambassador for BioSense. Reese, the BioSense brand team, and its industry-leading scientists will create content that is engaging and educational, empowering today's beauty community to become savvier, more health-conscious consumers. We are experiencing significant consumer growth for our Bioscience.com business and a very strong positive impact to revenue from this partnership with Reese, even in its early days. In addition to the very strong consumer performance in the U.S., We expect China revenue this year will be more than all of the Sephora revenue last year. The development of the Rose Ink brand has progressed very well. Rose Ink will launch selling in the third quarter and already has a strong retail order book from our various channel partners of more than $6 million. We are seeing strong interest in this new clean color cosmetics brand We have industry-leading product formulations. This is a beautiful brand with amazing clean color cosmetics at a time when the consumer is entering the roaring 20s and rekindling their love for color cosmetics experiences. We are also experiencing significant demand for our JVN clean hair care brand partnered with Jonathan Van Ness. We will bring the JVN brand to market in the third quarter. Our product developers and formulators have done an outstanding job capturing the brand essence of clean and simple formulations delivering a truly differentiated product, taking full advantage of clean ingredients we developed and manufactured. We develop and formulate our consumer products and own our formulas. We have deep knowledge in formulating clean ingredients for them to deliver the best efficacy of any product on the market. I can tell you I have now started using JVN shampoo and conditioner, and I will never switch back to another shampoo. It is a game-changing experience. I'm very pleased to announce today our partnership with Renfield Manufacturing. They are a proven manufacturer of cosmetics and beauty products, and we are investing with them in a manufacturing and fulfillment center for our consumer brands in Reno, Nevada, not far from the Tesla Megafactory. we expect to start manufacturing there in the fourth quarter of this year. We expect to evolve around 70% of our consumer products from various contract manufacturers into dislocation and expect this to reduce our consumer brands cost of goods by about 10%. Additionally, we expect to improve our speed to market and our flexibility in quickly adapting to the needs of our retail partners and consumers. We have more demand today from our consumer business than what we've been able to supply over the last several quarters. And we want to structurally address this. We are very pleased to work with Renfield Manufacturing and very excited to start delivering products from our Reno Fulfillment Center in the fourth quarter. Our consumer business is performing better than expected this year. And we expect this business to be around 300 million in 2022 revenue while continuing to more than double annually for the next several years. This is our track record. We've been able to grow our consumer business two to three times a year for the last two to three years, and we expect at least doubling our revenue for the next several years in the consumer business. We've made tremendous progress on the evolution of our ingredients portfolio over the past five months. In the first quarter, we announced the largest ingredients transaction in our history, which further validated the value we have long associated with our ingredients portfolio. This is a significant acceleration of our collaboration strategy and established a powerhouse for clean, natural ingredients that are sustainably sourced for the personal care and flavor and fragrance industry. This is definitely not a monetization strategy. we have now demonstrated an ability to capture around $100 million in value on average for each molecule in our portfolio. We have 24 molecules in development and scale up and expect these to all reach full-scale commercialization by 2025. In addition, we have over 250 molecules in our current pipeline where we have successfully engineered a strain and demonstrated successful production in a fermentation, these are ready to advance the full development and scale-up. We have successfully worked with multiple organisms. We make organism choices based on what's best for large-scale industrial fermentation. We are the largest producer of biomanufactured material. We are no longer in the academic discussion of how many organisms we work with. We are focused and need to deliver products to our customers every single day. We select and adapt to what organism works best for the molecule we need to deliver at industrial scale and deliver sustainably to our in markets. consistent with our previous communication, we have now completed three strategic transactions involving four different partners, namely Firminish, Givadon, DSM, and now also Ingredion. The first two transactions we closed represent an estimated value of more than $550 million in short and medium term contributions. The upfront cash was $190 million for the two combined transactions with which we paid down $23 million in debt. We expanded the collaboration with Furmanish by 15 years and deepened the partnership with Jivadon. The technology and development of these relationships remain with Amherst. We expect an additional 10 molecules for development with these partners that include our technology and would be scaled and produced by Amherst long-term. We have long-term supply agreements that represent an expected $2 billion in revenue for the remaining term of our long-term manufacturing agreements. The third transaction that we announced on Monday of this week is with Ingredion. I'll cover the details of this new partnership in just a moment. As it relates to our manufacturing capabilities, I can confirm that our engineering and operations team continues to work hard on the construction of our new ingredients plant in Barra Bonita, Brazil. We expect to complete construction by the end of this year and be producing in early 2022. We expect to update you on our long-term capacity expansion plans for our fermentation footprint during the second half of this year. Let me update you on the third of the three strategic transactions which is with Ingredion for the exclusive licensing of Amherst's zero-calorie, natural, nature-based, fermented REBM sweetener. The combination of Amherst's leading synthetic biology technology platform with Ingredion's global market and customer reach and formulation capabilities will accelerate the availability and adoption of zero-calorie, nature-based sweeteners and other clean-labeled, fermentation-based food ingredients to the world's leading food and beverage companies. We have the leading zero-calorie natural sweetener and the only one produced from non-GMO sugar canes. Ingridion, via its Pure Circle subsidiary, will become the exclusive global business-to-business commercialization partner for Amherst's sugar reduction technology that includes fermented RebM. The parties will enter into an R&D collaboration agreement to create and advance the development of sustainable resource, zero-calorie, nature-based sweeteners, and potentially other types of fermentation-based food ingredients. Ingredion will become a minority partner in the Amherst Brazilian manufacturing facility that is currently under construction. Amherst will continue to own and market its Pure Cane consumer brand, offering of tabletop and culinary sweetener products. The transaction value is estimated to be around $100 million, comprised of both short and medium-term contributions from Ingredion. This includes $75 million for the exclusive license to sell or market REBEM from Fermentation, along with a participation in the Brazil Manufacturing Joint Venture. Additional value is expected from future profit share from REBEM sales and R&D collaborations. We expect about $1 billion in product revenue from this partnership over the next 15 years. From the three transactions, We estimate about $3 billion in potential product revenue over the next 15 years. We believe this to be more than the product revenue of the entire industry over its history. We are continuing to lead the sector in revenue growth. We expect to deliver underlying revenue of around $250 million this year and total revenue of around $400 million this year, when including the completed 2021 strategic transactions and the GAAP revenue in this year from these transactions. Our business model is delivering on the promise of synthetic biology. Ingredients such as Rev-M from fermentation create significant value and enable us to support the continued growth in our consumer business while maintaining our sector leadership in the supply of natural, sustainably sourced ingredients. With that, I'll turn the call over to Eduardo. Eduardo?