Amyris, Inc.

to the Amherst third quarter 2022 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, today's call is being recorded. You may listen to a webcast replay of this call by going to the investors section of Amherst website. I would like to turn the call over to Han Kiefenbeld, Chief Financial Officer of Amaris. Please go ahead.

Thank you, Dave, and good afternoon. Thank you for joining us today. With me on today's call is John Mello, President and Chief Executive Officer, and Eduardo Alvarez, our Chief Operating Officer, who will participate in the Q&A session. We issued our results today in a press release. The current report on Form 8K furnished with respect to our press release is available on our website, amris.com, in the investor section, as well as on the SEC's website. The slides accompanying this presentation can also be found on the website and were posted today for your convenience. Please turn to slide two. 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 presentation or the press release distributed today. During this call, we will make forward-looking statements about future events and circumstances, including Amaris' outlook for 2022 and beyond, Amaris' goals and strategic priorities, anticipated transactions, and other future milestones, as well as market opportunities, growth prospects, and fit-to-win actions. These statements are based on management's current expectations 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 third quarter of 2022. Amherst disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. I'll now turn the call over to John. John?

Thank you, Han. Good afternoon, everyone. Thanks for joining us today. I'll provide an update on our business performance and our expectations for the next several quarters. Han will provide an update on our financial performance, our fit-to-win initiatives, and our fourth quarter and full-year outlook. And I'll recap before turning to Q&A. Our third quarter was another solid quarter of core revenue growth and operational execution. We delivered on our business objectives and made significant progress advancing our previously communicated fit-to-win strategic actions. Demand for several of our brands is higher than anticipated, and we are prioritizing spend and investment to ensure we meet retail channel needs while also delivering on our costs. savings initiatives. Our consumer business grew 98 percent in the third quarter over the same period in 2021 and has grown 107 percent during the first three quarters compared to the same period last year. Our consumer gross margin was in line at just under 60 percent. Q3 was our sixth consecutive quarter of record consumer revenue. We have become the leading growth company in health, beauty, and wellness markets and are not experiencing a slowdown in demand for our leading brands. Our technology access revenue has also continued to grow as a result of our industry leadership in the production of clean, sustainable chemistry. Our ingredients demand has continued to outpace our capacity. We continue to sell all that we can produce and have a backlog of orders that are shipping in the fourth quarter. Gross margins for our ingredients products have been challenged by higher input costs from contract manufacturing and air freight that has been required for product delivery that meets the needs of our customers. We expect to see significant gross margin improvement now that we're increasingly making product at our new Barra Bonita precision fermentation facility. We are in process of producing five ingredients at Barra Bonita during the fourth quarter. Looking ahead, we expect gross margin expansion in the fourth quarter resulting from increased production at Barra Bonita, the transition to consumer production from third-party contract manufacturers into our own production facility in Brazil, a reduction in packaging costs, and reduced dependency on China-sourced components, which to date have resulted in significant air freight charges. We executed most of these changes by the end of the third quarter through our fit-to-win agenda and expect much further realization of the cash and the margin benefit into the fourth quarter. To sum up the third quarter, we delivered strong operational performance. We launched our fit-to-win revenue, cost, and cash initiatives. We maximized utilization of the production lines that had been commissioned at Barabunita and our interfaces consumer production facility in Brazil. We also made significant progress with the setup of infrastructure for our expansion in the UK and the European markets with our consumer brands. In a few moments, Han will cover in more detail our financial performance, the fit to win update, and the outlook for the remainder of the year. Before that though, I would like to transition to our plan and strategy for the next five quarters and our long-term outlook. Let me focus on four priorities. We are transitioning from a singular focus on growth in the end markets we serve to a framework of disciplined growth and profitability focused on our four priorities. Portfolio, growth, liquidity, and profitability. Let me start with portfolio. Our focus is to maintain our leadership in health, beauty, and wellness consumer markets underpinned by our best-in-class synthetic biology, process development, scale-up, and biomanufacturing assets. We continue to be the world leader in making clean, sustainable chemistry and delivering leading high-value and high-impact molecules to the world's fastest-growing consumer brands. No other consumer company in our end markets has the science or integration that we have built and are now executing on. We intend to expand the availability of these molecules to the world's leading companies and brands through partnerships with respective leaders in each of the end markets. We will accomplish this through long-term marketing partnerships where we design, engineer, and make the molecules that our partners sell with exclusive marketing rights. We are the only company in our sector that has now generated over $1 billion in value from these strategic transactions. We have a track record of executing significant strategic transactions that enable us to continue the manufacturing while partners grow sales through their leading position in their end markets. As we continue to focus our business model and portfolio, we expect near-term strategic transactions from the continued simplification of our portfolio to generate over $500 million of value. That includes $350 million in upfront cash, of which the net proceeds we plan to reinvest in our technology and consumer business. Let me now discuss our growth. We expect to continue delivering the leading growth compared to public consumer goods companies in clean health, beauty, and wellness. we are transitioning to more prudent spending and adding a significant focus on making our company profitable. The combination of our consumer brands, our science, biomanufacturing, and go-to-market strategy is enabling us to provide consumers with what they want and need. We are focused on slowing the rate of investment in new brands while continuing to support our leading brands to meet the strong demand they are experiencing. Long term, we expect our portfolio to consist of around 12 brands in categories where we can be leaders. These brands will continue to be sold through an omni-channel strategy with our own direct-to-consumer channel leading in revenue contribution and success in retail from partnerships with the leading retailers in their respective geographies, like Sephora, Ulta, Douglas in some European markets and our continued deepening of our partnership with Walmart in the U.S., where we now sell Pipette, are launching the 4U brand, and are expanding our Menolabs brand into Walmart stores near you. Currently, each of our brands that have been in the market for more than one year are delivering the best growth in their respective markets. On the beauty, is more than doubling this year. Costa Brazil, JVN, and Rose Inc. are all up more than 300% for the year to date. And Biossance continues to be the best growing brand in clean, sustainable skincare powered by science. Biossance is also our first brand to exceed $100 million in revenue in a single year. Rose Inc., has just launched in Brazil and is performing in the top 10 color brands at Sephora. JVN is currently experiencing a significant store expansion in the U.S. by tripling the number of doors. BioScience is seeing strong traction in China by delivering over $1 million in sales during a single week, recently for the first time in the Chinese market. We are launching the 4U brand by Tia into over 2,800 Walmart stores in the U.S. Meanwhile, we are slowing the pace of rollout for Stripes and EcoFabulous to ensure differentiated use of cash. The idea is simple. Invest where we have the leading brands and can grow efficiently. Spend less on other brands to get to profitability faster and with better predictability. The third priority for us is profitability. We are focused on ensuring that our growth is profitable and making our company financially sustainable and attractive. We have a clear path to operating profitably. Our goal is to deliver 10% operating income on an estimated $200 million revenue in the fourth quarter of 2023. We expect this to be our first solid quarter of operating profitability for our core business based on maintaining our current growth rate and delivering on our fit-to-win initiatives. We expect over 10% operating income for full year 2024, expanding that to over 20% operating income by 2025 with a goal of more than $1 billion in revenue during 2025. We have built the fastest growing consumer company in clean health, beauty, and wellness and have proven differentiated business model underpinned by the world's leading science and biomanufacturing platform. We have focused on growth to reach the scale necessary to win. And now we can turn our focus to profitability while continuing to deliver industry-leading growth. We are the leading clean beauty company and the only company in beauty powered by by the world's leading science to make clean, sustainable chemistry. We make our own chemistry and formulate some of the best performing products in health, beauty, and wellness markets. Let me now turn to our fourth priority, which is liquidity. Consistent with the expectation we set during our last earnings call, we have closed on $180 million of term loan financing, a portion of which is secured against future earnouts with our DSM strategic transaction. This funding enables us to continue executing our strategy without any significant dilution to our equity. We expect growth to continue at the current rate for both our consumer and technology access businesses. We also expect over 150 million of annualized 2023 impact from fit to win that will impact revenue costs and cash. Our current business performance, current cash, and fit-to-win improvements provide us with the necessary liquidity to self-fund to the closing of our 350 million of expected upfront funding from our large strategic transaction. Our strategic transaction regarding the marketing rights of two molecules for 350 million of upfront consideration and up to 500 million of total value remains on track for the fourth quarter, and the fourth quarter is tracking toward another record revenue quarter. The combination of our current growth and operating performance, combined with our fit-to-win actions and the successful execution of the strategic transaction, enable us to self-fund our growth and deliver on sustained profitability. We have no current plans for dilutive financing. Now, let me summarize and transition to Han. As I described, we are focused on four priorities. Our portfolio that enables us to continue delivering the best growth in consumer health, beauty, and wellness and is underpinned by a portfolio and a pipeline of the world's best clean, sustainable ingredients. Second, a focus on growth, continuing to deliver the best growth in the categories we operate in and doing it profitable in the near to medium term. Our third priority, profitability. Deliver 10 percent operating income starting in the fourth quarter of 2023 and expanding from there. And our last, our fourth priority is liquidity. We are committed to self-funding based on the current growth rate, delivery of our fit-to-win benefits, and the execution of our strategic transaction in the near term with no further equity issuance planned. We believe these four priorities are underpinned by our leadership in the consumer business and by the best performing platform in synthetic biology and biomanufacturing. We are prioritizing profitability and sustainable shareholder returns over growth. Let me now turn the call over to Han.