Twist Bioscience Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Twist Biosciences Fiscal 2022 Second Quarter Financial Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to your host, Angela Bidding, SVP of Corporate Affairs and Chief ESG Officer.

Thank you, Operator. Good afternoon, everyone. I would like to thank all of you for joining us today for Twist Bioscience's conference call to review our fiscal 2022 second quarter financial results and business progress. We issued our financial results release this afternoon, which is available at our website at www.twistbioscience.com. With me on today's call are Dr. Emily LaProuste, CEO and co-founder of Twist, and Jim Thorburn, CFO of Twist. Emily will begin with a review of our recent progress on TWIS businesses. Jim will report on our financial and operational performance. Emily will come back to discuss our upcoming milestones and directions, and we will then open a call for questions. We would ask that you limit your questions to a maximum of two and then review as a courtesy to others on the call. As a reminder, this call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for two weeks. During today's presentation, we will make forward-looking statements within the meanings of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we cannot at this time predict the full extent of the ongoing impact of the COVID-19 pandemic and any resulting business or economic impact. We disclaim any obligation to update any forward-looking statements except as required by law. With that, I'll now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust.

Thank you, Angela, and good afternoon, everyone. During the second quarter, we continued to serve a growing list of customers, delivering record revenue of $48.1 million and $55 million in orders. Of note, Our revenue for the first half of fiscal 2022 is equal to our revenue in all of fiscal 2020 at $90.1 million, illustrating our rapid growth and continued commitment to executing quarter over quarter. We have increased our revenue and customer base in the face of micron, supply chain description, and market uncertainty, and have expanded our employee base with our lowest turnover rate even in the midst of the great wedding nation. We have been successful to date, We believe we will be successful moving forward because of our employee and unique culture, where we use our grit to make an impact each day in service and trust of our customers and each other. During the quarter, we added to our balance sheet in the midst of a difficult market where growth stocks are out of favor. We see a robust opportunity and potential ROI that can result from investing in vertical market segments, At the same time, we are allocating resources in a fiscally responsible manner. We are working diligently to balance the drive to profitability with significant upside from new product and new market, including data storage. We remain committed to achieving adjusted EBITDA break-even for the core business at $300 million in revenue, with the core business being defined as Symbio and MGS. When we reach that point, we expect to have options for data storage specifically that could further mitigate our spend. We understand that, particularly in this market environment, it is critical to both execute quarter-over-quarter to drive revenue growth and manage expenses to have a demonstrable path to profitability. We are doing both. And we are finding that our value proposition resonates in an environment where the funding for our customers is more difficult since we are the high-quality, low-cost leader. To review the second quarter, source and bio, we reported revenues of $18.4 million with a strong order of $23.6 million, indicating continued growth ahead. We achieved several milestones in April to increase our gene capacity, which will allow us to accommodate both the ongoing and surge demand as we bring up the Factor of the Future schedule for the beginning of July, with shipping from this facility starting in January 2023. We announced a new four-year supply grant with Ginkgo that includes a minimum of $58 million in diverse product purchases over the lifetime of the contract. Over and above this minimum commitment, Ginkgo has the capability to access significantly more products from Twist to meet their needs moving forward. As the SynBio industry evolves, we continue to increase our revenue and expand both our customer base and market share, and therefore we do not anticipate Ginkgo revenue would become material to us. Last week, we launched commercially our Twist high-throughput antibody production, or HiDG product. This is an exciting gene-to-antibody production platform that enables customers to turn candidate DNA sequences into purified antibodies for therapeutic discovery and screening applications, and a product we believe has tremendous potential with a select group of customers. To facilitate our continued growth, the Factory of the Future remains on track, and we expect to begin shipping products from this site in January of 2023. We stand ready to meet the needs of Ginkgo, as well as many additional customers. In parallel, We are advancing our enzymatic synthesis approach, and one of TWIST's early patent applications in this space, published in April. Recall that we are developing a low-cost, scarless enzymatic process to synthesize DNA that we expect to use for enterprise data storage offerings. We expect to continue to use phosphorylated chemistry as our primary method of DNA synthesis for the immediate and near term, and once we develop, we will have we will add applications that are animable to enzymatic synthesis. This could be a decentralized OEM option, or cell-free creation of DNA, or other markets we are not serving today. For NGS, we reported revenue of $23.1 million and orders of $23.6 million. Last quarter, we talked about liquid biopsy and minimal residual disease. And during the quarter, we signed a partnership with C2I Genomics to develop reference materials for whole genome cancer detections for minimal residual disease. While we are not able to announce every customer, as some didn't want to share that we are part of their secret sauce, this is a great example of how we enable innovative workflows to ultimately benefit patients with cancer. We continue to work with many liquid biopsy companies, we are developing new diagnostic tests for a wide range of cancers. As a whole, the industry has been slower to run commercially, though traction is building. As Jim will share, we continue to expand the number of customers we serve in NGS, with the top 10 accounts resulting in about a third of our revenues for the quarter. Our expanding customer base has decreased our reliance on anyone customers, while positioning us to scale with the organizations as they commercialize and thus scale their volume significantly. Ultimately, no matter the application, we are focused on dominating the workflow between the sample and the sequencer. This includes library prep, target enrichment, beads buffer, blocker adapters, and all reagents for DNA and RNA workflows. We can customize panels quickly, We offer off-the-shelf solutions for a wide variety of applications, and we are well positioned to capture the market share moving forward. Moving to Biopharma, we reported $6.6 million in revenue and $7.8 million in order, a great quarter. We announced partnerships with Medisix and CREA. In the second quarter, we added five new partners for Swiss Biopharma, with 47 partners in total. We initiated 15 new programs, with 47 active programs ongoing at the end of the second quarter. We completed 21 programs during the quarter, for a total of 60 completed programs or trees by a farmer. Of our 107 total active and completed programs, 52 have milestones and oralities. I'd like to note that several of our new partners are focused on optimization projects, which typically do not include milestones and oralities. However, They are very good gateway projects that allow our bioformat team to demonstrate their expertise and can lead to larger agreements. SwissBoston, also known as Adveris, has eight new projects underway, which, as a reminder, are fee-for-service and typically take three to six months to complete. During the second quarter, SwissBoston signed nine new partnerships accounting for 56 new discovery projects, and we continue to be impressed with the team. We added two new beacon machines in Boston. And as a reminder, the Boston team is a power user of the beacon, which reduces the cycle time and increases capacity, enabling significant revenue per machine. Turning to data storage, you will recall that in December, we demonstrated DNA synthesis on a one-macron pitch array. Now, we have a fully integrated CMOS chip with electronic control at one-macron pitch. The next step is to debug the system to achieve synthesis up to a gigabyte of data in a single run, and we remain encouraged by the technical progress that we are making, as DNA synthesis on this chip will translate into an aerial density capability of 100 million oligos per square centimeter. It's an entity that is significantly higher than any competitors. We expect this chip, once functioning at production scale, to enable limited early access customer engagement, and we look forward to sharing details in the near future. In parallel, we continue to work on the design of our next chip, designated alpha, which will enable a cost density inflection point that we believe will accelerate growth in early access markets. As we previously said, we expect our first offering to be a century archive solution, where customers can store data for 100 years or more without migration, maintenance, or energy. As the technology matures and increasing automation can be realized, we expect to introduce an accessible archive solution targeted towards data center environments. With the technology moving forward, we are building the ecosystem and relationships that we believe will serve Twist well as we enter the market. In February, We became a supporter of the Digital Preservation Coalition, a membership-based organization enabling its customers to deliver resilient, long-term access to digital content and services. Engaging with the Digital Preservation Coalition provides access to archivists with precious data to store and will help us navigate this important initial market. In addition, in April, We announce that we are now a voting member of the Storage Networking Industry Association, known as SNEA. SNEA is made up of member companies spanning the storage market and is globally recognized as the trusted authority for storage leadership, standards, and technology expertise. We are already engaged as an active member of the organization and believe our involvement will be critical to our ecosystem activities and will help inform our product roadmap. Finally, the DNA Data Storage Alliance is gaining momentum, as evidenced by over 50 member organizations at this time. The ecosystem is building nicely, and it's come a long way from the four funding companies in just 18 months. I'd like to point out that in every aspect of our approach to data storage, we have built novel technologies and extended our engineering sophistications. We have augmented our team with experts from the data storage field, and we remain committed to introducing our initial solution at the right time. Data storage is a very large market opportunity spanning from individual and small businesses to enterprise and ultimately hyperscale customers, all seeking to address their anticipated archive storage needs. We believe the early access market for DNA storage includes media and entertainment, digital preservation, healthcare, as well as big science, and we are building those relationships today. On the ESG front, SNP Global recently issued a report on TWIST, which we encourage you to review. It evaluates TWIST not only from a single point in time, but takes into consideration our ongoing activities. As a reminder, we released our inaugural ESG report in January, and I encourage you to review it to glean a better understanding of our culture and sustainability initiatives, which are so important to do work with at TWIST. And now, I'd like to turn it over to Jim to review our financials.