Twist Bioscience Corporation

Welcome to the Twist Biosciences Fiscal 2023 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Angela Biding, SVP of Corporate Affairs and Chief ESG Officer.

Please go ahead. Thank you, operator. Good morning, everyone. I would like to thank all of you for joining us today for Twist Bioscience's conference call to review our fiscal 2023 third quarter financial results and business progress. We issued our financial results release this morning, which is available at our website at www.twistbioscience.com. With me on today's call are Dr. Emily Leprous, CEO and co-founder of Twist, and Jim Thorburn, CFO of Twist. Emily will begin with a review of our recent progress on Twist businesses. Jim will report on our financial and operational performance. Emily will come back to discuss our upcoming milestones and directions, and then we'll open the call for questions. We would ask that you limit your questions to a maximum of two and then re-queue as a courtesy to others on the call. As a reminder, this call is being recorded. The audio portion will be archived in the investor section of our website and will be available for two weeks. During today's presentation, we will make forward-looking statements within the meaning 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 and 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 disclaim any obligation to update any forward-looking statements except as required by law. We'll also discuss financial measures that do not conform with generally accepted accounting principles, including adjusted EBITDA. Information may be calculated different than similar non-GAAP data presented by other companies. When reported, a reconciliation between these GAAP and non-GAAP financial measures will be included in our earnings documents, which can be found on our investor relations website at www.twistbioscience.com. With that, I will now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily LaPruce.

Thank you, Angela, and good morning, everyone. The third quarter of fiscal 2023 highlights continued management of our business with a particularly strong quarter for the core business. We reported record revenue of $63.7 million, exceeding our guidance of $60 to $61 million, and with orders of $63.8 million setting the stage for future growth. Beginning April 1st, we shipped the vast majority of Symbio products out of the factory of the future as we shifted production for this business line And today, we are celebrating record revenue driven in significant part from manufacturing at this new site. Taking a step back, in December 2020, we signed a 10-year lease agreement for the space in the height of the pandemic. We made a $100 million investment to build out the site, which we knew would be instrumental in our next phase of growth for SynBio product line, specifically communal genes and gene fragments. Our team completed the factor of the future on time and budget, even amid global supply chain challenges, significant distributions of the pandemic, and macroeconomic pressures. The successful completion and now operation of our second manufacturing site demonstrates the ability of our team to plan and execute on difficult projects and lay the groundwork for future growth. We shipped about 159,000 jeans out of Wilsonville this quarter, and that number will continue to expand. By point of comparison, We shipped less than 12,000 jeans out of South San Francisco in the same period, and these were jeans that had started production before we began pressure testing the factor of the future in April. For the core business, we continue to expand our customer base and take market share. In Symbio, our consistent turnaround time of 10 to 14 business days for clonal jeans and 3 to 5 days for jean fragments resonates with our customers. In addition to scale, in the past, price was our primary differentiating feature, but today, We see almost every customer review highlight fast runtime as a key benefit. We will continue to drive speed as we move towards the planned introduction of fastGene in the fall timeframe. Between today and the launch in the fall, we are working on four key activities. First, releasing the software module of the internal manufacturing execution system to minimize the time that genes are idle, and then testing the implementation of that software. Refining the molecular biology processes to reduce processing time where it can safely be done. Third, retraining the manufacturing associates to readjust to the new cadence of this streamlined production process. And fourth, prioritizing our e-commerce platform to be able to transact with dynamic pricing. In addition, we're working on the marketing side to prepare a robust launch targeting current and future customers. I'd like to note that when we launch, we believe this will be a disruptive product, and we also believe there will still be efficiencies to gain in the future, further improving our turnaround time for genes and fragments. While the factor of the future is producing the vast majority of our Symbio products, our South San Francisco site continues to manufacture all of our NGS panels, delivering excellent results for the quarter. We continue to receive positive feedback from customers. Some highlight that using our chemistry for target enrichment saves them approximately 50% of downstream sequencing costs reducing the customer COGS overall. In this macroeconomic environment, that value proposition resonates. We continue to win pilots in head-to-head trials against our competitors. In addition, we were pleased to see several positive proof points for the liquid biopsy field over the last quarter. We are substantially tied to the commercial success of our customers in this field, and we believe these important tests will continue to demonstrate their value in detecting cancer and recurrences early, as well as guiding treatment decisions. Finding our market opportunity during the quarter, we launched a robust RNA-seq portfolio, and the initial feedback is very positive. We have many customers trialing the products and have received initial orders. As we believe this product portfolio opens up the RNA research markets with workflows, we are particularly excited about this launch. Like all of our products, it takes time to drive revenue growth. Products we introduce today do not produce immediate revenue but grow over the next one to four years. Through the introduction of innovative products that meet industry needs, we have cut out a niche for the core business that we expect will continue to radiate and extend within the markets we serve. Overall, the core business continues on its growth trajectory, and we have delivered very good results again this quarter. Turning to biopharma, revenue and orders both came in below our expectations. We shared in May that we were experiencing internal integration challenges, and those issues have resulted in the lower numbers for the quarter. Our lagging indicators, or those that we see today, underscore our headwinds, which includes deal timing, open headcount for the sales team, and internal integration challenges. We have seen some market impact from the restricted biotech funding environment, though we also see strong interest from top pharma companies throughout the world, particularly in APAC and EMEA. These relationships take time to foster and close, impacting deal timing, particularly for the quarter. In addition, We have key open headcounts for Biopharma business development managers, which has been open longer than we anticipated. On the positive side, we know that where we have commercial talent, we secure deals. We are looking to roughly double our current sales team from Biopharma from 5 to 10. It does take time to onboard and ramp up, so this is not an immediate fix for revenue, but we play the long game. We continue to see interest in our robust Biopharma services, particularly the newly launched Twist Gold Standard offering, which combines in vivo in vitro and in silico discovery approaches, and we continue to make progress on internal processes that we believe will set us up for operational success as the deals increase. Moving from our biopharma service offering to our internal asset monetization, we have focused our efforts and prioritized five programs, and we're in discussions around all five. As we will cover next, we expect to hold short of our previous guidance for biopharma for the year, but I want to reiterate that we will continue to evaluate, analyze, and manage the business to ensure value creations over the short, medium, and long term. For data storage, we expect to demonstrate an end-to-end gigabyte century archive workflow by the end of calendar 2023. Following on this, in calendar 2025, we expect to launch a terabyte century archive solution. Moving to corporate developments, we are now three months beyond our substantive action to accelerate our path to profitability through the shift in manufacturing and resizing the company. While the full cost saving will not be realized until the fiscal first quarter of 2024, the organization is adapted to the changes. With the reductions we have made across the business, we wanted to ensure that we also had the ability to hire key positions. Rob Werner joined us as our Chief Accounting Officer in late May, bringing a wealth of technical accounting expertise and global accounting experience. Chad Gandhi joined us in late June as our Chief Information Officer, bringing expertise in a range of areas, including application and solution architecture, as well as data analytics. We are looking forward to how both executives will accelerate our transition into the next phase of skilled, profitable growth. With that, I'll turn it over to Gene.