Twist Bioscience Corporation

Welcome to TWIS Biosciences Fiscal 2023 Fourth Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. Please be advised that this call is being recorded. I would like to turn the conference call over to Angela Bidding, Senior Vice President of Corporate Affairs and Chief ESG Officer.

Thank you, Operator. Good morning, everyone. I'd like to thank all of you for joining us today for TWIST Bioscience's conference call to review our fiscal 2023 fourth quarter and full year 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 LaProuste, CEO and co-founder of TWIST, and Jim Thorburn, acting CFO of TWIST. Emily will begin with a review of our recent progress, and Jim will report on our financial and operational performance. Emily will come back to discuss our upcoming milestones and direction. We will then open the call for questions. We would ask that you limit your questions to only one 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 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 disclaim any obligation to update any forward-looking statements except as required by law. With that, I will now turn the call over to our Chief Executive Officer, Dr. Emily LaPruce.

Thank you, Angela, and good morning, everyone. Fiscal 2023 was a year of growth and strong execution for TWIST. We grew our business with We completed internal integration of our biopharma group and we implemented strategic action to align our cost structure and at optimizing our operations with a clear focus on increasing growth margin along our accelerated path to profitability. We invested in our best-in-class innovation to set the stage for near and long-term success. And now, we are focused on profitable and scalable growth moving to fiscal 2024 and beyond. Getting to the specifics for the first quarter, we grew revenue to $166.9 million and $245.1 million for the full year, exceeding our updated guidance for the quarter and the year. Our gross margin was approximately 37% for both the quarter and the year, and we ended the year with approximately $336 million of cash, cash equivalents, and investment. Across the business, our efforts over the last 24 months in building the Wilsonville facility, expanding our production line, and streamlining workflows are now benefiting both our SynBio and NGS product lines to allow us to deliver what our customers need. Within our factory in Wilsonville, we have analyzed each process in the SynBio workflow to remove excess time, and our production data shows that we are able to turn jeans around in six business days consistently. This is an incredible feat and one that required all hands on deck to optimize every process and procedure. This robust workflow now allows us to make more Symbio products in less than half the time we could even one year ago. On Tuesday, we launched ExpressGene, what we previously called FastGene. This is the first product that we'll directly benefit from and has been made possible by the time and infrastructure investment in our Wilsonville facility. With ExpressGene, we have the opportunity to increase contribution margins for the Symbio product group as well as our overarching growth margin. I'd like to note four important things about how the launch of ExpressGene impacts our business. This is our clonal gene service, our bread and butter of the Symbio products. About half of our clonal genes order qualify for this express gene service today, with an eye towards expanding to the majority of clonal genes ordered moving forward. Genes that do not qualify for express service will continue to be ordered at standard speed and will be priced starting at $0.09 per base pair. For express genes, it is the same great product delivered faster, and so we charge a premium price for that speed. The price will be dynamic based on how full the fab is. Second, all jeans, whether standard or express, will be manufactured on the same manufacturing line. This is a streamlined, highly automated process where all jeans go through the same steps. Standard jeans will either wait before or after synthesis, as we will use standard jeans to maximize cheap utilization. This is similar to how airlines use standby passengers to run planes that are as full as possible. So, with higher revenues through premium pricing for express jeans, we expect to see margin improve. Our objective with pricing is to expand our market opportunities significantly into the maker's market, as well as capturing additional customers within the buyer's market. This means that our offering must resonate as a cost-effective alternative to customers making and cloning the jeans themselves. Working with pricing experts, our initial dynamic price range is designed to optimize our pricing in a way that will not alienate existing customers. At the same time, we expect to increase our margin from this differentiated product line while serving a large unmet need for our current and future customers. Fourth, because we are making all genes at x-ray speed, our genes capacity for our research site is now close to double compared to the 10 days turnaround time production timeline. That's a strategic and key point that allows us to continue to scale. Also note that we've implemented the improvement in turnaround time throughout the SynBio product line, so our gene fragments can now be delivered in ASUS 2 business days and Oliverpools in ASUS 3 business days. For Freymans and Oegopools, we are pleased to offer these products at competitive pricing without a premium. The enhanced speed and efficiency of our operations have allowed us to gain a stronger foothold in the market while maintaining healthy contribution margins for these products. With a successful launch of XPS genes, our aim is twofold. To scale up our gene volume with existing customers and to attract new customers, thereby expanding our market reach. In the initial phase of launch, we are directing our efforts towards our current customer base. Once we know the workflow is tried and true, we will amp up our marketing efforts, targeting customers' conversions from competitors as well as new customers who have not yet used Twist for their clonal gene needs. As we run Express Genes, we expect the book-to-be ratio will essentially approach one, as there are so few days between order and delivery. As such, orders for SynBio becomes less informative. will be revenue growth in SynBio. Importantly, the speed of expressed genes unlocks additional applications, including long genes, complex genes, additional IgG antibodies, as well as mRNA production. So not only are expressed genes an opportunity to increase margin and take market share, but they also lay the foundation for growth into the future. Moving to AGS over the course of the year and particularly in the fourth quarters, we saw the work we have done with customers to optimize their workflow over time beginning to pay off. Several key customers are now scaling production for validation and commercialization. In addition, we see strength driving into the middle of the market. We see an increasing number of customers using our RNA6 workflow and several customers are implementing our minimal residual disease or MRD workflow. We believe both of these product groups validate our innovative approach to develop and commercialize products that our customers need. At a high level, our licensed SynBio and NGS products grew at more than 23% year-over-year. Production is ripping. As we think about our trajectory towards profitability, we believe we have set ourselves up for success. We have momentum going into fiscal year with the launch of Express Jeans and the ability to unlock future product lines. We have energy extractions with the top and middle of the market, as well as initial R&D seek and MRV uptake, and an energized team that is committed to driving the business forward towards profitability and scalable growth. As a management team, we have a strong track record for executing against our strategy, growing our customer base, and driving best-in-class product innovation. We are now laser-focused on increasing our growth margin and driving towards profitability. Turning to Biopharma, we have effectively addressed our internal integration challenges, and as of early October, our commercial team was fully staffed with all territories covered. We've shared that it typically takes about six months for a new representative to come up to speed, and orders for biopharma directly translate into revenue in a three- to six-month time frame. For the fourth quarter, orders increased quarter-by-quarter for the first time this fiscal year. We see this uptick as a positive sign of health for the overarching biopharma services business. Of note, the majority of our orders came from large pharma. The last few months, we announced agreements with Ono Pharmaceuticals, Bayer, and more, and we are cautiously optimistic that the fourth quarter of 2023 will represent the low point for biopharma revenue as the spectrum for SynBio all the way through biopharma services is gaining traction. The biothermic group continues to provide a strategic advantage, allowing us to utilize our syn-bio products, including genes, fragments, oligopools, laboratories, and IgG antibodies, all the way through to antibody discovery optimization and humanization services, differentiating us from our competition and providing upside through potential milestones and royalties. Our acquisition of Adveris broadened our offering beyond synthetic laboratories and enabled in vivo discovery through animal models. This has been integral in extending our comprehensive offering. Now fully integrated, BioPharma provides a full menu of in vivo in vitro and in silico services to our customers. This means that we have a powerful comprehensive offering that is able to meet varying customer needs under one roof. For example, our large pharma and biotech customers often pick and choose from a broad menu based on their needs, whereas smaller companies often benefit from a full end-to-end offering. Finally, our in-situ eco-services enable us to provide more sequences and heads for our customers' in-vivo and in-vivo projects, which maximizes their chances of success. For data storage, we have made progress in our approach to enzymatic synthesis for this application. We're working to implement an industrial-grade codec, the encoding and decoding algorithm, with a large industry partner. We remain on track with our plan to demonstrate an end-to-end gigabyte century archive workflow by the end of December, with the early access launch of a terabyte century archive solution expected in calendar 2025. On the corporate side, we added a key operational leader in Mark Buck as our SVP of operations. He brings a military background as well as deep expertise in supply chain, quality, and production. At his prior company, he was responsible for 21 production facilities, and we look forward to the perspectives he brings with respect to optimizing our operations further for scale and improving gross margin. With that, I'll turn it over to Jim.