Twist Bioscience Corporation

Welcome to TWIS Biosciences Fiscal 2024 First Quarter Financial Results Conference Call. At this time, all participants are in a list-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. I would now like to turn the conference over to Angela Bidding, Senior Vice President of Corporate Affairs.

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 2024 first 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 LaPruce, CEO and co-founder of Twist, and Adam Loponis, CFO of Twist. Emily will begin with a review of our recent progress on Twist businesses, Adam will report on our financial and operational performance. Emily will come back to discuss upcoming milestones and direction. We will then open a 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'll now turn the call over to our CEO and co-founder, Dr. Emily Leproust.

Thank you, Angela, and good morning, everyone. It is a very exciting time for TWIST. with revenue, margin, and market share increasing, new products introduced recently with more to come, and growing markets for our products, which enable a diversified customer base. Today, as we report our financial results for the first quarter of fiscal 2024, we will focus on three important items that drive our business, revenue growth, margin expansion, and financial discipline to track to our path to profitability. Our entire team at WIS is laser-focused on these initiatives while simultaneously bringing exceptional products to our customers. We continue to deliver record revenue and consistent robust growth year-over-year. We expanded market share in both SinBuy and NGS with strong commercial and operational executions across our teams. We are building a resilient and diversified business with a portfolio of solutions that stem from our innovative DNA synthesis platform. This allows us to pursue multiple market opportunities simultaneously while mitigating risk. Several years ago, we established a plan to achieve profitability for the business. We continue to execute against the plan, we laid out for ourselves, and we are firing on all cylinders. Diving into the specifics, revenue for the first quarter increased significantly to $71.5 million, with orders going to more than $77 million and margin increasing to 40.5%. Moving to the products area, Revenue for SynBio increased to $26.8 million with strong orders of $29.2 million. SynBio revenue grew 25% year-over-year, excluding in both periods GAAP revenues from a key account that was affected by timing of the quarter and expected to return in the current quarter. In November, we began a limited launch of our X-rays gene product, which is our clonal genes delivered faster in five to seven days. I am pleased to report that as for Q1, 98% of X-rays genes ordered have been delivered in the quoted time frame. Delivering clonally perfect genes in this timeline at scale is an exceptional feat. This performance is driven by our platform, our site in Oregon, and our operations team that implements orders successfully. We are the only X-rays offering that can deliver at scale. If you need one gene or thousands of genes, we can deliver clonally perfect genes in as few as five days. Importantly, our differentiated express offering allows us to charge a premium price over our standard clonal jeans in exchange for the speed. Customer can choose to order standard jeans with a turn-on time of 10 days or express jeans with a turn-on time beginning at 5 days. The premium price for the express offering varies daily and by the capacity available in our manufacturing facility in Wilsonville, Oregon. To date, we have tested premiums from 20% to as high as 200%. As a reminder, we use the same manufacturing line for both express and stellar jeans, so all increased pricing applies directly to margin expansion. Because the manufacturing line is the same, it also means that our capacity has increased whether we sell jeans standard or express. When we launched in November, half of our clonal jeans volume qualified for express service. Last week, we announced that virtually all clonal jeans at all prep scales now qualify for express service. With this expansion, we began a full marketing launch around the Express portfolio, largely using digital marketing tactics to keep the cost of customer acquisition low. We are pleased with the early days of the launch, particularly the balance of uptake between pharma, industrial chemical, and academic customers. Early feedback indicates that this product resonates. We monitor orders daily, and we are seeing the early stage of a revenue ramp. We consistently observe varying degrees of customer willingness to pay a premium and daily we gain valuable insight into pricing sensitivity, geographic nuances in the three specific trends and account level patterns. Moving forward, this allows the sales team the potential to proactively secure contract pricing for key accounts in exchange for terms such as volume commitments and fixed premiums, which enables expanding margin as well as predictability for manufacturing. As of January 30, We have received confirmed interest from several pharma companies, reflecting a positive trajectory. Up until we turned on our marketing machine last week, our focus was on existing customers. Today, we are targeting new customers who use other providers, and we plan to use our differentiated express product portfolio to take shares from incumbent suppliers. We are also targeting customers who currently make their own DNA because they need it quickly. We call the little group of potential customers DNA makers, and we know that to convert DNA makers to DNA buyers, it will take time to change behavior. We also know that we have the product, the channel, and the operational capacity to drive a generational change where ordering genes rather than making genes becomes a standard operating procedure across the globe. Moving to NGS, our revenue increased to $39.4 million. Revenue for the Quarter included several large customers reorders, primary diagnostic customers running clinical trials and ramping commercial volumes. For these larger customers, we invested time and energy into the relationship and we are now included into their workflow. While the sales cycle for NGS is quite long, we are now seeing the benefit of this long-term investment of our time as their tests advance to the clinical and commercial stages. As a reminder, Diagnostic customers, including those pursuing or selling liquid biopsy and minimal residual disease assays, choose Twist for their target enrichment solution within their testing workflow, as we save our customers about half of their downstream sequencing costs. And each sample run by our customers uses some Twist DNA, so the larger their volume, the more they buy from Twist. In a constrained macroeconomic environment, Our offering provides margin expansion for our customers, and in some cases, our workflow makes a substantive difference in our customers' business viability. Over the last two quarters, we have seen customers training tests, selecting the tests within their portfolio that includes a twist workflow to save downstream sequencing costs and improve their overall COGS. In addition to larger customers in advanced stages of development and commercial scale-up, we see NGS workflow components as an increasing percentage of our NGS revenue. For example, a customer who ordered a custom target enrichment panel previously may now also order laboratory prepped buffers, beads, blockers, UDIs, UMIs, and more from Twist as their supplier, expanding our share of wallet within existing accounts. Our customers appreciate reaching their number of suppliers and benefit from our exceptional and responsive customer service and supply chain teams, allowing them to focus on expanding their business. This focus on enabling the workflow between the sample and the sequencer will continue next week during the AGBT conference, when we will introduce several products, bringing truly differentiated solutions for key workflows within specific applications. Moving forward, we expect revenue growth in NGS to come from increasing commercial adoption of our customer's assets, workflow expansion in existing customer accounts, and the acquisition of smaller accounts, as well as penetration of the research market through R&SE. Moving to Biopharma, revenue increased to $5.2 million with orders coming in at $4.9 million. We were fully staffed on our commercial team as of November, and we do see green shoots for this business, including 41 new program starts in the quarter. We know that the process of ramping up a sales representative to full capacity typically takes about six months, and we are cautiously optimistic that revenue from BioPharma services will increase steadily in the back half of the year. In addition to providing antibody discovery services for our partners, this area of our business builds off of our silicon platform, which enables the ability to create antibody discovery libraries that we can then pair with our in vivo and AI ML capabilities. There is a strategic fit here as we serve pharma and biotech customers who both are seen by offering and by our pharma solutions, providing a full and complementary spectrum of offering to our customers and partners. For data storage, we completed the end-to-end demonstration of the Gigabyte Sentry Archive workflow. This was an internal demonstration designed to refine and validate our workflow, and we succeeded. We are encouraged by our engineering advancements and we remain on track to deliver an early access terabyte central archive solutions in 2025. We continue to believe that the market for data storage provides a large opportunity, and we see this area of our business as a valuable asset with optionality at multiple points of development. In early January, we welcomed Adam Laponis to the team as our CFO. Adam brings a wide range of experience in finance and operations from large and smaller companies, and is ideally positioned to support our next phase of growth. With that introduction, I'll turn it over to Adam to discuss our financials.