Q1 2020 Earnings Call
The results conference call.
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The speakers presentation, there will be a question answer session to ask a question and especially you need to press star one when you touched on telephone.
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<unk> jumped Doernberg Chief Financial Officer thinking. Please go ahead Sir.
Alright. Thank you Chris Good afternoon, everyone and thank you for joining us today for twist Bio Science conference call to review, our fiscal Twentytwenty first quarter financial results and business progress.
Please.
You are press releases.
We issued earlier today, which are available at our website www dot twist bio science Dot com.
With me on todays call.
I don't plan, Emily lit Prost CEO and co founder twist and also Mark Daniels Chief Legal officer.
Twist.
Family will begin with their view of recent progressive twist businesses businesses and Mark is available for you in a on our litigation.
I will report, our financial and operational performance and namely will discuss our upcoming milestones in direction.
We.
Well then open the call for questions. As a reminder, this call is being recorded.
The audio portion or will be archived them investor section of our web site.
Bill for one week.
During today's presentation, we will make forward looking statements within the meaning of this.
<unk> Securities laws forward looking statements generally relate to future events or future financial or operating performance.
Expectations and beliefs regarding these matters may not materialize and actual results.
For natural 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 lose more fully described in our filings with the Securities 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.
Now turning the call over to our Chief Executive Officer and co founder.
<unk> Emilie lip crossed.
Thank you, Jim and do that.
Hi, everyone.
I'd like to begin okun with an update I know you said to know that's where reach a settlement was evident in the litigation originally filed on February settled.
The 16.
No. The tells US the agreement we obtain a full release of claims made against with but I am myself.
He wants and put on Scully inexpensive a onetime payment of 22.5 million though.
I had been must agreement contains join me sort of lightly.
Oh, I'm doing because they will not.
But she loved launch in school I would legal assault on twist, and Indiana, we not only survive but.
That's right through the epic.
We were prepared to take these kids to try it however, though.
We have chosen to do this indication to remove the uncertainty and exceptional legal fees associated with the jury trial.
In addition.
Well be diabetes it isn't the best interest wonderful nickel, though that we eliminate these.
Right and cookies business.
With that.
I'd like to 2012 financial results for the first quarter fiscal 2020 ish.
Okay.
So with $17.2 million in revenues, resulting from a lot of true not built although shipping in the last days of the.
Water.
We we bought these impressive rule synthetic biology, and she has revenues year over year.
And we can follow up.
Oh that also bolstered by an end to yes look very strong at almost 25 me on that.
<unk>, which has a yearly run rate of 400 million, though.
While we believe Oh.
Although increases due to exceptional products and commercial team with who believed that we add it beat the could've done you said you entered the kinda you from a company that need to spend a budget. We saw these into first quarter fiscal between Nike.
We could again in fiscal 2020.
We also reported 700 keen on deals from Biopharma. This is included in <unk>.
And well they're excited about the progress of two domestic coal market the puts me.
I do want to cushion that we expect both on my revenues to be exceptionally lumpy moving Coa and.
No grew quarter over quarter.
Our gross margin was good the Tim three points coming into a 20, but essentially flat sequentially.
As we have built up capacity seen by an NGL.
We continue to invest in new product launches to shoot additional revenue growth for both business.
Moving to business segment.
And by you wish it about 80000 jeans business quota.
On a bit from the fourth quarter.
You too what do you did timing.
During the film Hospice care about 2020, well, bringing two new right goes online, which will allow increase capacity.
In addition, when lifting in additional Regal.
Pinch point, you know positive to continue to reduce I'll comment on time.
An important note what we have improved on time six young to be over the past two years, we continue to hook you Sunny putting these metrics to stay competitive and win additional market share.
Well canoeing I'll squeeze of the long tail.
First quarter incorporated into the same period last year, we received about doubled Annabel. This is all do which were smaller in size by both critical.
Resulting in substantial revenue cool okay.
We remain on track to introduce product line extensions in mid 2020, which we believe it will allow us to meet the need of large pharmaceutical company that requires a larger quantities of any.
In addition to CECO grows in the long tail well on track to introduce kind of 2020, Oh I don't already.
Right.
With these products.
Be expanding into two very important sub segment, but well not serving today, we the road map to cool.
It's in the near future.
Well genomic sounds like it as you.
In the first quarter.
Yeah.
Well targeted enrichment products 287 customers. We study said one of these customers now in production.
We continue to show good growth it is market and the very strong Aldo.
1.8 opinions that off this quarter.
Well, we posted revenue of seven years, though which is an increase.
86% yogurt.
Well I can't keep us think loves what Im just announced within liquid biopsy, Pennsylvania sticks and relative.
As we discussed how do we are now going after the Blackberry market, which has resulted in two system. That's that's these conversions.
With that.
Yes.
In addition.
Nothing else go Crazy.
Right.
We expect continued launches to sell the growing mobility application, yes, yes.
I'd like to pick a few minutes ago, but no real cool enough era.
On a melting capacity.
Okay again that nature, it's a great that's right through it.
As an emerging virus.
That's great and then of C and B well, there's a tremendous amount of research ongoing worldwide.
Can you give south African fits with as we work a product he.
Area, but in other rapid if she shopped with us.
Into a potential.
Thank goodness.
Well supporting customers.
Making specific genes engine.
By making custom and establish when I know that money to outbreak area.
And then making antibody sequences that may work as a potential treatment for those.
These new yes, exactly is fine the reason twist exists today.
Okay, well take advantage of all weekend platform, which we see that he will gene.
Justin panel and anti body framework.
We do this in a safe and secure mono leveraging our industry leading.
Security platform.
Cool and Portugal.
Importantly, we can see both lost a little skus to knows and do we took scale.
No just would have grown the virus.
It does go wider bunch of diseases and conditions that need that's dynasty.
When I stepped up.
That makes us an important we saw some pablo.
Goals as we see this is not to.
As a global crude.
And at the we provide since he and his product.
We improve health and sustainability.
A couple of important points.
We make all the phone in indicates the state.
Because of this big screen continues 24, seven with no impact to turnaround time from the cooling flavor.
And in terms of late security.
We routinely screen every single teams all increment sequin that is all that.
And with clean every customer, yes, good I'm not less.
I would tell you.
We have put in place very robust basically the political that's like any sequence that met she's a known pathogen.
So.
Because we are the inkwell customers around the corner virus means providing a suite of products. We also regularly we do have this they expect to see a significant.
Revenues from customers ordering the sequences.
We do not want to minimize the great if the situation.
She is what we do each and every day and the others coming into it fits within our regular workflow.
Turning to our vertical market opportunities.
We have generated data, Iran, Oh, seven GP somehow yet.
And we are leveraging these data to validate our approach and boot business.
As evidenced by the 700000 go Dolphin, Oklahoma order this quarter.
When we bought the data from.
We all want that's free GPCR development candidate at an Investor Conference in General.
So maybe a one dollarsthree is a button GMP went out and take when is that in preclinical studies as Sean complete inhibition of GLP, one hour at higher attrition.
In vivo, if you could see nuclear.
What I run mouse study.
And that that would you like this could have potential applications in radnor indications such as she the.
Yes.
In January when also quite rational wishful thinking from a company focused on transforming do with rapid pick up this quarter.
This is Dave.
Competition or platform.
Well, bringing our two companies that's close together.
I just couldn't you antibody therapeutics against GPCR target.
Sharing any potentially coming.
This is an excellent example of the way we may access complimentary technologies to they look a bit too.
Rapidly in a wide range of.
We expect continued collaboration opportunities across a wide range of solution.
That will find biopharma, some of which we expect with Jared This revenue initially.
As we generate additional that somebody nation, we expect to have more.
More of those contracts that include milestones and royalties.
We do expect is take sometime but were encouraged by the progress well things will fall.
Turning to the storage.
In January when others, who have selected as the unison didn't provide though.
That's right.
Projects under the I am.
Mike Lawton commissions so rich.
Program.
We're currently seeing with Joel just take with such a teacher all GTR right Microsoft.
Still pushing to and arose well by technology to make long term DNA that that's already exist.
The good commercially viable within the next three to five years.
The total contract is worth 25.
With twist, we TV up to 9.15 near though.
He is an additional 5.5 million that also this contract. That's when you go to GTR right, but then if it's the crush when they look at.
As part of the contract we are designing is Cmos chip to drive a novel in its citizens device, Iran.
Yes, you're right, we collaborate whose twist on the by design.
We could use the purchase price.
The sip contracts as well.
He is an important step featuring.
Financial backing.
That's for example.
And working with these graduate though.
We'll be integral well if folks to be it could not sure.
Finally, because the next phase of data storage is highly dependent upon the palm chip design manufacturing and refinement.
We expect that the council updates on that that's the range would be less frequent.
As a stand up its chip design build cycle is 80.
As we scale up.
Correct.
And at school in value and Ngs businesses, we have made some organizational changes to.
The future go.
Bill then you.
Wonderful speakerphone.
Really though you know that desperate.
As we develop in new silicon platform specific to this market.
Bill extensive instead again is extensive and we look halt in leading this important.
Hello.
The same time.
Patrick life has become CEO.
He built the operations from the growing up a week any we take on additional responsibilities to be the infrastructure and processes quitted allow rapid growth into the should show.
At this time I like to turn the corner.
Got to Jim to reveal how should we model for the quarter.
Alright, Thank you Emily.
Litigations settled.
We're executing well and we enjoyed a great quarter of sequential growth in artisan revenue.
Touched on some of the quarterly highlights.
Fiscal Q.
One revenue was 17.2 million and exceeded our guidance.
We have the 24.8 million and orders, which is a record for twist.
The quarter, one book to Bill ratio was approximately 1.4 to one.
Our gingko business is doing well.
2.6 million orders revenue of.
2.1 million.
Send bio business non gingko in Ngs products are growing strongly and we continued to build our customer base and we shipped approximately 1000 customers this quarter.
Oh farmer orders is worth noting several highlights were approximately 700 Kay.
Looking the details of orders for the first quarter fiscal Twentytwenty.
24.8 million an artist represents hearing your growth of 63%.
And sequential growth of 24%.
Send by orders.
Our symbio products are defined as genes.
Libraries, and all legal pools or 12.3 million for the quarter now includes gingko orders of 2.6 million.
Although the gingko is down from 2.8 in the fourth quarter, our gingko business fluctuates based on their project activities and received orders or approximately 3.5 million in January.
Our jeans business is doing very well with orders of 9.5 million and we're seeing strengthen both AMEA and the U.S. markets.
Hi, My only from industrial biotech academic and health segments.
Our genomics products, which are repair too.
As Ngs products continued to perform very well.
We booked approximately 11.8 million orders for Ngs caught us in quarter, one which is up sequentially from 8 million important for received orders from 253 accounts in the quarter and that's up from approximately 180.
In quarter, four with bookings, primarily from health care, which includes diagnostics and academic institutions such as abroad.
Blamed for larger and Ngs opportunities continues to scale.
And we're now tracking 91 large opportunity is progressing through.
The pilot validation adoption phase, but fair to seven customers adopting and that's up from 36, and a total of 54 and the pilots and validation phases.
In terms of our progress with global expansion, approximately 40% or bookings were out of sight Americas.
EMEA delivered another strong quarter to 7.9 million orders, including 4 million from Ngs, the solid orders across industrial bio Tech academic and health segments in Europe.
Hey pack bookings were stronger in quarter, one with 1.5 million, including bookings.
I have a million from China.
America orders for quarter, one were 15.4 million of which 8 million was symbio 6.7 million as Ngs and thrilled to NAS Biopharma point 7 billion.
Please note, we provide orders not to directly translate into revenue for the.
Following quarter.
But more to provide a trend line for each product group.
Currently or send vial and Ngls are growing strongly although we anticipate both ngs and gingko orders to be lumpy and fluctuate from quarter to quarter.
Now moving from orders to.
Revenue.
Quarter, one revenue was 17.2 million last compare to our guidance of 15 16, the half million.
Iran. Gs product revenue was 7 million as compared to approximately 6.1 million in quarter, 420, 19, and 3.8 million in quarter 120 18.
We continue to expand or customer base and ship to almost 190 ngs customers during the quarter as compared to approximately 152 customers in the previous quarter.
Send bio revenue was 10 million with gene revenue of 7.8 million in the quarter and that includes 2.1 right. Okay cool.
Our gene business does well is doing really well and once again, we shipped approximately 80000 genes in the quarter the longer jeans over 1000 take Kb accounting for over 30% or a gene revenue in the quarter.
Now, let me quickly cover our global expansion.
In fiscal.
So first quarter 20, we continue to expand our global presence, Nebraska strongly across all regions.
The Americas first quarter revenues, approximately 10 million as compared to 8.6 million in Q1 fiscal 19.
The Americas now accounts for approximately 60% of revenue.
As compared to 75% in Q1 fiscal 19, unless you too strong growth in EMEA and APAC and our investments in our commercial organization is paying off.
EMEA revenue was 5.9 million for the quarter as compared to 2.4 million in Q1 fiscal 19.
APAC revenue.
So the first quarter totaled 1.2 million and zero point Fourmillion versus zero point Fourmillion Q1 fiscal 19, the strong really strong growth outside the U.S., both EMEA and APAC doing well.
In terms of segment revenue this quarter, the largest segments or industrial chemicals accounting for.
6.1 million and health care 5.8 million.
Year over year, the two largest growth segments.
Health care, an academic apples.
Driven by Ngs and bio products.
Now moving down the piano gross margin as we highlighted in our last.
Earnings call, our gross margin is going to be 20%.
Positive in the first quarter and this includes about <unk> point Fourmillion stock based compensation for the quarter.
Our operating expenses, excluding the cost of revenues and litigation settlement for the fourth quarter increased to approximately 36.
7 million from 34.9 million in the fourth quarter.
R&D was 10.3 compared to 10.5 million.
SGN aim increased 26.4 million, the first quarter compared to 24.4 million fourth quarter, reflecting additional commercial costs associated.
We will continue in investment.
Our commercial organization and higher litigation fees.
During quarter, one we added 19 personnel commercial organization.
Skilled organization to 140.
We now have approximately 70 fuel sales personnel with 33.
40 Ngs.
Our net loss excluding litigation settlement for quarter, one was 33.1 million up from a loss of 31.2 in the fourth quarter and compares to our loss guidance of 30, 132 and that Delta is mainly due to higher litigation fees.
Net loss for the first quarter.
Her including litigation settlement this 55.6 million.
In summary, the years off two very good starts with Contra revenue of 17.2 million and 24.8 billion orders I think it's exciting to see the progress we're making.
It does that really in the year.
We're maintaining our revenue guidance of 80 to 84 million.
Jinko revenue is estimated to be approximately 10.
Non gingko Symbio is estimated to be approximately 32 to 33.
Ngs revenue is estimated to be there to seven to 40 and pharma.
1 million.
Our net loss guidance for the year, excluding a settlement expense as one or seven to 110 up from the previous guidance of one or three to one or six last year to higher litigation expenses associated with defending settling the case.
In addition, as you saw in our press release.
Recruit additional 22.5 million over for our settlement agile and so total estimated loss guidance, including litigation settlement is one 229 million hundred 29.5 million 232.5 million.
Finally, we closed the first quarter with 100.
3.1 million cash.
And strengthen our balance sheet cash position as we completed and that at the market offering at the end of January.
We issued approximately 2.24 million shares of common stock.
On an average price of 22.32 for a total 40.
<unk> point 2 million net proceeds.
This position does well to finalize our settlement agile and.
And with that I'll turn the call back to Emily.
Thank you Jim.
As we move into 2020, we continue to innovate execute and we sponsored the market.
Costs in buyer.
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We expect continued revenue growth and diversification of custom.
We expect to introduce new products designed to meet the needs of markets. We do not currently serve today.
And we will continue to NFL ecommerce experience Cohen's, yes, we continue efforts to just.
The most through the pipeline from pilot Twit option in parallel boot introduce new products designed to meet the needs of goes they were being liquid biopsy and cancer research tools as well as continued focus on could go on.
On converting organization that chart you need.
Microgrid.
Probably a pharma we expect to leverage the data we have generated to date on all seven additional antibodies against GP Socalgas.
To sign a revenue generating contract.
We're now though sales collaboration in January.
Remain on track to sign between five and.
Collaboration some of which will include bull milestones and royalties.
And for that afterwards.
We'll continue to collaborate with a public.
Screwed me program to create a fully integrated commercial offering in three to five yes.
With that let's open up to call for questions.
Operator.
Thank you and as a reminder to ask a question and we need to press Star 100 telephone.
So withdraw your question. Please press the pound key please stand by all the composite culinary roster.
And our first question comes from the line of Surrogates Evercore ISI. Your line is help.
Hey, guys.
Couple of congrats I think are needed I guess it's.
Talks about the litigation kind of walk us through you know why the timing.
Now and then deciding because you for a while you're talking about willing to go through the full nine yards understandable why not just kind of how that shook out.
Thank you look.
I Love pass it to my doesn't yes, our chief legal officer. Thank you.
We were prepared to take this case, all the way through to trial.
But you have to understand almost all cases settle 97% of cases that are brought settle so it's not unusual that the case settled.
It was the right thing.
To do for the company. It was the right thing to do for our stakeholders, we looked at the settlement as a victory for twist, it eliminates uncertainty and legal expenses.
There are no royalties associated with the settlement and the legal claims were resolved.
Yes.
Thanks, that's it.
At Red Lake.
And I.
Back to the business on so I'm thinking about the margin dynamics, Jim can you walk me through how that that's going to shake out through the year.
And also within north of the quarter right. So you guys did really well.
Placed a lot of were sold a lot as a long genes.
The higher margin business like Ngs continue to ramp.
But the margins came at a little light is that more from the capacity expansions and still not.
Duration, just kind of walk us through that.
Yeah. So good point look.
When we set up the projections this year was ramping our gross margin.
And targeting.
Growth as we scale or revenue from from rough roughly 20% in the fourth quarter tax thing at roughly 40%, 20% the first quarter to reflect thing at 40% in the fourth quarter.
Yes, we're adding capacity.
We're bringing some has slightly ahead of schedule in terms of.
Hearing for the ramp up in the next couple of quarters I think in terms of the way we look at it were directionally heading towards the 40% gross margin as we scale or revenue.
We're comfortable the forecast 80 to 84 million are comfortable the average gross margin of 32% and.
I think kids, it's really really incredible progress. The team has made to move into her 6000 square foot facility here and assembling highlighted we are.
Commissioning, two new synthesizers, which will give us.
Capacity.
As we skills for the year.
Before we get.
Into their holidays, there we expect.
To some of our customers to actually be shut down all the Christmas holidays.
We actually shipped more than we expected.
And.
We've seen some spike demand and that's put a little extra costs and ahead than we expected, but we're tracking towards.
Our internal models are look like.
Alright, great. Thanks.
Thank you and our next question comes from the line of Katherine show with Baird. Your line is now open.
Hey, guys, congrats on the quarter and and the federal net.
Two questions for me I guess first for the new Schrodinger collaboration.
What are the next step the milestones.
During this coming year and whats the timeline to potentially reach Christmas concept in preclinical development there.
Thank you so.
Well not sharing details of.
After the milestone I think.
What the in terms of news flow on the on the from my side.
Side I think.
We've signed up for five to 10.
Collaborations.
And.
Well the time once we expect to see is.
Good morning economics of deals.
And then.
Being able to command some milestones and royalty.
Of payments per contract.
So I think those those are the milestones for.
Two.
Not all of contracts.
Size of economics, and then milestones and royalty.
Okay, and I know, it's early but any qualitative comment on how that Jack collaboration going so far and perhaps just your outlook for NGL uptake in Asia more broadly.
That's why it's going well.
And.
I should mention the the bookings in China are growing.
Oh, we anticipate that that the.
Portion of the growth that.
Come in the.
In the future quarters.
Be capitalized.
I'd.
Cooperation with GE I and the call marketing agreement, we have together.
Okay last one I'll hop back in the queue, but any preview of what we should expect to see from you at the age.
The conference later this month.
So we always see the on so and so I think the.
It used to be the fills time went with GBT. It was twist standing up saying that we had built in a new product.
Climb, but had substantial advantages in terms of the cost of sequencing sampled in terms of the speed at which would make.
Custom product.
Increment and the work flow for used to be me and.
The the twist, though.
Putting that that.
But that story.
And what happened last year at the JBT actually our customers.
To do stage and and validated what we had said and so we.
Just to know that were.
Reading.
The.
The advantage is that outlets from bring and so I think the preview for for this year would be no more the same.
So more customer testimonials.
And not the name the into markets, we serve today, but in the markets that.
We want to extend into.
Yeah well.
Great franchise, and we've been taking market share, but there will not yet so being home will do markets and a for instance in into sneak in equivalent of the steam microarray toward the end, yes, we're still in early innings.
We'll now.
We'd want to.
Okay.
Oh product.
Ken can be transformative to wasn't applications, especially those with.
Great. Thank you.
Thank you and our last question comes from a lot of Doug Schenkel with Cowen Your line is now.
Hi, This is to go on for Doug.
Congratulations you continue to have an impressive number of customers in pilot and validating your entry is product how big could it isn't good for you over the next to the tree.
I couldn't reach like hundred million in revenue by 2022.
And I have a follow up.
Yes. Good question, we're certainly doing well and yes, I mean the guidance we gave them for this year is.
Since our 740.
We are adding more ngs.
Resources in the field to position for ramp up we get a.
Good strong value.
Proposition the marketplace.
Okay.
Not giving guidance for the following year, but the market is growing 20.
6%, 30% a year.
And.
We're feeling good how are there opportunities.
PGTI Perkinelmer collaboration are going well, we're seeing good strong positioning in Europe and good growth opportunities in Europe. So I'm personally excited about it we get 33 people in the field.
There are quite a.
So roughly 2 million ahead and.
Our goal here is to accelerate in that market opportunity.
Optimistic with future I'm, not going to give guidance for over the next couple of years.
Got it that's helpful.
And then some really nice momentum in pharma that.
And again or what does that translate into revenue and have what have you baked into guidance.
So.
We expect all of the although the.
All those to.
Transforming to revenue, although the next few quarters.
Guided revenue for the year of want to me in the last.
Oh for pharma.
And so.
It's a great start that.
That.
Quarter, we've already booked a substantial.
Portion of that the guidance.
Got it.
Thank you guys.
Okay. Thank you.
Thank you and this concludes today's question and answer session now, let's turn the call back to <unk> CEO and co founder of twist for any closing remarks.
Thank you Chris.
Thank everybody for joining us today is.
Being a very Evan food and put it did for twist and we look forward to building on our momentum to drive future growth and business success have a grid.
Ladies and gentlemen, today's conference concludes today. Thank you for participating you may now disconnect.
[music].