Q1 2021 Amyris Inc Earnings Call
[music].
This morning, John will provide of business update Eduardo wheelchair operational performance highlights and I will review our financial results for the quarter.
Please note that on this call and you will hear of discussions of non-GAAP financial measures, including but not limited to underlying sales revenue gross margin cash operating expense and adjusted EBITDA.
[noise] reconciliations of these non-GAAP and I was just to the most directly comparable got financial measures are contained and the financial some resection slides of the accompanying presentation or the press release distribute of today, which is available on our website.
The current report on for them as came furnished with respect to the press release is also available on our website as well as on the S. E C website.
During this call we will make forward looking statements about future events and circumstances, including Amyris is 2021 outlook goals and strategic priorities as well as market opportunities and growth prospects. These statements are based on management for and expectation and actual results and future events may differ materially do too.
Risks and uncertainties, including news details from time to time, and I will filings with the Securities and Exchange Commission, including our 10-Q for the first quarter of 2021.
Congress disclaims any obligation to update information contained and these forward looking statements whether as a result of new information future events or otherwise.
Before we begin today I'd like to note that included and a webcast is a slide presentation, we will refer to the slides, but also be posted on the investor relations sections of Ammonolysis website following the call.
And I will now turn the call over to John.
Thank you high and good morning, everyone and thank you for joining us today.
I'll start by providing of business overview I'll didn't cover our recent strategic transactions and the acceleration of our market leadership, all provided and update on our consumer business and it's key growth drivers and lastly, a few comments regarding the new strategic partnership we announced earlier this week with ingredient.
We delivered significant value during the first quarter from continued product related revenue growth and the completion of the second strategic ingredients transaction, resulting in record revenue of $177 million gross margin of 91% and significantly positive adjusted.
And as evidenced by our partnerships companies seek us out to help transform their supply chains lower their costs and meet the needs of their customers for sustainable sources of supply. The competition is the establishment the suppliers of traditional chemistry.
Most of our peer group has promising technology at the lab stage. However, if you have been able to demonstrate and ability to convert this into commercialized products that can be produced at industrial scale.
The the.
The bio of manufacturing sector leader with a proven business model that we believe has attained self sustaining growth.
We are in a consumer super cycle for beauty and luxury this is global in nature and the result of Mega trends driving a significant acceleration to healthy skin and a deep commitment by the consumer to personal health and wellness.
And your previous Investor calls, we discussed the for areas of growth for our consumer brands first new product launches second exclusive formulations and ingredients thirdly expansion of selling doors and square footage space and retail stores and fourthly geographical expansion.
So far this year, we have added five new brands that address fast growing market segments, and the beauty and personal care space. This includes hair care with JV and and clean color cosmetics would rose Inc. We are also adding specialty skincare brands, including terrorists sign up for.
Skin care treatments like acne and cost of the Brazil, a clean and luxury skin care brand as well as equal Fabulous for the Gen Z consumer who's focused on clean sustainable beauty.
We have become the house of billion dollar brands for clean sustainable products that are accessible to consumers and deliver the best performance for their health. This is a deep capability that starts with our leading lap the market science platform, our clean bio manufacturing and and award winning.
<unk> product development team that continues to deliver differentiated products that are loved by our consumers the future of health wellness and beauty is clean and we are leading this path for consumers. The first quarter was very strong for our consumer business and this has accelerated into the second quarter.
We are at over 4000, new retail doors for our brands versus our 2021 target of 2000 doors, our direct to consumer Dot Com business has continued to deliver much better than industry growth and heading into the second quarter brick and mortar sales have returned with <unk>.
Very strong performance our support of sales are now delivering better than pre COVID-19 growth rates. We are very pleased the benefit from the return the strong retail store buying and luxury and beauty without losing the strong dark current performance, we delivered through the COVID-19 period.
Recently, we announced the five year partnership with Reese Witherspoon and as global brand Ambassador for Bioscience Reese, the Bioscience brand team and its industry, leading scientists will create content that is engaging and educational and powering today's beauty community to become Savvier more health conscious.
Consumers.
We are experiencing significant consumer growth for our bioscience dot com business and a very strong positive impact to revenue from this partnership with Greece, even and it's early days.
In addition to the very strong consumer performance in the U S. We expect China revenue this year will be more than all of the sephora revenue last year.
The development of the Roche, Inc. Brand has progressed very well Rose Rosey, Inc will launch selling and the third quarter and already has a strong retail order book from our various channel partners of more than $6 million.
We are seeing strong interest and this new clean color cosmetics brands and we have industry, leading product formulations. This is a beautiful brand with amazing clean color cosmetics at a time when the consumer is entering the roaring twenties, and we kindling their love for color cosmetics experience.
Yes.
Cost of goods by about 10%. Additionally, we expect to improve our speed to market and our flexibility and quickly adapting to the needs of our retail partners and consumers we have more demand today from our consumer business than what we've been able to supply over the last several quarters.
And we want to structurally address this.
We are very pleased to work with Winfield manufacturing and very excited to start delivering products from our renal fulfillment center in the fourth quarter.
Our consumer business is performing better than expected this year and we expect this business to be around 300.002 million 22 revenue, while continuing to more than double annually for the next several years. This is our track record we've been able to grow our consumer business to the three times of year for the last.
Two to three years, and we expect at least doubling our revenue for the next.
Several years in the consumer business.
We've made tremendous progress on the evolution of our ingredients portfolio over the past five months and the first quarter, we announced the largest ingredients transaction and our history, which further validated the value we have long associated with our ingredients portfolio.
This is a significant acceleration of our collaboration strategy and establish a powerhouse for clean natural ingredients that are sustainably sourced for the personal care and flavor and fragrance industry. This is definitely not a monetization strategy. We have now demonstrated an ability to cash.
<unk> around.
Millions of dollars and value on average for each molecule and our portfolio. We have 24 molecules in development and scale up and expect the east all reach full scale commercialization by 2025 and.
In addition, we have over 250 of molecules and our current pipeline, where we have successfully engineered a strain and demonstrated success successful production and a fermentation.
These are ready to advance the full development and scale up we have successfully worked with multiple organisms, we make organism choices based on what's best for large scale industrial fermentation. We are the largest producer of bio manufactured material, we are no longer and the academic discussion.
<unk> of how many organisms, we work with we are focused and need to deliver products to our customers every single day, we select and adapt to what organism works best for the molecule, we need to deliver at industrial scale and deliver sustainably to our end markets.
Consistent with our previous communication, we have now completed three strategic transactions involving for different partners, namely from any G EBITDA and DSM and now also ingredient.
The first two transactions, we closed represent an estimated value of more than $550 million and short and medium term contributions the upfront cash was $190 million for the two combined transactions with which we paid down $23 million and debt.
We expanded the collaboration with from a niche by 15 years and deepen the partnership which EBITDA and the technology and development of these relationships remain with Amyris we.
We expect an additional 10 molecules for development with these partners that include our technology and would be scaled and produced by Amyris long term.
We have long term supply agreements that represent and the unexpected $2 billion of revenue for the remaining term of our long term manufacturing agreements.
The third transaction that we announced on Monday of this week is where the ingredient.
Cover the details of this new partnership and just the moment.
As it relates to our manufacturing capabilities I can confirm that our engineering and operations team continues to work hard on the construction of our new ingredients plant and backup and eat the Brazil, we expect to complete construction by the end of this year and be producing early and early 2022, we expect the update you.
On our long term capacity expansion plans for our fermentation footprint during the second half of this year.
Let me update you on the third of the three strategic transactions.
Which is where the ingredient for the exclusive licensing of Amyris of zero calorie natural nature base.
For a minted Reb M sweetener.
The combination of Amyris as leading synthetic biology technology platform with ingredients and global market and customer reach and formulation capabilities will accelerate the availability and the adoption of zero calorie nature based sweeteners and other clean label fermentation based food ingredients to the world's leading food.
And beverage companies, we have the leading zero calorie natural sweetener and the only one produced from non GMO sugarcane.
And greedy on via its pure circle subsidiary will become the exclusive global business of the business because of the commercialization partner for Amyris sugar reduction technology that includes fermented read them the.
The parties will enter into and R&D collaboration agreement to create and advance the development of sustainably sourced zero calorie nature based sweeteners and potentially other types of fermentation based food ingredients and.
Ingredient will become a minority partner in the Amyris Brazilian manufacturing facility that is currently under construction.
Amyris will be will continue to own and market, it's pure cane consumer brand offering of tabletop and culinary sweetener products.
The transaction value is estimated to be around $100 million comprised of both short and medium term contributions from ingredient the.
This includes $75 million for the exclusive license to sell the market rebound from fermentation along with a participation and the Brazil manufacturing joint venture additional value as expected from future profit share from Reb M sales and R&D collaborations we expect about one.
$1 billion and product revenue from this partnership over the next 15 years.
From the three transactions, we estimate about $3 billion and potential product revenue over the next 15 years. We believe this to be more than the product revenue of the entire industry over its history.
We are continuing to lead the sector and revenue growth, we expect to deliver underlying revenue of around $250 million. This year and total revenue of around $400 million. This year, when including the completed 2021 strategic transactions and the GAAP revenue.
And this year from these transactions.
Our business model is delivering on the promise of synthetic biology ingredients, such as Rev them for and fermentation and create significant value and enable us to support the continued growth and our consumer business, while maintaining our sector leadership and the supply of natural sustainably sourced ingredients.
With that I'll turn the call over to Eduardo Eduardo.
Thank you John.
We had a very good first quarter delivering product revenue of $28 million, which is of 47% increase over the same quarter last year.
From a safety perspective, we had zero recordable incidents in this quarter and.
And we continue to be very vigilant of our management of COVID-19 and had no operational impact from it during this quarter.
Good day, I am going to review of three items with you.
First I will provide and update on our ingredient production.
And.
I wouldn't explain how our consumer operations continues to drive industry, leading growth and third I will discuss our strategic priorities for the year.
We had a breakthrough quarter for squalene and.
In fact, we just set of quarterly production record in our history, we delivered 500 metric tons and production and sales for this quarter.
Representing an 83% increase compared to our Q1 2020 figures.
There were three major reasons for this for.
First we had of 60% revenue growth and Europe.
Where we converted and your brands like L. B M H, while increasing usage and formulations at current customers like l'oreal.
Second we've captured tremendous growth in China.
As John mentioned, we continue to see many Chinese brands like perfect dairy converting their formulas disclaiming.
We also competed as Quailing supply agreement valued at $19 million over the next two year period.
Finally, we continued with our content and leading customer engagement and now have and record lead generation with 1500 active fleets.
During the quarter. We also ran our second and CPG campaign.
As we mentioned and in the recent Investor meeting series of this campaign delivered outstanding results.
We delivered volume that was six times bigger and unit cost of where about one fourth.
One fourth of the cost of the first campaign.
And all of our CBD production muscle doubt and Q1.
We also completed our largest campaign to date for our sweetener product.
Campaign delivered 250 per cent of the volume from the Alaskan pain and are processing yield was 25% higher too.
As John just mentioned, we are very excited to enter into an agreement with ingredients, where we will continue to produce our revamp and leveraged ingredients and <unk>.
<unk> solutions capability and.
And global reach.
Now, let me spend time on our consumer operations, we believe for 73% revenue of growth across brands.
For Bioscience R e-commerce volume tripled over the quarter over the same quarter in 2020, and now represents over 70% of our current orders.
We continued our operational improvements and fulfillment.
And our valentines and friends and family campaigns and the first quarter were very successful delivering 250% more E. Commerce orders. The last few years. We also introduced for new Biosense products and Q1.
For the pet we continue with excellent momentum opening three new retail channels, including Anthropologie, Katy and 607 target store locations nationwide.
And we have 13 distinct retail and e-commerce channels and and our volume was five times larger than the same quarter of last year. Clearly, we are seeing tremendous momentum going into the rest of the year.
Looking ahead, our plans for launching our announced five new brands remains on track and operationally as John mentioned, we have begun to scale, our production and distribution to meet that growth I would be expanding on these actions in our next quarterly reviews.
Let me now shift to our strategic priorities.
And with our plant.
We continue to be on track for completing construction by the end of the year.
And Inc. In the first quarter, we completed the sourcing all the long lead items and began construction and foundation work for our from inpatient area and for our power and infrastructure operations.
We now have over 100 people working on site.
And our single biggest risks and priority remains COVID-19 management, we continued to manage the operation with the strict protocols.
Second our development of the squalene as an excipient and our collaboration with EBIT on the next generation advance RNA vaccine for current and potential call. The the variance.
This effort continues to progress very well here.
And here's an update we just completed an array of studies using both our sustainable squalene and short the rise squalene and the results showed comparable performance between the two sources and provided us as another data point and confirming that our sustainable produce quailing will be the best adjuvant and it did.
The ex excipient and adjuvant applications.
Our RNA vaccine is delivering preclinical immunogenicity results comparable to other leading vaccines and he and requires only one dose.
Finally, we're entering the final stages of testing prior to initiating phase one clinical trials and we will look forward to sharing additional results soon.
Now, let me close with the focus areas for the remaining of 2021.
We need to complete construction.
Structure of the Barra Bonita planned by the end of the year.
Second we need to ensure continued scale up of our new products with special focus on the squalene production and metric ton scale the iron.
<unk> seen advancements of the clinical trials and the continued sales growth and market development for a clean for the sucrose ethanol.
The final priority for us is to ensure the successful launch of our five new brands in the third and fourth quarter. This will require us to continue to add more scale and resilience to our fulfillment and production model for our consumer business.
We are off to a strong start the 2021 and we look forward to executing against our growth agenda and priority with that I will turn the call over to and to review the financial results and.
Thank you Eduardo and let's turn to slide 12.
I'm pleased to report and we had a very successful quarter with record sales revenue expanded gross margins and significantly positive adjusted EBITDA.
We delivered significant value during the first quarter from continued product related revenue growth and the completion of the second and strategic ingredients transaction.
This resulted in record revenue of $177 million gross margin of 91% and significantly positive adjusted EBITDA of $103 million.
Q1 product revenue was up 47% driven by strong consumer revenue growth.
We further reduced our debt position versus year end 2020 by 33% to $115 million and.
And since the closing of Q1, we saw and the third strategic ingredients transaction with an estimated value of $100 million and the successful equity raise of new proceeds of of homeland and $31 million.
All of these factors combined significantly improved our capital structure solidified our liquidity and provided for and provides financial flexibility to accelerate growth of our business.
Total revenue of $177 million was the new records and include the proceeds of $144 million related to the strategic ingredient portfolio transaction.
Underlying revenue comprising product sales and collaboration revenue increased 37% to $33 million compared to the prior year quarter.
Product revenue of $28 million increased $9 million of 47 per cent compared to Q1, and 2020 driven by of $6 million of 73 per cent increase and consumer sales and a $3 million or 25% increase and ingredient sales.
Gross margin of $161 million or 91% of revenue improved from $18 million or 63% of revenue and quantity and Q1 2020 ex.
Excluding the Hunter the 44 million contribution from strategic transactions gross margin of $17 million increased by $4 million compared to Q1 2020, mostly due to product from Asia related margin growth.
Cash operating expenses of $54 million increased by $9 million of 21% compared to the prior year quarter, due primarily to marketing investments and the expansion of consumer brands and additional R&D spend.
G&A expense was down 3% compared to the prior year quarter due to lower expense incidence HR and legal.
Increased expenses and something where we made the two investments for the setup of new grants marketing and fulfillment and distribution expense due to increased sales activity.
<unk> expense continued to be down due to COVID-19 travel restrictions.
Adjusted EBITDA was the other than the 3 million and improved $130 million year over year due to income from the Q1 strategic transaction increased underlying revenue and also improve product margin. This was partially offset by higher operating expense.
GAAP net earnings were minus $289 million due primarily to of 377 million of unfavorable non cash mark to market adjustments related to changes and the fair value of debt and derivatives GAAP.
GAAP EPS of minus $1 <unk> compared to minus 56 and.
And the prior year quarter.
Adjusted net earnings of $95 million or <unk> 35 per share compared to adjusted net earnings of minus $44 million or minus <unk> 28 per share for the prior year quarter. The company record of non-GAAP adjustments totaling $384 million and Q1, 2021 and.
This relates to the $377 million I, just mentioned in terms of noncash mark to market adjustments cash.
And at the end of the quarter was the 144 million and this compares to $3 million.
At the end of Q1, 2020.
This includes the one other than $23 million and net cash from the Q1 strategic transaction after paying down $23 million of debt and $4 million expense.
Total debt principal at the end of the quarter wasn't other than $50 million, which compares to 200 of the $9 million at the end of the same quarter last year and the $170 million at yearend 2020.
Interest expense for Q1, and 2021 of $6 million compared to $50 million and Q1 and 2020 due to lower debt.
Let's turn to slide 13.
Q1 product revenue of $28 million group of 47% versus the prior year quarter consumer revenue of $60 million grew seven 3% and ingredients revenue of $13 million grew 25% versus prior year.
And <unk> continued to see strong sales activity from its own line channel with 70% of revenue from E Commerce and prepared and delivered its best quarter, yet and was up five ex versus Q1, 2020 pure cane also set of new records.
The ingredients of strong revenue from screening for beat to the cosmetic applications and recorded the strongest quarter yet.
Let's turn to slide 14.
I have commented already on the various key financial metrics. The key takeaways from this space as it relates to our first quarter financial performance can be summed up with five simple points first we continue to grow revenue.
Second, we enhanced product margins for growth and consumer and efficiencies and ingredients.
Third as a result, adjusted EBITDA was up fourth we much improved the balance sheet with debt down significantly, resulting in lower debt servicing expense and lastly, we finished the quarter with total cash of $144 million.
As I previously mentioned since the close of Q1, we have successfully we have of successful equity raise with new proceeds of $131 million. This resulted in the current cash balance of around two one of the $35 million not including any proceeds from the ingredient transaction that we announced earlier this week.
Let me now turn to the outlook for full year 2021.
We are of a number of activities on the way to continue to support the growth of our business and to ensure we execute effectively on the strategic transactions. The addition of the new brands and the continued development of our product development pipeline.
Our current outlook for 'twenty. One is that we expect underlying total revenue. This is consumer ingredients and collaboration and grants to be and the $250 million range went out of income from the complete the strategic transactions. We expect total reported revenue to be around $400 million.
We expect the trust the strategic transactions to be most of the accretive to revenue and earnings resulting in positive full year adjusted EBITDA.
We expect to continue our work on the balance sheet and expect that to be below $100 million by year and this includes a $50 million convertible to equity I E. The net debt position of $50 million.
With that I'll turn the call back over to John.
Hi, and thank you.
We believe that we have a truly winning business model and advantaged portfolio due to the synergy between our proprietary lab to market operating system, our ingredients pipeline and a track record and bio manufacturing along with our portfolio of clean consumer brands.
Consumers are demanding natural products that are clean and sustainably sourced.
This is true for all consumer goods, including beauty personal care health and nutrition markets.
And we deliver better performing molecules at a lower cost and they are sustainably sourced. This is our no compromise promise for customers and consumers of that is delivering industry, leading growth and margins.
And to make the world's sustainable our company needs to be sustainable the <unk>.
Simple vacation and growth of our portfolio and our continued operational performance enables us to become one of the first companies and our sector to become financially self sustaining.
We're very excited about the year ahead, and I look forward to hearing your questions.
Haley.
Please open the call for questions.
We will now begin the question and answer session to ask the question you May Press Star then one on your Touchtone phone and you are using a speakerphone. Please pick up your handset before pressing Nicky.
Let's try a question. Please press Star then two.
Ask that you price limit yourself to one question and one follow up.
Okay strongly we'll pause momentarily to assemble our roster.
Our first question today comes from call in and work with Oppenheimer.
Thanks, so much and guys congratulations on all of the progress.
I wanted to dig into the the yield improvements that you're talking about and debt.
Sounds like a pretty meaningful.
<unk> here and can you speak about the underlying drivers and how we should think about the cadence of that as we go forward and kind of ongoing regular yield improvements.
So you spoke of mines.
Yeah, Colin Hey, great to have you on the call and I'm going to ask you the water to help out all the I'll summarize and give you three big drivers of the improvements and then have a heavy dwyer to give you a little more color. So there are three things that are really driving the significant improvement in gross margin and the yield improvement for our.
The production and I would say first we obviously have the new generations of strange, especially for some of our high value products, CPG and vanilla and B and a couple of great. Examples and also read that most of the three great. Examples of new generation of strange. So that's 0.1 0.2, we've done a lot to improve.
And and see continuous improvement and our downstream processes, the chemistry that policies and cleans the molecules that come from fermentation and that is the second big driver and the third really the biggest contributor that we haven't yet started to see the full benefit of the you will see.
As we approach the beginning of 2022 is actually what happens when we consolidate the fermentation of the downstream processing into a single sided pocket of benita and eliminate the need for transportation and the need for off site, finishing of our product. So think about that as a structural change and how we.
We actually operate manufacturing.
First and secondly, a downstream process improvement and then last but not least strained improvement and those three are the key drivers to our continuous improvement and yield and productivity Eduardo a little more color if you'd like to jump in.
Yeah, absolutely and and and calling.
Thanks for the question. We as you know every every time of run a campaign, we look at the settings and and ours is the precision manufacturing activity. So as it relates to what John mentioned from the process side, we adjusted the the settings and our upfront filters do for maximum performance and that includes temperature of ph.
And the various other settings.
The second part to it John.
And as we just discussed is really balancing our flow we got a lot better at adjusting the flow between the front end of the purification today for the backend of including the filter press and Dave and Dave.
The dry and I think the as it relates to your comment about the future.
We have and learning.
Process excellence approach to everything we do and that will be continued to be and in fact, but I think we will expect additional significant improvement when we call of Kate.
Clearly, we today, we ferment and one site and we purified and other and that does include that does introduce a level of.
Additional and improvement that we hope to capture as we open our new Barra Bonita plant the Colin.
Perfect and then the Sunshine.
For me for Han just around Capex, and and the Buildout of of the new facility, obviously commodity prices are moving all of the place where the stadium.
The tremendous amount of tightness and the labor market.
Speak to you know kind of visibility to the Capex numbers.
The cadence of the construction and any concerns and and bottlenecks and you're seeing right now.
Yeah, Thanks, Scotland and.
Yes, we do we have a very.
Very strong governance around as we need to on the weekly basis with the with the per their team we met as the tide budget, particularly as it relates to the Barra Bonita facility, which is our biggest capital investment.
So we're very much aware of what's going on from a from the foreign exchange <unk> to USD perspective, and we're keeping close tabs on debt.
Uh huh.
Does it want to mentioned earlier most of the long lead items have been ordered and so we are.
We have those commitments out there so yes, absolutely top of line for us very important projects and managing the budget within the within the guard rails as is very much a from a governance.
And his perspective, and the oversight and the planning perspective, and so very much the top of mind and what I can tell you is myself Eduardo and include and John We're very closely involved with this with this project and watch it on the weekly basis.
Thanks, so much and maybe a final one day.
Yeah, the only thing I would add ons comments here and I was just in Brazil, and the last couple of weeks and I can tell you the <unk>.
<unk> is on track, it's within budget and I think we said about $70 million for plant that will generate $200 million of product revenue.
And now with our expanded agreements to manufacturer of long term and supply of the industry. We're very focused on getting this plant out of the way and looking for what the next expansion looks like but that's just wanted to confirm that it's on track on budget and we expect to stay that way.
Fantastic and then just given the dynamics and the agricultural sector, where commodity prices are trending and obviously sugars and not anywhere near historic highs, but it's off of lows.
The two some of the the.
And the risk management around input prices and supply access that and you guys are putting in place since and move forward and start crying and all of the more aggressively.
Yeah, we have again of a locked in a structure for pricing with our partner in Brazil of Hazen, which is obviously one of the biggest.
The producers of sugarcane in Brazil and.
We look at it carefully at this point I'd say, we're very comfortable with the natural hedge of currency and commodities being a kind.
Kind of offsetting each other and Brazil. So we don't see any pressure in the short term and we obviously keep a close eye on that Eduardo and his team of.
Obviously focus on that regularly.
Okay, great. Thanks, so much guys.
Our next question comes from Doug Schenkel with Cowen.
Hey, good morning. Thank you for taking my question, so I want to start with.
The guidance question.
Specifically I wanted to dig in on the full year guidance update if I have it right. You had previously indicated that you expect the 35 percentage of core revenue.
And the first half and <unk>.
Our model, we had a little bit more in Q1, and then you generated but that said it could just be that we were a little too aggressive early in the year with our core accounts. So that's probably more of us that for you.
But all of that said guidance implies youre expecting a pretty robust ramp and revenue from Q1 to Q2, and even more and the second half of.
And this is especially true of giving you actually increased underlying core revenue guidance for the year I think by about $10 million can you just help us better understand the pace and dynamic and maybe more importantly, what gave you confidence to actually increase the target, especially as you're I.
I think expecting a bit more and the second half of the first half.
Yeah, Let me, let me start Doug and then I'll, let on provide any underpinning detail look the big picture is really around three key drivers are that are that are really doing well for us right now and giving us confidence on that base increase and I think you nailed it and we basically are increasing by about 10.
The revenue from our base business this year and the three drivers for this we of five new brands coming into selling starting at the end of the second and then obviously major activity and the third quarter. When we look at the demand I mean, there is one simple example, we had one brand that we.
<unk> did $1 million last year, we thought it would do $2 million to $3 million. This year, it's now tracking for $6 $5 million. That's one example of an acquisition that we start benefiting from the revenue here and the second quarter and then obviously going through the rest of the year. When we look at Roseanne and when we look at J D and I mean these are brands that are all.
Starting with an order.
Book and retail environment, that's much better than we expected. So that's one driver of of US providing of slightly healthier guidance and we started the year with secondly, when we look at the ingredients portfolio. The deals we've done with and greedy on with DSM and then the other deals.
From a niche and geodon actually give us a better outlook than we expected earlier when we were thinking about the deals we were contemplating for the ingredient portfolio. So robust ingredient performance and a structure that enables us to capture the benefit of that momentum going into the second half of the year and.
<unk> really driven by the end markets the end markets for personal care and beauty are very robust right now and we're seeing that flow through and greater demand and I think lastly.
And I look our collaborations and the partnership portfolio. We have is looking very strong and we ended up with several additional molecules out of to the portfolio that will drive strong collaboration revenue into the second half of the year. So those of the three drivers and I hope that helps and again happy for her to jump in.
No John I think.
Sorry, Han huie of sorry about that.
And I'll go ahead.
Doug.
No I think you and I was going to say it was pretty helpful and I'm guessing Han and you were going to say that that probably that probably covered a lot of it.
Exactly so please proceed.
Alright, so thank you for that and then I guess just the.
I'd.
I'd like to talk a little bit about.
The pipeline and then at a higher level.
The process by which you're you're advancing the pipeline and other initiatives. So let me start on the pipeline.
How many molecules of total or and the pipeline as we speak after the announcement of some of the recent collaborations and how should we thinking how should we be thinking about timelines from discovery to development of it does seem like things are accelerating a little bit. So I'm just wondering if there's any updates you could provide there because ultimately it would be really intra.
The thing for us to think about especially given some of the Tam updates.
It would be interesting to think about how quickly amyris could start to recognize revenue from.
Some of the pipeline molecules being created in conjunction with partners.
Look I think we started the year with 18 and the pipeline and right now we're running at about 24, and the pipeline and by pipeline, we really mean active development and scale up.
And so what that what that says is this year.
We will have around four to six that ended up going commercial and then I expect to see.
And somewhere around an average of six molecules a year between now and 2025.
On average going going commercial and generating revenue.
How you could think about timing to revenue and they each have obviously a different profile of how much revenue, but we know.
And that on average our molecule will deliver of $1 million and revenue its first year and we have several of the do much better than that it really depends on the size of the market and the molecule we're putting in.
Okay and.
I'm going to ask this question even though.
It might be better for another for them, but I think it's interesting to just think through its something that jumped out at us from your Investor Mini series on Earth day, which was really helpful.
We're just wondering.
If you could share a little more about how your business development team of selecting and betting profiles for new ingredients.
Placing of incumbent products versus differentiated chemical and mechanical properties stability I guess, we're just you know.
It does seem like if anything of the velocity of partnerships, but maybe just as importantly, the verticals you are moving into is picking up and.
And it would be interesting just to hear a little bit more about how you're prioritizing given it does seem like there was a myriad of opportunities which continues to grow.
Look I think there is a.
And there's a few dimensions from them from an economic perspective, we obviously care a lot about time to market and cash the market how much investment to generate the first cash and how long will it take to get there and that matters a lot because we are of very tight resource pool of people.
And actually more than anything our space now is very constrained and our labs and emeryville. So we have to be really thoughtful about which ones. We take on and we take the ones that we believe are profitable the fastest I think the second is really the market structure and we look a lot at volatility of supply and price and then.
The man structure and partner a partner capability and that demand structure, what I mean by that is we want people that the partner with debt or leaders for those specific ingredients for products.
Have you know at least double GDP or better growth and in markets that have and unusual where high volatility of supply and price where the technology is advantage. The performance. So I just said a lot there I hope that made sense, Doug, but it's really three different dimensions, we assessed the.
The the market structure, we assessed the molecule and the dynamics around the molecule and the market, including the technology's capability and then we address kind of the the the no compromise our components of the molecule and our ability to really win with that molecule and the market.
That's great John and thank you very much appreciate it guys.
Thanks, Doug.
Our next question comes from Laurence Alexander with Jefferies.
Good morning.
Can you connect the.
The strategic agreements with how youre thinking about the growth rate for ingredients.
And.
In particular, I guess two angles, one is through the likely near term growth rate for the ingredients business. The next several years, but then I guess the second question.
And what kind of milestone thresholds out of about $3 billion target sales.
Whats the threshold does to the your partners need to hit for you to get the full value of the future value of the strategic transactions.
I'll try to frame that answer and in three parts Laurence the first one is.
Milestone payments and and what we expect and that's all really driven on.
How the earn out was structured around certain molecules and all of that is based on molecules in the market today and the performance over the next three years and.
So we were pretty confident about that and as you know in total now we have about $275 million of earn out payments coming over the next three years. When you look at the total of both deals.
The second is the revenue component, which is what the the $3 billion number you've spoken about and the $3 billion number is actually predominantly based on the molecules that are currently and the market the FNF molecules as well as the sweetener and the continued growth.
Right of those molecules over the 15 year period.
So nothing really.
Different has to happen.
And I guess, the only thing that can't happen is of some competitor came to the market, where the molecule that was lower cost and better performing than our supply and the partner decided to Ah Ah Ah Ah.
Break the agreement with US and then not deliver the growth, but as long as those things don't happen and we've got a pretty good sense of confidence that those things are pretty well and place than we realize that revenue over the 15 year period. There was upside right. That's the third component here is theres upside in two dimensions.
We obviously have a significant number of molecules and discussion right now with all of the partners that we just signed on those molecules the development payments for those molecules and the revenue the incremental revenue and market opportunity for those molecules would be incremental to the outlook that we shared.
I don't know if that helps or not and the orange thinking about the three parts.
And John.
And John maybe Laurence if I may just with one thing. This is Eduardo I think beyond what John said on the product revenue side. There is also true. Thanks that I believe this new strategic agreements will help us drive that $3 billion number that you mentioned one of its more scaled by retaining access to the product supply that John mentioned.
We really will capture of additional efficiencies scale and Inc and.
And also scaling and raw materials that are also will drive help us keep the cost even more competitive and drive additional market the man and the second and these capabilities right I think part of a chain of obtaining that of incremental value is is the fact that we're partnering in a way that leverages additional capability like the solutions capability of that ingredients brings to the.
Table beyond the high quality ingredient that we created and so I hope that helps too.
And then just to clarify then the 10 molecules that you mentioned are in development.
And would give it on a permanent I believe that would be additional to the molecules already signed the deal with them on.
That is correct and I, just say and it's a combination of for many shimada and DSM and ingredient and all have new molecules for us to work on and that is all part of that 10 selection, which is incremental to what's already out there and what we've made public.
Thank you.
Thanks Laurence.
Our next question comes from Amit Dayal with H C Wainwright.
And thank you good morning, guys and just a question on you know the collaboration verses the consumer revenues. So we look consumer business now and a pretty strong footing.
Collaboration revenues have been relatively stable and the 5 million and for the $5 million levels per quarter.
Is this going to change because of these new sort of partnerships or do you think your investments and resources.
And would get a better ROI, if we focus more on the consumer side of the things.
Look I mean, I think this is why I sort of missed by the way and thanks for being on the call and let.
Let me try the question this way.
For the partnerships, we've had we actually got into a pretty stable funding and.
And of pretty stable pipeline that's predictable.
For development I think what youre going to see is some expansion around that and from a return perspective, you know, we havent really share it publicly but where we're generating about 10 times on our money.
For the molecules that we've put into these agreements with these partners are 10 times return on our money over what is probably a three to five year period, depending on molecule. So we think that's not bad it's obviously not as good as we're getting in the consumer side and the consumer side look some of these recent acquisitions.
I mean, we are getting significant returns fast because I think we're buying right and were by and interesting brands that are really having a lot of traction with the consumer and and we like the.
And it looks like we might have lost John Kline and so please hold blocky and.
And we cannot.
Yes, we lost him.
Yes, we lost and we should proceed with the with the question and then the so Amit. Please go ahead of you have the next question that we might have my next question and there's going to be around the thank you and my next question was going to be around.
John's comments about her and $200 million and consumer revenues in 2022, and what will that the mix look like.
In terms of the the beauty segment versus the sweeteners and use the other products that you have.
And you asking about next year correct, Yes, yes go and you're going to hear.
Yeah. So I mean of course, we expect.
The consumer side to continue to grow faster.
And then the ingredient side. So if you think about it from.
Of relative perspective, where we typically have and you know is historically more ingredients Hill. This year, we will definitely have the the consumer.
Piece the.
The.
The ingredient segment. So what we've said previously I was think of debt where it used to be 40 60, it's now going to be more of like 60 40.
If you look at 2021, and we can we expect the trend to continue so think about it longer term, perhaps as you.
Two of those one third and then.
As the consumer piece continues to grow both organically as well as perhaps by a by a rolling out of the brand portfolio of adding a few more brands.
That's the direction, we see from an overall portfolio composition perspective.
And the only thing I'd add on and by the way sorry, I got dropped off you would think that in Switzerland, and telecoms actually worked really well.
But the.
And the way the way I would think about this is and they really.
Big picture I have to look at where what are we building and where are we going to and you look at 2025, I think we have a business from 2025 based on the current portfolio that generates one six to $1 7 billion of revenue and has a very solid 30 35 per cent or so EBITDA.
Adjusted EBITDA based on the business structure and I think the business structure is all about really creating sustainable leadership and in markets, where we believe synthetic biology is going to be a critical enabler of those markets based on what we see as the market dynamic or markets.
<unk> for certain molecules and demand demand patterns by the consumer so I don't like I think so far we.
Nailed it on strategy and structure of the market.
And I think we're going to just execute and ensure that we have that leadership position by picking the right partners, having the right molecules generating more margin from the molecules than anybody generates today and our industry and making sure that we continue to really be the leader and the markets that matter.
I think beauty people ask like why beauty look beauties of wonderful market first of all of what we do with synthetic or what we do with natural fermentation based molecules is exactly where the beauty industry is going where the best at it yeah, and consumer brands and live a lot longer than IP and patents.
And so we think there's a beauty and having an amazing set of brands that are all really tracking excellent with the consumer backed by and amazing IP portfolio of the world's leading synthetic biology platform. So we think that strategy is differentiated and we think that strategy has traction right now.
Now the just continued to focus on execution.
Understood. That's all I have John Thank you so much.
Thank you and it.
And we have time for one more question, how much will come from Craig Irwin with Roth capital partners.
And good morning, and thanks for taking my questions. So most of what I would've asked has obviously been addressed already.
But I did want to dig into the guidance, the $2 50, and and base revenue of $10 million higher debt. That's a really good thing can you maybe update us in the context of the divested revenue from Europe.
You are of strategic adjustments for the portfolio I think you've said previously that.
You were divesting of about $30 million and revenue from 2021, and it seems that those agreements actually where all bigger for.
From a cash taken out of total value of standpoint.
And is $30 million still a good number to work with or was there maybe slightly more revenue and divest it.
But still we increased guidance by $10 million.
Yeah, Craig Great to have you on and let me start and then have high and.
Fix whatever I say so the first thing is not only where all of the value components of the deals better than we expected. We also did not sell off the revenue. We expected. So we had said we think it's about 30 million and based on our 2000, Twenty's and 2021 yeah. The.
And he is off of 2021 base, we've actually sold off.
About 10 or slightly less than $10 million of revenue.
Call it $10 million of revenue Hans giving me the fives here.
So about $10 million of revenue and when you look at the growth rate and you look at the additional molecules and what we're putting in the market with these partners. We actually are growing the revenue pretty significantly and our SNF portfolio from 2020 to 2021, so it's actually of.
[laughter] outcome than we expected credit, which is one reason why now that the deals are done we have a little more confidence and what the year outlook looks like and we're also seeing and the orders come in and the demand for these ingredients. So not only are we.
The ending up with a different structure, that's better from a revenue perspective, but also we're seeing and demand really robust from these partners for the molecules we sell.
And that's really great that's for.
Really great to hear.
So my next question.
Every phone call and I get a lot of a lot of phone calls everybody's asking how big is bioscience, how big is five sites every quarter. So we're kind of left guessing a little bit by some of the some of the metrics you share.
I guess, you didn't give an absolute number and this call or the other the.
Last couple of things or the prior call.
Can you guys, maybe update us on how big it is right now or how big It is you think it will be this year.
And what's the track trajectory really is at this point.
And I know Han will kill me, but I'm going to jump in because he and I argue about this all the time, meaning whether we share of it or not.
And I can tell you.
Bioscience this year will be over $100 million and revenue Bioscience right now is already at a run rate of about 80 million annualized and as you know each quarter has been significant growth for us and the fourth quarter is the biggest quarter by far.
So that kind of gives you a sense of bioscience consumer and total.
And it's bigger than we expected this year and I think you'll start to see that consumer number.
Get north of that $1 35 for $1 45 level this year and that's really coming out of just robust performance.
Of our new brand so.
And you saw and the reported results that our margin for consumer our gross margin for consumer and the first quarter was outstanding.
We see again, just maintaining a robust performance and consumer right now.
Great. Thank you so much for taking my questions congratulations and the progress.
Thanks, Greg.
This concludes our question and answer session I'd like to turn the call back over to John Melo for any closing remarks.
Great. Thank you I really really appreciate your help and thanks to everyone for joining us today and for your continued interest and support if we did not get to your question. Please follow up with our Investor Relations team will make sure to get back to you.
For the response and wish everybody of the best of luck for healthy and successful rest of the 2021 and we look forward to speaking with you during one of our upcoming investor conferences and thanks, everyone.
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