Q3 2022 Twist Bioscience Corp Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Welcome to the twist Biosciences fiscal 2022 third quarter financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one one on your telephone please be advised that today's conference is being recorded.
I'd now like to turn the conference call over to Angela.
Fighting S V P of corporate Affairs, and Chief ESG Officer.
Thank you operator, good morning, everyone I'd like to thank all of you for joining us today for twist Biosciences Conference call to review, our fiscal 2022 third quarter financial results and business progress we issued our financial results released this morning, which is available at our website at <unk>.
W. W. Dot twist Bioscience Dot Com with me on today's call are Dr. Emily, let Bruce CEO and co founder of twist and Jim Thorburn CFO .
Emily will begin with a review of our recent progress on twist businesses, Jim will report, our financial and operational performance and believe we will come back to discuss our upcoming milestones and direction. We will then open the call for questions. We ask that you limit your questions to a maximum of two and then re queue as a courtesy to others on the call.
As a reminder, this call is being recorded the audio portion will be archived in the investors 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 our 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 cannot at this time predict the full extent of the ongoing impact of the COVID-19, pandemic and any resulting business or economic impact we disclaim any obligation to update any forward looking statements, except as required by law.
With that I will now turn the call over to our Chief Executive Officer, and co founder Dr. Emily <unk>.
Thank you Angela and good morning, everyone.
During the first quarter, we continued to benefit from our position as the high quality local kilo, especially that makes us a bullet.
Climate, we reported record revenue of $56 1 million and almost $60 million in audio with strength coming from both.
Yeah.
Beginning with some value when reported strong revenue of $22 1 billion.
One we did see some disruption both from China.
Colby.
Well from both a manufacturing and commercial perspective.
We make all of us.
United States, which provided an advantage over companies will make James in China.
For the quarter with 25, and then all the decrease the country do you have any.
And the biggest softness from foreign exchange in Europe , and overall cost it's done with a pattern last year.
We have completed the build out additional capacity in the system, which.
Allows us to produce over 200000 per quarter, enabling us to meet the increasing demand for <unk>.
In particular, while we bring on the future.
We received a temporary set to kick off with Japan, Steve. Thanks for the future in late June and are now in the process of bringing the site we will go through.
Thank you Peter.
Just some additional clarification operational qualification and production presentation, you see the <unk>.
We have gone through each time, we move location creates a <unk>.
We've completed successfully.
In the past.
You can even move the equipment from one site to another over a short period of time, usually the weekend, which is significantly more difficult.
New fab with new hardware, while running its wasteful production scheduled this time for the fact that as a future one getting all new hopper hardware, while continuing operation in South San Francisco.
We remain on track to generate initial revenue.
In January 2023, and as a reminder.
And you said in line with the labor.
Faster.
Recall the data loss market is people can make their own.
They need it more quickly than these FCC vote today with effective of the future. We have the ability to use open on time to address this market opportunity.
This benefit we expect we'd give it to Kevin premium pricing and better market, we intend to begin operations with us and buy a product suite and work to us introducing genes with faster turnaround times shortly thereafter.
Yes.
With revenues of $21 8 million $34 million.
The strong back half of the year for NCS.
Consistent with our guidance.
And yes, it's driven by many factors, including Canada.
The <unk> biopsy as they prepare to launch a commercial day.
<unk> been resonating with guests.
And new business wins.
During the quarter, we launched two new products for cancer research.
<unk> panel.
Okay, and developing meaningful resume disease test for MRV.
These products build out the oncology offering further differentiate us from our competition.
If I might be specific Eddie we introduce a disruptive product that is just to make it.
And highly cost effective with the rapid.
PCL of preterm birth.
Which capture.
Specific sequences are captured.
102 is highly scalable.
Thank you Benno recall Eagle and awards.
To be clear.
We are incorporating into our customers' workflow.
Pilot testing validation and verification before getting a full commercial use we expect the revenue to grow.
So let's go through this process.
We have slowed down several key control for multiple then you will guidance of clean energy.
Importantly, we see continued uptake of our securities liquidity controls, which we believe will be less dependent on public health cycle.
Controls.
This product line has all has delivered consistent revenue.
Is a nice entry point into new accounts.
This week.
Sure.
Seems excited as I mentioned to use authorization for mgs assay.
For the amplification and differentiation South Korea to pangolin hedges as well as densification of specific genetic mutations.
While we are more than 200 highly.
The pandemic the virus continues to evolve and orca still need the most robust tools to install.
During the quarter.
We gave you at the conference in June It was clear that the sequencing walk back with new providers entering the market in bringing differentiated solutions.
We believe that as the cost of sequencing comes on it.
It will continue to drive.
Trajectory of sequencing volumes overall.
<unk> twist.
Our Mcs tool as we speak.
Do you think its enrichment, we expect demand to increase <unk> applications that require deep sequencing lack of liquid biopsy and the mom and.
Importantly, our products work with the virus sequence of short and long read where sequential agnostic and look forward to the continued growth of this market.
Well, let me follow up when you bought it six months revenue at $8 8 million dropping audio revenue increased significantly year over year, but it is down sequentially, primarily due to project delays and cancellations due primarily to budget constraints at specific customer, but we expect a strong Q4.
And those partnerships with <unk> and the sets based on <unk> in South Korea, We added six new partner Socs with Biopharma for a total of 63 partners. We initiated 11, new programs with 50 active programs ongoing as of June 30.
We now have to go to.
67 completed program cells with Biopharma.
100 <unk>.
Total active programs 55 milestones and royalties.
Please turn.
It varies at 70 projects underway in the third quarter, 12%.
New partnerships in addition to expanding existing relationships with a pleasure.
We should continue.
Quincy site, a streamline facility enabled.
Many people have to have any discovery work for our partners.
Turning to rent it out.
And then we've got the Sweet Biopharma with initial 19 MW asset.
Lead antibody candidates neutralized every then loan volume of concern of the Sars Covid two virus, including a macro.
Unfortunately, recent that shows that it does not neutralize the latest <unk> five.
It may play well with other treatments at this time, we have been out there is nothing to initiate the clinical study for against that would be.
Seek a partner to move it forward.
In April we entered in a resource exclusive option and licensing agreements with Stella from one of our twist I just wonder I discovered antibodies.
And it sounds like the agreement we will.
Work with Astellas to jointly conduct research activities to further identify and optimize appropriately twist.
Yep.
I'll get an undisclosed checkpoint inhibitor.
As the exclusive option to license any development.
<unk> asked about the collaboration.
We are very excited about this partnership as it is.
Yes.
Thanks, Taylor is a leader in immuno oncology with its Scott.
And it's a fantastic validation for the Twinsburg Matabele discovery.
<unk> platform.
Although the term of the agreement.
We see the upfront payment underpinned.
Licensing option will twist would we say, okay, well, we see success based clinical milestones and royalties on product sales for each product developed under the agreement.
We said that the initial base to build on as we pursue larger later stage opportunities.
Our <unk> team continues to advance multiple integrity through the discovery and optimization path and because I guess.
Capability to move most of the programs falloff in pilot.
In regards to the overall macro environment in Biopharma and in low restricted funding environment, we continue to find that out.
Offerings resonate.
We do see some projects pushed out with BT to purchase management, but in large block. We believe those projects are not going away with differentiated approaches that for antibody discovery, which excluding interest and engagement with both partners and potential partners.
With a growing list of.
Our risk is diversified across a number of accounts.
Just a few.
We continue to debug all fully integrated seamless cheaply electronic controls Thats, one micron pitch our objective at this time two gigabytes of data.
Zynga run once we are able to achieve the synthesis scale, we would introduce that commercial storage solutions.
Yes.
Okay.
The fastest time to market.
I'm sure the archive will be upheld at the storage as a service solution.
Solution. Initially we will start with the writing service, which will extend into rising.
Turing and retrieving with pricing.
We approach launch.
As the technology matures.
Submission can be realized we expect to introduce an executable archive solution.
These two other doesn't bill environments, which will be located on premises.
The scale of sites.
This week, we said the new Weisbecker that putting the enterprise at the storage market from further market research. This report highlights the dramatic need from you enterprise storage technology that can be deployed at massive scale with minimal power consumption DNA that the storage. These features.
The opportunity to address the demand that will not be able to be served by current storage success.
For perspective, the unmet demand could be at 27th at the base of that at 2030 and as a reminder is that these are billion terabyte.
It is the highest capacity available in a nicely today.
The reports estimate that about 75% of all of that that would be a couple of data growing from about 60% today.
And key industry executive interviews indicated that you saw in the storage of data.
Which means that they do not intend to delay data ever.
<unk> is well positioned to meet the upcoming demands and yesterday's media with the key features of that.
Our ability to recruit the CBD.
There will be technology.
And pilot.
Initial development, we continue to make.
Strides in building a market for unit two at.
Once the DNA of this exploration alliance, peaking in a technology of the storage networking industry Association known as Neil. This is an important evolution of <unk> from an educational organization into a group that will also drive turns out development.
That was required to be the Intel critical ecosystem for the.
Industry.
And now I'd like to turn it over to Jim to review our financials.
Alright, Thank you Emily.
We had another good quarter at Swift revenue for quarter, three was $56 1 million, which is a sequential growth of 17% and year over year growth of 60%. This brings our year to date revenue to $146 3 million margins were $59 7 million for the quarter sequentially increased 9% and 53.
Percent year over year, bringing our year to date August approximately $164 million.
Gross margin for the quarter was 44, 8%.
We shipped to approximately 900 customers in the quarter and now have shipped to approximately 3000 year to date.
We ended the quarter with cash and investments of approximately $528 million.
Now I'll provide a deeper dive starting with Ngls as we have highlighted on our previous calls we anticipated pickup in our NGF I'll address the second half.
Third quarter artist realistic.
$4 million, an increase of 64% year over year and sequential growth of 29%. This increase was primarily due to liquid biopsy as well as other clinical and diagnostic applications. During the quarter. We received garden's from approximately 550, mgs customers, which is a decline from $7 50 in the previous quarter. This is.
Due to fewer customers Adrienne Colby control and as noted on previous calls that our cohort control revenue has not been material.
Top 10, mgs customers placed orders of approximately $14 million or 48% of our auditors, primarily due to pick up in a liquid biopsy customer demand.
Our pipeline for larger acre changes continue to scale and we're now tracking 249 accounts up from 271 and noted in our last earnings call 114 of adopted twist and increased from 104 last quarter.
The increase orders flowed through and our Mcs revenue for the third quarter increased to $27 8 million up sequentially, 20% and an increase of approximately 50% year over year with a top 10 customers accounting for 50% of our revenue during the quarter.
Turning to Syn <unk> Syn by August which includes genes DNA perhaps.
G libraries, and oligo pools declined sequentially to $25 million in the third quarter from $23 6 million.
This is primarily due to declining clonal genes are those particularly from pharma, which really is mostly related to seasonality and we had the same slow down this time last year.
<unk> product revenue for the quarter was approximately $22 1 million up from $18 4 million, a 20% sequential increase and approximately 54% increase year over year. Some of the highlights include shipping to approximately 500 <unk> customers genes revenue was strong in the quarter and rose to $17 4 million.
Up from $14 2 million in the second quarter and $11 2 million in the third quarter of fiscal 'twenty. One we shipped approximately 163000 genes in the quarter and Thats up from 124000 last quarter, although the pools had a strong quarter with revenue of $3 3 million up from $2 million in Q3.
Slide 21, with the increased demand primarily from health care segment.
Now to Biopharma.
Scalar biopharma business and orders rose to $8 8 million from seven client $8 million in the second quarter and revenues for the quarter was $6 2 million down from $6 6 million in quarter, two primarily due to project timing issues and five project cancellations, primarily due to budget constraints.
Twist Biopharma antibody platform, we now have 53 partners up sequentially from 47%.
50 active programs with 67 programs completed and back in the hands of our partners or our total programs 55 include milestones and royalty agreements.
Chris It was Boston business doing well, but 64 customer service in the quarter, including Texas certain projects on the <unk> platform.
Please note.
Others may not translate into revenue, but provide a trend line for each product group.
Cover our revenue breakdown by industry healthcare revenue corporate <unk> was $29 4 million up from $17 $4 million a quarter of fiscal 'twenty, one industrial chemical revenue in quarter, three was $16 7 million up from $9 4 million third quarter of fiscal 'twenty, one academic revenue and.
Corporate <unk> was $9 5 million and that's up from $7 7 million in the third.
For fiscal 'twenty one.
I will now briefly cover our regional progress EMEA third quarter revenue was $50 5 million as compared to $12 7 million in the third quarter of fiscal 'twenty one.
<unk> continues to deliver robust growth revenues, increasing to $4 8 million and that's up from three 1 million in the third quarter.
Fiscal 'twenty one.
U S, including Americas revenue was $35 8 million in quarter three of fiscal 'twenty two versus $19 3 million for the same period of fiscal 'twenty one.
Now moving down the P&L.
Gross margin for the quarter was approximately $25 2 million or four 8% of revenue as compared to 40% in Q3, FY 'twenty, one and up from 38, 3% in Q2.
The increased gross margin reflects the impact of higher revenues in particular, higher and GFS revenues and less leveraging our fixed costs also known as the factory of the future startup costs are recorded in G&A and Cogs include stock based compensation of $1 2 million and depreciation of $1 7 million per quarter.
Now to operating expenses, our Q3 operating expenses, which includes R&D SG&A and change in fair value and Mark to market adjustments of acquisitions was approximately $86 3 million as compared to 7% to $9 2 million in quarter two to break it down R&D for the quarter with respect to $6 eight.
An increase from $51 2 million in quarter, two and Thats, primarily due to increased spend associated with Biopharma, which includes the various on Revpar and also increased same situation igt's spend.
SG&A in quarter, three was $53 $7 million as compared to $54 million in quarter two.
Startup costs for the factory of the future included in G&A expenses were $4 million in quarter, three and Thats up from $2 million in quarter two.
Change in fair value of contingent considerations and indemnity hold backs for the quarter resulted in a gain of $4 million.
Especially with a gain of $6 million in quarter two.
Stock based compensation for corporate <unk> was approximately $20 million depreciation was $3 1 million for the quarter <unk>.
And amortization of $1 4 million, primarily associated with acquisition.
<unk> intangibles.
Net loss before taxes was approximately $61 2 million as compared to $6 8 million for quarter two.
Capex for the quarter was $40 million, including approximately $2 million with taxes in future and this now brings a fraction of future capex investments to approximately 73 million given.
Given the global supply chain challenges, we've been strategic about investing in our inventory, which remains at approximately $43 million compared to $45 million at the end of quarter two.
We ended the quarter with cash investments of approximately $528 million.
Provide updated financial guidance for fiscal 'twenty two.
We enjoyed strong bookings in the quarter, however, due to seasonality and as more Sars Covid. Two variants continue to match, where project Q4 revenue to be approximately $56 5 million, which brings our revenue for the year to be approximately $203 million.
Up from previous guidance in the range of 191 to 199.
So and by revenue in quarter, four is estimated to be $21 million sequentially down from Q3, which we noted that it was particularly strong combined with lower Q4 revenue expectations in EMEA.
Our <unk> guidance for the year.
Million, which is up from previous guidance of 71 to 73 million.
NGL revenue is estimated at between $7 million in quarter, four and our total revenue is now projected to be approximately $97 million for Ngls and thats up from our previous guidance of $94 million to $96 million.
Our pharma revenue, including twist, Boston is estimated to be $8 5 million on our Biopharma revenue guidance for the fiscal year.
Is it supposed to be $26 million as compared to our previous guidance of six 2 million.
Our FY 'twenty two gross margins projected to be approximately 40% operating expense, which includes R&D SG&A and mark to market write space.
Space would be approximately 300 million for the year, including a $125 million in R&D expenses, and that's down from our previous guidance of $1 30, Mark.
Mark to markets for the year is projected to be $12 million favorable factory future startup costs included in SG&A, our pace will be $12 million for the year.
Net loss guidance before tax for the year will be approximately $250 million, which includes stock based comp of approximately 80 million depreciation of $14 million amortization of intangibles is projected to be $5 million.
Capex for FY 'twenty to be in the range of $95 million to $100 million.
As we highlighted on our last call will focus on managing our cash and scaling our core business to $300 million in annual revenue and adjusted EBITDA breakeven. We have line of sight on scaling our biopharma business adjusted EBIT breakeven the $80 million in annual revenue and believe we have the cash runway to achieve both.
With that I will turn the call back to Emily.
Thank you Jim quickly Jim's comments, we remain focused on driving to our profitability.
Katy hosting value, we're focused on bringing the effect of the future.
Oregon with initial revenue generated from this facility in January 2023.
Moving to our fourth quarter with 30 means that up in other.
<unk> finished the second half strong we will continue to focus on originating within existing customers offering differentiated products and expanding our market share as we seek to own the market between the central and the sequencer, particularly a.
Particularly in R&D.
In Biopharma, we predict with partnerships programs enrollment the value chain both for service offering.
Our internally generated antibodies.
As we get closer to the I'll note for the bus market, we are planning our integrated portfolio.
And the condition of hearings kept it out I think on efficiencies and showing that one plus one equals more than two.
Combined solution.
It's tweets from the rest of the pack and we look forward to cross selling as well as broadening our reach through India in that period.
And at the switch.
Roadmaps, which terabyte scale, we have our first really integrate consumers chip predict when you're controlling health and I'd like to use the system, which is simply it is up to one gigabyte of data into a single road, we will continue to drive market, whereas we'll actively participating in the development of <unk>.
For the industry overall, while we cannot control the overarching macro environment, we have a differentiated platform technology in a silicon based.
This profit we have an exceptional team will come to work everyday to be diverse we have a plan to reach adjusted EBITDA breakeven for the core business without accessing the capital markets again, and we have tremendous opportunities ahead to grow market share in each area to introduce new products and to truly disrupt markets.
Let's open up the cultural questions.
Bill.
Thank you as a reminder to ask a question you will need to press star one one on your telephone.
Please standby, while we compile the Q&A roster.
Our first question comes from Matt <unk> with Goldman Sachs. Your line is open.
Hi, Good morning, Emily and Jim Thanks for taking my questions.
Maybe the first question just on the Biopharma business I know the full year guidance coming in at the low end of your previous guidance you guys talked about some project cancellations due to budget constraints, but also about trying to shift into later stage programs could you talk about sort of your mix of.
Potential emerging biotech targets and their funding issues and do you expect additional project cancellations and then secondly.
What is the strategy to kind of move into later stage for Biopharma in and how do you think that plays out from a timing standpoint.
Yes. Thank you.
<unk>.
So whether it is.
So the derivatives might.
Amicus headwinds.
The funding for a private company in biotech.
Is it a bit more difficult now than it was a few quarters ago.
So.
We have seen lead to me to that however, we have a very strong and differentiated offering.
<unk>.
We have.
A large number of partners.
No.
<unk>.
If we only had a few partner.
Beth.
At issues, so the combination of our offering.
Brett.
People were talking.
Cooking too.
Insulates us a little bit and as a reminder, we are the high quality low cost can you do.
Keeping edge type of discovery.
No.
The offering that we executed the CDO is in a quite a bit.
Scott.
Second.
Point.
We have seen on the Biopharma side, so the Easter recall twist antibody discovery that we have been able to see.
<unk> royalties.
And which means that we are able to go off script, a little bit into later stage.
Value add.
<unk> done that yet.
With the.
<unk> seen between Boston.
We brought in the eastern QD Thats, not where their business was doing.
So now we can apply some of the learnings.
Alex we approach.
Commercialization of services from the twin Biopharma. The original one we can apply those learnings to the <unk> Boston.
And participate more.
More in the downstream economics so.
You said there'd be some timing to it but.
It's under the side.
Wed like to catch up.
Great. Thanks for that and then kind of like a similar version first question, but taking the other side of it and you kind of mentioned a little bit just given your scale and cost advantage not just in biopharma, but probably more importantly, and sym bio and given the kind of cost containment environment that we're in how do you feel twisters.
Competitively advantaged in this space given the fact that you can probably provide your customers.
Or cheaper.
Cheaper materials at a larger scale do you think that will resonate.
Cost conservation environment continues into 'twenty, three and do you feel like you're well positioned in that area.
Yes.
This entity.
A strong selling point.
We have always been.
Gently.
Less expensive than competitors.
Except for any high quality same Ohio.
Then the police.
And so there were some segments where that resiliency to really win.
You look at the <unk> of the World.
The approach is to try and more data points.
To get that vintage.
Having a lower.
Adding.
Even though twist.
Partner with a lower price to a gene that is extremely advantageous to WCS, Melissa that were already being strong.
On the base on that side.
Frankly.
The actions in the past with some Biopharma company.
Got it.
Budget not an issue.
And now, but it is an issue for them and so from that segment the Biopharma segment.
By all tools, so DNA libraries.
Libraries.
<unk>.
The.
The products that we've already had.
Other family with 18 more.
This agency.
Let's begin.
Impedance match than on the Biopharma services.
It's more expensive.
Somewhat premium pricing.
But on the C&I side.
As you can see.
Terrific match.
Between what the researchers proceedings on their pizza under budget.
Perception of shopping center under budget and.
The process, we have thats really stretching that rollout and enable them to get more and better data.
So a fixed budget.
Great. Thanks for taking my questions.
Yes.
Okay.
We have a question from Vijay Kumar with Evercore ISI. Your line is open.
Hey, guys. Thanks for taking my question and congrats on the.
CQ B share maybe.
Jim.
On the guidance here.
If I look at the gross margin for Q really strong, but the guide implies Q4 step down.
The book to Bill came in a little low.
<unk> Q4 revenues.
<unk>.
Implies flattish Q on Q was there any timing of.
Revenues that benefit in <unk> or maybe just explain what drove the strength in the queue from the revenue and gross margin perspective.
Yes.
So good question P. J, we had a really strong quarter.
Revenue was strong, particularly in Ngls.
The overall <unk> revenue as it was also good.
Do have seasonality, primarily driven by EMEA.
You saw the same step down last year in orders.
We're putting together the plan based on the.
The view in terms of where we see some of the.
European countries in terms of the.
The vacation periods.
So we were prudent in terms of our forecast for the quarter and also we're also.
Im very mindful of what's happening with the new Covid variance.
So as we as we thought about our guidance.
We'd give prudent guidance for the quarter.
Overall.
<unk> continues to do well the pipeline continues to grow.
And as we highlighted.
Overall Ngls are just for the first.
Nine months of notice $76 million.
So very strong and we saw very strong pickup in orders in Q3.
Some of that translates to revenue in Q3 and.
Are you is that we will we will see a good solid Q4 in <unk>.
Sure.
We put together a prudent guidance just based on the seasonality.
Okay. That's extremely helpful. Jim.
One for you on data storage.
If I understood you.
We're now at <unk>.
The Alpha chip stage is it right enough and.
What are the.
I guess hurdles going from alpha to beta is that the technological hurdle or maybe just laid out to us on what what needs to be done and how much risk is there in this project.
Thank you Vijay great great Great question.
So on the storage.
The way I look at it.
Three components.
One is the bottom side of the <unk> ships of the <unk>.
Demos.
<expletive>.
Then there is the.
Hopefully.
The silicon chip.
The DNA is.
And then Dave.
The chemistry.
That's we're going to deploy and then we have to get all of those three components to work together.
So.
The.
The seamless.
Section, which is very.
Very complicated the advent.
Speaking of technology.
Is.
They read.
Similar from the ultra cheap to debate that chip and so getting it to work is this massive confidence falls, we'll debate that chip.
Then what has to mostly.
Get developed from the outside to debate that <unk> totally.
The city can chip.
<unk>.
From Alan that is substantially less risk and then one now that we have been able to get the cheap working at five micron.
Well.
Yes.
In the final stages of debugging of one micron.
One micron.
Chip.
We think its we believe it would be.
Relatively straightforward to still take some time, but.
A lot of.
Mkay records that need to happen it's just.
Use engineering.
To go from the outset is better.
To put things in perspective.
<unk>.
The typically have is thats, one micron pitch.
And we have $256 million.
Gotcha.
Chip.
And just.
In the recent past one of our competitor.
Great released Paypal, but their progress on on the storage.
So you can see beds and 256 features.
We have 256 million features.
And feature sizes of 100 macro.
And obviously there is one background. So hopefully it gives you the.
<unk>.
The leaps and bounds.
We are.
Leaps and bounds.
From from.
Okay.
That's helpful. Thank you guys.
Yeah.
One moment.
Our next question comes from Luke Sir got with Barclays. Your line is open.
Yeah.
Hey, this is Jake <unk> today, thanks for the question.
So on factoring in the future can you give a sense of the backlog reduced that youre seeing there and how quickly the new capacity is kind of fill and contribute to revenues will it be all at once or in stock.
So I can start thanks for the question.
Turning to the future.
We're going through qualification right now and we anticipate.
The rest of this year.
We will start to do the <unk>.
Initial debugging and testing and running initial runs so.
So we don't start shipping revenue until early next year.
This quarter with real solid solid quarter in terms of orders and since <unk>, we've increased our capacity in San Francisco.
So we are well poised to grow the business.
We're really well positioned to see the impacts of the pace of future.
Next year as we start to record revenues in January 23.
That's really helpful. Thank you and just one more if you don't mind could you update us on what's going on in China, and what's happening there from a share dynamics, how big the businesses and what the mix is like.
Yeah, So for China, we had.
As Windows is an earnings call it not a strong quarter in Asia.
So China business with revenues about $1 7 million.
Slightly I think it was.
Flat with last quarter of last year last fiscal year revenue for China was $4 million this year anticipating revenue for $7 million.
Although obviously the Chinese market has been impacted we've done an exceptionally good job of being able to service our customers.
We'll continue to be optimistic about our opportunities in China, and Asia, where we're doing extremely well in terms of gaining customers in Korea, and Japan are come.
Countries.
That's perfect. Thank you so much.
Yeah.
We have a question from Puneet <unk> with SBB Securities. Your line is open.
Yes, Hi, Emily and Jim Thanks for taking the question. So just a couple from me.
Biopharma.
Given the cancellations that you're seeing and maybe fewer customers given the smaller biotechs.
Think it pushes out timeline to get a product into the clinic or into the phase one and then.
More importantly, what are you doing in that business now to Australia to ensure that you would strengthen the funnel then coming funnel for projects again, because I assume that.
The guidance reduction that you have is related to that but there were a number of other smaller biotechs that are under pressure that are.
That could potentially cancelled.
<unk> as well so just wondering what are you doing in that business to ensure that you have a stronger funnel and for 2023.
Well. Thank you have a great great question. So the first question.
It.
Delays.
In the kidney.
Yes.
As a reminder, once we are done with our where we give the antibody.
To the system.
The preclinical development and then it goes into excuse me.
So as a reminder, we don't have really any any impact at all.
On the timing.
Of those programs.
And and we don't have.
Lots of lots of <unk>.
The ability to that.
However.
We do know that.
It's very close from going into the clinic in.
We look forward to.
Celebrating that that milestone win when it when it happens.
It is possible that some of the partners.
We've got we've given back <unk>.
We're planning that's we're in the process.
It is possible that that.
Some of those programs have been rationalized.
Again, we have <unk>.
To that.
And then second question in terms of what are we doing.
Actually we have a bay.
Nimble.
Bleeding edge R&D team, both in Biopharma and coastal Cisco as well as in tweaks Boston.
In Boston.
<unk>.
Based on the recent.
Dynamics in the market today.
Really.
Developed slightly different product offering.
That.
That leverage all of the infrastructure that we have.
Slightly.
More.
In June we with what researchers are looking for at the moment.
Especially twist Boston.
We have new offerings that were maybe.
The cost.
Cost of what we're offering is it needs to be.
So the customer.
Interestingly when we look into the process.
Better margin.
<unk>.
And early indications.
<unk>.
But that is resonating with guests and so there is an opportunity to maybe get a little bit less revenue.
Perfect.
But.
Some product lines. In addition to its where is the AD that is.
Potentially with an 18 four.
A.
Market.
Newly price sensitive.
So well definitely.
<unk>.
Continuing to innovate.
Very close to what the customer need.
And their needs and be able to respond.
Best in class services.
<unk> two different chic need and that should step budget and that fits our financial milestones in terms of.
The margin profile that we want to achieve.
Got it that makes sense and then for <unk>.
Jim I mean.
Jim on gross margin came in strong this quarter you're guiding to.
Number that is higher than what we had for the year. So I mean, when we think about factory of the future coming online should that impact gross margins at least in.
Initially in 2023, and how should we think about gross margin cadence here over the next couple of quarters.
Yes, so good question Puneet.
Yes, I mean, as we launch the practice of the future we're going to have under utilized capacity that will impact gross margin.
Your line of sight to scale the financing future as quickly as possible.
And when we're targeting $300 million revenue adjusted EBIT breakeven range gross margin target is about 51% as we continued to scale. The business. We're looking at gross margin range of 55% to 60% I think.
It is notable this quarter that we achieved gross margin of 45%.
When you look at adding back depreciation.
Stock based comp.
Can figure out the math for the cash gross margin. So the setup is extremely strong for us I mean, our goal is to scale a factory of the future as quickly as possible, we haven't broken out the guidance for next year yet.
We will do that.
On our earnings call our next earnings call.
Got it and then on the EBITDA guidance towards $300 million does that include only just to be clear it doesn't equal it's only mgs ensign bio.
Yes, so so as we said in the call that's for Ngls and send violence of core business $300 million.
And <unk>.
Also we are targeting adjusted EBIT breakeven Thats 80 million for our Biopharma business as well.
Got it okay alright. Thank you thanks guys.
Our next question comes from Matt Larew with William Blair. Your line is open.
Hi, Jim Hi, This is Max on for Matt I. Appreciate you taking my questions I wanted to follow up on Bj's first question, specifically asked about the massive gene shipments number. This quarter is there anything that we should be aware of there in terms of large one time orders and then.
In terms of guidance for <unk> revenue in 2023, your updated guidance for this year I think costs were over 50% growth you've been pretty clear that you have the potential to grow twice as fast as the market. So is it fair to think about <unk> potentially being up close to another 50% next year or just in general how are you thinking about the outlook for <unk> moving forward.
Yes so.
Let me go ahead Ryan.
Well, maybe I'll take the first sponsored bigger second pump.
So on the first bump on the on the volume.
If you recall, we took the capacity.
In two <unk> one is total capacity and then the second is surge capacity and.
Yes.
Managements, which we have to do is predict William.
And we can see.
A few quarters ago that.
Not only the total the total demand was growing but the sort of the sales demand.
We're big all of those once in a while coming.
Well were happening and.
So that's why we decided a few quarters ago to increase capacity in South San Francisco.
Cool.
Before we had the effect of this is true because we knew that.
If we didn't do that there could be a point where we.
You may not have the capacity to say, yes to those big orders coming in and so that's what I think we do whether the management team is anticipate the need and execute really well and so that's what we did.
The team.
Build that extra capacity.
And indeed, that's what happened that way, there's been a few big orders coming in.
And those are very lumpy.
Grateful grateful.
Thanks.
Multi <unk>.
Fixed cost and we're able to take them.
And then ship them in.
Great turnaround time, and so the expectation is that this will this will continue.
How to predict are they going to come in this week or three weeks from now but.
No there is.
Multiple <unk> mill.
That that come in.
Regularly.
Big Auto so that's one of the things.
<unk>.
Again, not just the total capacity, but the search capacity.
Turning to you till the second part of your question.
Yes.
So Mike maybe just.
I mean, we are the low cost provider in the market.
When we bring on frankly a future.
Very fast turnaround. So this macroeconomic environment is a great setup for us.
Nielsen Bio <unk>.
Interesting sitting by orders year to date of six 6 million.
As Emily highlighted we have increased capacity.
San Francisco and we're excited about the potential opportunities to continue to scale up in factory of the future and really bringing a tremendous platform to the market.
So.
You're right, we're growing twice as fast as the market.
Uh huh.
I mean, our view is that we're going to continue to aggressively expand.
Got it. Thank you both for that color Thats very helpful.
I wanted to turn to Ngls, Jim I think you mentioned during the call that the strength in <unk> was driven by a pickup in liquid biopsy revenue in last quarter. You had mentioned that youre working on more than 20 companies developing liquid biopsy test just as a first part do you have any update on this figure in terms of how many companies you're working with today and then.
Any detail you can share around how many of these customers are actually in production versus pilot in validation and what have you learned about how volumes from things like a biopsy develop scale over time as they move towards commercialization.
Yes so.
Very strong quarter and as we highlight the second half of this year.
We're going to see a step up in Ngls that happened in Q3.
And that was driven primarily by liquid biopsy.
Number of customers, we're dealing with is roughly around the same.
And the overall setup as we continue to expand the ladders.
Our customers were dealing with the number of adopted continues to scale and we're seeing tremendous opportunities in all of these new platforms coming in the marketplace. What that means is there's more opportunities for twist.
I think the setup for us.
Yes, well, there's liquid biopsy or other applications.
Is really is really looking good.
I mean, we've got great product, we've got a great team and.
It's really nice to see that our business last quarter and $50 million and we're very optimistic and task those businesses going.
Got it thanks again for taking my questions.
Okay.
Yes.
Okay.
We have a question from Catherine Schulte with Baird. Your line is open.
Alright, thanks for the questions I guess first on Ngls, great to see that ticking up there were there any one timers in that order book or in revenue for the quarter and then guidance.
Our guidance assumes that revenue there was down slightly quarter to quarter. Despite the uptick in orders and Jim. It sounds like you said some of those orders turned into three key revenue, but any color on the moving pieces there sequentially.
No there was no.
I mean, there was a pickup in terms of the business.
By customer we did see some large orders come in but that's driven by in liquid biopsy and that was driven by the nature of the demand from those customers.
The small sequential decline in Q.
Q4 from Q3.
I mean, thats really driven by seasonality.
And.
Mainly driven by seasonality in EMEA, so just being prudent in our guidance. There we did see a big jump up from Q2 to Q3 in business and.
The pipeline continues to scale.
At the same time, we're being prudent in our forecasting.
Okay, Great and then I was hoping you could give us some more color on astellas out licensing agreement.
What are the next steps there and any key steps in the timeline that we should expect to hear updates on how that's progressing.
And then maybe I'm jumping to the business.
Net sales have been agreed to and.
So now.
No we are doing biology.
We're doing the <unk>.
Work.
We do a twist and.
Sure.
The past the next steps from a scientific point of view is extremely well defined and has been extensively agreed to in the contract.
It's all about going through those scientific steps in delivering the milestones.
We agreed to twist the lesson.
So Scott.
King So model three milestones.
So we're very very excited about it.
And it's.
It's a great template for what we want to do more.
Okay.
Great. Thank you.
Yes.
We have a question from Steven Mah with Cowen Your line is open.
Oh, great. Thanks for taking the question a lot of ground already covered so I'll keep it quick but yes, maybe just to continue on the astellas.
Since the agreement just wondering how how is your pipeline discussions evolve post the <unk> given that it was.
Validating partnership in a hot area in oncology is that increase the number of Vin balance you guys have been getting.
Yeah. So we've had.
The robust business development.
<unk>.
Team and.
Our approach to adding more more like a stellar.
Q4, some of the industry conferences.
First time.
Last year in 2021.
Significant presence at <unk>.
We did that again.
This year and so as you probably know BIOLASE.
Well a lot of those business execution.
Business development.
Institution around deals happen and.
We can definitely see.
That.
The level of engagement gets more and more robust overtime and differently.
It is a great thing.
Two.
To engage further.
We partner with different on oil targets.
<unk> targets that we have.
Okay, Great. That's helpful. And then my second question is.
Given the macro environment, where people are trying to conserve cash.
Has that impacted the calculus.
Partner deal structures that is are you seeing less less upfront payments for instance, and then more backend economic way.
What kind of trends are you guys seeing there.
So that's not that will do that.
Well that's in the business of subsidizing some of it is.
So so far.
We.
We have been.
Steady in.
And the pricing and actually had a pricing increase from last year to this year.
So.
We haven't been trading.
Gross margin for.
Don for more.
More downstream later with not being due debt.
<unk>.
I don't think we have any plans to do that.
Okay. That's really helpful. Thanks for the questions.
Yes.
Thank you and there are no other questions in the queue I would like to turn the call back to management for any closing remarks.
Thank you very much for joining yesterday.
Our team continues to execute across the board and we have a tends to adjusted EBITDA breakeven with significant opportunities in some bio engineers biopharma and as such we look forward to seeing some of you into some of the UBS conference in Southern California, and the Baird Conference in New York is that we have clinical thank you so much.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Okay.
Yes.
[music].
Sure.
[music].