TWST - Earnings call transcript Q2 2019 | Twist Bioscience Corporation

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Operator

Good day, ladies and gentlemen, and welcome to Twist Bioscience Fiscal 2019 Second Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to Chief conference Financial like host, to now Thorburn, Jim Officer. would turn over the your I

You may begin, sir.

Jim Thorburn

call of for Twist. All With Twist available Leproust, at and Co-Founder right. you Bioscience Emily www.twistbioscience.com. milestones XXXX report direction. upcoming today thank on the CEO financial review Please milestones is results release everyone, a then afternoon, is today's our and conference business financial second Twist business discuss quarter Thank operational and you, which for will we of will website Nicole. joining Emily Dr. issued at Emily Good today, to our fiscal review review of me progress. call and I on progress with our our will performance, press us begin and overall earlier and

for open call We will the questions. then up

will the weeks. archived this of our As will portion a being and be available audio reminder, recorded. Investors section The be call for in is website two

During today's Law. make the within Federal statements of forward-looking the meaning Securities presentation, we will

financial statements future future relate operating performance. to events or generally Forward-looking or

now Co-Founder, in forward-looking our call SEC. as the actual to from Our to as Leproust. any hereof and by financial include results as that Chief the to to periods subject today, disclaim well statements The in we may in and presentation beliefs our Emily risks available these date any described those I over those materially Executive those With us the to results that, projected. cause required with forth materialize These filings and earlier the information and set are could differ regarding expectations statements not more except release update issued and and will law. actual uncertainties obligation based matters of risks Dr. fully turn press this are forward-looking as on we

Emily Leproust

$XX.X million, strong another in growth driven genomics and both of reporting everyone. by our We've synbio quarter, Jim, revenue afternoon, good had and strong you, very Thank line. product

positive achievement company. quarter first In addition, significant a posted a our young with margin, gross a we for

to the top We are building of are Beginning see synthesis on silicon-based year increasing course DNA as continued momentum, continue and guidance growth to over with and growth this for the fiscal to our platform, and consistent expect are we line leverage synbio, deliver that XXXX. revenue we that now our they be by customers, that competition. average turnaround we faster but cycle the to price heard talk and when slower XX-day decreased time product experienced market. than were than our we It our used we the our broadly our loved continuing to

the Now, have the price, we offering for time. routinely and that we rapid quality, affordable best turnaround hear great

this In of days about was X other lengths, XX all fact, our even kb quarter gene average for turnaround genes X.X XX days and to kb. up time for the

continuing very On surprise the to in of of same numbers, second XX% long customers X.X increased capture ago turnaround number our times by the XXXX a differentiation. strong fiscal success year quarter-over-quarter, strength quarter these orders to and of the that time compared it product tail increased reflecting quarter is the the with no of in

needs fall-to-winter support As more new synbio new believe which several the follow-on we the includes in address growth plan will need synbio, we in market, introduce to In market. designed to of for move drive this products forward products XXXX. our the the we in improvement of timeframe, customer will

compared with first our quarter quarter continued product, represents target to accelerate several to we potential AGBT customers, changer little revenue XX we million and way targeted quarter enrichment of We over We same the a which this launched revenue For XXX% industry. Bolstering $X.X compared shipped production. coming fiscal of now a in for Conference in of XXX our FastHyb, at than hours second again hybridization with genomics XX to XX this offering, more XX% the the quarter-over-quarter. products growth as these in see NGS, growth, February. end new game XXXX, from ago introduced the to one of during to year the previously, products as and customers minutes

In addition, of several automation of for all we samples. products and types introduced designed high-throughput analysis

several panel. our experience As part customers using of AGBT, we had their present

reducing Helix, analysis customers. with partnership capture targeted genes. a offering XX Helix to for that of their From benefit SNP During this for can of will this an this that than and example affordable. who the This sequencing exome were such biopsy. test all made SNP to target sequencing but, XXX,XXX analysis about in switched production information thought physical is cancer are NovaSeq to spoke panels. genomics products biopsy, genomics a it of was with provide testing with we area Broad use they a microwaves SNP been and Institute initial rather bring. plus have per need PerkinElmer and They of content we enrichment definitive more a through Initially, their AGBT, to cost would to past, have announced a a is significant our customer needs. Broad with from demonstration our reflecting sample, ongoing are for the course, $XXX commercialize sample switch. with $XXX This a test probes. new samples with value, Twist we using excited that the liquid Twist their our switched our is done innovative savings down the they leader all-in announced supplemented converting about second industry and covering in at forum, product of the resonating In has great conversion cost to exome the now sequencing Twist and their significant quality, recently develop and our the project, also Twist blood of bring exciting a

done we remain launch synbio, and market, to into to track several genomics e-commerce the our for week. platform have on we next e-commerce scale reach leverage business, our will the we products increasing for As genomics

strongly orders of the $XX.X our quarters synbio remain ahead this genomics Looking next for at at and ahead core outlook remains quarter revenue strong. the businesses, revenue and million

beginning actionable gap in to We the orders now that revenue, booking come we sequences can than between sequences an with of a to into and immediately portion orders close just order since bigger with are rather come later. turn revenues

early a our both in month Moving to library data verticals, April, Boston. antibody biopharma. we've at for for active on presented our proof-of-concept PEGS team GPCR had and the antibody solution In technical optimization very

in we multiple cell develop we the different we antibodies that range. exhibited library, antibody readily that allowed can of these action activity. GPCR And modulated For showed modes showed minimal with antibodies affinities to

with antibodies or In and improved compared for demonstrating cancer we presented affinity, to solutions market anti-PD-X antibodies commercial binding, data addition, function therapy. our successfully generated antibody when optimization today on that similar anti-PD-X the

agreements biopharma April. this We for have vertical signed two

collaboration existing strategic discovery LakePharma, and have is first future appropriate to customers. The with the the platforms to ability we where their and optimization

our LakePharma's later addition, can services. development discovery access and In customers

to the of may agreement know, LakePharma has entire application. customer created robust allows extending reach through the capabilities from through at you network CRDMO. joint the while time leverage As a the the IND development process, same discovery This to as robust customer us LakePharma's base leading

our to excellent and are we optimize antibody bispecific one partner, the partnerships. us In are are better for antibodies. larger demonstrate solution with providing parallel target our showcase building the benefits. optimization to a its for work we a an package of we on targeting Pandion to with addition, their working disease, Therapeutics, focused arm is This opportunity autoimmune private inflammatory of company In and

a we viable While some value to to do partnerships, expect for to this pathway create long-term these it our solidify shareholders. believe take is time we

Finally, in to in approach our was high encouraging, for innovative of presentation interest discovery optimization. response official vertical levels very of silicon-based DNA PEGS, the at antibody our and with launch our biopharma writing

non-directed on data Turning negotiations funding have we to pleased a contract to into data storage. storage, report entered that we through DNA government are for

While moving there is months, as are we larger we we take San rapid this in that we are facility a will negotiations our Francisco. and accommodate next to announced, step. about expect previously funding believe positive this a receive to six under South while growth, guarantees contract, To manufacturing no

support any will or we interruptions For equipment phases. in do in customer as time, ordering, our this not genes, transferring anticipate during we be manufacturing, shipping,

interruption we will which NGS, materially product time do differentiation. turnaround a our in production affect not For anticipate one-week

be As the China, to it our expect part of our ISO-XXXX:XXXX out the have in will ISO-XXXXX:XXXX new are of of we building needs. expanding XXXX. and fit and in space the In already certification calendar and we physical completed the we facility, move early fourth quarter audit the to the to process scheduled be

calendar the space this with XXXX, the manufacturing in expect will of be initial from beginning shipments this ready fall year. facility We

for China adding We Chinese continue believe market. us this China allow rapidly that make in enter to a to will facility DNA to

biosecurity used for Thorburn, CFO, in Battelle's leadership like screening is our continuing to protocol, responsible With for over that, call ensuring ThreatSEQ Finally, our I'd turn we the review research. Jim a added service our financials. our DNA of our to to synthetic position

Jim Thorburn

Thank you, Emily. right. All

this results well. were as aggressively quarter business are we Emily million. confirm the Revenues, highlighted, our Emily executing XX.X As growing noted, and

Our orders. commercial booked we and in team continues XX.X to million deliver

was quarter X.XX X. for book-to-bill Our to the

XX half million. first were almost orders Our

now our Our Ginkgo. gross customer quarter margin We're synbio for XX% positive beyond expanding positive margin reach gross and we're extending base was the and year-to-date. our

XXX thrilled and to customers quarter in we announce For X. from customers approximately to in we're example, that XXX we shipped had over bookings quarter also the

Just remains our to customers. shipped Gingko XXX XXX note, more in customers. we we to than And for very solid. And half, first XXXX, shipped the business

provide XX% quarter. XX%. sequential, orders of me more year-on-year let and million details the for our represents Now, growth on XX.X

genes, including synbio million Oligo were the as which pools, Our orders, quarter, XX.X for is defined and Gingko. libraries,

of synbio and million, XX%. year-on-year orders rose X.X sequential growth in growth of Excluding Gingko, resulting XX% to the

the Our strength both genes coming good, strong and genes. million, from X.X with and doing with we're well, orders markets, is longer US orders on EMEA business seeing of

from X.X the growth of one. for and the quarter million orders Gingko X.X Our in XX% quarter up million, were representing

call, As synbio we our will we Gingko on last scale our continue percentage to of as to genomics a our revenue as discussed business. execute and total decline

I our perform NGS, business, and genomics Our continues which well above expectations. to will forecast to as refer very

opportunities an order It's stated, million X.X and and booked $X one orders. advantage did for X.X of Emily million in quarter masked our QX, of approximately of XX strong total for a pilot we everybody the orders to quarter two. order continues business not the customer X.X of announcements orders competitive in As XXX as AGBT confirms growth. orders from received up accounts, included place bookings from in sequential demand NGS products one, is orders in validation which are we're one have our to for reminding customer build and which The million worth quarter quarter accounts million continue NGS scale We seeing strength stage. pipeline robust into our we clients. and in this a at currently our in NGS two larger we in XXX and translating in and

larger our previous In XX, addition, discussed the to adopted the more on bringing total customers tools, NGS adoption XX now six the up we have from call.

our optimistic the APAC and pilots increased about we're scale million. the and the Over of do paying regions, year, EMEA and at million. sales quarter bookings and investment future. last X in the Quickly, well NGS We're in highlight scaling to have and progress to continues a business our business this record on the were is very X.X and we supporting off. making operations investment great results data bullish

provide we following lumpy to product quarter, Just win the do are strongly, I'd revenue Currently, continue orders be NGS synbio trend provide but large Gingko we line expect a not into orders for that like each both group. NGS note to and growing and quarter directly to as to we although briefly, for orders. to quarter to more translate

Now, revenues. I'm to going discuss

growth to in moving million growth sequential from brings the revenue as from We more million XXX% of quarter XXXX. revenue first revenue scale of half growth was million the coming than year-on-year million non-Gingko. revenue. X X.X million by 'XX. in the from and So, products first half doubled million XXXX. of half revenue to the 'XX we to of this of from orders This rose two, first million million from XX.X X.X in 'XX. of to accounted Synbio million of Note, Quarter X.X compared half million, XX.X of our two the X first-half for the in the the Gingko X.X first NGS XX% 'XX growth. the bulk of XX.X is in growth half in XX business with to first million X.X the from

last to Our X.X and was X%. a of year, second revenue quarter same representing genes, compared approximately just reminder, and includes million growth synbio Oligo the -- a that period XX% million in libraries X pools, sequential of -- growth

decreased million from anticipated, million. X.X X.X As Gingko

The million, growth X.X fell was of XX%. revenue up XX% sequential to compared year-over-year of with share synbio XX%. approximately to which was revenue Gingko, Excluding Gingko

up to just synbio clarify, XX%. X.X of revenue the by So, million was approximately

seeing in non-Gingko. growth we're strong good, So, synbio, really

sequencing next-generation are two quarter products customers Our for revenue well, of XXXX extremely generating doing our in adopted. launched in as million X.X more

Our and our an and continue first-half X.X are projecting we and million excellent NGS job synbio customers was summary, to are in scale. revenue our strategy. NGS we doing revenue will account expanding customer our executing In

Turning quarter from revenue million to quarter up US, growth $XX.X revenue, driven regional primarily global APAC compared with to which now EMEA, US was million two, in commentary, by million the million XX% in which in growth previous quarter, quarter year-to-date. That's our to the US The X.X one. X.X of brings was revenue. see million in revenue accounted the the in fiscal continued we X.X quarter. X.X million in strong in to X.X for for

healthcare, to sequential growth, reported XX%, addition due X.X quarter see in revenue an increase of sector. NGS. for increase the a million global In healthcare approximately revenue of from our the to We we primarily executing coming in

of we second P&L, And and of would call we in quarter gross margin excited delivered the last earnings down positive this XX% sustain margins revenue. the margins actually that in mid-teen that through of positive very we'll gross 'XX. anticipate announce moving to our projected Now, million we X.X half we're fiscal our be

million This and we R&D the to XXXX increased million, increased X.X including and increased XX AGBT, accelerate second Emily the R&D products, development excluding with quarter, the to our as reflects associated increased first. to the development. million compared XX.X as product fiscal investments QX, million product scale Our particularly quarter for storage, commercial our to increased in data NGS costs our product to XX.X XX.X continue shows, operating in biopharma, up sales quarter, from million second quarter. of X.X including in we invest customer million the revenues, we Sales from and mentioned. continue cost marketing and pipeline the in FastHyb first first new as compared support. costs, organization, to SG&A launched in to trade in

position summary, the we ourselves from marketing in million was previous investments. net increased loss touching XX.X as doubled on for of have over and sales for cash We our loss strong organization growth. In and quarter, the quarter up a balance year last our had million investments reflecting our sheet, we continued the XXX Quickly XX.X million, and strong growth. the short-term

we guidance products million, NGS to as XX demand to non-Gingko XX to million, highlighted, to customers XX to seeing our million XX X experience to approximately growth to approximately we're for volumes. NGS XX revenue be estimated our scale start million. XX strong momentum million to robust to fiscal of to and estimated XX be we for XXXX, which range synbio, compares XX production increasing continues our is highlighted. and million Consequently, to are Moving million a as million to to previously is X Gingko million, million guidance

net loss the million million, the previous Our million. to XX XX of is for up million to year guidance XX guidance XX from

growth new commercial increasing consistent as future increased We additional technical offerings. accelerated field, and offer organization our net and in improved reflects strategy R&D, in strengthened. investments products reflect our to support investment our in support loss continually is in with to are sales confidence also guidance the our It to

of farm we addition, gaining is our buildout summary, our top R&D China efforts executing. traction line we're delivering our facility. and the expect gross and San We're growing plant at In incremental with positive consolidation operations our Francisco and associated facility South In costs and margins.

near benefit base NGS will term. in customer are are we long term turn call over our I the investments growth significant ensure Our from products will is customers adopted, and to the strong continue our scaling, for and positioned being our make back continued are With products, Emily. seeing that, to to we

Emily Leproust

we you, several calendar milestones aggressive achieved the Jim. at and Thank already. We XXXX have of end set

the production, share focus roadmap continues both increasing synbio our guidance. into genomic introduction products momentum and move Similarly, market convert second we meeting we improving of expect are as current in executing business, focus solution on and we As into grow take in revenues our continue reach next area. to to although for our pilot revenue this new in we and service the and year, on continued our updated Jim as accounts market have implementing our needs with We're into in in market noted, our genomics fiscal we accounts XXXX. genomics, on half and pharma launch we we and product expect the into the a week. the several Overall, continue of the e-commerce synbio to revenue moving

NGS We in are to we relatively fiscal sizable than of first faster growth and some pleased were half in with our the able the anticipated year. orders convert

some to However, revenue lumpiness our ongoing the we want full-year half some expect into projected genomics going and year. in second of the in the we do business conservatism maintain

for For intend in to generating and to signed biopharma, package we completion for let's PEGS launched we that in process that, April questions. months. the look data drive storage, agreements the use partnerships. we seek LakePharma non-directed call In continuing a contract to and forward officially robust Pandion. Operator? in we of revenue-generating We're data the at expect up with With six to next it financing open the negotiation and the to

Operator

first J.P. from Peterson from Tycho comes our And question Morgan. Instructions] [Operator

Tycho Peterson

some was this just Hey, thanks. on Can volume much margins. maybe improvement leverage you with efficiencies? I'll gross there. Nice of maybe versus start manufacturing how touch Maybe just

Jim Thorburn

manufacturing a of A and it efficiencies. volume combination is lot of

is our down, efficiencies. our manufacturing As we've costs NGS which NGS, seen scaled come driving we've

business provide margins. consolidate goal look we'll the way at And I get grow to think, new will our over that gross our to we the in efficiencies. facility is, us Tycho, that mean, time, is the as once I at is to XX% expectation we give San the South grow more we opportunity -- as Francisco,

Tycho Peterson

just can versus Jim, manufacturing? is investment. incremental South then, versus figure here much out you is maybe And calling San disaggregate much to the out operational how R&D I'm R&D versus China Francisco of incremental you're how spending trying

Jim Thorburn

the $X X.X in China, for quarter. In for about that's San incremental. South X got to China of we've the million about Well, of we're impact million, in terms Francisco, next a million forecasting range in

terms in we're going bit incremental the forward, next months, launching some also see R&D pharma going NGS and So, investment we're in six well. of to the products little a -- space have more we're investments as over we new

So, is the pharma and the spend roughly year million $X be for to million. between going $XX

Tycho Peterson

-- Okay. guess, you traction NGS it talked think for kind validation? and you What for and forward? baked pilot so to of takes takes those do prep And Can Emily, convert with in I accounts XX about to NGS, think, into what's on talk I what guidance about, then convert good going you far. you sample maybe think it

Emily Leproust

pilot far, really every so goes So, well.

XX launched scale-up the and and pilots those it's to we've move so think I time question pilot really from a pilots validation. to of

previous have And they sometimes companies. have reagents on that to the shelf burn customers from

been quarters the continue broader team should to full we nurture those to the market. many to four more to have toward that And And to tool strategy the of pilots so, us as new to for us, it reach accounts e-commerce production. has revenue pilots the go this part enable takes generation. knowing And add, to make sales to into have continue that addition of that of we three two as ongoing, those the sure

Tycho Peterson

last go And -- ahead. Okay. then one

Jim Thorburn

growth for between to we once going And, Yeah. goal as we're XX obviously, very year. be through pipeline, San highlighted, we're mean, very and is I our seeing roughly forecasting and million this in strong under-promise NGS. but $XX million to well-positioned over-deliver the Emily NGS we're offer get Francisco strong move, to and

Tycho Peterson

I just one, one on last guess, Okay. clonal And then genes.

now about a evolving that really do we how out going on rolling that you're kb? X forward kb, X and Just X,XXX, you think kb, If question mix X mix. see

Jim Thorburn

Yeah.

X were about million. it's Tycho, that quarter, in terms of the roughly million. kb X.X X going that, X X this kb, genes Of total be million So, to and of

genes be is to roughly So, of kb. X going XX%

Operator

from our from And next you. Thank question Doug Company. and comes Cowen Schenkel

Adam Wieschhaus

on questions. Wieschhaus Hi, guys. Doug. taking my This Thanks is for Adam for

expect with from I will How scaling for next launch week. you think on important in think to mentioned but help platform And, of timelines, do phase Thanks. this You production terms NGS to Emily, all? e-commerce driving at you you could volumes? your this, pilot be you for touched also

Emily Leproust

us we That's can It question. what looking that's at a are touch. increasing the number are accelerate number from if to and we pilots we increasing the but number the the for will of conversion to help pilots. great with production remains pilot of to customers looking Initially, be it seen are for. a looking it we of is What not

Adam Wieschhaus

the fragment to gone extended on X gene and And place of in that the gene and product the awareness adoption side the you kb early of put length? of initiatives side, any clonal ordering have drive as things, has expected

Emily Leproust

think XX the significantly I but we genes, little genes, than we XX lot X than at On market, we is, what market. which time faster can days faster a other is the days, on are a in shorter for kb, kb, mentioned, the faster. are X turnaround do companies the Yeah, bit as in the days, XX long

the is The rate turnaround great. time So, high. success is

how saying you same. are And they they know they don't of nicely are do the how experience then but next if I operationally, really experienced to spread unprompted examples few our with are because has a in that and So, by others which encouraging are follow that the start us customers, come what long Twitter much to and like doing the we there's set word. customers really customers up well happy account us, been on quarter genes, the happy back

signs the think I So, really positive are and encouraging.

Operator

Catherine from [Operator Schulte question our Baird. Instructions] next from comes And

Tom Peterson

bit big I after know I the general, in a biopharma but Hey, just thanks. the interest team little Peterson PEGS This Catherine. how for forward? touched on Tom wondering, you is guys pursuing opportunities was is those in your conference, around going on actually

Emily Leproust

in team pharma are people Sato. Aaron drug the on led our by and and development experienced that discovery drug the So, highly they side are XX is CSO,

with further package doing developing work us we data sign And will after so in be scientific And the partnership the we're that the that the partnerships that will signing. to enable they're team even also larger opportunities future. on go

Tom Peterson

then of around And agreement we just project? the Thanks. update? When around sort timeline just get in Great. on Pandion economics And that some specifically, your type might what's that general, collaboration? what are the of

Emily Leproust

this reasons, partner not So, the competitive we to for we'll the an are leave And update economics. at provide project. sharing timeline time, or you to on

Tom Peterson

Okay. maybe. one thanks. But Well, I more understand.

on I had out it -- that different? negotiations can't quarter -- began pointed this Is grant something the the storage contract you last remember You or guys you side. data is IARPA this noted these if had was Thanks.

Emily Leproust

about Yes, bring It we excited non-directed and substantial that earlier. some could we're one grant That's you funding very are is to mentioned correct. that the IARPA us.

forward. are I it's we we misspoke. It's a are that So, pleased very grant, moving a contract. And not

Operator

time. you. Twist further I'm remarks. showing for questions further CEO I Bioscience, and to would call turn back this like any Emily And Co-Founder of Thank now at not any to Leproust, the

Emily Leproust

Thank you Nicole. very much,

Thank moving write that continue will, execute DNA will plans our much. and future. the We forward our so to indeed, on synthetic you believe

Operator

participation gentlemen, This conference. you Ladies and in for program. concludes today's thank your today's

You disconnect. great a may all have day. Everyone,

Twist Bioscience (TWST) 4 May 192019 Q2 Earnings call transcript