Ladies and gentlemen, thank you for standing by and welcome to the Fiscal 2019 Fourth Quarter and Full Year Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions].I would now like to hand the conference over to your speaker today, Jim Thorburn, Chief Financial Officer. Thank you and please go ahead, sir.

All right. Thank you, Chris. Good afternoon everyone and thank you for joining us today for Twist Bioscience conference call to review our fiscal 2019 fourth quarter and full-year financial results and business progress. Please review the press release we issued earlier today, which is available at our website at www.twistbioscience.com.With me on today's call is Dr. Emily Leproust, CEO and Co-Founder of Twist. Emily will begin with a review of overall progress on Twist businesses. I will report on our financial and operational performance and Emily will discuss our upcoming milestones and direction. We will then open the call up for questions.As a reminder, this call is being recorded. The audio portion will be archived in the Investor section of our website and will be available for one week. During today's presentation, we'll make forward-looking statements within the meaning of the 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 and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us, as of the date hereof. And we disclaim any obligation to update any forward-looking statements, except as required by law.With that I will now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust.

Thank you, Jim and good afternoon everyone.Fiscal 2019 was the year of continued innovation and execution. We shipped our product to more than 1,300 customers compared to over 700 in fiscal 2018. We reported record revenues of $54.4 million, more than doubled the $25.4 million in revenue for the similar period in 2018 and substantially more than our initial guidance provided approximately one year ago on our fiscal 2018 year-end call. In addition, we booked $70 million in orders, versus $39.4 million last year.And we were growth margin positive for the year, a tremendous goal accomplished which validates our business model. We reported steady growth in Synthetic Biology and exceptional growth in NGS. Our silicon-based DNA writing platform continues to provide significant advantages, not only in our revenue generating businesses, but also in our biopharma and DNA data storage vertical market opportunities.Our success in fiscal 2019 was due to two key factors, excellent products and our commercial execution. I would like to highlight our accomplishments for the year, and this will give you some insight into the future growth of our businesses.Beginning with our excellent products in Synbio, we shipped about 81,000 genes in the fourth quarter of fiscal 2019, compared to about 71,000 in the fourth quarter of 2018. In the full year 2019, we shipped more than 288,000 genes, all of which are unique sequences. This is incredible scale and we received 2.4x, the number of purchase orders which were smaller in size by about 60%, indicating that we are starting to reach customers in the long tail of the market.Even more importantly, we delivered 8 billion bases, if we include gene fragments, oligo pools and variant libraries as well as NGS products. That is a lot of DNA, but still a fraction of our future capacity. To…

Thank you, Emily.As Emily noted, the fourth quarter was another very strong quarter for us in terms of revenue growth and increased gross margins. Our annual revenue for 2019 was $54.4 million which exceeded our revised upward guidance of $52 million to $53 million. This represents another year of triple-digit growth for Twist.As we continue to grow our revenue and leverage our fixed costs, our gross margins improved and the margin for the year was $7 million positive compared to a negative gross margin of $6.8 million in the previous fiscal year 2018.We exit our fiscal year with a very strong operational performance in fourth quarter, revenue was $15.7 million, a sequential increase of 16% and 87% year-on-year. We booked $20 million orders, sequential growth of 10% book-to-bill ratio was 1.3 to 1 and gross margin for the quarter was positive 21%. And we ended the year with $138.1 million in cash and short-term investments.Now, looking at some of the details of orders in fourth quarter. Our NGS bookings had another good quarter of $8 million of bookings for the quarter and that was up from $6.8 million in quarter three.We received orders from approximately 180 NGS customers with approximately 40% of those orders from diagnostic service companies, which we categorize in health care. Synthetic biology orders of $12 million in Q4 was a 6% sequential increase over Q3 and 43% year-over-year growth. This includes orders of $2.8 million from Ginkgo.Growth was strong across all regions in Q4, reflecting our investment in the commercial organizations, as Emily noted, we scaled our resources there and field sales representatives and total resource in commercial organizations scaled up from 70 to approximately 120, as we have added technical support and customer support. We also launched a number of new products that are gaining…

Thank you, Jim.As we move into 2020 from a position of trends, we will continue to innovate and execute. For Synbio, we expect continued revenue growth and diversification as we introduce new products to meet the needs of both extremes on the spectrum of complexity which means researcher needing high volume, high complexity genes, as well as those with few requirements of gene fragments. In addition, we will continue to enhance our e-commerce experience.For NGS, we will continue our efforts to move customers through the pipeline from pilot to adoption. In parallel, we expect to introduce new products to meet the needs of those developing liquid biopsies and cancer research tools. We will also pursue additional applications of our technology within the SNP microarray market, including the DTC and high-bio.For biopharma we will continue building proof of concept that are packages for the antibody, we've generated through our unique drug discovery platform. We will continue to generate data for our Twist Antibody Optimization programs, both for internal use and for our collaborators. Finally, we expect to sign between five and 10 collaborations, some of which will include both milestones and royalties, more typical of biotech development partnerships.And for data storage we will continue to execute on our roadmap to increase the synthesis density of our silicon platform to reduce the cost of DNA writing, specifically data storage in DNA. And operationally we will continue to focus on increasing our gross margin, reducing turnaround time and expanding our presence globally.Overall, we are focused on moving up the value chain in all businesses and believe that it would be our unique silicon-based DNA synthesis platform that will continue to enable our successful growth. We see continued opportunities to invest in R&D and our commercial team in order to fuel continued medium and long-term growth.On the litigation front, side discovery has now closed and we are working to our filing motions for summary judgment, which will ask the court to dismiss Agilent's claims. We expect to file these motions later this month and we continue to believe the case is merit-less and intend to defend ourselves vigorously.To the extent the case is not resolved through these motions for summary judgment, we look forward to being in court. As you can appreciate, we will not be discussing the litigation in the Q&A, but do encourage you to read the updates on the Investor Relation section of the website.With that, let's open the call for questions. Operator?

[Operator Instructions] And our first question comes from the line of Tycho Peterson with JPMorgan. Your line is now open.

This is [indiscernible] on for Tycho. So firstly, you added 10 customers to production mode this quarter versus two last quarter. Can you talk about what drove the uptick this quarter and how we should think about the quarter-to-quarter cadence in fiscal year '20?

Yes, I mean, I think if you look at this business is really driven by customers of an internal processes. They've all confirmed that we offer significant competitive advantage. So they're advantaged to actually convert us faster. I know that in terms of the pipeline, we've extended the pipeline from 84 up to 88, number of customer it takes between 9 months and 18 months to move through the pipeline.And as we have looked forward, we believe that this is going to give us strong momentum going through this year and into - we're actually looking now into 2021, and feedbacks given the product reduces throughput time is great, great reductions in the cost of sequencing and the customers are very, very happy to accelerate the product through that pipeline.

And then in light of one of your competitors, IDP recently rolling out NGS discovery pools and probes at ASET. Can you talk about how your NGS sample prep offering differs and has it been or do you expect it to become a more competitive sale process now?

It's a great question. So I think when we launched our kit, especially in the area of custom targeted sequences, we had a few key features, one of them was the speed at which we could make custom panels and then the cost of that first experiment and it was not close, it was a very significant differentiation with the competition.And so that has been very successful for us and has been a key driver of the pickup that we've add commercially. I think what you're seeing is an attempt to a response, because those are two features that are greatly appreciated by the market. And our view so far is that we still have the fastest turnaround time and the best price focused on panel.So while it's an attempt I think it does not match the liabilities that are silicon-based platform offers.

And then just one last one in terms of litigation costs, could you talk about your assumptions in terms of the outcome in guidance what the timelines are post decision and whether the costs of an appeal are included or not in guidance? Thank you.

Yes, we don't break out litigation costs, as Emily highlighted, the case no matter and we're going to defend ourselves vigorously. Our business is doing very well. Our NGS customer base continues to grow strongly and we're going to be positioned to grow the business and drive gross margins this year.

And our next question comes from the line of Doug Schenkel with Cowen. Your line is now open.

Thank you for taking my questions. Maybe just to start off by talking about recent trends, given there are less than three weeks left in the quarter and one of those weeks has Christmas and it so that's usually not the most productive week in the quarter.First, is it fair to say that the risk for your fiscal Q1 revenue target is pretty low at this point, presumably you have a lot of that revenue in the bag. And then secondly, can you speak to order trends through the quarter. You had a very nice close to the year in terms of book-to-bill, the tone was quite positive, at least in my opinion, in terms of how you characterize momentum this quarter. I'm just wondering if you can say a little bit more about how orders - how the order book has built throughout the quarter?

Yeah order. So thank you, Doug. Order book this quarter, building very strongly. And I mean it's interesting when we're developing the guidance for this quarter, we've been watching that. You're absolutely right, there was Christmas and New Year in the middle of the week.We've given guidance, of range of $15 million to $16.5 million and because the order book is billing so strongly, we feel very, very good about the $80 million to $84 million guidance for the year, and particularly with the number of NGS customers that move now from - and now into adoption from the validation stage. So that's some of the thinking behind our guidance for this quarter. Does that help?

It does. And presumably, what you're seeing on the order trend side recognizing you didn't guide for fiscal Q2, but there is enough momentum there that would make it feel like if you're going to do what you think you're going to do in Q1, if you're going to see a normal step-up in Q2, that's kind of what shapes the trajectory of the year whether - it doesn't feel like based on what you're seeing in terms of revenue and bookings, but this is going to be an extremely back-end loaded year or something like that?

Well. That's right. I mean I think it's interesting, the number of customers grew, we're seeing real good strength in Europe, the feedback in NGS is great, Synbio had a great quarter. I mean, we shipped 80,000 genes in quarter four. And we moved, I mean, Doug, we moved into new facility and it's all very encouraging. We saw more of the longer genes shipped, definitely the platform, we've got a disruptive platform.

Super helpful. Okay. So I was just doing some basic and quick math. So, hopefully I'm not messing up anything here, but if I take your quarterly NGS revenue and divide it by the number of customers you have, the revenue per customer is going down. Now, that makes sense, because you're growing the customer count pretty rapidly and it's only a fraction of those customers who are in production. So I don't see anything alarming in that trend. I guess what, my question is, ultimately, as you move more of those customers into production like we saw this quarter, where there is a much bigger step up Q3 to Q4 versus Q2 to Q3. At some point should we see an inflection in revenue per customer as the production mix goes up?

Yes. So it's a good question, we've been digging into that. So the good news is the increased number of customers that means more customers are sampling us, more customers are still coming in at the front end of the funnel. The flip from validation from 26 is 36, supports our revenue growth. Last year revenue was $21 million, which was slightly hotter than I personally expected.We felt we'd do about $20 million this last year and a range of revenue this year is $37 million to $40 million. And I'm assuming, roughly 50% of that is going to come from those customers that have moved to adoption and we believe those customers will continue to scale. And so what we are now planning for is the 2021 revenue growth.

This has been another big year of financing activity across Synbio. I think a lot of us have seen data that supports that assertion, certainly for those of us who attended Synbio beta it was apparent that it's a growing field with a lot of interest from both end-users as well as the investment community.If we think about the amount of money that's gone into funding growth for existing the companies and the creation of new Synbio companies. I'm just wondering, obviously, it's a positive trend for you. But how do you weigh that in the equation as you set guidance for this year?

I think it's means interest and because we - if you look at, may be go back even VC funding back in 2018. And I mean I guess through this year has been very strong. What does that mean? There's more applications, more market opportunity and we have a platform that allows our customers to scale and I - and you just look at the number of customers, we ended up with over 1,300 customers and well there is a - I think there's a huge room for us to grow.And - whereas partly moving into this new facility, we are positioning ourselves for another year, as the guidance highlights $80 million to $84 million another year of strong growth and we're now starting to sharpen our pencils on what's going to happen in 2021 and biopharma is going well.So it's all - all of it leveraging off our platform. So, you step back, we have a platform that provides a great product that's going to allow our customers to scale. So it's - we are going to just keep our foot to floor and keep on the gas here.

Yes, it's - that all makes sense. I mean part of the reason I ask, and it probably sounds like a really obvious question, but it's just when I do again some quick math and just try to measure you basically just analyze revenue on a per customer basis it. Even though your guidance is above what I think a lot of folks were looking for.I think one might be able to argue that there could be a bias to the upside when you think about the funding environment and you look at your guidance, which doesn't seem to across the board factoring in assumption that this growing group of customers who is increasingly better funded is going to spend a lot more on product but practically speaking, you didn't think they would.So I'm not sure there's a question there, it's just kind of an observation that it doesn't seem like your guidance is assuming that this growing group of customers is going to spend a ton more on your products in spite of the fact that practically speaking, they kind of need to and they have the money to do so. Last question, how meaningful has the MGI BGI partnership impacted revenue growth in China?

We just signed it few weeks ago. So I think we look...

It's too early.

It's too early, but I think it's important catalyst for next year growth.

Okay.

We're excited about it and though - we would like to be the first targeted sequencing kit on the platform. And I'm glad that we achieved that goal.

And our next question comes from the line of Luke Sergott with Evercore. Your line is now open.

I guess just to follow up on that MGI question from Doug, any discussion with Illumina right now to do the partnership with them as to help keep the overall sequencing costs down?

I don't think there is any discussion I can comment publicly on, I think we are always looking to, as we mentioned, always looking to - and then our reach through Prix and then partnerships, right now we have two publicly announced with Perkin Elmer and MGI. But I think we have a great product and we are looking to enhance it with partnership with different channels.

And then your growth on the Synbio, ex-Ginkgo revenue has been quite strong versus our model. Can you talk about how much of that is from new customers and then also just from - versus - extra wallet share versus existing customers?

So interesting question. So it's a combination of both, it's new customers and we're getting extra wallet, particularly, I mean, it's interesting, some of the customers come on, they ramp faster than we expected and those are new customers in Q1 calendar I guess. So I think it's both, I mean the platform is allowing to scale. We offer very competitive pricing and they're seeing terrific services.So it's a combination of the overall impact of the commercial organization, our e-commerce platform and we continue to see opportunities growing particularly in Europe for Synbio as well. I mean the good thing is, if you go back in time and Ginkgo is a great customer for us. Ginkgo share is now down or roughly at 17% of our total company or 16% and we are seeing more and more customers added us, I mean we're over what, 1,300 customers, so we're now close to 1,000 Synbio customers.And the revenue for longer genes continues to grow as well. We launched 5kb earlier this year, and we're seeing really good feedback from the marketplace.

And then lastly, I guess on the biopharma funnel. Can you talk about the order trends and where you're seeing how the funnel looks versus on the antibody optimization versus the drug discovery?

So thinking about the biopharma vertical, right?

Yes.

Yes. So as you correctly note there are kind of two offerings that we have. One, is a drug discovery offering, where someone comes with their target and we can give them functional antibodies. And then the second is an optimization solution where someone comes in with an already discovered antibody and we can turn it into a better antibody, so whichever drug-like properties they're interested in could be cross-reactivity, could be affinity, could be others.So I think now we have data for both, and that was the focus of this year was to demonstrate that both ways are possible and in the funnel we have - we are pushing opportunities for both. And so I think we should see some partnerships or collaboration announced in both areas.

And our last question comes from the line of Catherine Schulte with Baird. Your line is now open.

Congrats on the quarter and thanks for the questions. First on the $1 million of biopharma revenue in your fiscal '20 guide, is that only from already signed agreements or does it assume some success in signing those 5 to 10 new deals?

Well, from what we announced Pandion, so it's from some of the deals we've signed and it's - we are seeing, as Emily highlighted in the call, we're seeing good opportunities are coming down the funnel and we're getting more line of sight on the revenue that's why we're highlighting $1 million revenue, approximately from biopharma.

And then to complement that we - next year, as we announced, we are looking to sign deals that will include milestone payments and royalties, but the revenue that we guided is only for the upfront portion of those deals.

And then just going back to MGI for a moment. Any qualitative comments on how those co-marketing activities have gone so far and what are you assuming for contribution from that partnership in your $37 million to $40 million NGS guide?

So I don't think we are planning to allocate the growth at this point on different sequencing platform. However, we do it as a good catalyst for growth, especially in Asia and China.

And then last one for me, going back to Doug's question on cadence, particularly for that NGS piece, you expect lot of growth there this year. As you look at your pipeline of customers in pilot and validation stages, are there any large customers you're expecting to move into production in the coming quarter two worth calling out? Or just trying to get a better sense of revenue cadence throughout the year for NGS?

Yes, it's a good question. I mean the orders tend to be tend to be lumpy. I mean the good news is the broadening out of the number of customers have adopted and we are starting to feel therefore - I mean we've shown revenue growth every quarter and I think in quarter two this last year, we had one large order, which did - which was great.And we have not built into our forecast this year to have similar sort of large orders. So, it's more a broad customer adoption and a smaller revenue assumptions by - for each customer, which gives us more confidence in terms of our $37 million to $40 million revenue.

Thank you. And this concludes today's question-and-answer session. I would now like to turn the call back to Emily Leproust for any further remarks.

Thank you, Chris. So we are very pleased with the exceptional growth we have demonstrated, not only in our revenue curve, but also in our ability to take an idea and drive it into a product. We began in Synbio, we've added NGS and we are making good progress, both in biopharma and DNA data storage. So we look forward to sharing our progress with you in fiscal 2020 and I'm very confident that it will be a great year. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.