CDMO - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Avid Bioservices Third Quarter 2020 Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference may be recorded. I would now like to hand the conference over to Tim Brons of Avid's Investor Relations Group. Please go ahead.

Tim Brons

you. Thank thank us. and for you afternoon, joining Good On and Officer; CEO; we have and Interim President Rick Hancock, Dan Compton, Commercial today's Chief call, Timothy Officer. Hart, Chief Financial

be updates on welcome remarks, activities Bioservices will Today, ended of the results we your corporate an After January manufacturing including and will XX, and Avid XXXX. we business, contract providing for development quarter financial questions. overview prepared our

company undertakes XX, Litigation obligation or conference XXXX, risks made I and like to any caution comments call Before company, filings revise and forward-looking today. today, a this and within the no the statement March of Actual which will concerning we update Securities meaning the I'd matters. assumptions, begin, number company's you Exchange the of differ concerning the statements uncertainties. and made Commission that belief all the certain these to Reform from contain with of review during encourage could of XXXX to of involves and current results these statements, the other Private Act Securities

will I Interim to Rick the and CEO. that, With Rick? call President turn over Hancock,

Richard Hancock

Tim, to and those webcast. in are you who's dialed to via and participating you, today thank who everyone Thank

piece commence and its manufacturing runs manufacturing during equipment, During during in-process also specific of backlog; faced problem which to third the a of project production resulted postponement quarter. termination runs quarter Avid the of the strengthened however, several quarter, a scheduled both with challenges and in pipeline the company the related third other to

progress expect to XXXX. quarter a the the and lower number I'll operational profits and period, during quarter, production implementing also interruptions which made Though third impact of with shortly. And challenge, the fourth in it corrections, revenues we discuss the for now temporary Avid this fiscal we are and profits projects despite of revenue the necessary for resulted

as Avid our development Chief Compton welcome we to very Commercial team, to are Timothy On the pleased Officer. front, business the

regional and third pipeline Tim, will following Tim and development additional outreach. of quarter provide continued his expand the third operations and and quarter, business the team, financial to I results. and our overview an on During our of business X-month details

turn over Dan Hart. For to that, call the I'll

Daniel Hart

Rick. you, Thank

I I'd today's on to call, everyone Before Exchange to today with details. and to, XX-Q recommend which filing Securities like begin, we the participating for our refer Commission, additional filed

ended our XXXX third first discuss financial I'll our I'll from X were the operations fiscal first for and results. now XXXX, third million. quarter continuing third of January $XX.X the for XXXX. address results months of Revenue quarter quarter XX, fiscal

to of due the in third revenue fiscal million While are process consistent an year Despite revenues the primarily with these third for third and quarter of revenues lower-than-anticipated with revenues by XXXX. manufacturing fiscal line offset period, quarter runs, the in-process the during XXXX, of production development in of quarter during $XX.X as XXXX. remained the to prior number interruption they the in of completed fiscal period, increase a the decrease are total recorded of compared

X%, was production XXXX new expense costs a as depreciation attributable primarily was prior XX% The an a decrease quarter margin gross from the revenue. Gross gross decrease the and in in net third of with XXXX the period. in described for the the to for decrease of associated in margin to compared increase equipment the earlier, margin quarter the year interruption acquisition

offset accrued third year million bonuses for separation-related operating the compared partially the in to for XXXX, discuss now expenses. increase decrease quarter quarter $X for fiscal XXXX. third costs. expenses I'll to This were fiscal decrease a fiscal primarily an $X.X of employee Total was XXXX of due million by SG&A in

million $X.X $X.XX loss common the net XXXX, million third attributable quarter a of or stockholders quarter share, of loss or share, stockholders third compared $X.XX as the attributable to a company recorded fiscal consolidated the a XXXX. a to for $X.X fiscal consolidated of For to common net of

Our in $XX an at manufacturing backlog XXXX and quarter compared the fiscal runs. months is due of $XX year. second the the XX% the fiscal primarily of deferred end increased of compared third runs, This an was increase at quarter $X.X of due quarter increase $XX revenue compared including million of quarter end to million, last at end the to XX% first delay of of XXXX X demand in the to in-process XXXX both third future increase the the manufacturing backlog to the third to million million the of and the of fiscal the

months I'll now X of provide fiscal of first the results XXXX. our for an overview

increase to and scope the quarter, XXXX, for increase year was in For as associated and up Gross million, equipment, interruption depreciation of maintenance offset in were the ended period. continued an January number payroll with growth the increase new repairs months during the related $XX.X January the and ended and compared XXXX, a XX, and with equipment XX% in XX, in the expense of margin equipment was an from significant increase projects. manufacturing due primarily X million X revenues costs of prior to prior This of compared was to the by higher $XX.X costs, customer costs. related acquisition XX%, period. the slightly revenues associated production This XX% months result primarily primarily partially increase general costs during third year the facility runs

the was separation-related to the $X.X employee separation-related increase XX% the For The first the first XXXX SG&A a expenses fiscal increase stock-based expenses million months increased as When in were compared excluding months expenses, XXXX, to fiscal increased and SG&A to fiscal during the attributable months SG&A X XXXX. compensation. year. of primarily of X XX% prior compared of for X first million, $XX

$X.X net attributable stockholders or common per For or first $X.XX stockholders to consolidated first million common recorded the per share months company $X.X X share of months $X.XX attributable of fiscal of of the million X loss to net for the loss compared consolidated XXXX. to XXXX, fiscal a a

as XX, as of of were January compared fiscal cash $XX.X ended million million cash equivalents year April XXXX, $XX.X as Our the prior to XXXX. XX, and

have We continue of and raise a need to fiscal the funds third revenues such impact facilities. reiterate Despite quarter and we anticipate strong strength profits our initiate will balance XXXX. our not to production fourth a time that additional sheet quarter the expansion in until also wish for of do of interruption to we the during the backlog, the that

revenue million to versus year guidance As a are $XX of fiscal for XXXX and our $XX between guidance result, $XX million. prior restating revenue million our to $XX we million

revenues will in lower half we anticipate expect we contained fiscal XXXX. of the impact While production interruption projected, than of originally and the to be the profits second fiscal XXXX that

my for I'll activities overview. the development concludes quarter. business and the This turn call now over financial on achievements update Tim to an for

Timothy Compton

I'm very to have Hello, and in my everyone. first forward first Avid Dan. yes, weeks with and Thanks, I at progress happy been participating look productive, Avid earnings call My exciting to be you. with our few Bioservices. sharing

build well Chief and and my overview order like way business goals first an to to of our on outline near-term provide I team, quarter's be activities, we're Officer. of an goal. Commercial My achieving to as will the objectives I'd BD that industry-leading Before

team I'm currently highly with closely is providing end, ensure operations this hiring, in I'm our business winning play. new working management To focused customers that and proposals. potential coordinated Beyond also that and we on project in new responsive potential to business closing are with

improve commitment targeted wins, and Avid plan our thought work industry in sales XXXX. and upon campaigns, to Building business marketing to our sales our leveraging the ultimately expand established, fiscal cycle, the has organization accelerate team strategy and solid leadership in to to plan reduce to also the I the process foundation I place customer-focused culture. that new the within conferences,

which new relevant the Another sales new we recently driving are the is to with the that important already pleased visibility and a our tool website is content in in generating company's report launched website. new Avid continue optimize leads. we and to update to marketplace, business qualified website,

third efforts I'll to on the our period. now the turn during quarter

new presence several the a of customers team seeking key had conferences our potential projects. existing manufacturing quarter, industry Avid's for and with the expanding strong with customers support During goals visibility, new meeting at with engaging

quarter, during multiple signed we to Avid. with customer of manufacturing, taking CGMP These result, of customers. additional breadth projects our at existing agreements to the and manufacturing ranges add advantage process entire development X new the campaigns a As from here services scope

we've disclosed prior leading is As in onboarded of one recently the our clients of companies. pharmaceutical calls, world's one

they of when expansion are that CGMP facility the our clinical additional We this believe of announce quarter, to at the our their the pleased existing runs skill for services. and is very expand one with of orders Myford signed our scale. team business Avid, within that company third for quality project are customers during validating largest manufacturing the our multiple We

to equally of pursue continue to we While pleased current our expand are new the projects, aggressively scope work customer customers. with we

This Rick? business hand call I'll to and concludes my Rick. the overview, over back now

Richard Hancock

Thank you, Tim.

First, I'd to the to like Avid welcome team. Tim

in marketing growth client mentioned responsible corporate including sales business Tim management, the CDMO company's including clinical commercial be experience of driving has of January, for business, and he new Avid's extensive his the commercial ongoing operations, we As continued In base. in development, team development. role, the expansion will and

happy our and his we look are commercial forward leading effort, to contributions. We have Tim to very

company. CEO search ongoing our permanent to now pivot I'll the for a for

position the candidates screen highly soon. to hope fill to and continue We qualified we

we previously, leader must organization. search identify for we stated take growing this the to the and as However, required ideal our on time delivering be

priority, as on We continue to make this search report warranted. we our will and progress a

the to business. Turning now

the we impact While to remain beyond. we Myford for be the support enhance key we're general negatively expansion infrastructure. potential. lost plan and respect anticipate to and results, With to projects continue our the pharmaceutical-grade optimistic in systems the that strong. operations, upgrading system of XXXX, growth progress disappointed revenue We remain in we setback and to about facility XXXX that will of fiscal with These and a we that these XXXX recover order improvements IT XXXX fiscal water quarter's growth will fiscal facility future in able make anticipate to and installing operational the Avid's our include the fundamentals business

We installation general system XXXX. upgrades of XXXX, to water completed the the to fiscal enhancements end IT and and calendar infrastructure system in validation the place the and expect take by of be late

with and several disappointed and interruption state quarter that In runs on are the like with impact unable profits. negative fourth the results were we of that the again was closing, to resulting in revenue complete The the results third impact production the to we we scheduled quarter. for expect production I'd a

We necessary additional be perform will will resolve as problem proper testing external the equipment resources the in Once fiscal using all now are issue. is verification that will correction completed, internal anticipate and contained impact our working make we to this ensure we expectation are this fully us the is soon, these to be It conceivable and behind and remediations that order. that to XXXX. such, to

we to support to support needs are a are To state continue And we experienced future, the we have positioned our Looking enhancements growth. conducting well growing plan and the required of base for believe that art to commercial upgrades expansion for the sustainable end, that leadership, we clients. strategically we the will and and hired revenue customer the of growth. that

the my questions. concludes We today. for remarks Operator? can call This up open now to prepared

Operator

[Operator Instructions].

line of Matt comes Capital. Craig-Hallum Hewitt question first from the with Our

Matthew Hewitt

resolved lines, questions. or A piece those production And piece a number issue. Is an Welcome, a you're guess, And does this old are If impact equipment replaced? equipment? old what of quickly assure to doing be it you equipment, new not business? if number bit your losing couple get an this equipment. piece lines, can kind -- I of it then, piece how on along that more it's of them customers? the get -- of of this can what same little What it's that one, we of Is those have two, color along you with you could could a Tim. so

Richard Hancock

You bet.

I verify time bit this properly about specifically can of with great piece on, equipment everything speak issue. stated, piece we to clients and as working our closely we But to of I believe tell cooperatively the take to that don't in resolve from completed to in it based have all will unable I'm about good transparently extremely detail though in the that. Matt, client the corrections we're permission you and a that equipment order. that very are our I talk have once has that is of corrections been the place, working initiated So

be it released that, So to go we steps a then of back can production. need to through into number assure and

cooperation be in fell to the work up want quarter completed. stated, that of out done will all our this And none this canceled, of of just All it being are with equipment soon as I is clients. as has been as the I repairs made repeat,

Matthew Hewitt

pose of progress issues really quo for and, I for you're business? sign then that Tim, they as front they Or guess, business? and, of -- And new to kind you. these types you're this trying the is any Does remediation the new kind industry this signing the therefore, on of see it status therefore, making impact are challenges doesn't understand,

Timothy Compton

we Yes. these with clients how operations. see It's through any challenges. date, the really and issues current don't onboarding you future, get to with And new in our

Matthew Hewitt

from seeing from you hop everybody's days. last back is mind one type Or situation? along customers as for a impact, other drugs? these new looking Are any, either and/or then you business treatments seeing you one another? helpful. lines are will of business opportunities are Maybe Just the on anything to they're one, I'll as What Okay. seeing shifting possibly coronavirus in be Obviously, region the result those queue. if

Richard Hancock

You is one, beginning the the DCAT that conferences of we One thing being are conference been falling season, by for a This seeing immediately bet. attending is off, on of you that have and number canceled. probably questions. largest. we're planning one they've been Thank

with getting time So not with the on our people phone to with clients. losing the we were just planning in we're so person, that meet contact

of point. a effect of materials very We're of seen in chain, advance. We lot several inventories for terms at haven't quarters carefully. critical supply hold a In that monitoring we this great

seen just So these on-time know some big there. impact do because haven't that's don't a a -- of delivery not that do while to take we so we things produce, we

In our to terms occurred clients date. orders to of or nothing that to placing, has disruptions they're

still yet. for to them. traveling production in plant are person our in development monitor changed that site a We constant their activities, so are and Clients contact with the to hasn't

workforce health one is safety and our concern. of the course, Of our number

we So and But we've regarding employees, extent County, far. we're questions. been to here addressing impacted haven't our of established policy their Orange great all any so in

Operator

line next Jacob the Our from with question Stephens. Johnson of comes

Jacob Johnson

Dan, impact a you on First, million was say third on just equipment. the there $X the about did quarter?

Daniel Hart

$X.X million the a in third there's Yes, impact quarter.

Jacob Johnson

to I million Got it quarter, quarter? as the And of fair the fiscal reduction we think balance $X about was due it. maybe headwind in about sort in say I fourth reduction of think then, the the 'XX, Is to and million of you mean all $X expect guidance. fourth to the

Daniel Hart

yes. that's right, Jacob,

noted addition going affected. the that So cash And corrections that's in revenues fourth will Rick our working for for they're critical prepared being currently also what just be we're the currently. That of equipment. our to remarks said, we're flow, also impacted looking as piece with seeing to edification, on that be like quarter, in to

burn for So we're looking $X million million at to cash the a $X quarter.

Jacob Johnson

on I guess the Got questions the color it. here. That's Thanks Tim. question going the strategy X I all it. for guess, Got for helpful. forward.

sales. it like on other or business additional sort charge big like that underpenetrated going it felt -- to focused you're focus What of sounds where you people there's First, are in areas Any now also or were shifts be these web small sounds previously? customers of on? strategic there adding Were And development? you're you then salespeople. your

Timothy Compton

customer-focused remain strategy the is way in getting ground. great first the is answer on additional just brand And that and and the visibility to salespeople To the the just -- do with to question, one really Yes. big the marketplace.

our and most the on to to spreading going are be new word Avid getting importantly, salespeople also of of and portfolio. brand customers, in focus of our customers the and so on focused front And

Jacob Johnson

one And to answer it. from here. in Got Good that you tell last see was know addition added if it. million maybe but you that or the quarter then you not, and just much us to $XX customer don't million I question to a backlog. Got this could of $XX want how customer? the

Daniel Hart

break growth customers can Jacob. we backlog, existing question. differences No, are I going from significant we're appreciate to the But out not our quarter-over-quarter. the in seeing the

Operator

with line of question Knight Our from Paul Montgomery the Janney Scott. next comes

Paul Knight

this to is and And issue, come facility? inspect is due Rick, put where that failure FDA that's something in in you also, have there an to equipment new? they

Richard Hancock

a regulatory by scheduled is not quite here It's piece arrive international done do FDA The Everything time either of agencies preparation. or in we visit. so a do regulated equipment. unscheduled for we and any of new other the time number can any all it's something, FDA

any make, repairs equipment to processes verifications heavily and that ought any and we So to modifications performed. be documented

doing, resources. a that having do and any thoroughly with bit any documenting or there's and without and going regulatory of along quality our consumes and So a we anything oversight review that quite clients' significant regulatory hand-in-hand for very don't and either quality operations we're agencies. work outside that But prepared and time

Paul Knight

guess, to in I current the audits quarter, right? go And Okay. you've got customer through here

Richard Hancock

Correct.

Paul Knight

-- could right? actually much on it's And lastly, the as time take really guess, then, that equipment, Tim, audits that, fixing you as I talk

Richard Hancock

This on is in I'll one. Rick. chime that

X-day So efficient. X- them. very, to They're audits are typically very performing The at good team very exercises. is

often, people we X.X a three if in day days. through plan So audit, it get

a because And documents people backroom as order. up very quickly is good them. that all is in the ask usually for very, there's pulling as paperwork Just

themselves a So time. terribly the follow-up. long There's don't audits take typically

a then that maybe maybe So -- have in to there's audit, have gather we the need to we everything data show some that we they might them and follow-on.

properly maybe takes verification, amount wrap that amount itself reports, And to that document and need or another them that do time. just up. the there's certain a time. so and takes working of week So runs significant then to to The we correspondence everything the of sometimes work produce audit, of after is a all verify

Paul Knight

for was smaller that market monoclonal quarter, the I biopharmaceutical in customer it Was XX? count you a from welcome And that very or coverage this a one? is strong, landed Tim, customer aboard. understand the you does major customer pretty to then And it lastly, The is Okay. selling other that bring environment? have you finding a positive we this question then are

Timothy Compton

queue it organization. clients have but ongoing speak the in in a sales opportunities is activity clients we size, The the cycle. environment, Yes, client, sales add very the of we've lot selling do and that in and to new of our the they to their have respond positive to can't a cycle got onboarded a pipeline new to already

Richard Hancock

Rick. And this is

right client our Just customers. to now is clarify, active base XX active

Paul Knight

With multiple projects, right?

Richard Hancock

That's Of either clients have the have correct. molecules additional That's significant correct. and we are those, to XX their pipelines with obtain pipeline. working or in

Paul Knight

Okay. And what Avid saying about they like your competition? are customers versus

Richard Hancock

tackle you that let one? I'll Tim,

Timothy Compton

Yes, our and team They as the project our our to as sure. certainly collaborative well California, Tustin, getting Well, management and our approach. compliance of our regulatory location, they like like ease -- record.

and I got records for regulatory best certainly we've we're of think industry, in the recognized one probably the that. compliance

Richard Hancock

could just there. I If a of things add couple

that the commercial one said, small as hear who early-stage and capabilities from and I has is, with, think development way Tim of things frequently all a nimble relatively regulatory commercial tremendous through record. somebody company I the for we're track

So turn time, around confidentiality for quickly. very from up engages move agreements. people that We first them very in want Tim who quickly, to the setting

our of all We including counsel. our in-house, here have management team

expertise with. agreement complex our multi-year think scale, track it work easy and and So to to record. first regulatory competitors. more on Based technical comes whether we're it's down And our I than to turn contracts, quality we a really around that much very rapidly confidentiality

Operator

First next Munda comes Our with the line of question from Joe Analysis.

Joseph Munda

me you Can hear okay?

Daniel Hart

Yes.

Richard Hancock

Joe. Yes,

Joseph Munda

XXXX. there to It of that the coming you're to about loss So going comes like? or you us be sense you anticipate it talked that in year? the Is quarter? in thoughts look come some X throughout Any great. all first would revenue evenly -- what Can off, back give anticipating you

Daniel Hart

other overall hitting through in appreciate year we the the Joe, the year. through those now, of the I first question. early it of Well, but because production the production do next anticipate Right definitely runs through schedule, we depends schedule, a going half on lot those and being have clients

Joseph Munda

Okay.

definitely you or there's color you Okay. give little here us in increase Then and background uptick there? -- inventory the talk a some as AR. Can bit an maybe could to

Daniel Hart

Sure.

of inventory Some buildup contractual of them we increase the as the our in we in-process of that on clients upfront. end we saw inventory that quarter, the when on bill deferred, our hand sign relationships so AR just based an because of is the with and we a have runs were portion

the near So we quarter. up some quarter, the end of at kind which end signings the the had of ticked third the of AR

Joseph Munda

Okay. customer machinery? just it it of in by a That's Or is that's helpful. piece terms And customer? one -- solely the by just of that's multiple your around this B, piece being of customers this being owned equipment this is commentary for machinery. A, then used piece used using of this or

Richard Hancock

is of a used equipment be customers. it So and own, for that multiple it piece can we

Joseph Munda

And being -- one but only is impacted this? by Okay. customer

Richard Hancock

I I'm sorry, I can't that. comment apologize. on

Joseph Munda

And flipping that's customer. new then gears to Okay, the fine. here. Switching gears

You here word did in? it curious, out. I'm How the a to have new come customer? a you how campaign land did get

Richard Hancock

that address to want you do Tim, one? Sure.

Timothy Compton

getting Yes, our the joining, sure. And me earlier customers already come was we're new prior qualified in during Trade of different BD mentioned all their fact, This and queue in call, team network. -- angles. in from customer leads can I our website; shows; as website. to the in course, from but new

And NDAs support we about customers. those to having generating some of and already those qualified leading how discussions leads can are

avenue there's lot I'm goal one was which customer we the did them different I line come in. the before nonetheless, sign to surely on new it came -- This But in, over avenues that So not a in, and aware company. come the the as with of queue joined. just get in who

Richard Hancock

You bet.

Tim's So this was before time.

had them for active this others came to and discussions. was he became also more And through it well gone development aware some had and discussions, quiet And dormant previous reengage but when Tim then website. we our able then some as us, back work our needed that time. do they a actually convert So of of that customer and into this was onboard, client couple contacted went a capabilities to

Joseph Munda

you will Got the my question. CEO mean think time touched potentially a bit have you couple carry last role on a somebody of Or year? thoughts I you. Then fiscal search. the I on do it hope into you Do to within Any it, guess next but in months? 'XX little line?

Richard Hancock

very X X I'm in next months. to the role the have hopeful in somebody that we'll

Operator

I At would call hand Rick this remarks. like to time, over any the back to for closing Hancock

Richard Hancock

Thank thank you, to participating Again, remain today's The visibility while the And everyone are impact health on have and and the of regarding sector. disappointed Operator. quarter's in CDMO the results robust it you will to call. overall. financial we highly business with and we the optimistic on industry biologic the we fiscal build is XXXX, continue growing,

in our for that of will Thank Avid expansion updating again facilities as remain our strong we on our are evidenced services. of we Our strong, backlog, bring additional our forward in efforts team. group and client you leadership We customers. demand be participating Bioservices. our state-of-the-art for building and all to growth and you relationships and business work your increase finally, business have for continued commercial pipeline exceptional support by believe for excited we future the To remain advancements. to today from Avid's for driven an the consistent And these development in these look brought ability by we

Operator

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

You now day. great disconnect. a may Have

Avid Bioservices (CDMO) 10 Mar 202020 Q3 Earnings call transcript