CDMO - Earnings call transcript Q4 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen and welcome to the Avid Bioservices' Fourth Quarter and Year-End 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

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

Tim Brons

Compton, afternoon today's Good President on overview quarter updates ended remarks, XXXX. our you joining and for CEO; activities providing April will Today, Thank business we and an will development On Timothy we manufacturing Officer; results Financial call, prepared Hart, Interim Commercial have us. Officer. Dan we your Avid you. XXth, Chief thank Chief of be and Rick and questions. will contract financial Bioservices' and including corporate the welcome for After Hancock,

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

Richard Hancock

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

management experience products. industry to healthcare global has significant credited onboard. Green CEO successfully South businesses been financial roles value a North his experience the spans has senior countries in new and manufacturing have expanding contract and the organizations number has career, for appointed manufacturing for the science Nick the company's held global having and companies of I'd thrilled America, four and run with with and Nick patients, contract pharmaceutical other services years continents Throughout facilities than building like His pharmaceutical Europe, XX Nick he of we welcome and significant Before customers, America, novel expertise performance, recently life are employees, him and is and in in of more to addressing XX in delivering first to nine Avid pharmaceutical team. several Asia. operational where stakeholders. Nicholas Avid's those

We are With to start his part be highly company's Nick's day-to-day of join believe valuable and continue both forward. experience Director operations, this on the quarter will grows offset support very quarter. to to Avid's XXth, I working now with pleased July company and address going have Nick quarter. his Avid the recorded expected lower than the during longer and is the will no as be we the revenues and as the but XXXX. forward commercially I look third will arrival, Avid I'll partially the Nick the performance during Board company's operationally. date fourth I team

interruption experienced revenue of during a quarter last our a period. problem of equipment. production resulted in specific during earnings for third This piece on the a company deferral discussed the quarter, As that with some a the call, third and

annual strong the backlog. were the projects period, to fourth generating the unplanned allowing extended the end during its the exceed with a additional While year interruption quarter, initiated revenue restated company guidance into revenue and

the quarter, remediation. We in identified confirming the responsible we are cause are mitigated problem and we that for successful this pleased report fourth process equipment the production of and to the currently of interruption during the

customers' of increase capacity. on the from come. phase development we new development additional a and on years details we expansion our that into activity, in which also provide and financial significantly business will overview to Tim entered Based support expanded development quarter, that business team another our the growing to and quarter year-end co-marketing a our into and we will have believe we our will provide will business entered planning partnership business results. our we believe fill growing the demand I During that Accordingly, expanding capacity utilization operations for and beyond. and fourth in of an XXXX following channel

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

Daniel Hart

Thank Rick. you,

XXXX a our fourth fiscal gross for were a Before year-over-year the the today interruption to for fourth XXXX. compared of piece of The I XX-K was from due to of decline the attributable revenue. $X.X the revenues a during the depreciation in specific we fiscal result a million with quarter XXXX financial new call expenses. million, million, Gross on of production, recommend quarter fiscal XXXX. margin from projects. quarter increase the stronger quarter of operations XXXX to of was slight primarily fiscal and customer began fourth Total for of production XXXX primarily attributable was for the the margin quarter continuing in of like which for SG&A the third were costs equipment, in decline, fourth of now begin, XXXX. the now decline to as the address were negative XX% fourth interruption to in quarter in fourth for a quarter for additional an into recorded decrease of expense first $X.X to recorded a the described decrease quarter which acquisition associated revenues Revenues for quarter. million fourth and to $XX.X XX% an participating operating of fiscal the equipment. Despite gross of and full-year expenses address the net I'd a quarter that I'll details. the our earlier, a Commission, quarter I'll quarter fourth XXXX compared April The increase filed primarily fiscal revenue refer during fiscal of Securities with than with today's margin the XXXX. to $XX.X expected and Exchange XX% I'll everyone compared decrease problem continued XXXX filing fourth discuss ended XXth, results

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

XXXX end of an backlog represents fourth fiscal This end of million, at XXXX an deferred $X scheduled in-process increase over quarter of of for Our year. the of the runs quarter the at $XX revenue an of backlog million of full million compared results the XX% to third million record at I'll delay of of now was XX% compared fiscal to increase the last $XX XXXX. increased backlog $XX and Avid. XX% during a due end high to the excluding Even year-end. the when fiscal for second our manufacturing half the the XXXX, overview provide prior of fiscal

year. of April restated of compared April year For were ended scope and increase revenue Gross the will result to payroll prior primarily of to related decrease an depreciation fiscal the primarily guidance costs year $XX.X facility the fiscal to revenues was revenues the results year of associated interruption equipment, period. for growth the the second primarily margin associated during full number in during projects. half with the period. related new XX% the XXth, acquisition $XX.X XX% the the X%, This increase in ended our growth XXXX customer expense as increase related million be for and with and million, decrease compared XXth, a planned year These of the an in and was prior XXXX equipment continued costs, due higher the from This production was costs year.

When to for SG&A increase prior due recruiting The the fiscal For a to XXXX, increased million increase was full the $XX.X X% year million, XXXX expenses, employee $XX.X expenses SG&A to the fees, year. related and excluding the as prior were in related stock-based during SG&A increased separation compared separation year. costs, XX% compensation. compared

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

April business million capital of compared million overview. development increase I XXXX. for a cash update XXth, ended positive XXth, company net prior achievements expenditures Tim cash flow year year fiscal XXth, cash for XXXX. achieved the XXXX $X an change of XX% April to from as April my The on operations, were $XX.X the concludes and during quarter. also as equivalents activities Our of free fiscal of in measured and call turn over the ended will to as cash financial $XX.X million, This as the now

Timothy Compton

$XX was million project perspective, Thanks the Dan. existing fourth successful most of one company's signing commercial XXXX with orders the customers. expansion the From of team a quarter in with

taking year, wonderful to way was have important for and we great and momentum. the this expectations While are growth steps XXXX continue the this a needed end to beyond

tremendous Sylvia CDMO Development Sylvia Asia-Pacific of CDMOs. in As driving North pleased eastern team a business quarter, with America responsible I'm that to Chief the during experience my strength well to directors Business America XX we Director Avid Jason the order addition and and in They the research industries. development and Europe Director and the conference report to with depth BD comes named Business added as for with team. of to are Europe, Officer quarter's region. western Asia. in I region stated of Avid's contract as our first of Hinds business key records has been America, in Commercial Brady Senior for the last as serves North of growing business an growth and track North of Senior roles our of proven two build call, as senior industry-leading Development during fourth was region years for

has Baxter. her and accomplished business therapy, has increasing business Cook biologics, During Jason track charged Avecia, held in America relationships record Novasep, the CDMO positions Asia-Pacific cell gene extensive Pharmica the with and new and expanding successfully Bio, regions. and with securing sterile clients. sales with Denko fill/finish biopharmaceutical contracts professional new an company's and new establishing manufacturing In in existing western expertise her role, an services. clients in North long-term with specialized Brammer and both of with career, Nitto responsibility is she she Sylvia is

In for North his Bio-Pharma Lonza. is to very in to and the CDMO Jason role, from and both commercial Avid future. expect we During they level with have America engagement contributions quickly his sales both business and great I'm continued new existing our both of company's Jason eastern with he of welcome expansion responsible onboard customers the team. career, held pleased and driving Since prospective coming growth Sylvia the in Aji Europe. has April, and elevated and senior and positions in

partnership of expertise will co-marketing delivery customers. development. of of our a Another important is cell development Avid's It of substances. stage sequence-to-manufacturing process service therapeutics commercial It Aragen important the seamless an services for and and leading patients analytical is was a development Bioscience, to on belief accelerating that in provide customers to integrated Aragen's a agreement will timelines drive line to development focused reduce development manufacturing need. CGMP provide and co-marketing and streamline offering with product Avid's with pre-clinical bulk drug and overall with solution upstream partnership early downstream rapid for efficiencies announcement delivery recent this enable CRO integrated intent the

discuss and and the of converted our customers and or of all to during postponed to meeting have have postponed pandemic. due formats. nothing have In-person excited been face-to-face business new important surprised collaboration prospects, already business are canceled, been to as have the been. converted in We online the all benefits been to or a seeing events the virtual and us effective prospect past virtual been as now we and both business networking meetings the platforms for scheduled is customer in discussions been valuable have now tangible co-marketing do pleasantly while changed. to previously the Industry we sales we part a era COVID-XX, development formats have way are which In discontinued pitches how I at with companies. has No marketing quarter. efforts this will conferences be

to on are fact, audits a travel, the both virtual would burden It is and/or able typically quality important have customer than note local new auditors. at In calls that we participants industry using third-party we event. prospect without of have during leveraging proceeding formats more an meeting were to

back I challenges engaged the over the This to team COVID-XX, close would despite so with busy and our And and hand call now working business my current during of extremely both prospective and concludes diligently overview doing customers Rick. new is business to business. Rick?

Richard Hancock

Thank Tim. you,

closely a pandemic, context pandemic. the first production in the Avid continuation I'd COVID-XX beginning of health the comments, Since workforce. our of address management the has As our of of to operations Tim's and like Avid's pipeline monitored

material hopeful that that, currently uninterrupted. last quarter's that I is well-being taking no like following and and We and will are equipment state production chain comment our or our to of have our will reiterate date, and we guidelines and healthy that supply remain for remain to productive. have that continued operations we been pandemic programs Management delayed issue our due expectations are employees no impact further ensure work production our I'd change. pleased every and will observed now local to no the members has and safety precaution and team highly the regarding to we to interruption. canceled

that now confirm first me of piece question specific equipment operational. in is the Let

is date, we remediating multiple stages confirmation. by problem. is remediation, that have generating of revenue the executed stage first through the this source currently running completed project phases: three To we company confirmation the However, campaigns. during and is production progressing it identifying in which the believe successfully being investigation, two and The

stage, company are completed we confirm completes be the it be resolution confirmation full months. the will coming While the to until will we not in expect able the optimistic, which

more work to expansion believe the customer additional our demand required quarters, As we in have we a comprehensive growing In support future. is will development a of the ahead, result need expanding much that recent in business look we activity capacity. for ancillary done that and

As we've work general key enhancement systems infrastructure. this and prior the upgrades of in calls, included addressed to has

taking opportunities now for are we the we prepare However, additional to steps growth ahead. see

recognize for may expansion, While months specific take kick-off date that set to been has this we XX not complete. between XX months construction and

work us project For undertaking design, appropriate permitting this break and we ground at the to that the to are time. allow pre-engineering, reason, on required

and of this and Given expect the in accordingly. revenue strong the of XXXX and to we we and to pleased very XXXX million a revenue fourth optimism as than for In our fiscal record-breaking backdrop, fiscal fiscal margins of continue XXXX, closing, beyond. announce growth like strong fiscal expected XX% to representing record million, achieve of we the and finished with communicate track quarters growth, XX% $XX to backlog we improvement I'm that approximately business. to third Despite revenues XXXX, to for $XX expect I'd of challenges between over higher

elevate to are next provide are and our CEO, We preparing new and welcome Green, vision level. strategy Nick the we will the to to confident that execution Avid he

can will call of up today. to increased on projects capacity We forecasted readying to demand utilization. Our questions. an to development for with concludes both open new allow customer now Accordingly, my to customers, we kick-off activity, that number believe strong business prepared of we Operator? increasing an significantly relationships the Combined are to our expanded are growing. our and we generate we customer which expansion and from that path list. This increasing existing expect are meet ever-growing a remarks demand us the is

Operator

Our Matt from Instructions] Group. with Craig-Hallum question [Operator first Hewitt comes Capital

is line now open. Your

Matt Hewitt

help if the one, First year. could understand for me little guidance a you next bit

So fourth 'XX exiting the in quarter the pushed, and think Is with half $X me kind in is 'XX quarter into there? and million of roughly walk QX. essentially was the puts pulled first just through that of million some QX, half the had it around the of fiscal getting that takes or you therefore the of I into outperformance from first $X fourth less

Daniel Hart

that our $X at or guidance we when a was So the of of the is pushed reiterated when third quarter. reforecasted question, sliver small your to we answer end million our yes, the there

you we was we to a the quarter However, agreements. that with saw business that from for commence the the from new increase, of majority revenues have in are customers earlier and/or start - fourth new able existing

in fourth the So small sliver that was a there that $X quarter. million is of

will of that of next fiscal year. XX% first be good the in a However, still this half

Matt Hewitt

these won or and whether pandemic I back with think it's that guess how appreciate that building, the would at given anticipate you the hearing where and not I urgency the then quickly given business you pipeline of COVID but feeling? we're And of I everyone's any opportunities, sense given

Richard Hancock

Go ahead. ahead, Tim. please No, go

Timothy Compton

several to next going but is are is in XX say, there stages the opportunity that every certainly in every I COVID hearing the we opportunities of - different, mean, anticipate was back of timeline in cycle. from I the probably various next opportunities different, have but queue for some the days, sales we probably

Richard Hancock

sense There But, Matt, absolutely urgency. right. of a tremendous you're is

new do nine engage very clients. or whereas they These get months potential we months quickly. responses So typically with six might to for need opportunities,

So, that incoming group, get aggressive inquiries, we interested - get information Tim they them all when on budgeting, right his begins. they and timelines the timelines all one team need, the they and are very of production once get away, these are in

Matt Hewitt

one guess I queue. for last back I'll hop then me then the And into and follow-up

about should expansion, be Regarding the of cadence expansion, investment your the how thinking capacity we there.

might are when perspective, the is discussions to a you in help 'XX from you discussions? cost start partners with potential As talked what past CapEx some get the and about do of expecting customers something I your it's you've when with start able know you maybe do of in be in to that that those but the that expansion, you fiscal investment.

Daniel Hart

is Sure, Dan. Matt, this

start the design a moment. as to we're at requirement, any that capital up effort far doing currently, so we're full As prepared

appropriate Once a So out, at toward when presents the with time low right financing that we'll forward time, we typically, outlay itself. and are expenditures. that the at any look building it's we capital of move efforts, the design feel options time find

with build funding the participate out. In our vendors funding the and/or in with addition, of and will customers overall conversations to help continue to we that

Richard Hancock

slots couple future. conversations the there a would just And to One them order is in customers. is parts of add, of with I reserve participate opportunity our the those to for for

just everything at sure with their we current XX over that requirements what and in years. the next The is making put needing looking other they're completely aligned is

Timothy Compton

that would would equipment, And Matt, the, XX so with $XX be in over I overall to to million XX anticipate the the million months all-in call to $XX out which it kind finalize, build capital of build around would months. be somewhere

Operator

Our H.C. Pantginis with from Joe comes next question Wainwright.

line Your now open. is

Joe Pantginis

is all Hope certainly you business well. and families the and doing doing are your well

this. hear to glad So

contracts Just something curious, the opportunity they going well, to doing for back where Kingdom multiple to for as exclusive for the also the what example similar are have the contracts, or there COVID is potential in Oxford United they suppliers. vaccine

Richard Hancock

So the are main them while very doses The with think don't contracts something proof could as Avid for an partner we're makes attractive as really of looking largest through I part material something we is not to possible commercial drivers of of of capability. a it. things currently, proof and the fact to at amounts scale, per of concept many of but dose, is, from our these the of very things small concept that get exclusivity quickly kinds of commercial requiring rapidly take have the years or some we production small very that one

have most to, as available opinion, as therapeutic people vaccine or think then are and make something strategy it do the my from, where you as a based you anything want is they the I we're their identify to add? possible. to that goal Tim that of getting Compton, funding Just on works either talking widely the of

Timothy Compton

been really driven of No, much those have I that, deliver. timeline the not types certainly delivering agree now, Right discussed and exclusivity agreements in to It's it's engaged about on. with legal or Rick. timeline very and

Joe Pantginis

on this next the I then is, to know Nick And my not directly. question answer phone is

he would of certainly process you vision Obviously, why share for some to describe ask which this the guess question you and Can able of selection through earlier, on the might went you any the I company? I'll his you decided the be you way. of aspects So, but future, that the have CEO sort I Nick. for shared guess background fits

Richard Hancock

Joe. bet, You Great question.

wound really right think up fast in wasn't lightning realm, Nick's future for on end the but growth. person just both excellence, to this at obviously, exact strategic of process, So, operational Avid the the based I commercial lead the day, tremendous with a the experience we

excited and So and we're I spoke get again he here. very to Nick and to joining very with is today happy he's us that lucky he just him get expressed how

really vision do. many asset support. has Not what of going here I concept, think management commercialization we we CDMOs we from the is his continuation here. exciting sure can through Again, of in have been what do that senior the that on to and all proof space team way doing, post-commercial our capitalize unusually the independent a making can very that

a career. So and I pointed companies out, expanded get to as fast-moving many built and to delighted here think company up he's over nimble he's we his

going So build build his focusing be we the to looking making some lean, and and on is bringing our on that potential growth sure sure have. excellence more and existing then throughout focus I on Compton, marquee and making the the customers think operational we're on Tim first we that just clients all with out to organization, running capitalize relationships strengthen with

Joe Pantginis

plans margins. year And could about then continue Dan. we maybe is With mean, at expect my looking regard to the gross be you're that can best next start these them? expansion as gross conversations I over normalizing having basically to margins before last we choppy could for question

Daniel Hart

question, the the I Joe, Appreciate and spot question on. is think

to fiscal for margins the failure. were the half in effects gross depressed the the second year second the in that Our due XXXX the half year primarily overall happened and of equipment

backlog. and this capacity. expansion We expand, and margin industry that capacity standard as that. can for gross base, installed both grow, any being is currently be is a to current expand should we to upon we of to start reach the approach profitable continue forward, able as continue be to we and we toward EBITDA we that trending margins to and the prior customers as profitability start to not but expand continue customer That we said, only business new will our Going to margins additional

be here incremental limit. should As said should to 'XX, hit to mass, start XX% reach line gross we doing fiscal that the to future near we and drop once the which bottom XX% margins as we the we before, in into critical a capacity straight I see

Operator

question Johnson Jacob our comes Stephens. And of next with

is line open. Your now

Jacob Johnson

on First and you hire going the it's great role working Nick off, of Rick, hope the to enjoy Board. Congrats you. back been with your on

Richard Hancock

Thank you so much.

Jacob Johnson

Yes, confirmation you when on the enter this issue, up when expected the process than volumes or confirmation are how with equipment in stage? expectations? do then, in you the Was And did line faster normally? to running you stage and compare

Richard Hancock

The pretty few So, amount remediation months last the it a to was needed months about and expected. it been took wrapped took stage clear of of but while, do. couple time what the we the up hope confirmation in another have identified going the through we we the for I that the problem, We've to investigation quite once source of here.

Daniel Hart

XX% utilization documentation And as do some is additional but because the that call volumes, capacity capacity process, the far it's not it's we as during during it there full stage. at Jacob, above, confirmation

Jacob Johnson

that Dan opportunities we to for would are fruition, we should thanks - think Rick. Thanks they guidance with, guidance and you're these that, additive? contemplated and about of presented or the COVID COVID And on of COVID, be just come in for how as much think Dan, being then, that, opportunities if of number

Daniel Hart

baked as a - would for type that's discussions items we've that had the related the is lead guide that to be into COVID-XX coming may be There product COVID into that the that related most would for we an COVID in be strictly next anything the part, would some upside. upside overall but number, Any have year.

Jacob Johnson

do hires. business one, senior team the one or And currently on congrats you then how on just your have need do maybe have? Tim, and many people many How more sales business development last you to

Timothy Compton

don't we additional two fiscal adds have this any Externally, making year. foresee and we

Jacob Johnson

for taking Got the Thanks it. questions.

Richard Hancock

would number existing to project as add lot clients from client comes of that, our base. who our you a that has in our work of management I people bet. You and a just manage know, existing team

So they are with team business resource and very work Tim and activities. another very kind closely our his of for development valuable

Operator

At you. closing like back to for Hancock the over hand Rick I'd call to any Thank this time, remarks.

Richard Hancock

everyone team. position believe In Thank and participating from to business. the today's unprecedented you, on you call. Tim and which Green to thank With we commercial Avid expertise, I Nick pleased to welcome are wish Compton's grow are Nick's to reiterate in operator, we to executive we experience the how an closing,

give for our client fiscal our future discussions to optimism addition, Avid efforts your Thank look and and again great and updating on and Bioservices'. continued beyond. these In participating forecasts for We us XXXX of support you you today for forward advancements.

Operator

on for your This and Ladies gentlemen, you thank you your participation today's may conference. does conclude disconnect. now and program

Avid Bioservices (CDMO) 30 Jun 202020 Q4 Earnings call transcript