CDMO - Earnings call transcript Q2 2021

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Operator

Good day, ladies and gentlemen, and welcome to the Avid Bioservices Second Quarter Fiscal 2021 Financial Results Conference Call. [Operator Instructions] 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. Please go ahead.

Tim Brons

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

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

Nick Green

to a to and quarter, we Thank operational to today a company strong In maintenance new expectations perspective thank strong has our And well productive Avid. as from another program. customer. you an and highly completed the revenue for a second performance also project that a we during beat had which showing who From development, report as financial had you, in customer, webcast. key successfully development new other financial metrics. in I annual those The process added Tim. dialed business during participating manufacturing are the pleased again we who existing everyone via am quarter was

that, development and finalized Dan. additional look an Tim operations effort. to business importantly, over will details quarter our with I’ll and for second provide I turn of we expansion and financial overview forward the of view options this on More we call And our proceeding important following results. to

Dan Hart

Nick. Thank you,

of Before for are issued I on financial results our provide in of begin, additional the second included press financial I SEC. addition the which I’ll to the details overview our second the in XXXX now provide in-process compared on this for quarter update improve I'll call of XXXX. was release call increase of October quarter fiscal a recorded number utilization, today the brief during XXXX. our XX-Q quarter the quarter financial our second growth, prior second our revenue XX% Form margin. gross filed continuing an results our to operations and with today, drive from Revenues $XX.X the to revenues XX, manufacturing runs scope ended continue increase growth to $XX.X and million million, and fiscal were completed in The and/or of

recognized of during addition, performance the revenues included With with XXXX fiscal of gross quarter second compared of to was the quarter XX%, our personnel significantly equipment, batches XXXX. a increased margin fiscal for combined for and the XX% number in facilities manufactured of second the utilization up gross as of therefore certain margin increasing of of the obligations consideration In in increase quarter period. variable for manufacturing the revenue result a revenue during changes recognition from $X.X million increase completing estimated projects, manufacturing an in

previously the utilization. revenue strengthened in increase increased Our discussed and manufacturing was gross due to margin further capacity

expenses increases in increase were in SG&A $X.X payroll XXXX. the quarter, revenue period. XX%, Total for second due a in $X.X change cost, was additional the recorded Excluding fiscal significant during quarter improvement estimated fiscal in still approximately compared for year of XX% to the increase margin quarter stock-based a gross to in compared to compensation. consideration the from of million revenue XXXX SG&A million the related manufacturing million the The second an was variable prior including $X.X primarily

XXXX, For diluted approximately the per fiscal second or of income basic attributable recorded common $XXX,XXX to share. the quarter $X.XX company a and net stockholders of consolidated

attributable a to per share or common stockholders of quarter compared the $X.XX consolidated to As net of million fiscal loss for diluted $X.X XXXX. second basic

also report quarter $XX are We pleased flow million the during company activities year-to-date. cash generated operating million the $X to of from and

and first offset due the million, cash of and primarily compared in the year. consistent an as of were end partially October $X.X revenue $XX.X gross as end as of cash Our in period from growth expansion up margin, steady XXXX expenditures. million increase to of remains $XX.X to the by the XX, prior fiscal the Cash for the capital quarter million equivalents and

half an are from backlog and other visibility quarter. fiscal industry we are the we the $XX factors. and guidance Having pleased million achievements over and This my must concludes XXXX, highly the now million. a that of together report unknown on million of we overview. optimistic year, activities for While revenue demand, development $XX $XX may balance call and on increasing the the present I’ll or the XXXX current the for that of currently remain fiscal as million the financial between of challenges annual Tim our regarding $XX customer mindful of update that, turn with COVID-XX into to first to result we are to pandemic business our for between strength based said

Timothy Compton

Dan. Thanks,

project heels first to expand quarter, base a our we and continue the customer of strong pipeline. On

including process During existing our project within the business manufacturing an and existing customer new orders team new signed a second customer. for with million development quarter, development $XX customers, and new new a

are million totaling period. new customers to to existing our of equally With add happy signing relationships our companies our with are always customer during expand pleased their grow. we in million list, the to needs new and $XX While as orders, the revenue we $XX

compared quarter recognize fiscal next the this of $XX This at Our of at backlog represents of first becoming level increase fiscal quarter Avid has to pure-play expect of highest a the of end million majority million, CDMO and the XX% backlog of to XX the $XX XXXX. to achieved since of end months. grew the we an over second the XXXX the

report I’m operate and development with to team slowdown activities. business no and Finally, in engage continues our customers prospective current both happy that to with

the continue. And and hand for as related concludes the not number at proposals to the will are a hopeful our this call overview. development that of time of the I’ll interruptions fact, high. business pandemic is any In to business and This my all ramp request development an have negative pipeline Nick. continues over value result we Thankfully, of we sales experienced now

Nick Green

Tim. you, Thank

continue plan. to Avid’s quarter, second to the operations manufacture During

the last scheduled at preventative this our was reported initiated a we conclusion maintenance period. And of we As July. quarter, successful to shutdown annual the during end brought

quarter, decision the making one ahead forward. to with target last expansion to our indicated was I as the of first respect company’s of review plans final as my best As ancillary requirements other well path

have using this am developed two-phased already phased for We is happy a our approach. expansion moving the with I We completed review, now recently that Myford expansion our and forward to report facility. company plans of a

addition processing our capacity suite. the facility first existing the by The North expands a downstream of Myford of second production phase

build out of demand, expansion, take we processing in first million. months will and complete to cost phase second through an upstream of within $XX we phase commenced a downstream train approximately anticipated XX South. at suites have the capacity including the customer an approximately Myford which to The both further the second months estimate manufacturing XX Due expands increase estimated to of

them. estimate million, approximately annual these North to by million. Based Myford revenue anticipated capital strong considering and take to that their markets and We projected $XX we beating to we quarter growth on expansion the flow to behind $XX excellent capacity the million, phase XX raise our months estimate development for Myford a months million expect as operating work are and that $XX appropriate, revenue respective $XXX the team while income the demand. complete increase million by bringing us addition very to million. cost we to the $XX capacity $XX We South that $XXX share the as generating determined complete facility both that generating In support cost XX up our many margins is Franklin of is happy dictated capacity expansions, increase appropriate report of most revenue of testament preliminary generating backlog and to delivering up revenue facilities the of to form the will positive conceptual annual customer Accessing to increasing the operations. to first by at the cash of capital from million. generating available the estimates of achieved future time. phase the closing, scenes decision Myford from and our of we external be our we commence up above Further expansion The a the which people combined business earnings revenues To to plans, expect annual capital. revenue and our will per of to at well could second expansion South during and our will to the

Operator? our aligned with approach, up time and prepared been As for with also can open today, capacity, cost. the and which both expansion and my now well a to cognizant have plans call concludes increase demand, This being questions. for we believe result, phased initiate guidance we able the provides of remarks while we

Operator

Instructions] you. comes [Operator Matt Group. first with Hewitt Our question of Thank Capital line the from Craig-Hallum

Your line open. is now

Matt Hewit

the quarter. taking Thank I'm you that days, talk been you a see hitting the congratulations far could vaccines I are items beyond of questions about could there? the the drive strong you the top Maybe business that your What on news. the and really market that mean, is that have from up, helping wondering is What if one help you vaccines. for first hearing seeing? way? these but customers capacity you Anything maybe that or are bit little as a beyond some within you as constraints market

Nick Green

that? Tim, do want take to you

Timothy Compton

Matt. sure. Yes, Thanks for the Thanks question.

you vaccine capacity significant As has the imagine, of now the a marketplace. up taken in market right amount can

as to build to certainly just continuing future meet so look demand described. our to of available well having our as expand advantage And capacity and we as Nick take that capacity,

away. number as shortfall there with it's is a well. not likely like a of that for going of the mean, by COVID being is therapeutics capacity there's So in consumed And still to-date. capacity well that's as out there amount COVID-XX development the vaccines as capacity that I looking of

Matt Hewit

Myford, things then then of any the out way on for decision approach you at that as customers that help that kind helpful. of to from things, phased look what it kind the was the pay customers expansion you where is out essentially looked can Nick some the it was Thank there, maybe thing that the that you That's build there out And kind could And to to get you split same even have capacity? you. piece, Is of with actually I you to is access guess, situation in what to or obviously way? expansion? that two to have for drove a of as phase – pre-paying there lock

Nick Green

Yes.

answer than doing one it both of So that we was terms to I questions guess Matt, a approach, approach the all phased liked at about of timeline it what has go. those particularly in shorter

So Myford between to South XX to full that expansion. us take would do months somewhere XX months the

the So And to requirement. capital us benefit. of capacity allows a the this reduce is big also amount which available brings immediate forward, secondly

we've we revenue bringing interstitial rather somewhere of an expansion So of expenditure We're $XX and of ahead lower revenues. million allows able it's Myford and top of maintain The coming And some of idea of do adding cost, around in than step for demand. would sort managed being us in the pay. which that capacity additional pay also to some that fortunate capability, very concept maybe million, to those $XX the to to meantime that whole South. in somebody it that, contribute of on only the degree, depending for on our turn million, to then in us million obviously else timing have the all $XX growth getting of to profits the to a terms the that at $XX people that, forward enables towards and to of sort forward, it pay, a generate

also We do so been their that continuing they within as do anticipate that our I continue But know that. I that think we to can to the successful, that's are some to foresight right that it, think clients see meet requirements. business lot now could out for this and is but have there demand for wouldn't of see I announce nothing be otherwise pay opportunities opportunity for there. capacity, We a others building we sure. potentially do to certainly it certainly

Matt Hewit

much. very you Thank Understood.

Nick Green

Thanks, Matt.

Operator

Thank you.

the KeyBanc. Our next question comes with Knight Paul from of line

is now open. line Your

Paul Knight

of to have the place you and Could customers now as that you in Nick. number well? number of talk Hi products

Nick Green

who one. probably hand one got pick to question. want Good has But up customers? detail best just I'll total do to the Tim, Tim, on full that over you number of that of

Timothy Compton

roll that able program-by-program but of customers. don't up announced with total does we're as and as quarter expand to well every continue of the to them quarter-by-quarter have existing a actually I when customers, And announce number them. we

Paul Knight

And how Tim? many are in commercialization,

Timothy Compton

Well, that's – point disclosed, previously we, I in we customer commercial this one time. think as have at

Paul Knight

based ultimately long margin what run at? industry, the your do on in Okay. you And should a experience then believe gross Nick, you

Nick Green

we somewhere the terms between existing in XX% XX% expect So our to margin. of adding capacity, and gross new business

Paul Knight

Okay. And then…

Nick Green

The new additions…

Paul Knight

do think that these at commercialization add? that talent Or need look Myford the you you And talent would of North, you do have terms in then Myford now? South, need what you you to as do to additions

Nick Green

of, So development talking in light. you're bring in new in to terms business about opportunities the those

Paul Knight

Yes.

Nick Green

I clients can little the is Obviously, think three in a say, and client. the doing quarter's think they job. forward, more team quarter plus excellent into many bit hence have pipeline in but this business on I but existing Tim expansion. we expressed as the going extraordinarily insight new the as we months I team, new as one today, team leading Tim indicators are working brought and think also I of the expansion and And an call, client did an we see we and last an light, the the well, I see quarter another as [indiscernible]

So there's think plans future. so. more do that, a the got than dealing immediate And may foreseeable add time, we've no at in I that's team capable to of this we but with to moment

Paul Knight

other monoclonal manufacturing? your therapy? cell like gene what's you do antibody terms Do want some then capacity in to areas And you beyond of mRNA this or Okay. envision in of outlook go expansion and

Nick Green

think good areas, those that and looked foremost made that relationship. sort sort was are on and after again, sure client our strategic my kind was always existing perspective I first interesting we sure make strong, from of side to a of base of

right also that team Secondly, can our business ensure the in in infrastructure was to that growth. have execute in to a manner for on clients. the people and an And inspect we we that have time, drive then to ensure believe place development full we

first the cornerstones So the first of that's the for kind the of strategy been period.

then on moving us to of I expansion to then offering. again, think adding we're nicely And highlighted ahead anything maybe forward, and areas that one with the little interest always further of But I our the consider say you. that are you further point that. expansion from think, that, than for early that

Paul Knight

are California do on based company lastly, business? global you have experience, and then you a feel how your What the And with Southern your about presence? the regarding do presence, negatives positives

Nick Green

world, about XX last I all I've but mean, facilities, think I over I checked. countries time the not so, Yes, run it's

is think, again, call nice quarter's I in is last right I California be the to place now. a think, mentioned as I

seeing of sort chains of quite supply we're the late to to COVID do of domestication think that. a adding I of lot need our

stay the we've on localization of pharmaceutical rather Coast globalization literally the purchasing East even people move regional vice In who So an by amongst want and of seen versa. as outsourcing seen sort some not we've than to companies. some many cases, strategy West to the or

the look of Corridor very development. market overall U.S. it’s California So strong in terms is market the component the at that world in of market. if I the probably strongest pharma

bad be Southern now. right in is being not think to I place a California So

this with as happy location. very a So

Paul Knight

Thank you.

Tim Brons

Paul. Thanks,

Operator

you. Thank

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

Your line open. not is

Jacob Johnson

we Nick, that? question Hey, thinking how really longer my think presence congrats I'll have or are California could nice Paul's on – first, should we point, quarter. a on if on And add thanks. following-up strategy, Maybe about Southern last and at a about some term, high-level Avid Avid beyond you think as

Nick Green

Yes, than I think it's more possible.

a clients we very to why active reason a does manufacturer transfer. are And client do the then of Europe and end localization broader to a base and your market. think of of want formula, if no shouldn't have day successful and we that some Asia capability we've project market in terms global both there's I got ultimately degree the at of that from being close custom benefit execution to markets.

don't some So as a be today. not feel we fill of that question maybe broader from geographic would of spread offering, broader areas out fulfilling the thinking a equally my the

So again, foremost other we bring what to to feel got at can start can things first get well-honed the expansion and value. then doing make we're we look and sure was moving, we we where that

Jacob Johnson

That it. follow-up makes COVID. on of it, maybe sense. Got kind a to And tied

value maybe could drug years, this into we highlighted at pharma I an of COVID in And something some insourcing think I think is of Avid back has somewhat the of point? from could see coming benefit U.S. U.S., manufacturing. manufacturing that the

Timothy Compton

COVID I’d I so. seen reasons. coming back from Yes, think, this we've molecules molecules. Asia of of happening with for variety like even lot before small frank a I seen mean, a we’ve be back Western To to you, in to manufacturers think

trend as in obviously but so molecule of we manufacturing did as anywhere coming molecules, don't already it or the had I large think has in And small much near abroad gone of biologics, back. seen terms that

top supply. the sometimes think, I aware frailties think I politically and push have. strong chains has towards that, And the much we'd then made a seen of more supply on very global COVID of localized everybody risks can

in will that do from benefit the likely I foreseeable future. we that so And think

Jacob Johnson

Great. Dan. I just last Maybe a so hope then, too. – And for one

a for uncertain just takes puts a terms we're But And about, of think, called weaker certainly capacity. quarter, back out, in of you in strong fee kind I and I you an environment. Looking think, ask one what got implies half thing was half. wanted unused to reserved as living last I at some first guidance, really it versus a

that in that might just been any of headwind have could capacity. if for next chime a backfill comments think I to Tim And and maybe fill effort that quarter? quarter. something that the be on maybe to a Is third bit the to wants

Dan Hart

the thanks for Jacob, Yes, question.

essentially is I'd $XX for our visibility fee backlog, the that be But we at of the looking the the backlog it'd we're we was and we what and the had looking first quarter did some bit $X.X first half ended one-time that with on visibility is, at and into had when start additionally thought and We think as have what books, we to headwind can see guide. year that first a this customers the helped our year. pipeline demand takes. million have customer of and demand that's to we the that million a where million I initially the the up, we full million half and seeing exited the far the we for the the the our puts little as into $XX got quarter out how $X

Jacob Johnson

the taking for questions. Thanks

Operator

now concludes will This the session. for call question-and-answer today's you. hand Thank closing Nick remarks. I back to Green

Nick Green

everyone in environment all COVID-XX. employees as this effective the they in like call. continued our call result Avid to adapting on employees. efficient do their your of only thank been Avid’s of Thank I'd success which performance, but you improving In to today's support to lives. the is today's are wish our incredible the thank also a again challenging you, efforts at Avid. continued operator. and their challenges Bioservices. to And personal continue and I Not Thank them on impacting for And for both thank in they upon participating professional, business participating but for their you closing, dependent have to

Operator

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

now You disconnect. may

Avid Bioservices (CDMO) 2 Dec 202021 Q2 Earnings call transcript