CDMO - Earnings call transcript Q4 2022

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Operator

Good day ladies and gentlemen and welcome to the Avid Bioservices Fourth Quarter and Fiscal Year End 2022 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call maybe 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 Matt President and Nick Green, Hart, Avid’s Commercial today’s Chief call, Kwietniak, Officer. Chief Financial Officer; be updates on activities Bioservices will Today, and of the results corporate an XX, year manufacturing including and ended and Avid April we business, contract providing for development quarter financial overview XXXX. will After our questions. prepared welcome your remarks, we

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

Our release certain of will non-GAAP call earnings include and information. press discussion this

Avid’s on and our call find reconciliations relevant over non-GAAP turn avidbio.com. corporate Nick I website release, at to Green, including can earnings With the press CEO. that, You our will President

Nick Green

to measure, year-over-year you thank and financial, Thank you, and every has via our and the compared the for in for dialed business exceeded in those trajectory everyone Tim and the year ‘XX ‘XX. extended fiscal development operations, ‘XX. who of year revenues a Fiscal our was growth goals stated impressive including we to for an Revenues fiscal fiscal In growth doubling year as reflected established Avid. who ‘XX to and webcast. participating are exceptionally strong

to we the development new analytical multiple recently in announced we to months have new our continue this expansions, I the opening additional brought backlog year business. operations into exactly we and development fiscal make cell will turn intention Operationally, and orders, calendar our to-date. second call laboratories financial business ending therapy, and details results. and resulting Our on this XXXX process overview our with to expansion day for ongoing progress its that I year the highest development company X team the signed the provide And financial an online expand on for over quarter business fiscal fourth and year. the This Matt is following Dan. gene period of that, to the will

Dan Hart

Nick. you, Thank

for quarter revenues revenues, of of can were Revenues to process prior year period. increase prior year with year and $XX.X fourth on in financial scope the in the million to in and overview our release representing as prior SEC. quarter new runs which call begin, and in completed in The fiscal for Form was to quarter period. Before results addition will the the provide a provide the the $XX.X increase today, in-process I this be fourth financial full with I XXXX primarily I XX% now fiscal XXXX. XX, brief to an compared million, results compared the in issued manufacturing primarily financial are customers details on April ended the included year filed quarter increase the an recorded to fiscal press for attributed an development increase provided additional to call will and and from today XX-K, overview operations in services our the associated of XXXX our

and the as the consistent $XX.X in margin fourth as increase was process were in compared gross the to fiscal primarily partially associated our of for the compared attributed higher year quarter fiscal unutilized For benefit the the the and compensation expenses, reserve year development period. business XXXX year and Gross in-process margin increases with million, in the fiscal from and of of increase was manufacturing million fourth to completed $XXX.X be year margin with during primarily full offset and period facility full XX% the can capacity quarter fiscal an including for prior facility related number for expenses XXXX growth by XXXX XXXX scope well quarter compared full costs as revenues The for fees period. impacting the of the increase a expansions, runs, period. to revenues. the XX% for prior XX% year, in and were Gross the XXXX. year gross to increase of in margin prior revenues Factors revenues our fiscal XX%,

year. are achieved for XX% to the gross have pleased fiscal full of a We margin

in the as continue the margins fiscal to expand as to expect fourth impacted be ‘XX during quarter, However, we operations. we

establish business. margin therapy increases other hiring well costs and our mammalian and cell fourth spending our during Specifically, growing the was expansion impacted support to quarter business as by gene to new related in our as to

benefit in fourth The increased facility of expansions, costs. continue Total was Given expenses related that as margins to quarter $X.X fiscal fourth quarter quarters. million, of XXXX compared expenses the the in fiscal fourth coming $X.X were increase increase primarily due affected to higher XXXX. the to our for an the compensation ongoing and be XX% quarter may we for well recorded believe in million SG&A SG&A and of as

and increase year, and million expenses full during the fiscal $XX.X the full the benefit was were compensation year due accounting The primarily year. SG&A XXXX for For $XX.X and related fees. as advertising and million fiscal in to expenses, SG&A facility to costs prior XXXX legal compared expenses,

evidence weighing or realized. the fourth it’s if company company recorded diluted than assets. non-cash deferred deferred more of will the support our of there benefit the is assets, assets deferred to tax evidence we reversal of some the portion be release a until million of income a $X.XX to against all quarter or valuation allowance of share negative its not $XXX sufficient some on tax assess of reassessed the per During deferred valuation company’s valuation allowance to likely all previously recorded the company’s tax tax On due tax periodic maintained and positive its fiscal that or the allowances. XXXX, of basis, assets these all The

the deferred deferred income cumulative the forecasting related April that likely more the determined as allowance fourth not as well company quarter, of was assessing and As XX, company evidence, assets profitability growth. and pretax positive that as the of XXXX. tax than demonstrated negative valuation the realized After and the be assets revenue released tax state has both to and federal it would

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

net income of common or quarter, during recorded diluted share. attributable basic our income tax benefit was Excluding million stockholders approximately $XXX,XXX the $XXX non-cash the to $X.XX per and

net for For attributable $X.X and fiscal attributable per $X.XX the million of company income basic $XXX.X stockholders as share the of or common diluted to common recorded the full to $X.XX net diluted year. income XXXX compared share to basic $X.XX stockholders full year, or fiscal million XXXX per and per

net or $X.XX during diluted million of benefit $XX.X to tax basic $XXX our income non-cash per and the period, the share. million recorded attributable income common Excluding was stockholders

XXXX million the an for $XX.X achieved company $XX.X the quarter, million when increases and fourth for represent million and compared full These of and fiscal adjusted EBITDA the $X.X of fourth of XX%, quarter of full to fiscal the adjusted million XXXX the XX% XXXX EBITDA For for year. respectively, year. $X.X

million. concludes XX, to I’ll April to XXXX year-end turn compared the cash $XXX.X now financial our overview. of Our quarter. for and $XXX were of on the prior cash fiscal million $XXX.X call quarter and my during activities over balance on an commercial third equivalents update million Matt the balance This

Matt Kwietniak

Thanks, Dan.

Avid, million highly signed at and refining totaling During team XXXX been projects. my has as our recruiting new The encouraging the we fiscal strategy from on year. results million net expanding commercial $XXX project our these first $XX during and we changes quarter for the business fourth approximately focused X new full for early orders months

result, the a increase $XXX XX% end This million a the at As a ended million, Avid’s we to $XXX ‘XX. of with ‘XX of backlog fiscal represents fiscal backlog of compared to-date. highest

over the The commercial team business. to gene specific expect include cell our XX additions doubling next last our most over enhancements in regions focus including backlog biotechnology of in COVID-related a with leading recognize of backlog months. our the size X current North the we our the And sales on We therapy no made and notably, mammalian contains this businesses, America. months and

to finally, from as a size help enhancements. and we our generated team well created have to of organizational from promotional existing dedicated business sales increased our operations our orders Complementing website team an leads. clients. result also expanded and project marketing identifying engagements generating overall as new and growing industry customers speaking of We search as the increased the And these also pipeline visibility campaigns, expanding prospective new support business has internal improvements,

new track back will bring early proven These of quality, Nick In year. the in times of of quarter market well I proposal believe perceived positions and reported concludes need quarter. during capacity and in and bookings We that strong achievements Avid years. we X the our are positioned overview capacity last over and for update over XXXX. how my Avid’s issuance timed to on activities and an our This indicators meet Avid’s is to addition performance and reliability is additional in other record and call all to increase, client value success company coming count as the record months. well for operations our by given the multiple available both turn flexibility, the results of fiscal now is on for the commercial

Nick Green

Matt. Thanks,

for Avid. Not manufacturing of capabilities expect work. our past if will haven’t and Having the weeks the X look of the and expansions line side development a just facilities am well As reported – the pleased newest XXXX, time both as directly wins subsequent and enhancements continue I of that strengthened customers fiscal by that be during our development analytical gene seeing ‘XX financial service their capacity mammalian advance January as our transformational that XXXX. the the enough, business whole. development as existing customers Myford as a forward been prospective process will year, to we company’s process in the exciting completed South top well meet And we cell years our line of customers therapy business to allow the business, position to and company’s X Dan demand as on development as report the only to new the on have during our and fiscal expanding completion Matt, and of our ago; are Facility us

our and cell process during development to programs, transformational and meaningful on clients equally now therapy Finally, business performance opened prospective the and will that enable year, we team CRB, gene the described Tustin schedule, development enough engineering, operational that the of technical but each around timing business at cell phase also of the a maintain the the but and planning are have capabilities cannot result should could be will suites. larger and a contributions embark in this newly EPR are looking every amount GMP an an only also groups then the their the safe have execute also timed managed while all quality, who Costa complete. only between this time level external home and and from a dialogue and with of to next complete perspective. this as been of achieve to are able Mesa. Avid, process that be knowledge operational gene I accept finance, both COVID. able program on be to cities well everyone suites our analytical in GMP amazing respect and teams of not in operations, GMP of commend for not the as phenomenal cooperation in suites maintaining and of to the and to program The expansions for maintenance internal such Furthermore, These with therapy a

ensure process internal and the sales, mammalian laboratories as multiple ‘XX. onboard the personnel of access customer operational the number and the in Myford contributors even expansion of the now of fully our house, have included to the customers. more and to the doubling function, enable of business On increased to the Phase and proposals programs of teams of suite. to completed as manufacture The we expansion in operations to beyond. our addition increased Avid can side X key capacity are in South submitting enter team this XXXX programs Enhancements development commercial of new Matt we will This calendar which, front described, is our in now our bandwidth a BD of are marketing clients

the On are staffing execute XXXX. effectively the in and also efficiently people whole XXX we in in Across every saw operational of side expanding program too calendar a we timely business, of approximately manner. increase each ability our the an and organization,

capacity While expect ‘XX continued we growth the onboard required where to therapy the will we the and equipped to fill South. year new business current capacity capacity, new business fiscal cell fully a in programs fill the mammalian see seek Avid of we to to the also year Myford gene as be the and the

years years short-term enhanced during demonstrated fiscal fiscal endeavor come, to ‘XX. XXXX of time progress business enable like year. the million capacity these to on fill place In inevitably I and what will model, this made which be The effectiveness be margin. in would the to margins recover the to revisit XXXX we our Dan, further by by next considerable highlighted we as clearly will the to close and $XXX closing, of will some this have As pressure

quarter of quarter revenues was company guidance achieved we of revenue XXXX. the recorded the company. and for fiscal new year, a the four operational of the representing The million, Notably, backlog signed $XXX to During this Supporting service XXXX years, that consecutive $XXX continue $XXX coming for ‘XX eighth in which fiscal we as proceed a project largest date. according profitability of beating million, of to plan. leading orders Avid’s our expansions fiscal as in growth anticipate in well facilities to backlog and to doubling million

to pleased momentum growth $XXX fiscal concludes the for between a representing anticipated our the million, are ‘XX, Operator? revenue fiscal can remarks call guidance the demand fiscal XX% to revenue. of And today. to ‘XX, increase achieved of million XXXX we $XXX increase projected in This as questions. prepared we XX% announce the Given during during open for compared now year-end my fiscal XXXX backlog for and and

Operator

Thank Our Sean Capital Markets. first with you. question from RBC Dodge Instructions] [Operator comes

may You proceed.

Sean Dodge

year understand range that congratulations via backlog from just this have the past for year? year’s versus guess into I afternoon you matter. changes I or you and Dan, or backlog what visibility on Thanks. in out factored had into ‘XX, targets? new how hit you there assumptions and I you Good current wanted need the range great that to fiscal any is to this guess, quarter guidance had for the the you better made are going business you conversion the laid of around Nick on for what additional that to things much past like kind compared

Nick Green

are some think there I Yes, differences.

all investment think in perspective the and I is COVID different weren’t really circumstances, last there biotech the market’s I in a set probably supply there guess, mainly, of against well. last political out Sean, uncertainty sort marketplace, those as into chains there lot we we terms outlook Obviously, always year. the sort that of, of had have and of of year, and a things

phase, we’re there is bringing projects generally is host of we account. I number And So longer – some are sort that the is would later there those what that whole took and things to consider and of take also factors of board a a that larger then good execute. additional into on those

than mature bit down expect a within there squeezing when to typically and whereas I be the said but case, the time That’s years probably to months little outside previous that the the So the we’ve little majority bit board. still of think is that we recognized XX-month get frame, was of in on less it we a probably as programs backlog. next more it XX comes turned

The to X on well expanded months is us other up capacity that factor the ago. about influencing of the jumps brought as guidance XX% – we that our

a just really it’s So of those. combination

doubling the size last years. the X think business the I over we’re of

the don’t of are. parts extend growth XX% us as the with worst think still hopefully, pretty but markets for is year negatives XX% We’re an that, those away months to And forecasting I there good. where XX if to were. opportunity is then this it materialize, still we’re they

Sean Dodge

Okay. Certainly, you any levels anything first you’ve should happening. of the all bit been one on seeing across to That’s maybe business. helpful. share there be of signing the bit the subsequent there guess, you macro outlook you thoughts biopharma feel we’ve the comments from can then kind it’s more end on the landscape? has you maybe thinking are that then demand of seems less And around fundraising challenging with we maybe new like made insulates what And the I about for trended? backdrop fundraising gotten April? else seen of a that a How

Nick Green

Yes.

let that I to of in He’s fill Matt should the of at it, regard. the the in line business. all, So on right his front part first end talk of that’s that, but to I’m happy

Matt, sort jump in add want there I can you if So maybe be. need to of just and

Matt Kwietniak

Yes, Nick. sure,

proposal feel the very the has really, we So volume, the issuance been have, strong. very,

I in X, over couple As record issuance. we’ve the had X, noted, months X of months new a last

there. is So the demand

a that I and late that our capabilities pretty in mix market to and business expansions far far think good really our we’ve have. as has as responded place phase our as as the we model put and well opportunities it’s early

seen of definitely with of investments of So with the recent. some agree we as understand as now, challenges very But the a impact haven’t that I in and biotechs. of tremendous

Sean Dodge

Okay.

Nick Green

highlighted, Matt strongly. But all growing fill that very see Equally, biotech. can leading proposal is in equally, investment over his raised of how on to what probably years, has still the of coming are with down which nicely encouraged we as are mean, one the seeing. indicators is out. sort lot fact To those gone I there last money and not that we’re Yes. we’re out that much immune was a all few the we CDAs, still

it this Matt to and a stage, it’s leading per continuing So drive come X mean doesn’t time doing to indicators – really that, XX to the months’ job positively. and great encouraging are that in at through couldn’t those and team se. forward But that what’s say is

Sean Dodge

congratulations and Thanks, Okay. again.

Nick Green

Thanks, Sean. Appreciate it.

Operator

next Jacob with Johnson Our Stephens. from comes question

proceed may You your with question.

Jacob Johnson

growing margins around around comments and the appreciate just Hey, Maybe Dan, to revenue the XXXX, of now the you base I building Phase come unpack just Can has gross online you margins. out? gross just And capacity line? also right now good additional have just inflationary incremental maybe talk impact from that for afternoon. on about of that margin into maybe and speak look XXXX, the to any outlook the the of pressures but really you’re kind kind margin versus takes in X puts the

Dan Hart

margin gross aggressively Sure, way gene the capacity to invest would the the Jacob. to mammalian expansions we’re ‘XX I business. bring to existing therapy fiscal going The establish for cell to the our frame our to continue adding and is to online,

would During we additional board. business, that it’s timing to is the can the we this facility It’s the in depending of and availability bring on in XXs. There and our lumpy. revenues going step-up gross margins also expect to growth, see lumpy costs. in of phase a be of a depreciation it’s Clearly, on personnel

margin. and expect run be would we rate, more plus XX% get normalized to as ramp a we a to gross So but – we at

we does. see as costs going of do else inflationary as As everyone board up across pressures, the kind far

On we that the material through. pass side,

on had far, significant it so hasn’t business. – impact So our a

Jacob Johnson

– that, the is for right Thanks to in then, projects I half these backlog how you’ve or you kind response think And guess, some some of of Has mentioned larger kind of going second some kind refinance development I mentioned in question, got year? of Nick, Matt the of or Sean’s larger – business that wins, the is and Dan. you the just to that in business after now. your you strategy And it. are Got your projects? seeing been of intentional new that fruits this

Nick Green

to of mean and of for are we Avid I I commercial record a sure. think the one those track of the number regulatory it’s think attributes strongest the and business intentional, is particularly have, is of I the which later phase sort that attractive I Yes. of programs. mean there pedigree

good at Ray the did them So across feel we it finishing [indiscernible] the able nice to were. that line take on want talk of that weeks quite is as subject. a CDMO ago actually a couple very to

his it’s that, constrained coming of people of we but of of never now get think realizing – you’ve we amount bit one the significantly course, that see it on a I and have broad company I also online, and out throughout has significant commercial BD level the as we’re the and a that things going commercial Avid there seen So as business, big then capacity. little is out increased been, driving. our more to can continue of effort, And capacity towards coming that top that so capability driving forward, also actually, we’ve people then name think BD it’s horsepower a significant is got that’s it of in of of which not the Matt pedigree that volumes continues but

pharma wouldn’t years have much normally more a to the maybe of some threshold clients bigger few stepped I interesting we think ago. that that’s their across

expansion, the So track a combination commercial the maturity, record, of etcetera. the

Jacob Johnson

Got it. the taking Thanks questions. for

Nick Green

Thank you.

Operator

question [Operator next you. Thank Hewitt Capital. Our Matt from comes Instructions] Craig-Hallum with

You may proceed.

Matt Hewitt

some But the at Are you kind up, I of like since larger it’s of feel capacity. end at today? was for perspective. a you from changes? spectrum out sit market large, an of any little and first end just know last a larger your curious, seeing Thank that kind by manufacturing currently of for and they questions. the over building couple lot I’m capacity sticking of got market are Maybe does sits. the that peers your And capacity how on the taking where been update I of afternoon. of there while releases press the view a was years, of Good we

Nick Green

sort before I I of of sort Matt, over the much couple Yes. last haven’t seen the that we weren’t of mean quarters in of aware new, X,XXX-liter platform.

highlighted confirming are people We in. able that their see concerned to continued I the market. time who we still about top of new amount of looking of capacity seeing massive coming but for lines We’re seeing in areas before, are clients the not achieve am and on that they that are a capacity investment other

in get balance So on it there enough with it assuming little leads is is growth do biotech. to believe to and have have continues out cash with me terms of feel bit of that doing in cash we that comfortable can capital as But our And the the constraints pulled in one today, sheet our still things business particularly that do sort a on are complete we of there. of all our that, obviously, the we markets back hand. expansions,

So we for point. is which bring that always capacity online big and the have a it going available selling forward, clients

Matt Hewitt

you online gene a you those maybe and regarding new and Thank are happen? you. therapy a process would progressing? do you those brought labs And anticipate Have that follow-up, that contract signed lines? yet? When the analytics great. how then development cell That’s Anything along discussions

Nick Green

announced that going It’s out. literally we get to started and Yes. X our it into I weeks, something think I obviously mean months like now this. since we is Conversations or name are getting X great.

these often stages. get them facilities is constantly can running. remain and there very, and who still up I very our impressed just engineering polish So early with teams

and therapy PD analytical off entry business. Obviously, cell the everybody to is start So, is gene those side the of in just in areas. going development

we it the and phase important the PD So as hope and soon good try with of it could was should somebody and was us that’s completes that kind to those the of ready. as running expansion PD up bringing that into – maybe to their onboard a – say, moves into get we some idea, for to GMP up thought so the clients then GMP ahead and I

that to in really, a been of to we only sell actually hard I’ve weeks capacity. able be frank, couple of So had earnest,

ongoing haven’t now starting of to people, we I of the anybody it’s I that a to period want no, there other think signed number day. number good I But were site, with conversations So some last in available. the people good looked, time. of with people a there visit was out time

few think forward be it’s next one going guarantee there. going some would that quarters. that I the it hopefully, that in new on will we to the hopefully now certainly, in So quarter, we it start and be next be. be clients will getting push somewhere will I to next can’t to but bring start I But will expect the few,

Matt Hewitt

great. Thank That’s you.

Nick Green

much, Appreciate it. very Thanks Matt.

Operator

I further Thank like I’m turn at any would any showing closing back Green questions you. not remarks. to And Nick now this time. for to call the over

Nick Green

have drive continued And Thank the I’d Yes. to I’d everybody for Thank like together acknowledge success. the you and also call employees today’s to very closing, In ongoing just much, participating Bioservices. for Avid’s of participating to Avid’s company’s support who and Avid Josh. always, to Thanks. you on continued collaboration. you Thank as everybody like call. on your thank customers, extraordinary partners investors again their for for

Operator

conference concludes for you. call. Thank you Thank participating. This today’s

disconnect. now may You

Avid Bioservices (CDMO) 30 Jun 222022 Q4 Earnings call transcript