- Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen. And welcome to the Avid Bioservices Second Quarter Fiscal 2023 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 maybe recorded. to Investor conference Relations like Brons to now Avid’s of group. would hand over the Tim I Please go ahead.

Tim Brons

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

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

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

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

Nick Green

for we participating that Avid. year thank everyone during on you today And be first Company’s Tim. to will another fiscal the anticipate webcast. you, months, via performance Thank the XXXX six strong Based

process and reflecting revenues record increases manufacturing Company work. During in the quarter, the for any second QX period, development both, recorded

complete the agreements existing signed facilities, contributing concluding track business Company’s with time multiple by new at On have the to we and expansions, backlog. same remain strong new we customers, expansion on the With and Myford to continue progress with respect front, make the both of calendar customer quarter to to shutdowns. one annual Franklin We both XXXX. our and new successfully the our end our Myford

gene period, on We our management mid-calendar range a significant the some senior and And cell also expect we XXXX. with the of facility to functions, new across and added finally, additions line during manage talent broad I notable to on to team along growing capabilities, in therapy business six operations, quarter come additional details for And and Dan. I’ll process results. turn months operations business of financial that, second Matt the and call developments overview on will development, over period first following XXXX of resources. human the for an to and provide our the fiscal

Dan Hart

Thank you, Nick.

and recorded I’ll overview XX-Q, first representing Revenues an Before call I’ll our to million, provide increase quarter year the million on our in this overview financial were ‘XX release in to on today, addition compared results issued operations today financial the the press ended results which prior I financial for additional provide from the to are was second of the filed of $XX.X XX% included XX, XXXX. six call brief details fiscal prior our period. a now quarter in months $XX.X October for begin, the Form with our in SEC. and

XX% increase For period. million, first of revenues six year million prior $XX.X ‘XX, in months the were to fiscal a the compared $XX.X

margin revenues process can were was of the the months XX%, an first Gross gross for margin during for fiscal gross XX% ‘XX. and manufacturing of was the the high, of of quarter Notably, primarily XX% year increases quarter six for attributed second quarter process the at second development second the a all-time our and of margin the prior both compared revenues fiscal as the same revenues year-to-date margin a development year-over-year XX% of periods, fiscal increase ‘XX periods. a representing for ‘XX compared quarter Gross in XX%. For compared to increase to fiscal ‘XX. be period in to to

For X% is to mammalian, margins gross in primarily margins growth in approximately that expansions. with our margins decreases and included and increases the note between therapy roughly prior of to capacity and costs our of gross from cell depreciation, of decreases six-month business It periods, quarter and these overhead incremental increases facility and our fees. XX-XX in were also the XX% important for accounted periods, were primary associated costs in the split due respectively, gene year’s benefits quarter unutilized the operations. both and and our six-month drivers labor, for The which

Excluding same period all in the second these with quarter factors, our year-to-date the were and line margins of year. prior gross

first of the other an to due increases million, $X.X near in expenses of and million compensation will costs incurring in ‘XX the expect with XX% costs compared recorded year-to-date six in affect were were accounting, date coming compared foresee fiscal related expansion related for $XX.X prior quarter $X continue to fiscal year in fees. We and XX% both quarter the margins, and quarter benefits the to Total ‘XX. and ‘XX the periods increase SG&A quarters in legal, incurred additional second second months were million, The for costs, expenses to for $X.X the of million fiscal SG&A period. growth. of related line professional SG&A term to incrementally of recorded primarily expansion anticipated increases an the we increase

net of compared million fiscal or of the ‘XX. share share quarter net quarter second loss to recorded basic and for second ‘XX, a a Company of the $X.XX per and or diluted $X.X $X.XX the For of million diluted $X.X basic income fiscal as per

‘XX, the $X.XX respectively, recorded first million and per share, or income Company $X.XX $X.XX net six of of income and of basic during to and year fiscal the or compared months as For $XXX,XXX diluted net prior per diluted basic $X.X the period. share

$X.X months ‘XX, six fiscal $X.X EBITDA of the the million, Company first million respectively. adjusted an and quarter second the achieved For and of

October I’ll call the equivalents cash $XX.X commercial were quarter. $XXX.X over on my during for XXXX. to compared and XX, Matt on turn on XXXX million XX, to April now activities million financial an the cash update This concludes Our overview.

Matt Kwietniak

Thanks, Dan.

was The second quarter productive. busy both, and

see We continued the marketplace and in the Avid’s therapy on term. current as interest demand near on in as cell strong line offerings gene the in capabilities for well to coming line and

through expanded We’ve at regularly existing team as our client Our industry, build meetings, trade increase as well through as face-to-face in continues seen increased within the with as to visibility presence interfacing interaction conferences. customers. well show potential an

proposal strong, client in add continue a we and As to base, continues and business leading new develop indicators values very other positive continue our our manner. to a pipeline to our to result, be

During for new signed $XX of the the first million bringing new year second business in quarter, fiscal this net to months total million. six the orders, $XX our team project

representing compared Our of $XXX the to $XXX of the XX% ‘XX. second backlog at the end increase quarter the backlog million quarter the million, a was end of at fiscal of

the current We expect months. our XX majority recognize next over the to backlog of

these new backlog we We the as impact as the We starting investments on we are to our converting capacity indicators it into team in the already made of leading see year to opportunities internally. earlier our relates capabilities. anticipate measure bring and this commercial

the the first year. of activities. second to generated a during Looking challenge year achievements to will of looking This for momentum of and the other period. the call team operations is back turn now successful I continue, the to on will that commercial this overview half my an Nick update over and concludes and during the the ahead, half embrace we forward believe ready

Nick Green

pleased am I to Matt. Thanks, our to report according continues team to execute plan. that

our fill a project of Our significant continues pipeline business development on revenue to growth. year-over-year team top

manufacturing continues team standards. employing produce Our time quality deliver the and to while on highest

improved to our invest the across on talent the this represented to execution of capabilities required evident not $XX.X that perhaps as same revenue continue manufacturing of result In compared to we increase expanded This a business. core Company’s is through is Company’s position prior the months This our important financial very to has first period. XX% customer note and expanding the our XXXX, strengthened revenues year most the track, fiscal growth in million prior business. success of to Our and compared It and years. the growth. simply facilities six base and is consistent expansions remain ensure significantly

process second had strong the we quarter, particularly from services. development revenues During

the from revenues our PD are projects capacity our second of quarter And by well high This key Specifically, in from is element the of and PD the during first and new on-boarded. for business. to customers and validates as a future both, this further expansions the new of whole invest XX%, PD bodes exceeded business XXXX our it prior in decision revenues particularly as exceeded capabilities majority and growth is quarter by of PD of XX%. where the encouraging mark revenue

the new coming staff that line, new well. calendar we we our capacity report these to forward to look and operate As are required the have progressing facilities to is on excited year recruitment we

in these high-quality, and Our individuals assets require cases, must ahead be time. brought trained many of well-trained in and

have is have these particularly short-term. is investment taken to move we with these interest impacted margins continue we X will making offerings, validating our two to decision in further continued to and gratifying in expansions. the investments years Avid’s This demand. we ahead our is been forecast, customer seen as meet have ago and growth Phase investments, of growing almost What the the essential As impact personnel in anticipated

forward With to great and to longer the this be position plan development progressing of start towards to And capacity. QX will in we at end our look expansions the we positive a this at line XXXX, margin on term coming stage, targets. seeing to consume

expansion. to quarter, second our gene cell the and During therapy progress make we continued with

has we prospective development As dialogue this capabilities have customers. process we announced allowed new during our for and the us one, with launched to business, already analytical which quarter escalate

by that suites to plan. to on will our mid-calendar to in therapy advance expansion are respect With gene early to We is projects business, cell continues with the is XXXX. capacity Based construction prospective report our and with customer GMP on needs we well be GMP them and this completed we expect already customers’ customers, according cell our schedule this first pleased facility. timing Likewise, onboarding business mammalian believe our suites. to progressing into align discussions for

equipment facility validation and initiated. of During of in downstream much the positioned equipment this the the was first was quarter,

mechanically our is largely today, facility And is calendar capacity remain during expansion During quarter of one upstream underway. well And as validation we installed two, stand is quarter release and well finally, we underway to complete for development on and schedule equipment. XXXX. process the operations the we as also

quarter capacity As we expansions one on-track remain calendar quarter provide to I we space of seeking one, onboard future am mammalian current manufacturing this to report all new customers, have utilize additional announced that by ultimately XXXX. capacity. will the PD to during to the pleased complete end the

we During utilities tie-ins successfully services in worthwhile on annual quarter, the to It certain at manage new is the alike. bring to is shutdown an central incredibly manage busy that and recognize on shutdowns year plants. we It lead was is also extended this Franklin noting Myford Avid. accommodate completed growing. and to transforming, both expanding growing And our need Company and workforce. slightly this our in expertise experience transformation, order and the of to time The

also Mr. across XX functions. than more industries. of safety range Lukash resource with Oksana Lukash and established human has operational As health XX Engineering, Jr. years Company’s experience years Prior we People. manufacturing, entrepreneurial promoted joined seen organizations In engineering, ongoing expansions. Alston Mr. Project to quarter, he continued have Vice which both Avid President environmental was and capital of Operations. a as promoted of and precision Alston at all a led the half the Ms. wish of the the fiscal supporting highlight to Michael Vice from Culture Mr. strengthen joining of starting first I closing, you of People than position management has in Alston our September, a served Avid Lukash Avid, Vice facility diagnostics company. management & to President experience, responsibilities, accomplishments GMP XXXX. Director our have facilities during in of role President to more In again and as Avid’s Oncocyte of team. Corporation,

Our strong. top line revenues remain

XX% the given continue And Our market, substantial grown in see has we we backlog expect to to year-over-year. the it continue grow. and is demand to

of continue. momentum expect utilization with and full and capacity soon to we As capacity to come line, approach additional current services on this we our

questions. to increasing remarks For from is reasons, pleased guidance the to we report $XXX between I fiscal $XXX revenue This its million prepared and all and can million year for for these full million. Avid of for am open XXXX call today, that Operator? million now to concludes between the $XXX my $XXX

Operator

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

You may proceed.

Sean Dodge

just with continues funding, new Yes. strong, sounds of afternoon. quarter, broadly. around be a extent had affecting than Maybe signed million, demand, concern macro be like been lot which $XX continues of the there a Good the that’s just it to the interest client is the biotech Thanks. to starting it at. business backdrop, in to you lower running Nick, kind but

guess, behavior, and and et is there can or seeing body around a language anything this notable represent placing -- a new cetera? trend Is are spending, change in work, a there I lumpy wins new business So delays around you necessarily be reprioritizations, share theme? anything you just quarter-to-quarter can this doesn’t around

Nick Green

before end, overarching people terms really we the of that the it quarter before quarterly marketplace. and Yes. interest point is we backdrop is at sign little doing and marketplace, demand to trends just latter a that, Sean. see always see And strap -- cash of a that’s -- we you General comment which amount least bit which very longer. taking We’ve navel-gazing sort the about are Avid is the it do in great if happy I quarter-to-quarter. little this people the in will Hi more great if comes more in that for the the about is with sometimes smaller lumpiness overall others of than the will we’re the of services players numbers. that maybe make who I the when would think, reporting behind at afterwards, the look and some for look at not some sign is But, just so talked

the I case. probably that’s think

little the the strength same -- demand. one. It the was subset Sometimes not as it’s and small we this a if be no thing quarter overall saw But it strong was again always seeing last that macro was as weren’t general that’s -- a we lower, same everybody. we highlight would in of last year difficult general, we no to as determine whether I the a raising the in wouldn’t of continued did inference impact relatively in quarter -- only we see there -- of see. And but we guidance market

the So, interest we as remain optimistic as in Avid. far

Sean Dodge

open that bottom we You then, on trajectory the much investments Okay, quarters, X great. guess at pretty soon the I weight over set the about Phase and to is, talked next And are growth and Dan, just several margins margins. question the are related the here? Myford very to adding

here of As those facilities the open margins and become revenue producing, I guess, direction should the from margins, trajectory upward? be of

Dan Hart

the Hey, Sean. questions. Thanks Good for questions.

As far looking of incremental we absorb the we start capacity margins we still therapy and see brought invested fill I’m start operational on. place to up the some We’ve to new in through that and getting the in as as forward, expansions that the will aggressively the other standing the gene confident second cell folks and some cost and business. quarter for of costs

we investment side, going line investment, we’re growth. but we’re in going that to -- the to to cost make the on anticipated forward make plan further with Going some

to able new in capacity essentially, we should we capacity, start ultimately to to margins discussed towards incremental the margin the to as to and that move roll start fill that So and continue out get new that goal past. we’ve be

Sean Dodge

the Thanks. for taking Thank you Great. Okay. questions. again

Nick Green

Thanks, Sean.

Operator

Thank questions. you. for One moment

from comes Capital Matt question Hewitt Craig-Hallum Group. next with Our

proceed. may You

Matt Hewitt

and Maybe building progress questions talk congratulations me, the well, the let’s taking on for you -- you up. Thank for the to out as back guess new afternoon. I customers capacity. Good on one the first

anything after already closed. orders the talk prior to response comment a the about late quarter, quarter? Can in the in some you closed coming quarter’s some about, this in one right questions in made has You coming of

Matt Kwietniak

lumpy really the just had next past. in again, the the we capacity of prior in guidance. we’ve reason. the I as in remain the And the for quarter. We that about very We’ve But, raised -- a coming this we’ve quarter, see. regarding the we talk on Matt, can’t just concluded back, see line labor optimistic that we again, business interest quarters going them ahead brought obviously

It’s not have clear. good a I pretty lumpy We ones, trajectory business, have which think ones. so some lumpy the of is overall we good and some not

Matt Hewitt

one signing had you or just peers the Got contracts, of that. side. for but even your of kind bit maybe talked Thank feet of new about a the payment it. not delays And dragging little then and on

Now looking from are that at think seeing your DSO XX come for But are any as in QX. or customers you here coming payments DSOs for I’ve the in quarter, up of would I anticipate? with you the

Dan Hart

than you anticipate. the the the from come conversation or Matt, would so in as dropping, From approximately we had it’s still to as see our see are DSO side, continue past. paying. more we’ve do XX People payments with think I I some in prior can quarter. days But,

Matt Hewitt

I’ll prospects some maybe our little faster? to a customers, to going one perfectly conversations far guess, look those and Is pushing anybody what one are this you the and as Fantastic. get customers? your this maybe come customers, hey, back the on, queue. then are with and And new they from timelines? with work you. I is timelines hearing in excitement hop last then done out new both capacity hearing Thank you try But, bit those at you as for as from and existing internal something just to that, your

Nick Green

see to him alluded good think Matt. Yes. anything had I six last I and with that It’s them mean, having the the offering probably it I had comments, but happy to good the bit few think quite months, facilities. over I I add up to any really I and positive been and five alongside Avid’s people to flows we’ve sort go mean, nice got if high-quality and have the and and like. make, really not of around further, I’ll the is to have response every to this going comments available of we think let very comments if little around Matt you And and available shortly. without last to go more But nothing capacity people some be months, walk

standing So, the we are delighted up that future. to very near in be

is obviously, did first line. actually to that capacity it with on phase the year we I last our backlog DSPX, on I ideal. think our hit quarter think in pretty mean, we expansion I timing brought close same the

this I we that So, we’d it have better. think that, to we don’t again then could timed And love any did do if up. quarter next coming

So, lots invested excited to again, good time my and interest fill then in and starting it it summary would really of and we’ve to margin. in of ahead further line that be Matt, your side? those that costs anything just see on of absorb and some then on have progression

Matt Kwietniak

No.

well think, said. I

I feedback. was in the tour how actually going and to lot accurate. excitement a client back think of get and eager interest space build-out great of We’ve positive, a the and engaged. the site out it’s the and is early and get and construction come in clients of number on and really had see A progress lot additional as

very, shows And well. very of it So, a interest. there has been lot

optimistic So, we remain for sure.

Matt Hewitt

great. much. you That’s very Thank

Nick Green

Thanks, Matt.

Operator

questions. One you. for moment Thank

Our Jacob with question next Johnson Stephens. comes from

may You proceed.

Jacob Johnson

Good afternoon. Hey. Thanks.

shy think how record we us the a of KPIs, kind quarter biologics expected. As And -- and development where process process how related question. are what just development you you of remind about process PD development. Can on maybe about capacity you a record you think just many Can capacity kind then, think you in of backlog what we quarter the I But, today a had looking in side? us forward? expansion talk that could of had have forward-looking in about also much as mean, bit was

Nick Green

Yes.

takes told in of just is facility. some already may across the I encouraging into sort or somebody business, do PD moving projects already go is, that scale well we the of runs transfers view, in for do the on So, us, process developed, it basically on they a we’re obviously, mean, really the sign. if into some manufacturing the we’ll demonstrating small Depending client, process have what we’ll ready PD. typically, my when in, work

end in. are the business really it’s So, front things where of the coming

small are revenues obviously So, to to a in. X,XXX good see in And move we those those of indication that sort for there me from people up hope X liter see then to getting the ultimately. scales people is larger

is capacity, over me business is really to where the this the the quarter And actually a in then, indicator terms that is good So, for heading. X of million capacity.

is capacity it’s a I sort campaigns different a whether you’re certain of because doing science. fungible all between thing. think, we’ve It activities often talked and a and bit can number, not vary of about perfect that little

X So, We we capacity. hit million down actually our capacity our somewhere million. the and quarter for we had beat around would’ve X

super So, the really that was sort of quarter.

going. is In where terms of the capacity

would XX give million So X annual. a million us year,

are the or in comes us take quarter, a last expansion super performance And in well. the then would quarter. based as on We million XX give million that doing one the effectively or quarter that on XX give obviously

Jacob Johnson

maybe put discussion, Got of Thanks up a Nick. think sequentially. margin to sold it. cost follow just And on the point gross up then finer that, I a as goods for

you various expansions, up about much You how journey and and the just would you during could of variety the don’t the left much quantify of I about but like we people a to to but go know talk revenue of called lot out this support, number think a going hiring. you have of as accomplished that how the forward? maybe maybe it And way there’s of kind quarter is sounds capacity staffing if things, a

Dan Hart

so front, quarter were we on the where gross Jacob, folks, as the XXX ended approximately at which up last is as we significantly margin year. far over So, heads,

many that and revenue we to heads these a the that those we needs we’ll start how some or of where function some of see in, we looks anticipated as need to start be of why groups that’s add see we’re forward the that specific kind and as fill essentially we’ll move capacity, of to fill we to expansions growth within that the backfill do costs absorb in we what bring of that’s start additional -- And kind think, to Looking as different as far forward. as at, able I load we like.

Nick Green

And sort think -- different in you come of see that seen add as costs well, other areas. part the into you’ve Jacob, organization I Yes. I’d is the the

example, additional beefing up commercial we the So, organization representation. BD with started for

We also are BD revenue. increased marketing those things initial and revenue with marketing those. stuff, calls, that and that end on associated proposal increased writers all sort the all the of front all of with The zero any doesn’t get

So Again, in fill that hits don’t to in those margins very need certainly of the I areas numbers we short think the term. large those increases out facilities.

sort don’t we forward. through in And the also in go you bring these start goes that we all repeat And then have operational on So, then is to those the like things and as more got of onboard going need the that forward, project as to of where in and the to ultimately we as we I management organization forward, PD. making people as go hands see actually batches. is where see think more growth this they’re you’ll that

which on investment in. now, is to people, the And the is forward the standing associated things as effectively start then apply get we cost that the seen you’ve the just with what hit variable So, all kind up of you need then, is by and to a the business manufacturer. we’ll early go margin

Jacob Johnson

Dan. Got helpful Nick you, it. That’s Thank and context.

Operator

comes Knight KeyBanc. question next from Our Instructions] with [Operator Paul you. Thank

proceed. may You

Paul Knight

revenues up that Nick, process in the was how I number number of the development much catch and didn’t quite quarter.

Nick Green

$X development process think So, about I million, revenues Dan? is

Dan Hart

million XX%, it up quarter, the $X.X for was year-over-year. and

Paul Knight

gene Okay. And in then, or is cell or therapy development both? and this monoclonal

Nick Green

It’s in monoclonal. both, but primarily in

Paul Knight

customers some of -- Avid on guess, to What’s Matt, larger the giving today? responding the And, question for are what is that a I edge and Okay. the well? competitors

Matt Kwietniak

Yes.

I quality -- think very capacity I available that of background success, record think resonates I think the track well. very, the the

good clients to and flexible work a and unique to approach with. that accommodating we’re our partner dealing think I with and is

clients to So, well respond that.

active lot So, engagement for sure. of

Paul Knight

profile like, And it you -- Is or view? biopharma, fit a in there customer? Matt, medium, what’s Is they large they your small? that your

Matt Kwietniak

And on there, We always at point, --- impact small the that us It’s all months had biotechs key continues. emerging and an mentioned. the someone above, manage ago. this been it’s brought that engaged everything nine for and accounts and seeing previously already to with six, already had you we’re

So, of by from new base, work as client we’re each encouraged the client well add quarter existing additional base. as

Paul Knight

and opinion, produced? manufacturing? that is, your chain supply to, for you monoclonal getting how there still line is in for could you And talk Nick, And brought and Okay. a and in is secondly question tight things you, supply the on

Nick Green

Yes.

demand can of that see So, capacity, always still got for doing. the are seeing for have see lots of you this I when at to plenty We sort capacity high you explanation I in. quality would commercial you doing. think, what think the in -- comes of mammalian when mammalian that shortage we of of operate the say. you’ve grade, demand we’re And I sort look that’s really And only we segments it to the capacity,

the So, any perfect slowly that supply seems of just those things one get of in the chain itself, imagination. of wouldn’t it’s stretch it’s better. I to say terms by again, continue to

still we things for here and scramble So, there. do

to demands. some able are We anticipate customer

find shortage customers in we a move there market. do come on the So we that the various will maybe available we where is that have so And can one. components here have quickly actually fortunately, --

where needs but makes the not where see continues be, which shortage, So, better, to and little you always to in because quarter-on-quarter it’s better difficult it manage, place get the same than again, it still not bit to it previous. better, a

Paul Knight

Okay. Thanks.

Operator

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

Nick Green

success. who and possible your work continued Avid’s Bioservices. drive I closing, today’s This pride Thank today’s on of not Thank to In on could everyone and without take Thank excitement our call we our you, again capabilities. you draw emphasize many be closer the participating Avid operator. for call. you hard and capacity talented participating new to employees our in like of would for to launching support as continued

Operator

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

disconnect. now may You

Avid Bioservices (CDMO) 7 Dec 222023 Q2 Earnings call transcript