Earnings call transcript Q3 2023

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Operator

Good day, ladies and gentlemen and welcome to the Avid Bioservices Third Quarter Fiscal 2023 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, ended of the results corporate an January manufacturing including and XX, and Avid XXXX. we business, contract providing for development quarter financial overview questions. our remarks, After prepared we will welcome your

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

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

You website release, avidbio.com. non-GAAP including can at on our our find earnings reconciliations press corporate relevant

Nick that, the With turn over Avid’s call will and President CEO. to I Green,

Nick Green

via and to Tim thank Thank you, everyone webcast. participating you today

The positive third quarter period was another for Avid.

front, due an increase to both On process capacity. are upwards trend development revenues for financial remained strong margins in the to and manufacturing, beginning and utilized

of a our number high. signing Our backlog record productive, new new agreements business a during development was team quarter, to significant business the pushing highly

development to operations Further, now expansions few operational has South progress handed Our our capabilities over expansion in be complete. continue a The Myford is will weeks. to facility new process well. and been

our therapy year. come cell new later facility We this to gene expect also online and

of over Dan. the Matt and months details our the and call And I’ll third operations I quarter provide business following to first for on X XXXX for additional that, fiscal financial turn overview and an period of results. development will

Dan Hart

Nick. you, Thank

financial included Before I to the financial filed XX-Q, the our are results press today, overview, begin, to in call this on release Form prior additional our provide the brief I’ll with in today in addition was which SEC. on our and call details issued

overview quarter first from period. financial provide X to XX, results a months January of and quarter ‘XX million, our recorded for XXXX. prior the for XX% year the were compared an representing ended operations the in now increase I’ll of fiscal $XX.X million $XX third Revenues

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

the be changes and in have year-to-date uncertainties provided increases the periods, can to manufacturing current in consideration the quarter where the to variable customers, estimated period a process for revenues in contract both related revenue primarily resolved. services in increase and For runs, new been recognized attributed development to

period during quarter the gross X margin a XX%, XX% for ‘XX fiscal the fiscal the third fiscal first XX% of for was to the XX% of ‘XX. margin same and of for compared of of margin Gross for was compared Gross ‘XX margin to third a fiscal months ‘XX. gross quarter

decreases been margins period, depreciation, quarter unutilized these prior resolved For same fees. X-month our the and to from and in points current periods, year-to-date year capacity the is quarter our were expansions. in the uncertainties the approximately percentage in and for primary benefited that both increases third facility X change and included respectively. important and contract percentage in variable overhead It where margins of a accounted decreases a under year X from The note associated to which of business consideration for the margins X-month quarter in margins also periods, a the driver gross and and points have growth were with primarily costs of increases labor, due costs incremental benefit

Excluding all of increase gross the and an compared gross adjusted XX% of respectively. XX% prior were to XX% year-to-date XX% factors, and third respectively, adjusted and and as margins year-to-date margins quarter year our these third quarter

to we We to will substantial with In margins. expansion-related additions. anticipated affect incurred capacity incurring of expect continue an to line the expansion-related incrementally support coming foresee date growth ramp-up in and near-term anticipated costs utilization the asset costs, additional in quarters,

quarter third the Total ‘XX year legal, expenses ‘XX. compared the SG&A to SG&A accounting increase $XX.X fiscal periods SG&A million to in months recorded compared million, the in to million, expenses. expenses were of XX% primarily and and fiscal for for of of increases The for X an quarter first are third were quarter $X.X of recorded an million both the ‘XX $XX.X $X.X compensation costs, the year-to-date professional due other prior increases increase as period. benefit-related XX% in in of fiscal and

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

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

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

equivalents $XXX January cash to XX, on XXXX. and XX, million cash XX were $XX Our compared April on million,

progress great make expansions. facility our to on continue We

that projects, potential expansion-related of quarter, $XX customer the facilities third we revenue generating combined approximately $XXX bring our on completion to As to capital Upon future mix and the the million depending to of remaining we million annually, total expenditures estimate have capacity these $XX million. to between up be the of our our estimate end will projects. of expansion

overview. my to an Matt over during concludes activities for commercial the This on financial call now update the turn I’ll quarter.

Matt Kwietniak

Dan. Thanks,

trade strong and highly third business be customers. existing very team meetings at engaged the maintaining remaining the active presence quarter, the industry, with During development to continues and prospective in a

that a strategic felt to supplier we year, not attractive would capacity. to it not but last strong pharma offering as capabilities capacity viewed would Avid be and require critical current allow mass only functional to outlined Avid’s big only also be of our in terms a accounts that and also disciplines, base, but customer we As

new of our an strategy end, new development included our on we the a achievements and We to achievement this was team a customer Avid’s provider business preferred as as pay BD noteworthy most position during company, continue large strategic pharma to starting expanded top diversify period To our one is focused a expand pharma off accounts. as for base. important feel the designation

already large to other the audits conducted we positive addition, companies so, view which facility very or committed have have and visited developments. have In doing pharma as

strong. signing in We signed the quarter. This fiscal behind for quarterly which company, represents I and pleased our agreement. signed highest that COVID-related quarter the significant our leading team the in indicators am we our industry, remain million second active remain to agreements a $XX ‘XX our in net to report interactions of only new during with third business date the

signed In the new addition during to agreements the significant signed also period. during customer the total quarter, a dollar of number amount we

signings customer fiscal XXXX during signings fact, number of during the approximately XXXX. quarter third represents of half all In of of fiscal the the new

end $XXX new at a result, third As achieved million of high our the record backlog the quarter. of a

on While over recognized depending maybe months, maturity some recognized backlog of over the next we which XX expect of the be longer majority of the to period, the a this project.

requests proposal quarters a solid remain ahead. signal new the robust, Importantly, for

a optimistic performance very deliver, for are of and and We team with remain to the they’ve continued significant we the commercial to the strong pleased our year. success that close

call over This period. concludes and an commercial of will update to during other back now Nick achievements for the overview my activities. on turn operations I the

Nick Green

Matt. Thanks,

of for a year. the third the progress our milestones quarter, make significant important During continued to team towards number

downstream the of including have ongoing. in the development processing all all schedule. only of will this projects and month, complete therapy, end and As of South, expansion our Myford expansion, along with cell both gene one others, on the process With mammalian, the we still the

quarter. pleased Quarter positive we as with raised achieving with our utilization. towards increased development strong the maintain which top margin the momentum three we guidance, performance, also also were revenues line last we Allied

signings quarter As a reported non-COVID-related company’s represents signing had the in largest commercial had totaling quarter million. Matt, have our another with exceptional we for $XX the that history. by This team

project end of the expanded significantly and and further our base our period current Naturally, our quarter brief have bolstered these customer exceeded at diversified a the then wins backlog, new which capacity. for operating

to our capacity the better Given provide we this that and mammalian which not for fact our high, cell month. be next complete new is backlog is our demand facilities has the pleased state-of-the-art Myford operations in Avid growth timing our new been scheduled hit will a to complete, to accommodate over could feel to that backlog. now South handed customer expansion first and begin and to we manufacture are has report expansion, The

will capabilities Further, operational our development weeks. be few in new a process

is than manufacturing and to PD with the quarter Myford. well in this will even capacity XXXX, expansion This new While was another then this also later And clients into to destined more move posting week, have of only our in initiated the fill impressive start will exceeding onboard PD new timed new more we year-to-date. team capacity their $XX revenues space. to June million

the and one thank team next new Our a to step service in today, attract our worked growth. complex of you of of been extend and level we will long great Myford will and the has deal professionalism executed reality. believe the This the the been complete a of process, to only profound that fuel for that team which years allow making great expansion that backlog a but business to this wish to has deal coordination our has expansion, collaboration which over us tirelessly to with we every the I way. few required not has last have to continue exceptional

benefit year. we Parallel to open building on this progress work, company which with the its come make the to gene later and this out facility, new continues to cell of expect

capabilities previously, As launched the development currently have we analytical areas. we already these in and for have persons business, this and ongoing we projects reported

was from and operations strong third business financial with the a development, As a perspective. one quarter

first log both We and revenue year-over-year for quarter the continue to months. growth X the

we margin development. continue During seen utilization forward, will increased this the drive And we to positive looking trend. quarter, have positive anticipate

In with quarters fiscal XXXX. of closing, three are pleased the we I extremely to first would like that emphasize

of guidance between our increased capacity fiscal Our on utilization XXXX and on strong, having $XXX $XXX million the our revenues million. positive hit for revenue full are and year a margins. revenues remain and are our Combined, impact target we to

wins to to significant team commercial from impress our facility an capabilities nearing expansions drive Our business capacity providing growth. customers. additional both Avid’s completion, continues new new next and phase of existing with finally, are And and

its supporting in commercial world. built North manufacture able field customers’ substance few the product past CDMO capacity time, X true development Over as the support and America. capable XXXX manufacturing. the commercial customers as the to and grade cell of cycle in marks derived top in the CDMO cell has year in the throughout Avid mammalian a We of from believe Avid to over provision line XXth years reputation position a Avid’s of year XXth biologics investments and around a commercial substance needs of drug drug capabilities life the

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

Operator

question from first Sean Dodge Our line comes Instructions] Capital of of Markets. the RBC [Operator

Your Sean. question, please,

Sean Dodge

Yes. afternoon on congratulations bookings the Thanks. strong results. Good and

last QX mentioned back, pharma. always large heightened several the strongest the the from at over looking have also now years. Matt seasonally But interest least So been

can the being So about do think I how going a $XX forward? sustain level, as that feel guess you million we you about pace when

Nick Green

much. This Nick, very Thanks is Sean.

increase in the turn backlog view not be quarter. is to I We’d what we that take but amount or you’ve over million suggest a every we that managed be seen quarter. highlighted, a difficult orders backlog to think as swings I years, that do continue, if the you in down you each but that get think But steady necessarily it me signing quarter-to-quarter, think to we’ve for $XX certainly, expect post will pretty always I longer-term on of and it. would

continuing see that for trend think we’ve I to on got just now. like So the

Sean Dodge

of going to like margin for I line. make the then growing It quarters, Okay. sounds should in your next gross at and cost sure forward, And I’m expect we there. Fair just comments least enough. kind clear handful of revenue Dan, want around

somewhere of So the for mentioned? gross answer one-time the you this there kind maybe about items adjusting in flat is being short range I XX% sequentially think after margin pretty guess

Dan Hart

Sean. Yes,

forward I would from, at. our pulling with, that cost those people aggressively point build-out that’s this the would So be this one-time anticipated mentioning been of run Further fiscal be we’ve with would say, I’d out throughout year, items, been as growth. reiterate just investing in and expansions. we we’ve the in line

say, a are point would out a from at expenses far quarters. We’re where as I prior ramp as flattening the or,

believe margins flattening as capacity we our will where So further backlog utilization as that and we that’s out, convert strengthened with that be our our increases.

Sean Dodge

great. Thanks, again. Okay, that’s

Nick Green

And that so mass smooth just to that a lower to better I say over that margins we’ve time. mean, we a line slightly that accordingly. that mean we sort and always think, doesn’t again, looking it’s as of there period, the think where got, see there that, with quarter-to-quarter example, a trend we’ve It’s the to longer I through positive, seen But which the like be. But as kind then – we we what quarter of a I add again far is go might a fluctuation Sean. shutdowns past the that always for as you’ll is we’re revenue not you getting to have, it for. is obviously if to in general much don’t the see. critical But that take

it’s say road, So bumpy – one. I but a wouldn’t fluctuating a

Sean Dodge

both. Sure, Okay. thanks

Operator

you. Thank

Our is open. line question Craig-Hallum. comes of Matt, the Matt from line Hewitt your next of

Matt Hewitt

contracts? echo one, I’ll seeing some end the to perspective, what challenging Are far strong Thanks. already was are with over customers moving the spectrum? smaller and pharma weekend are customers of movement on funding congratulations the the hearing hearing and as of events quarter. you from you Obviously, smaller given those the should funding large what but Maybe from cash you very a as Alright. what on positions? a first from help, any environment you’re a

Nick Green

a Yes. is has the our XX% funding roughly That Average you highlight, as for while. for somewhere of mean commercial. been, I environment portion, think revenue I sort close. of guess, is biotech I stressful

amount to important part exposure sort so – price that, small then as of to of you our of but We’ve very business. sort still that also big market cash I obviously, the price they some are not of pharma sorry, biopharma, then think, the generally, And add seen, then reduces very, being – conscious.

customers, Dan little So joke with when bit. can with I discussions – a you’re having always you

the cash. cautious can theme the background Dan You the speaking be in with always hear

prioritizing because phase later think phase of do of later-phased I it’s how So we’re seeing actually what see is how probably difficult much maybe it Again, is is much and projects. to us that people typically. us, we for earlier always more real than

in think be So I anybody it see less to affected going guess, responsible to in making difficult regards by But you will be have say for cash. I may that. marketplace can’t sure on adequate that of, some the sort behavior they

Matt Hewitt

helpful. maybe then really And a Thank second you. That’s question.

to is success that think that contract pipeline gene once Thank looking? give kicked with as utilizing able lot that how an just of the first capacity? curious you online, a manufacturing off far comes on and the of you’ll be started you’ve some so could Obviously, cell far. I’m capacity that quickly had Obviously, you. us pipeline, As and update do you there? get how that therapy

Nick Green

the lot indicator. mean, a of lot is go which of I a and We’ve talked been interesting, a we’ve always had Yes. It’s visits, back would bit a I people. me to site to strong to business that case. I would never that of going always site, a hasn’t to and COVID, piece if clearly, a wasn’t been pre-COVID But sign during then you. are they with client say on

we’re there. people looking seeing new gives trying used facility to it’s certainly norm, to we off a get lot of of GMP to once interest, go kick that will new a but lot us be which confidence that into So a the

provide has past it years, by few interest and certainly continued back funding There we mainly than seeing I the, and inside ensuring more area assets for again, we are C the think, that. And little impacted a a quality is you culture. strong in I good, but over do. maybe think been what the GT to goes place always high-quality that

to when and interesting that hoping will into that then conversations up we’re convert running, get business. site visits those and see So – we we facility

Matt Hewitt

That’s great. Thank you.

Nick Green

Thank Matt. you,

Operator

Thank you.

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

please, Jacob. question, Your

Jacob Johnson

larger nice go and development pharma. backlog. with work after chat drugs, just probably first curious they you work pharma, probably strategy smaller mean people but you unfairly, about touch could I I’m there. large to think on on congrats CDMO Hey, thanks. there about is assume blockbuster there, on not on quarter I would the Avid curious nice could so say and or new again, unfair. things if I But figure am and I forum strategy large pharma, the Maybe just the Matt, probably for Nick you Will business plenty handle, just maybe I might I’d of to don’t that? give pretty for a think addition the like

Nick Green

Thanks, Yes. Jacob.

up that, unfortunately. you the in Just of middle broke

big just you’re correct Avid, me they at let and are just or? asking So why pharma clarify, about looking I am

Jacob Johnson

just if and apologize yes, large pharma help about they of out I broke I investors think not think going Yes. pharma it’s where But can I And kind case? customers, up. Avid curious strategy might large about yes. after when something it, the of I’m in think

Nick Green

No, absolutely. Good question.

is let very won’t through me look now of So and look can I going to proposition has a an done well. big think article of windows. up was sub molecules but our are day X. facility that all of that views I pharma. a currently and walking last actually we molecules We’ve capabilities, fantastic strong new that over ready pharma. be and so love other of spent capability protein forward some for And years, exist facility because also what I our XXX even And we no, significant the a on is of But in really few mean, capacity. those around buttoned capacity, the the obviously, in up capital development significant though tied at number process anymore, it’s and the again, the they big really enhancing kilos reading manufacturing. I the a you in looking amount Avid and value there today, if will Phase with at very supported those number only it’s It

and focus we is more think, therapeutic and states, heading about than And blockbuster better obviously as down, the where scale states, yields comes the a the on There the that’s more obviously, frankly, industry is on the the disease you’ve and not as smaller targeted and drugs we’ve of as always that then then cured well. it’s disease drugs obviously, like. I orphan So big up blockbusters. the go lot have of that and to and the become manufacturing smaller of reactors got populations top

want if So out BLA the the opposed you qualifying big process out emerging that supplier, to pharma more larger qualified and And launch has your both going a reduced really scale to maybe then platform molecule even got with very relevant at be for platform ever on as on and smaller at it who or and and succeeding a becomes a pharma, from. yields maybe means getting second can commercially increase stage. to later adding capacity you’ve and indications, and in medium-sized your maybe everything large viable larger go a a liter bet moving X,XXX do

medium large is believe. and to the So board I the small, today, it’s pharma across offering

Jacob Johnson

of left on one for you just Thanks the the on projects. it dynamics maybe of Maybe the flow. CapEx kind relates And Got expansion that. two cash as it. just kind I if Dan, outline for touch to of then appreciate

this well? capacity along that flow online the margin a in the additional that through start is capacity – and the near-term for in and getting you’re next outlook if running you it lot investments making as and this just about is couple revenue beyond capacity quarters, with of of talk you the the Just now on cash maybe

Dan Hart

Sure. Thanks for the question, Jacob.

flow the capital in here. and to $XX incurred going year expenditures outlined of for I through remarks million, through had is estimated within filings that will we third had today, the spend cash this our which and fourth we $XX quarter prepared fiscal $XX be million, the As million roughly quarter, the

is But existing going of fund once Looking forward the some those million hand be the all spent facilities, get facilities forward, of commissioned of ahead, things cash $XX cash that there the lingers to roughly firmly operations looking an as $XX those passed million, close and additional left out. capital to on closed cash to that cash the we sufficient and operations. believe from get and equivalents out

Jacob Johnson

it. Appreciate Dan. that, for Thanks it. Got

Operator

Thank you.

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

question, Your Paul. please,

Paul Knight

Yes. Matt, over signings the you to was backlog last you statement customer built the earlier what new could one-half of about are XX that that comment? months, made talk

Matt Kwietniak

of was No, period client clients. the new the it was to year. Not about prior new equal signings half in

Paul Knight

Got it.

The seeing seems call you touch your million a other earlier anything yields, you than past. Are in question, Nick, that capacity higher behind $XXX mentioned the $XXX as potential? better in about million

Nick Green

attention but first guess, I I year-to-date. done Yes. capacity, was $XX your and to mean PD I’d kind of $XX foremost, million draw always We’ve that they said have process development. million already

than that. are So they better doing clearly,

So similar that suggest – of seen it’s today. capacity XXX-plus areas that other the certainly in and we’ve the would something mammalian

it’s throughput science, process that perfect actually I wish it’s sometimes So that the mix, was getting. a sometimes product it efficiency. Again, it’s we’re really

of it’s we we and million feel – a I saying wouldn’t an vary, feel can plus. there think it little it judgment. element always bit of if was I confident be it well, $XXX very But certainly, didn’t So that is –

Paul Knight

Catalent, what Avid what last with capacity from you think from are etcetera. going at relative WuXi, question, do your we the on, in from success liking then terms to about And others as capacity? of announcements Nick, Lonza, capacity would yet well backlog, be are doing this see people And building

Nick Green

That’s But everything. it’s focusing it’s and about everything mean, again, – anybody worrying on for I really comment Paul, else. Certainly, not going to them. on

quality solid a it’s So basis.

and a think closer comes parcel part before that was CDMO the that’s culture that and a and it the even step before quality culture Peregrine quality days Peregrine back to days patient. solid was of in to I out it’s stemming maybe one I here, being certainly back of think the to

assets, day build you And of quality asset facility. solid top of building you you quality build top what on that, the So on culture. the end at build the our system, quality of then is build the the that, the then then you

think that business. the way And the built I that’s we’ve

as We last made. ethos good that we have as batch a the strong here we’re only

strong So – you’re that of on out. in, little everything to bit focus goes doing day it really back day from England. a It a

it’s don’t on So football it games, over the you every or Premier XX you my didn’t. that soccer analogy win And after XX one. focus done or League you games, you’ve either

So do we across also through to day. just we’ve every And mentality take a then done the that standardization it lot company.

large So variability of the have deliver we with a downstream, means standardized you today old though the and the and high-quality platform have platform of time, on the desired standardized a on years X assets. assets yield. on the new on very that we only brand spec our minimizing are or A upstream, amount portion you

made little could that a complicated focus job thing, than I one afraid. my more because I wish – but really on bit it’s So I’m easy, it’s that,

Paul Knight

Great. Thanks.

Operator

for I remarks. you. to Green like would closing turn Nick Sir? Thank conference to back the now

Nick Green

your support operator continued the like to date. for Avid to and Thank would employees impressive Avid success ahead. for Bioservices. is closing, And of once and team that has today. you for to to the we opportunities exceptional the the participating of forward new and participating driven our you today and look professionalism again dedication you achievements. acknowledge thank Thank on It truly again call I everyone their In

Operator

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

may You now disconnect.

Avid Bioservices (CDMO) 13 Mar 232023 Q3 Earnings call transcript