On September 8, 2021 Avid Bioservices, Inc. (NASDAQ:CDMO), a dedicated biologics contract development and manufacturing organization (CDMO) working to improve patient lives by providing high quality development and manufacturing services to biotechnology and pharmaceutical companies, reported financial results for the first quarter of fiscal 2022, ended July 31, 2021 (Press release, Avid Bioservices, SEP 8, 2021, View Source [SID1234587395]).
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Highlights Since April 30, 2021
"We are pleased to announce another strong quarter. During the first quarter of fiscal 2022, we recorded an increase in revenues compared to the prior year period. Our margins significantly improved during the first quarter, reflecting the efficiencies of our business model and our ability to strategically leverage our existing fixed costs. In business development, we continued to expand and diversify our pipeline. And, as always, our business development team remains highly engaged in pursuit of multiple new business opportunities. Finally, with respect to operations, both Phase 1 and Phase 2 of our buildout remain on track as work continues to enhance our high throughput capabilities for upstream, downstream and analytical services, and we expect the Phase 1 expansion to be online in January of 2022," stated Nicholas Green, president and chief executive officer of Avid Bioservices.
"As we now have the first quarter behind us, and we are well into the second quarter, we believe we are on track to achieve our stated full year fiscal 2022 revenue guidance of between $115 million and $117 million. This represents a year-over-year growth rate of between 20% and 22%. Multiple factors contribute to our confidence in reaching this milestone, including an increase in existing customer demand, a growing pool of new customer projects, and our substantial backlog. Having said that, we remain keenly aware of the supply chain challenges that many companies continue to face due to the COVID-19 pandemic. While we have not experienced any material delays or shortages to date, it is important to recognize that uncertainty remains in the supply market, and we are cognizant of the impact it may have on timing and pricing of materials. As of today, we are aware of no supply related factors affecting our business.
"Having completed two successful fundraisings in December 2020 and March 2021, the company is very well capitalized, with approximately $160 million of cash on hand. These proceeds support our expansion and enhancement efforts, and will allow the company to explore value-creating opportunities for organic and inorganic growth in the future."
Financial Highlights and Guidance
The company is confirming revenue guidance for the full fiscal year 2022 of $115 million to $117 million.
Revenues for the first quarter of fiscal 2022 were $30.8 million, representing a 21% increase compared to $25.4 million recorded in the prior year period. The increase in revenues can be attributed to an increase in process development revenues primarily associated with services provided to new customers combined with an increase in manufacturing revenues primarily due to an increase in the number and scale of manufacturing runs in-process and/or completed in the current year period compared to the prior year period.
As of July 31, 2021, revenue backlog was $110 million, an increase of 83% compared to $60 million at the end of the same quarter last year. The company expects to recognize the majority of this backlog over the next twelve months.
Gross margin for the first quarter of fiscal 2022 was 37% compared to a gross margin of 34% for the first quarter of fiscal 2021. The increase in gross margin was primarily due to higher manufacturing and process development revenues during the period, as well as the receipt of a $3.3 million fee for unutilized reserved capacity from a customer during the quarter, similar to the $3.1 million fee from a customer received during the first quarter of fiscal 2021. The gross margin percentages for both the current-year and the prior-year periods were strengthened by approximately 7% and 9%, respectively, from these unused reserved capacity fees. While we believe the positive trend in our margins demonstrates the growing efficiencies of our business model, we do expect to increase hiring in the coming months to support our growing manufacturing capacity, and this may impact margins in future quarters.
Selling, general and administrative expenses ("SG&A") for the first quarter of fiscal 2022 were $4.5 million, an increase of 17% compared to $3.8 million recorded for the first quarter of fiscal 2021. The increase in SG&A during the quarter was primarily due to increases in stock-based compensation and consulting fees, partially offset by a decrease in payroll and benefit related expenses.
For the first quarter of fiscal 2022, the company recorded net income attributable to common stockholders of approximately $6.3 million or $0.10 per basic and diluted share, as compared to a consolidated net income attributable to common stockholders of $3.3 million or $0.06 per basic and diluted share, for the first quarter of fiscal 2021. The increase in net income attributable to common stockholders during the fiscal 2022 period is partially due to preferred stock accumulated dividends of $1.4 million included during the prior year period.
Avid reported $159.7 million in cash and cash equivalents as of July 31, 2021 compared to $169.9 million as of the prior fiscal year ended April 30, 2021.
More detailed financial information and analysis may be found in Avid Bioservices’ Quarterly Report on Form 10-Q, which will be filed with the Securities and Exchange Commission today.
Recent Corporate Developments
Appointed Esther M. Alegria, Ph.D. to the Avid board of directors. Dr. Alegria joins the Avid board bringing nearly 30 years of biopharmaceutical industry experience spanning research and development, manufacturing, quality control, assurance and compliance, technology transfer and regulatory submissions supporting the development and commercialization of small and large molecule therapeutics and vaccines.
Signed multiple new orders during the first quarter, totaling approximately $23 million. These projects span all areas of the business, from process development to commercial manufacturing.
The two-part expansion of the Myford facility continues to progress according to plan. The first phase of the expansion, which was initiated during the second quarter of fiscal 2021, expands the production capacity of the company’s existing Myford North facility by adding a second downstream processing suite. The second phase, which was initiated during the fourth quarter of fiscal 2021, is designed to further expand capacity through the build out of a second manufacturing train, including both upstream and downstream processing suites within Myford South.
Combined, the company estimates that the first and second phases of this expansion will result in a total revenue generating capacity of up to approximately $270 million annually. While the company believes that this expansion is critical to its ability to service the future needs of its customers, Avid presently has adequate capacity to accommodate current demand.
Statement Regarding Use of Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures such as non-GAAP adjusted net income, free cash flow, as well as adjusted EBITDA. The company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The company believes that they provide useful information about operating results, enhance the overall understanding of our operating performance and future prospects, and allow for greater transparency with respect to key metrics used by management in our financial and operational decision making. These non-GAAP financial measures exclude amounts that the company does not consider part of ongoing operating results when planning and forecasting and when assessing the performance of the organization and our senior management. The company computes non-GAAP financial measures using the same consistent method from quarter to quarter and year to year, and may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.
The company reports non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles, differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. The company believes that non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures, and encourages investors to carefully consider our results under GAAP, as well as the supplemental non-GAAP information and the reconciliations between these presentations, to more fully understand our business.
Non-GAAP net income excludes stock-based compensation; business transition and related costs including corporate initiatives into new business activities such as consulting and other costs directly associated with such activities, and severance and related expenses; and non-cash interest expense on senior convertible notes for the accretion of the debt issuance costs associated with our senior convertible notes. Adjusted EBITDA excludes non-cash operating charges for stock-based compensation, depreciation and amortization as well as non-operating items such as interest income, interest expense, and income tax expense or benefit. For the reasons explained above, adjusted EBITDA also excludes certain business transition and related costs. The company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital.
Additionally, non-GAAP net income and adjusted EBITDA are key components of the financial metrics utilized by the company’s compensation committee to measure, in part, management’s performance and determine significant elements of management’s compensation. The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP financial measures included at the end of this press release.
Conference Call
Avid will host a conference call and webcast this afternoon, September 8, 2021, at 4:30 PM EDT (1:30 PM PDT).
To listen to the conference call, please dial (877) 312-5443 or (253) 237-1126 and request the Avid Bioservices conference call. To listen to the live webcast, or access the archived webcast, please visit: View Source