On March 13, 2023 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 third quarter and nine months ended January 31, 2023 (Press release, Avid Bioservices, MAR 13, 2023, View Source [SID1234628582]).
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Highlights from the Quarter Ended January 31, 2023, and Other Events:
"During the third quarter, our team continued to make significant progress toward a number of important milestones for the year. Regarding our financial performance, our revenue remains strong, and we are on target to hit our revenue guidance for the full fiscal year 2023 of between $145 and $150 million. Revenue and increased capacity utilization are having a positive impact on margins. Our commercial team continues to impress with significant new business wins from both existing and new customers. During the period, we signed $67 million in new business, representing the strongest quarter in the company’s history excluding Covid-related business. Given this demand, and the fact that our backlog has hit a new high, we feel the timing could not be better for Avid to complete our mammalian cell facilities expansion which will provide new, state-of-the-art capacity to accommodate our growing backlog. The Myford South expansion has been handed over to operations and is now complete. We are pleased to report that our first customer is scheduled to begin manufacture next month. Further, our new process development capabilities will be operational in a few weeks.
"Parallel to this work, the company continues to make progress with the build-out of its new cell and gene therapy facility, which we expect to open later this year. As we reported previously, we have already launched the analytical and process development capabilities for this facility, and projects are actively in process.
"2023 marks Avid’s 30th year in the field of biologics and the 18th year of commercial manufacture. Over time, Avid has built a reputation as a true commercial grade CDMO capable of supporting its customers throughout the product lifecycle from cell line development to commercial manufacture. We believe the addition of this capacity and capabilities place Avid as a top CDMO of mammalian cell derived manufacture of drug substance in North America."
Financial Highlights and Guidance
· The company is reiterating full fiscal year revenue guidance for fiscal 2023 of between $145 million and $150 million.
· Revenues for the third quarter of fiscal 2023 were $38.0 million, representing a 21% increase compared to $31.5 million recorded in the prior year period. For the first nine months of fiscal 2023, revenues were $109.5 million, a 24% increase compared to $88.4 million in the prior year period. For both the quarter and the year-to-date periods, the increase in revenues can primarily be attributed to increases in manufacturing runs, process development services provided to new customers, and revenue recognized in the current year period for changes in estimated variable consideration under a contract where uncertainties have been resolved.
· As of January 31, 2023, revenue backlog was $176 million, representing an increase of 26% compared to $140 million at the end of the third quarter fiscal 2022. The company expects to recognize the majority of this backlog over the next twelve months.
· Gross margin for the third quarter of fiscal 2023 was 26%, compared to a gross margin of 29% for the third quarter of fiscal 2022. Gross margin for first nine months of fiscal 2023 was 21%, compared to a gross margin of 34% for the same period during fiscal 2022. During the three and nine months ended January 31, 2023, our labor, overhead, and depreciation expenses increased primarily due to the hiring of personnel and additional facility and equipment related costs in anticipation of the commissioning of our mammalian and cell and gene therapy CGMP facility expansions. Additionally, the current year third quarter and year-to-date margins benefited from revenue associated with a change in variable consideration under a contract where uncertainties have been resolved and the same prior year period margins included a benefit from unutilized capacity fees. Excluding all these factors, our third quarter gross margin was slightly higher, and our year-to-date gross margin was in-line with the same prior year periods, respectively.
· Selling, general and administrative ("SG&A") expenses for the third quarter of fiscal 2023 were $7.1 million, an increase of 22% compared to $5.8 million recorded for the third quarter of fiscal 2022. SG&A expenses for the first nine months of fiscal 2023 were $20.3 million, an increase of 33% as compared to $15.3 million recorded in the prior year period. The increases in SG&A for both the third quarter and the year-to-date periods were primarily due to increases in compensation and benefits, legal, accounting, and other professional expenses.
· For the third quarter of fiscal 2023, the company recorded a net income of $0.5 million or $0.01 per basic and diluted share, as compared to net income of $2.2 million or $0.04 per basic and diluted share, for the third quarter of fiscal 2022. For the first nine months of fiscal 2023, the company recorded net income of $0.9 million or $0.01 per basic and diluted share, as compared to net income of $12.1 million or $0.20 per basic and $0.19 per diluted share, respectively, during the same prior year period.
· Avid reported $60 million in cash and cash equivalents as of January 31, 2023, compared to $126 million as of April 30, 2022.
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
· The company’s commercial team signed a significant number of new orders during the third quarter, totaling approximately net $67 million. These orders are with new and existing customers, and span all areas of the business, from process development to commercial manufacturing.
· The company recently added in-house cell line development services, further rounding out its mammalian cell offering.
· The company continues to make progress with all its expansion projects. The Myford South expansion has been handed over to operations and is now complete, and the company is pleased to report that its first customer is scheduled to begin manufacture next month. Further, Avid’s new process development capabilities will be operational in a few weeks. With respect to the cell and gene therapy business, the company brought its process and analytical development capacity online in June 2022. The company anticipates bringing the CGMP manufacturing suites online by the end of Q3 calendar 2023.
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 initial start-up costs related to our expansion into viral vectors for the cell and gene therapy sector of the market, and severance and related expenses; non-cash interest expense on convertible senior notes for the accretion of the issuance costs associated with our convertible senior notes; and other income or expense items and is adjusted for income taxes. 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 and is adjusted for income taxes. 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.
Webcast
Avid will host a webcast this afternoon, March 13, 2023, at 4:30 PM EDT (1:30 PM PDT).
To listen to the live webcast, or access the archived webcast, please visit: View Source