Release Date: July 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Avid Bioservices Inc (CDMO, Financial) achieved the highest quarterly revenues in its history during Q4 FY2024, meeting revenue expectations.
- The company signed multiple new project agreements, contributing to a strong backlog of $193 million.
- Gross margin for Q4 FY2024 approximately doubled compared to Q3, indicating improved capacity utilization.
- Avid Bioservices Inc (CDMO) added a significant number of new projects and customers, including another big pharma customer.
- The company completed and launched new facilities, expanding its annual revenue-generating capacity from $120 million in FY2021 to over $400 million today.
Negative Points
- Full fiscal year 2024 revenues decreased by approximately 6% compared to the prior year, primarily due to fewer manufacturing runs and reduced process development services.
- Gross profit for FY2024 was significantly lower at $7.3 million (5% gross margin) compared to $31.5 million (21% gross margin) in FY2023.
- The company recorded a net loss of $140.8 million for FY2024, a stark contrast to the net income of $0.3 million in the prior year.
- Income tax expense for FY2024 was $113.8 million, a substantial increase from $1.3 million in FY2023, primarily due to a valuation allowance against deferred tax assets.
- SG&A expenses, while decreased, still amounted to $26 million for FY2024, reflecting ongoing operational costs.
Q & A Highlights
Q: Can you provide some insight into the fiscal '25 revenue guidance and the proportion expected from the existing backlog versus new signings?
A: The proportion is not markedly different from previous years. The confidence in our forecasting remains strong, and the mix of booked versus to-get revenue is consistent with past periods. (Nicholas Green, President, CEO)
Q: Can you elaborate on the growing interest in your new capacity and when it might convert into signed business?
A: Interest is already converting. We've completed or are finalizing the second PPQ campaign in the new facility. The process from PPQ campaign to commercial revenue takes time, but the fact that we've already completed two campaigns bodes well for future capacity fulfillment. (Nicholas Green, President, CEO)
Q: Aside from increasing capacity utilization, what other measures are being taken to help with margin recovery?
A: The primary focus is on improving utilization of our facilities. While we are always cost-conscious, the main driver for margin improvement will be increased utilization and operational efficiency rather than cost-cutting. (Nicholas Green, President, CEO)
Q: Can you provide more details on the business development side and any metrics or anecdotes on what you're seeing in the market?
A: Quarter-by-quarter bookings can be erratic, but the long-term trend is positive. We see good growth in our backlog and positive dynamics in customer interest and onshoring. The financial markets for biotech are easing, and we are optimistic about fiscal '25 and beyond. (Nicholas Green, President, CEO)
Q: How is the large pharma strategy progressing?
A: It's a slow process, but we are making progress. Big pharma looks for trusted suppliers, and while it takes time to get on their list, the number of customer visits, quality audits, and interactions have been strong and positive. We are optimistic about capitalizing on this market in the future. (Nicholas Green, President, CEO)
Q: What is the capacity of the CGT portion of the business, and how is business activity developing there?
A: The CGT capacity is about $80 million of our $400 million total. Interest and activity in this area are picking up, lagging the mammalian side by about four to five months. We are seeing encouraging signs in client interactions and customer visits. (Nicholas Green, President, CEO)
Q: Can you provide an update on process development activity and its impact on revenues?
A: Process development activity can vary depending on the type of project. Late-phase programs may need less development, while others require more. The level of activity is positive, and we expect to see a jump in process development revenues this year. (Nicholas Green, President, CEO)
Q: How do you view the CDMO capacity dynamics in the industry, and what are the challenges your customers face?
A: High-quality late-phase commercial-grade CDMO capacity is in relatively short supply. While the market is picking up, the speed of transactions is gradual. Onshoring is increasing, but meaningful amounts may take time to reflect in our backlog. (Nicholas Green, President, CEO)
Q: Can you discuss the cadence of inbound calls and the impact of onshoring and funding environment on business development?
A: Inbound calls and positive conversations are up. The pipeline behind the backlog is growing, with increasing onshoring and early-phase program opportunities. The overall outlook is positive, reflected in our guidance and optimism for the future. (Nicholas Green, President, CEO)
Q: How do you see the gross margins evolving with increased opportunities in later-stage contracts?
A: Larger runs in later-stage contracts typically command higher margins. Incremental margins will improve with increased top-line revenue, as evidenced by the nearly doubled gross margin in Q4 compared to Q3. (Daniel Hart, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
