TUSTIN, Calif., March 06, 2024 (GLOBE NEWSWIRE) -- Avid Bioservices, Inc. (NASDAQ:CDMO), a dedicated biologics contract development and manufacturing organization (CDMO), announced today that it intends to offer, subject to market conditions and other factors, $160 million aggregate principal amount of Convertible Senior Notes due 2029 (the "2029 Notes") in a private placement (the "Offering") to persons reasonably believed to be qualified institutional buyers pursuant to Section 4(a)(2) of the Securities A ...

Monty Rakusen Investment Thesis As its ticker indicates, Avid Bioservices (NASDAQ:CDMO) is a biologic CDMO. The company produces drugs for pharmaceutical and biotech companies and also helps them in the development, quality control, and compliance of the drug. Avid has been performing really well since becoming a pure-play CDMO in 2018, growing revenue at a 22.7% CAGR and adjusted EBITDA at a 21.5% CAGR in 5 years (although normalized EBITDA is much higher than what they did in F23). However, over the l ...

Financial Data and Key Metrics Changes - Revenues for the second quarter of fiscal 2024 were $25.4 million, representing a 27% decrease compared to $34.8 million in the prior year period [48] - For the first six months of fiscal 2024, the company recorded a net loss of $11.6 million or $0.18 per share, compared to net income of approximately $400,000 or $0.01 per share during the same prior year period [51] - Gross margin for the second quarter was negative 18%, compared to 12% for the same period in the prior year [66] - Cash and cash equivalents on October 31, 2023, were $31.4 million, down from $38.5 million on April 30, 2023 [69] Business Line Data and Key Metrics Changes - The company secured new business wins of approximately $35 million, resulting in a record backlog of $199 million, an increase of 35% compared to $147 million at the end of the second quarter of fiscal 2023 [62][71] - SG&A expenses for the second quarter were $6.6 million, a decrease of 4% compared to $6.8 million in the prior year [50] - The company recorded bookings of $35 million from new and existing customers, including a significant contract for the recently completed CGT facility [71] Market Data and Key Metrics Changes - The backlog has achieved a new record high, indicating strong demand despite the financial challenges faced by many customers [61] - The company is seeing growth in later-stage projects, which are generally larger and take longer to complete compared to earlier-stage programs [54] Company Strategy and Development Direction - The company aims to fill its capacity and continue guiding future development, focusing on both mammalian and CGT products [76][102] - Avid has completed a three-year expansion program, increasing its revenue-generating capacity to up to $400 million annually, more than triple the capacity of its pre-expansion business [96][102] - The partnership with CIRM is expected to enhance visibility and validate the company's new CGT services [63][93] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the second half of the fiscal year, anticipating revenues approximating those achieved in the second half of fiscal year 2023, which was the highest in the company's history [80] - The company acknowledges the impact of the downturn in biotech funding but remains positive about future growth opportunities [79][121] - Management noted that the backlog typically converts at over 95%, indicating confidence in the quality of the work in backlog [112] Other Important Information - The company entered into an amendment to its revolving credit agreement, extending the maturity date to October 2024 [52] - The completion of the CGT manufacturing facility is expected to attract later-phase projects and improve margins as capacity utilization increases [99][100] Q&A Session Summary Question: Can you provide details on the change in estimated variable consideration under a contract? - The change in variable consideration relates to a change in estimate where the revenue recognized on certain programs was less than originally estimated [126] Question: What was the impact of the customer's decision to defer the PPQ campaign? - The decision to defer the PPQ campaign was mutual, and it is now ongoing [110][127] Question: How confident is the company in the quality of the backlog? - The backlog typically converts at over 95%, with no material changes expected [112] Question: What is the outlook for bookings growth in the back half of the year? - The company expects bookings to potentially increase, but the market can be erratic [132] Question: How should we think about gross margin progression for the balance of the year? - Gross margin is expected to be in the mid-teens area, influenced by expansion-related costs [117]

FORM 10-Q Delaware (State or other jurisdiction of incorporation or organization) 95-3698422 (I.R.S. Employer Identification No.) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.001 par value per share CDMO The NASDAQ Stock Market LLC Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ AVID BIOSERVICES, INC. PART I - FINANCIAL INFORMATION 3 Item 1. Condensed Consolidated Financial Stateme ...

Financial Data and Key Metrics Changes - Revenues for Q1 fiscal 2024 were $37.7 million, a 3% increase from $36.7 million in the prior year [4] - The net loss for Q1 was approximately $2.1 million or $0.03 per share, compared to net income of $1.6 million or $0.03 per share in Q1 fiscal 2023 [5] - Adjusted EBITDA for Q1 was $2.8 million, with cash and cash equivalents at $24.9 million, down from $38.5 million on April 30, 2023 [5] Business Line Data and Key Metrics Changes - Bookings for the quarter were $36 million, with a backlog of $189 million, representing a 20% increase from $157 million at the end of Q1 fiscal 2023 [6] - Gross profit for Q1 was $4.1 million, with an 11% gross margin, down from $9.1 million and a 25% gross margin in the same period last year [55] Market Data and Key Metrics Changes - The company is experiencing increased interest in later-stage and commercial projects, which are generally larger and take longer to complete [57] - The new capabilities and capacities are expected to attract customers seeking clinical manufacturing and support through the approval process [60] Company Strategy and Development Direction - The company aims to establish a larger, more diversified, and predictable revenue base [7] - Avid is on track to launch its GMP manufacturing suites by the end of Q3 2023, with a potential total revenue-generating capacity of $400 million annually [9][61] - The strategy focuses on building capabilities for clients throughout the entire product lifecycle, which is already yielding results with multiple clients utilizing new capacities [38] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the financing environment, noting an uptick in interest and engagement from clients [67] - The company anticipates that the recognition of backlog will extend beyond one year due to the focus on later-stage projects [57] - Management acknowledged that expansion-related costs will continue to impact near-term margins but expect improved gross margins as capacity utilization increases [33] Other Important Information - The company has made substantial progress in recent years, marking its 30th year in business [25] - The operational build-out of the cell and gene therapy facility is progressing, with expectations to bring it online by the end of Q3 2023 [61] Q&A Session Summary Question: What is the expected revenue contribution from the new cell and gene therapy facility? - Management indicated that revenue recognition from the new facility is expected within the fiscal year, but it is too early to provide specific guidance [13][65] Question: How should the market expect the cadence of growth throughout the year? - Management noted that typical seasonal shutdowns could lead to a 15% drop from Q1 to Q2, but they expect to ramp back up towards the end of the year [45] Question: What is the impact of the current financing environment on new business? - Management reported that while the environment remains challenging, there are signs of improvement, and they are actively engaging with clients to prepare for a potential recovery [66][67]

Item 6. Exhibits 26 Form 10-Q TABLE OF CONTENTS Item 1. Condensed Consolidated Financial Statements 3 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (In thousands, except per share information) AVID BIOSERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands) AVID BIOSERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Note 1 – Description of Company and Basis of Presentation The ac ...

Financial Data and Key Metrics Changes - For the full fiscal year 2023, revenues reached $149.3 million, a 25% increase from $119.6 million in the prior year [54] - Gross margins for Q4 fiscal 2023 were 21%, down from 22% in Q4 fiscal 2022, and for the full fiscal year 2023, gross margins were 21%, compared to 31% in fiscal 2022 [7][54] - Total SG&A expenses for Q4 fiscal 2023 were $7.6 million, a 29% increase from $5.9 million in Q4 fiscal 2022, and for the full fiscal year, SG&A expenses were $27.9 million, a 32% increase from $21.2 million in the prior year [8] Business Line Data and Key Metrics Changes - The company recorded fourth quarter bookings of $55 million, leading to a record high backlog of $191 million, a 25% increase from $153 million at the end of fiscal 2022 [19][63] - Late-phase projects, defined as Phase 3 and PPQ campaigns, increased by approximately 34% during fiscal 2023 [82] Market Data and Key Metrics Changes - The biotech sector is shifting focus towards later-phase projects, which tend to take longer but have a higher probability of regulatory approval, thus stabilizing future revenue [19][20] - The company anticipates that the increase in late-phase projects will lead to more Biologics License Applications (BLAs) being filed, enhancing future commercial revenues [21] Company Strategy and Development Direction - The company plans to complete its cell and gene therapy expansion by the end of Q3 2023, with an estimated cash requirement of approximately $30 million for expansion-related capital expenditures in fiscal 2024 [9] - The company aims to leverage its reputation as a reliable commercial-grade partner to capitalize on medium to long-term market fundamentals [59] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the short-term uncertainty due to reduced funding for early-phase projects, which may impact the speed of attracting new customers [15] - The guidance for fiscal 2024 has been broadened to $145 million to $165 million, reflecting the anticipated slower growth [15] Other Important Information - The company has completed its mammalian expansions and is on track to launch CGMP manufacturing services for cell and gene therapy by the end of Q3 2023 [71] - Cash and cash equivalents as of April 30, 2023, were $39 million, down from $126 million a year prior [70] Q&A Session Summary Question: Can you provide a split of the backlog between commercial, late-stage, and early-stage projects? - Management did not have the exact split available but acknowledged the increase in late-stage projects [16][17] Question: What is the definition of late-stage projects, and what proportion do they represent? - Late-stage projects include Phase 3 and beyond, but management did not provide a specific proportion of the business [18] Question: What is the outlook for margins in fiscal 2024 given the larger cost base? - Management indicated that margins will be impacted by increased fixed costs and depreciation from expansions, but they expect long-term margin improvement as capacity utilization increases [37][95] Question: How much more capital expenditure is planned for fiscal 2024? - The company plans to spend approximately $30 million on expansion-related capital expenditures in fiscal 2024 [43] Question: What is the state of the balance sheet and cash flow outlook? - Management expressed confidence that cash from operations will fund the business, with the option to draw from a revolver if necessary [97]

Financial Performance - For fiscal year 2023, total revenues increased by $29.7 million, with manufacturing revenues up by $26.1 million and process development revenues up by $3.6 million compared to fiscal year 2022[303]. - Operating income decreased to $3.6 million in fiscal 2023, down from $15.4 million in fiscal 2022, primarily due to a $5.2 million decrease in gross profit and a $6.7 million increase in SG&A expenses[307]. - Income tax expense for fiscal 2023 was $1.4 million, compared to a benefit of $115.0 million in fiscal 2022, reflecting the first year of income tax expense[310]. - Other income (expense), net was $1.0 million for fiscal 2023, an increase of $1.1 million from an expense of $0.1 million in fiscal 2022, mainly due to increased interest income[309]. Expenses - Selling, general and administrative (SG&A) expenses rose to $27.9 million in fiscal 2023, an increase of 31% from $21.2 million in fiscal 2022[278]. - SG&A expenses as a percentage of revenues were 19% in fiscal 2023, compared to 18% in fiscal 2022[306]. - The company expects gross profit to be impacted in the near term due to increased fixed costs from recent hiring and facility expansions[277]. Cash Flow - Net cash used in operating activities for fiscal year 2023 was $(12.9) million, a decrease of $(22.4) million compared to $9.5 million in fiscal year 2022[322]. - Net cash used in investing activities was $(77.6) million, primarily for the acquisition of property and equipment related to the expansion of the Myford facility and the construction of the CGT Facility[323]. - Net cash provided by financing activities was $2.9 million, a decrease of $(296) thousand compared to $3.2 million in the previous year[322]. Assets and Liabilities - As of April 30, 2023, the company had cash and cash equivalents of $38.5 million, which is expected to be sufficient to fund operations for at least the next 12 months[290]. - The company is in compliance with its Credit Agreement's financial covenant, which requires maintenance of a minimum consolidated EBITDA of $15 million[296]. Facility and Capacity - The company completed facility expansions in April 2023, which are expected to increase total revenue-generating capacity to approximately $400 million annually[269]. Equity and Compensation - The company maintains equity compensation plans that allow for stock options and restricted stock units, with expenses recognized over the requisite service periods[319]. - The Convertible Notes have a fixed interest rate of 1.25% per annum, maturing on March 15, 2026, and are convertible into cash, shares, or a combination thereof[325]. Revenue Recognition - Cancellation or postponement fees from customer contracts are recognized as revenue upon the cancellation or postponement date, subject to variable consideration[317]. - The company allocates transaction prices for contracts with multiple performance obligations based on relative standalone selling prices[316].

Avid Bioservices, Inc. (NASDAQ:CDMO) Q3 2023 Earnings Conference Call March 13, 2023 4:30 PM ET Company Participants Tim Brons - Investor Relations Nick Green - President and Chief Executive Officer Dan Hart - Chief Financial Officer Matt Kwietniak - Chief Commercial Officer Conference Call Participants Sean Dodge - RBC Capital Markets Matt Hewitt - Craig-Hallum Jacob Johnson - Stephens Paul Knight - KeyBanc Operator Good day, ladies and gentlemen and welcome to the Avid Bioservices Third Quarter Fiscal 202 ...

Debt Issuance Costs Comprehensive Income Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Delaware (State or other jurisdiction of incorporation or organization) 95-3698422 (I.R.S. Employer Identification No.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such r ...