Avid Bioservices(US:CDMO)2019-12-10 00:17Financial Data and Key Metrics Changes - Revenue for Q2 2020 was $18.3 million, an increase of 80% compared to $10.2 million in the same period last year, marking the highest revenue recorded in the last two years [11][7] - Gross margin for Q2 2020 was 18%, significantly up from 3% in the prior-year period, attributed to increased manufacturing runs [12] - Consolidated net loss attributable to common stockholders was $1.9 million or $0.03 per share, an improvement from a loss of $2.9 million or $0.05 per share in Q2 2019 [16] - Backlog at the end of Q2 2020 was $52 million, a decrease of 16% from $61 million at the end of Q1 2020 but an increase of 13% from $46 million at the end of the last fiscal year [17] Business Line Data and Key Metrics Changes - Total SG&A expenses for Q2 2020 were $3.5 million, up from $2.8 million in Q2 2019, primarily due to payroll-related expenses and stock-based compensation [13] - For the first six months of fiscal 2020, revenues were $33.6 million, a 47% increase compared to $22.8 million in the prior year [18] Market Data and Key Metrics Changes - The company continues to maintain a strong presence in the market, focusing on attracting new business and expanding work with current customers [8][25] - The company hosted several industry events to increase visibility and attract potential new clients [26] Company Strategy and Development Direction - The company is focused on enhancing its services and offerings to contribute to continued growth, including the launch of a new process development facility [41] - The company is preparing to expand its Myford facility as demand solidifies, with plans to utilize the available 42,000 square feet of space [53] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving operational breakeven and sustainable profitability, with expectations for continued positive financial performance [24][50] - The company is actively engaged with clients regarding their future plans, indicating a positive outlook for commercial production [60] Other Important Information - The company reaffirmed its revenue guidance for fiscal 2020 of $64 million to $67 million, supported by a strong backlog and customer projections [23] - A new pharmaceutical grade water system is being installed to enhance manufacturing efficiencies [43] Q&A Session Summary Question: Regarding the new water system at Myford, how should costs be viewed going forward? - Management indicated that the water-for-injection system is an enhancement and the overall operational costs for such systems would be around $2 million to $3 million [52] Question: How does the company view the scope of work for opening new facilities? - Management stated that they are preparing contingency plans to build out the 42,000 square feet of space in Myford based on demand visibility [53] Question: How is the company prepared to handle volatility from major clients? - Management confirmed that there would be no negative impact from Halozyme's product discontinuation, as they remain focused on their ENHANZE platform [54] Question: Can you elaborate on the dynamics that led to the increase in revenue and the decrease in backlog? - Management explained that efficiencies allowed for the acceleration of manufacturing projects, leading to increased revenue despite the natural ebb and flow of backlog [57][58] Question: What is the expected impact of the new water treatment capabilities on gross margin? - Management noted that while the new system would not significantly boost gross margin, it would enhance overall productivity and efficiency [67] Question: Will the new process development lab contribute to business development efforts? - Management affirmed that the lab would allow for earlier stage projects and standalone process development, which typically has healthy margins [70]