Avid Bioservices(US:CDMO)2023-12-08 02:44Financial 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]