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, today announced financial results for the third quarter
and nine months ended January 31, 2023.
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: https://ir.avidbio.com/investor-events.
About Avid Bioservices, Inc.
Avid Bioservices (NASDAQ:CDMO), an S&P
SmallCap 600 company, is a dedicated contract development and
manufacturing organization (CDMO) focused on development and CGMP
manufacturing of biologics. The company provides a comprehensive
range of process development, CGMP clinical and commercial
manufacturing services for the biotechnology and biopharmaceutical
industries. With 30 years of experience producing monoclonal
antibodies and recombinant proteins, Avid's services include CGMP
clinical and commercial drug substance manufacturing, bulk
packaging, release and stability testing and regulatory submissions
support. For early-stage programs the company provides a variety of
process development activities, including upstream and downstream
development and optimization, analytical methods development,
testing and characterization. The scope of our services ranges
from standalone process development projects to full development
and manufacturing programs through
commercialization. www.avidbio.com
Forward-Looking Statements
Statements in this press release, which are not
purely historical, including statements regarding Avid
Bioservices' intentions, hopes, beliefs, expectations,
representations, projections, plans or predictions of the future,
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The forward-looking
statements involve risks and uncertainties including, but not
limited to, the risk the company may experience delays in engaging
new customers, the risk that the company may not be successful in
executing customers projects, the risk that the company may
experience technical difficulties in completing customer
projects due to unanticipated equipment and/or manufacturing
facility issues which could result in projects being
terminated or delay delivery of products to customers, revenue
recognition and receipt of payment or result in the loss
of the customer, the risk that one or more existing customers
terminates its contract prior to completion or reduces or delays
its demand for development or manufacturing services which could
adversely affect guided fiscal 2023 revenues, the risk that
the completion of the cell and gene therapy facility
may be delayed, may cost more than
anticipated or may not increase revenue generating
capacity by the amounts contemplated, the risk that expanding into
a new biologics manufacturing segment may distract senior
management’s focus on the company’s existing operations, the risk
that the company may experience delays in hiring qualified
individuals into the cell and gene therapy business, the risk that
the company may experience delays in engaging initial customers for
the cell and gene therapy business, and the risk that the cell and
gene therapy business may not become profitable for several years,
if ever. Our business could be affected by a number of other
factors, including the risk factors listed from time to time in our
reports filed with the Securities and Exchange
Commission including, but not limited to, our annual report on
Form 10-K for the fiscal year ended April 30, 2022, as well as
any updates to these risk factors filed from time to time in our
other filings with the Securities and Exchange Commission. We
caution investors not to place undue reliance on the
forward-looking statements contained in this press release, and we
disclaim any obligation, and do not undertake, to update or revise
any forward-looking statements in this press release except as may
be required by law.
AVID BIOSERVICES, INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME(Unaudited) (In thousands, except per share
information)
|
Three Months Ended January
31, |
|
Nine Months Ended January
31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
38,018 |
|
|
$ |
31,508 |
|
|
$ |
109,467 |
|
|
$ |
88,371 |
|
Cost of
revenues |
|
28,193 |
|
|
|
22,421 |
|
|
|
86,378 |
|
|
|
58,707 |
|
Gross profit |
|
9,825 |
|
|
|
9,087 |
|
|
|
23,089 |
|
|
|
29,664 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
|
7,107 |
|
|
|
5,818 |
|
|
|
20,320 |
|
|
|
15,311 |
|
Total operating expenses |
|
7,107 |
|
|
|
5,818 |
|
|
|
20,320 |
|
|
|
15,311 |
|
|
|
|
|
|
|
|
|
Operating income |
|
2,718 |
|
|
|
3,269 |
|
|
|
2,769 |
|
|
|
14,353 |
|
Interest
expense |
|
(620 |
) |
|
|
(718 |
) |
|
|
(1,841 |
) |
|
|
(2,125 |
) |
Other
income (expense), net |
|
432 |
|
|
|
(303 |
) |
|
|
627 |
|
|
|
(154 |
) |
Net
income before income taxes |
|
2,530 |
|
|
|
2,248 |
|
|
|
1,555 |
|
|
|
12,074 |
|
Income
tax expense |
|
2,069 |
|
|
|
— |
|
|
|
686 |
|
|
|
— |
|
Net
income |
$ |
461 |
|
|
$ |
2,248 |
|
|
$ |
869 |
|
|
$ |
12,074 |
|
Comprehensive income |
$ |
461 |
|
|
$ |
2,248 |
|
|
$ |
869 |
|
|
$ |
12,074 |
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.01 |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
$ |
0.20 |
|
Diluted |
$ |
0.01 |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
62,388 |
|
|
|
61,631 |
|
|
|
62,166 |
|
|
|
61,394 |
|
Diluted |
|
63,726 |
|
|
|
63,872 |
|
|
|
63,634 |
|
|
|
63,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVID BIOSERVICES, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands,
except par value)
|
January 31,2023 |
|
April 30,2022 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
59,916 |
|
|
$ |
126,166 |
|
Accounts receivable, net |
|
14,826 |
|
|
|
20,547 |
|
Contract assets |
|
10,388 |
|
|
|
5,369 |
|
Inventory |
|
45,102 |
|
|
|
26,062 |
|
Prepaid expenses and other current assets |
|
2,111 |
|
|
|
1,879 |
|
Total current assets |
|
132,343 |
|
|
|
180,023 |
|
Property
and equipment, net |
|
164,292 |
|
|
|
92,955 |
|
Operating lease right-of-use assets |
|
34,463 |
|
|
|
36,806 |
|
Deferred
tax assets |
|
114,580 |
|
|
|
115,082 |
|
Other
assets |
|
4,402 |
|
|
|
4,627 |
|
Restricted cash |
|
350 |
|
|
|
350 |
|
Total assets |
$ |
450,430 |
|
|
$ |
429,843 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
36,392 |
|
|
$ |
9,504 |
|
Accrued compensation and benefits |
|
8,400 |
|
|
|
8,418 |
|
Contract liabilities |
|
37,750 |
|
|
|
53,798 |
|
Current portion of operating lease liabilities |
|
3,024 |
|
|
|
2,969 |
|
Other current liabilities |
|
1,753 |
|
|
|
1,072 |
|
Total current liabilities |
|
87,319 |
|
|
|
75,761 |
|
Convertible senior notes, net |
|
140,359 |
|
|
|
139,577 |
|
Operating lease liabilities, less current portion |
|
35,659 |
|
|
|
37,886 |
|
Finance
lease liabilities, less current portion |
|
1,698 |
|
|
|
2,093 |
|
Total liabilities |
|
265,035 |
|
|
|
255,317 |
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.001 par value; 5,000 shares authorized; no
shares issued and outstanding at respective dates |
|
— |
|
|
|
— |
|
Common stock, $0.001 par value; 150,000 shares authorized; 62,523
and 61,807 shares issued and outstanding at respective dates |
|
62 |
|
|
|
62 |
|
Additional paid-in capital |
|
615,841 |
|
|
|
605,841 |
|
Accumulated deficit |
|
(430,508 |
) |
|
|
(431,377 |
) |
Total stockholders’ equity |
|
185,395 |
|
|
|
174,526 |
|
Total liabilities and stockholders’ equity |
$ |
450,430 |
|
|
$ |
429,843 |
|
|
|
|
|
|
|
|
|
AVID BIOSERVICES,
INC.ITEMIZED RECONCILIATION BETWEEN GAAP AND
NON-GAAP FINANCIAL MEASURES(Unaudited) (In thousands)
|
Three Months Ended January
31, |
|
Nine Months Ended January
31, |
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income |
$ |
461 |
|
|
$ |
2,248 |
|
|
$ |
869 |
|
|
$ |
12,074 |
|
Stock-based compensation |
|
2,744 |
|
|
|
2,111 |
|
|
|
7,427 |
|
|
|
5,352 |
|
Business
transition and related costs |
|
— |
|
|
|
834 |
|
|
|
— |
|
|
|
1,771 |
|
Non-cash
interest expense |
|
262 |
|
|
|
257 |
|
|
|
782 |
|
|
|
766 |
|
Income
tax effect of adjustments |
|
811 |
|
|
|
— |
|
|
|
(1,817 |
) |
|
|
— |
|
Adjusted net income |
$ |
4,278 |
|
|
$ |
5,450 |
|
|
$ |
7,261 |
|
|
$ |
19,963 |
|
|
|
|
|
|
|
|
|
GAAP net income |
$ |
461 |
|
|
$ |
2,248 |
|
|
$ |
869 |
|
|
$ |
12,074 |
|
Interest
expense, net |
|
176 |
|
|
|
637 |
|
|
|
1,132 |
|
|
|
1,895 |
|
Income
tax expense |
|
2,069 |
|
|
|
— |
|
|
|
627 |
|
|
|
— |
|
Depreciation and amortization |
|
1,917 |
|
|
|
1,024 |
|
|
|
5,326 |
|
|
|
3,060 |
|
Stock-based compensation |
|
2,744 |
|
|
|
2,111 |
|
|
|
7,427 |
|
|
|
5,352 |
|
Business
transition and related costs |
|
— |
|
|
|
834 |
|
|
|
— |
|
|
|
1,771 |
|
Adjusted EBITDA |
$ |
7,367 |
|
|
$ |
6,854 |
|
|
$ |
15,381 |
|
|
$ |
24,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net cash (used
in) provided by operating activities |
$ |
(6,915 |
) |
|
$ |
5,192 |
|
|
$ |
(15,686 |
) |
|
$ |
8,853 |
|
Purchase of property and
equipment |
|
(11,329 |
) |
|
|
(20,021 |
) |
|
|
(52,761 |
) |
|
|
(31,845 |
) |
Free cash flow |
$ |
(18,244 |
) |
|
$ |
(14,829 |
) |
|
$ |
(68,447 |
) |
|
$ |
(22,992 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:
Stephanie Diaz (Investors)
Vida Strategic Partners
415-675-7401
sdiaz@vidasp.com
Tim Brons (Media)
Vida Strategic Partners
415-675-7402
tbrons@vidasp.com
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