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 first quarter
ended July 31, 2022.
Highlights from the Quarter Ended July
31, 2022, and Other Events:
“Following a very strong fiscal 2022, revenues
in the first quarter of fiscal 2023 established a new high. This
was driven by our commercial team’s success in attracting new
business, as well as the exceptional performance of our
manufacturing and operations team in consistently delivering high
quality product on time to our customers. I continue to be
impressed by the talent and dedication of our employees, who are
largely responsible for the many successes that the company has
achieved to-date, and I look forward to this growing team
continuing to push this business to new levels in the coming
years,” stated Nick Green, president and chief executive officer of
Avid Bioservices.
“Essential to our success has been our new
commercial team. Over the last year, we have made substantive
changes to our commercial organization, including significantly
expanding our sales team, with additions supporting both our
mammalian and our cell and gene therapy businesses. This new team
is working exceptionally well together, and focusing on ensuring
Avid’s continued growth. During the quarter, our team signed $41
million in new project orders, with a significant portion coming
from new customers, and as a result, pushed Avid’s backlog to a new
record high of $157 million.
“During the period, the expansion projects for
both our mammalian and our cell and gene therapy businesses
advanced according to plan. In the first quarter, the company
achieved an important milestone with respect to our cell and gene
therapy expansion, with the launch of the analytical and process
development capabilities for this business. With respect to our
mammalian cell business facilities expansion, the second phase of
this project is ongoing, and we remain on track to begin customer
projects in Myford South during the first quarter of calendar
2023.
“We believe that fiscal 2023 will be
transformational for Avid, and look forward to reporting many
exciting milestones ahead.”
Financial Highlights and
Guidance
- The company is reiterating full
year revenue guidance for fiscal 2023 of $140
million to $145 million, a 17-21% increase over fiscal
2022.
- Revenues for the first quarter of
fiscal 2023 were $36.7 million, representing a 19% increase
compared to $30.8 million recorded in the prior year period. The
increase in revenues for the quarter can be primarily attributed to
an increase in manufacturing revenues as compared to the prior year
period.
- As of July 31, 2022, revenue
backlog was $157 million, representing a net increase of 43%
compared to $110 million at the end of first quarter fiscal 2022.
The company expects to recognize the majority of this backlog over
the next twelve months.
- Gross margin for the first quarter
of fiscal 2023 was 25%, compared to a gross margin of 37% for the
first quarter of fiscal 2022, which benefited from the receipt of
unutilized capacity fees of $3.3 million. Excluding the prior
year’s margin benefit from unutilized capacity fees, and the
current quarter’s increase in costs associated with the
establishment of our cell and gene therapy business and ahead of
our mammalian capacity expansions, including the company’s
increasing headcount and incremental depreciation from recently
released facility expansions, our first quarter gross margin was on
par with the prior year period.
- Selling, general and administrative
expenses (“SG&A”) for the first quarter of fiscal 2023 were
$6.4 million, an increase of 42% compared to $4.5 million recorded
for the first quarter of fiscal 2022. The increase in SG&A for
the first quarter was primarily due to compensation and benefit
expenses, facility and related expenses, and legal and accounting
fees.
- Net income was $1.6 million for the
first quarter of fiscal 2023, which for the first time starting in
fiscal 2023 includes a provision for income taxes as reported
within the company’s income statement, as compared to a net income
of $6.3 million for the first quarter of fiscal 2022.
- Diluted earnings per share was
$0.02 for the first quarter of fiscal 2023, compared to $0.10 for
the first quarter of fiscal 2022.
- Avid reported $115.1
million in cash and cash equivalents as of July 31, 2022,
compared to $126.2 million on 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 multiple new orders during the first quarter, totaling
approximately net $41 million. A significant portion of
these orders are with new customers, contributing to the ongoing
expansion and diversification of the company’s client base. These
orders span all areas of the business, from process development to
commercial manufacturing.
- The company recently announced the
appointment of Pramthesh (Prem) Patel, Ph.D., as vice president,
process development for Avid’s mammalian cell business. Dr. Patel
is an accomplished biopharmaceutical industry executive with more
than 30 years of experience and a track record of success in
developing manufacturing processes for clinical trial material and
commercial supplies. Dr. Patel’s career is highlighted by extended
tenures supporting research, development and manufacturing
activities at GSK and Bristol Myers Squibb.
- The company continues to make
progress with both the Myford South expansion, as well as the
construction of its new dedicated cell and gene therapy facility.
During the quarter, the company announced plans to expand process
development capacity for the mammalian cell business. Avid
estimates that this expansion will cost approximately $6
million and, depending on the mix of customer orders, has the
potential to support up to an additional $20 million in
annual process development revenue. The company currently expects
to complete the second phase of its Myford South expansion, which
includes both upstream and downstream CGMP manufacturing suites,
during the first quarter of calendar 2023. With respect to the cell
and gene therapy business, the company brought its process and
analytical development capacity online in June 2022. The company
remains on track to bring the CGMP manufacturing suites online in
mid-calendar 2023. Please visit the Avid website Facilities page
for more information about the company’s expansions and videos
documenting progress (https://avidbio.com/expansion-updates/).
- In an effort to appropriately staff
our new capacities and capabilities, the company plans to continue
increasing headcount through the fiscal year-end. At the end of the
first quarter of fiscal 2023, the company had 343 full-time
employees. This represents a 28% increase compared to 269 full-time
employees as of the prior year period.
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. Our
income tax expense was recalculated by excluding non-GAAP items
from the calculation of our estimated annual effective tax rate and
then applying the recalculated estimated annual effective rate to
non-GAAP pre-tax book income. 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, gain or loss on disposal or
sale of assets, and income tax expense or benefit. 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, September 6, 2022, 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 29 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 that the ongoing COVID-19
pandemic will adversely affect our or our customers’
business and operations, the risk the company may experience
delays in engaging new clients, the risk that the company may not
be successful in executing client projects, the risk that the
company may experience technical difficulties in completing client
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 second phase the of
the Myford expansion and/or 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 and/or its
current expansion of the Myford facility, 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 EndedJuly 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Revenues |
|
$36,692 |
|
|
$30,754 |
|
Cost of revenues |
|
|
27,575 |
|
|
|
19,363 |
|
Gross profit |
|
|
9,117 |
|
|
|
11,391 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Selling, general and administrative |
|
|
6,382 |
|
|
|
4,460 |
|
Total operating expenses |
|
|
6,382 |
|
|
|
4,460 |
|
|
|
|
|
|
Operating income |
|
|
2,735 |
|
|
|
6,931 |
|
Interest expense |
|
|
(518 |
) |
|
|
(703 |
) |
Other income (expense),
net |
|
|
50 |
|
|
|
76 |
|
Net income before income
taxes |
|
|
2,267 |
|
|
|
6,304 |
|
Income tax expense |
|
|
703 |
|
|
|
— |
|
Net income |
|
$1,564 |
|
|
$6,304 |
|
|
|
|
|
|
Comprehensive income |
|
$1,564 |
|
|
$6,304 |
|
|
|
|
|
|
Net income per share: |
|
|
|
|
Basic |
|
$0.03 |
|
|
$0.10 |
|
Diluted |
|
$0.02 |
|
|
$0.10 |
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
|
|
61,905 |
|
|
|
61,137 |
|
Diluted |
|
|
63,333 |
|
|
|
63,571 |
|
AVID
BIOSERVICES, INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited) (In thousands, except par value) |
|
|
|
July 31,2022 |
|
April 30,2022 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$115,137 |
|
|
$126,166 |
|
Accounts receivable, net |
|
|
25,945 |
|
|
|
20,547 |
|
Contract assets |
|
|
7,078 |
|
|
|
5,369 |
|
Inventory |
|
|
30,354 |
|
|
|
26,062 |
|
Prepaid expenses |
|
|
2,121 |
|
|
|
1,879 |
|
Total current assets |
|
|
180,635 |
|
|
|
180,023 |
|
Property and equipment,
net |
|
|
114,929 |
|
|
|
92,955 |
|
Operating lease right-of-use
assets |
|
|
36,093 |
|
|
|
36,806 |
|
Deferred tax assets |
|
|
114,472 |
|
|
|
115,082 |
|
Other assets |
|
|
4,740 |
|
|
|
4,627 |
|
Restricted cash |
|
|
350 |
|
|
|
350 |
|
Total assets |
|
$451,219 |
|
|
$429,843 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$30,461 |
|
|
$9,504 |
|
Accrued compensation and benefits |
|
|
5,300 |
|
|
|
8,418 |
|
Contract liabilities |
|
|
52,775 |
|
|
|
53,798 |
|
Current portion of operating lease liabilities |
|
|
3,152 |
|
|
|
2,969 |
|
Other current liabilities |
|
|
1,655 |
|
|
|
1,072 |
|
Total current liabilities |
|
|
93,343 |
|
|
|
75,761 |
|
Convertible senior notes,
net |
|
|
139,837 |
|
|
|
139,577 |
|
Operating lease liabilities,
less current portion |
|
|
37,077 |
|
|
|
37,886 |
|
Finance lease liabilities,
less current portion |
|
|
1,963 |
|
|
|
2,093 |
|
Total liabilities |
|
|
272,220 |
|
|
|
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; 62,165
and 61,807 shares issued and outstanding at respective dates |
|
|
62 |
|
|
|
62 |
|
Additional paid-in capital |
|
|
608,750 |
|
|
|
605,841 |
|
Accumulated deficit |
|
|
(429,813 |
) |
|
|
(431,377 |
) |
Total stockholders’ equity |
|
|
178,999 |
|
|
|
174,526 |
|
Total liabilities and stockholders’ equity |
|
$451,219 |
|
|
$429,843 |
|
AVID
BIOSERVICES, INC.ITEMIZED RECONCILIATION BETWEEN
GAAP AND NON-GAAP FINANCIAL MEASURES(Unaudited) (In
thousands) |
|
|
|
Three Months Ended July 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
GAAP net
income |
|
$1,564 |
|
|
$6,304 |
|
Stock-based compensation |
|
|
1,897 |
|
|
|
1,299 |
|
Business transition and
related costs |
|
|
— |
|
|
|
486 |
|
Non-cash interest expense |
|
|
260 |
|
|
|
254 |
|
Income tax effect of
adjustments |
|
|
(474 |
) |
|
|
— |
|
Adjusted net income |
|
$3,247 |
|
|
$8,343 |
|
|
|
|
|
|
GAAP net
income |
|
$1,564 |
|
|
$6,304 |
|
Interest expense, net |
|
|
434 |
|
|
|
627 |
|
Income tax expense |
|
|
703 |
|
|
|
— |
|
Depreciation and
amortization |
|
|
1,590 |
|
|
|
1,009 |
|
Stock-based compensation |
|
|
1,897 |
|
|
|
1,299 |
|
Business transition and
related costs |
|
|
— |
|
|
|
486 |
|
Adjusted EBITDA |
|
$6,188 |
|
|
$9,725 |
|
|
|
|
|
|
GAAP net cash used in
operating activities |
|
$(5,034 |
) |
|
$(6,942 |
) |
Purchase of property and
equipment |
|
|
(6,924 |
) |
|
|
(4,199 |
) |
Free cash flow |
|
$(11,958 |
) |
|
$(11,141 |
) |
|
|
|
|
|
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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