Avid Bioservices Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
December 7, 2023

There are 9 speakers on the call.

Operator

Day, ladies and gentlemen, and welcome to the Avid Bioservices Second Quarter Fiscal 20 24 Financial Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call may be recorded. I would now like to hand the conference over to Tim Franz of Avid Investors Relations Group.

Operator

Please go ahead, sir.

Speaker 1

Thank you. Good afternoon and thank you for joining us. On today's call, we have Nick Breen, President and CEO Dan Hart, Chief Financial Officer and Matt Kuitniak, Avid's Chief Commercial Officer. Today, we will be providing an overview of Avid Bioservices' Contract Development and Manufacturing Business, including updates on corporate activities and financial results for the quarter ended October 31, 2023. After our prepared remarks, we will welcome your questions.

Speaker 1

Before we begin, I'd like to caution that comments made during this conference call Today, December 7, 2023, will contain certain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the current belief of the company, which involves a number of assumptions, risks and uncertainties. Actual results could differ from these statements and the company undertakes no obligation to revise or update any statement made today. I encourage you to review all the company's filings with the Securities and Exchange Commission concerning these and other matters. Our earnings press release and this call will include discussion of certain non GAAP information. You can find our earnings press release, including relevant non GAAP reconciliations on our corporate website atavidbio.com.

Speaker 1

With that, I will turn the call over to Nick Green, Abbott's President and CEO.

Speaker 2

Thank you, Tim, and thank you to everybody participating today via webcast. The 2nd quarter revenues were impacted by a number of factors, these are now behind us, and we are looking ahead The second half of the year with some optimism. We closed the quarter with an improved cash balance. We have now completed the expansion program started almost 3 years ago. Our backlog has achieved a new record high.

Speaker 2

And as we amend guidance, We expect significant growth over the first half with revenues approximating those achieved in the second half of fiscal year twenty twenty three, the highest 6 months in the company's history to date. During the Q2, our team continued to execute on both business development and operational Despite the financial challenges faced by many of our current and prospective customers, important programs continue to advance. Avid's commercial team had another strong quarter, securing new business wins of approximately $35,000,000 resulting in a record backlog of $199,000,000 This work comes from both new and existing customers As reported last quarter, while we continue to win more projects in the later phases of clinical development, We were pleased to see several early stage programs advancing during the quarter, and we were delighted to see one of our customers In support of our UCGT Services, the company was recently accepted into an industry partnership The California Institute of Regenerative Medicine, which we feel both validates our newest business as well as increases our visibility in the industry. CIRM is dedicated to the advancement of manufacturing of adeno associated adeno virus as well as other cell and gene therapy programs within the State of California.

Speaker 2

And Matt will provide a bit more information on this partnership shortly. In operations, during the quarter, having successfully executed its planned annual maintenance shutdown, Most important, we also completed construction of the company's CGMP manufacturing suites within our new world class And as we rapidly approach the start of calendar 2024, we are looking forward to being able to engage with potential customers With our offering

Speaker 3

complete, Matt and I

Speaker 2

will provide additional details on business development and operations for the period,

Speaker 3

Thank you, Nick. Before I begin, in addition to the brief financial overview I'll provide on the call today, additional details in our financial results are included in our press release issued prior to this call and in our Form 10 Q, which was filed today with the SEC. I'll now provide an overview of our financial results from operations for the quarter 6 months ended October 31, 2023. Revenues for the Q2 of fiscal 2024 were $25,400,000 representing a 27% decrease as compared to revenues a 12% decrease compared to $71,400,000 in the prior year period. The decrease in revenues for both periods As compared to the prior year period, it was primarily due to fewer manufacturing runs, the reduction in process development services from early stage customers and reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.

Speaker 3

Gross margin for the 3 months ended October 31, 2023 was negative 18% compared to 12% for the same period in the prior year. Gross margin for the 1st 6 months of fiscal 2024 was negative 1% compared to a gross margin of 19% for the same period during fiscal 2023. The decrease in gross margin percentage for both periods as compared to the same prior year periods was primarily driven by lower manufacturing volumes and costs related to expansions of both our Capacity and our technical capabilities. This included adding staff and associated overhead, including depreciation expense that will provide critical capacity for near and medium term growth. Margins during the 3 6 months ended October 31, 2023 were also impacted by the decision to defer our customers PPQ campaign until after our annual maintenance shutdown.

Speaker 3

Combined with a reduction of revenues for changes in estimated variable consideration under a contract where uncertainties have been resolved. The decrease in gross margin for the 1st 6 months of fiscal 2024 was further impacted by a terminated project relating to the insolvency of 1 of our smaller customers and the delay in our ability to recognize revenues of a customer product pending the implementation of a process change. Excluding all of these factors, our 2nd quarter and year to date adjusted gross margin percentages would have been 2 percentage points and 1 percentage point lower than the reported gross margin percentages in the same prior year periods, respectively. As disclosed previously, we expect the expansion related costs will continue to affect near term margins, especially the related increase in depreciation costs. Importantly, as we increase our capacity utilization, we will begin to absorb these increased costs leading to improved gross profit.

Speaker 3

SG and A expenses for the Q2 of fiscal 2024 were $6,600,000 a decrease of 4% compared to $6,800,000 recorded in the Q2 of fiscal 2023. The decrease in SG and A for the Q2 was primarily due to a decrease in payroll and benefit expenses and other professional fees. SG and A expenses for the 1st 6 months of fiscal 2024 were $12,800,000 a decrease of 3% compared to $13,200,000 recorded in the prior year period. The decrease in SG and A for the 6 months was primarily due to decreases in legal, accounting and other professional fees. During the Q2 of fiscal 2024, the company's net loss was $9,500,000 or $0.15 per basic and diluted share compared to a net loss of $1,200,000 or $0.02 per basic diluted share for the Q2 of fiscal 2023.

Speaker 3

For the 1st 6 months of fiscal 2024, the company recorded a net loss of $11,600,000 or $0.18 per basic diluted share as compared to net income of approximately $400,000 or $0.01 per basic and diluted share during the same prior year period. For the Q2 of fiscal 2024, the company had an adjusted EBITDA of negative $6,000,000 For the 1st 6 months of fiscal 2024, the company had an adjusted EBITDA of negative $3,200,000 Our cash and cash equivalents on October 31, 2023 were $31,400,000 compared to $38,500,000 on April 30, 20 The 2nd quarter cash and cash equivalents balance represents a 26% increase compared to 24,900,000 at the end of the Q1 of fiscal 2024. As of the end of the Q2, we estimate our remaining fiscal 2024 expansion related capital expenditures In other financial news, during the quarter, the company entered into an amendment it's a revolving credit agreement with Bank of America. This credit facility was amended to extend the maturity date to October 2024 from the initial maturity of March 2024. This amendment also included an increase in the related interest rate The other material terms of the credit agreement remained unchanged.

Speaker 3

While the company has no current plans to draw down this facility, Adam views this instrument as a valuable tool to ensure financial stability. This concludes my financial overview. I will now turn the call over to Matt for an update on commercial activities during the quarter.

Speaker 4

Thanks, Dan. I am pleased to report that our commercial team had another strong quarter. During the period, Avid recorded bookings of $35,000,000 from new and existing customers, including a meaningful contract signed for the recently completed CGT facility. The company ended the quarter with a record backlog of $199,000,000 representing an increase of 35% as compared to $147,000,000 at the end of the Q2 of fiscal 2023. While certain early stage projects in our pipeline remain on hold pending customer financing events, We continue to see growth in our later stage and commercial project portfolio during the quarter.

Speaker 4

As a reminder, later stage projects are generally larger and take longer to complete as compared to earlier stage programs. For that reason, we expect that recognition of our backlog These projects will extend beyond 1 year. As these later stage programs have significantly higher probability of regulatory approval In a shorter timeframe, we believe they are more likely to generate the recurring and ramping commercial revenues associated with such approval. While there is no guarantee that regulatory approval will be achieved for any program, we do believe that our pipeline, which remains weighted toward later stage projects, offers enhanced opportunity for regulatory success and ultimately for stable growth in the medium to long term. We are pleased to see continued growth in this segment of our backlog and remain committed to pursuing and supporting projects at every stage of development and manufacturing.

Speaker 4

We are in fact seeing some improvement in our early stage pipeline. We remain fully engaged with new and prospective customers in every phase and continue to build visibility for the Avid brand through consistent outreach and industry events. As Nick mentioned previously, Abbott joined the CIRM Industry Resource Partner Program to provide development and cGMP manufacturing services to CIRM funded programs. Currently, CIRM has $5,500,000,000 in funding from the State of California and has more than 161 active stem cell programs in their portfolio. Avid will assist SERM's partners in accelerating gene therapy development and manufacturing through its suite of CDMO services, which span Process and Analytical Development, Cell Banking, Virus Banking, Drug Substance Manufacturing and Cell Finish activities.

Speaker 4

CIRM funded programs will be offered access to Avid's services in order to reduce the timelines required to advance through clinical development. All partnership activities will be performed in Avid's recently launched world class CGT manufacturing facility. We are very pleased to have entered this validating partnership with CIRM, which we believe will further strengthen our presence broadly among CDMOs and more specifically as a manufacturer of CGT products. In closing, I'd like to reiterate how pleased we are with I will now turn the call back over to Nick for an update on operations and other achievements during the period.

Speaker 2

Thanks, Matt.

Speaker 5

I will provide an overview of the

Speaker 2

company's operational activities. First, Avid successfully It is an essential activity to ensure the efficiency of our systems, and we are very pleased to have this process complete for another year. As we announced in October, we have completed the construction of our cell and gene therapy manufacturing suites on Shaiju. These newly launched suites, which are housed within the company's new world class CGT development and manufacturing facility, With the completion of this latest expansion project, Avid has now completed all phases of a broad multiyear expansion And we have deployed upwards of approximately $180,000,000 of CapEx from 2020 to 2023 into expansions of both revenue generating capacity and technical capabilities. Looking ahead, We are now well positioned to meet the manufacturing needs of current and future customers advancing both mammalian and CGG products.

Speaker 2

Today, we estimate that our combined facilities have the potential to bring our total revenue generating capacity to up to $400,000,000 annually, more than triple the revenue generating capacity of our pre expansion business. And while the operating costs associated with these facilities and service expansions have impacted our margins, We believe this new infrastructure has been a major contributor in attracting the later phase projects Currently in our backlog, as well as positioning Abigail to serve the large pharma segments of the market previously underserved by the business. This strategy is already paying off, demonstrated by the increasing customers with whom we work, aligned with the strong weight towards later phase. Further, we are now beginning to onboard projects for utilizing the capabilities of the Biologics and GT Services. When we combine Avid's new capacity and services With decades of experience in biologics and commercial manufacturing, a track record that demonstrates our focus on quality On the talent signing early stage development through commercialization, we believe we have established an organization and brand They will continue to thrive in this growing and attractive market.

Speaker 2

Not only did the quarter see the completion of our current expansion program, It also saw the cessation of manufacturing in the company's legacy small scale stainless steel facility. And while the effect of this impacted the Q2, as we look forward, Avid now benefits from all its mammalian GMP manufacturing under a single roof with one of the most modern and high quality facilities available in the industry. This will further enhance the company's ability to improve margins as we continue the process of growing AbbVie and filling this capacity. As we are all more than aware, the downturn in the biotech funding has certainly impacted the business in the short. This combined with other factors we have reported has led to a disappointing first half of fiscal twenty twenty four.

Speaker 2

And as a result, we are compelled to amend guidance to $137,000,000 to $147,000,000 That being said, as we look forward, we have an improved cash position. We have seen an increase in our early phase signings during the Q2. We have completed all our current expansion activities, entered the second half with our backlog at an all time high And one of the products in our late stage pipeline has already received FDA approval. As we look more closely at the second half of the year, We anticipate revenues approximating half 2 of fiscal year 'twenty three, which represents the best half year performance in the company's history. As we approach the end of our 30th year, we are delighted to mark the completion of what has been a 3 year program of increasing capacity, modernizing the asset base, as well as transforming the capabilities of the mammalian business, And at the same time, broadening the Avid offering to include the new CNGT capabilities in both process development And now GMP Manufacturing.

Speaker 2

Also during our 30th year, we look back at where we came from As we retire the old stainless reactors, which mark the start of our CDMO business and close to 20 years of commercial manufacturing. While calendar 2023 has had its challenges, the team has worked diligently in pursuit of our goal. As we enter calendar 2024, Avid is a company with 30 years in biologics manufacturing, a 21 year regulatory track record and more than 200 commercial batches under our belt, operating out of a modern asset base with capacity to accommodate commercial needs of our date based clinical programs, some of which we hope will soon become commercial products and a business with an increasingly diverse customer base and pipeline. While there will be much of 2,033, we will be happy to put behind us. It would not surprise me that we look back at this year as the start of the new phase, not only in how our company looks, but also in the market which we serve.

Speaker 2

I feel genuinely blessed to work with the team that has shown the fortitude to undertake such a monumental task, I'm wondering if not wavered one bit in the pursuit of the targets we set ourselves. And I look forward with a high level of excitement At the prospect of filling this capacity and continuing to guide the future development of Avid. This concludes my prepared remarks for today. We can now open up the call for questions. Operator?

Operator

And our first question comes from the line of Jacob Johnson from Stephens, your question please.

Speaker 6

Hey, thanks. Good afternoon. Maybe Nick, kind of leaving off Starting off where you just left off, I guess, can you on the backlog and the 2Q revenue and the 'twenty four outlook. So pretty good bookings in the quarter, record backlog, but revenues down year over year. Can you just kind of help us square those two items?

Speaker 6

And I guess along the same lines, you keep pointing to the backlog extending beyond a year. Has that backlog lengthened, like extended even further? Is it taking even longer to close that? Or Are we just waiting for things like this PPQ campaign to hit? I know that's a lot, but I'll stop there with the first question.

Speaker 2

Thanks very much, Jacob, and good question. First, to sort of answer your last question, how's the backlog extended? The answer to that is no. Pretty much stable in terms of where it is. So certainly no further spread.

Speaker 2

I think at the end of the day, what we've seen here, apart from some of the things that Dan highlighted in the earnings in the Obviously, is the impact of the biotech defunding. But we'll continue to sign the business. And then it really is a matter of Bringing through those late phase programs, which are just a lot bigger in size and take longer to execute and you've got to line them up. So we've got I mean, I recently Published on the website, our investor presentation, which kind of shows you a good indication of the maturity of the pipeline that we have. And simply to put large volumes of material into that new asset, one has to, 1st of Obviously, attract the customer.

Speaker 2

The second thing then is to execute on the PPQ campaign, which ultimately will lead to a BLA filing and then the commercial volumes that And I think that for those of us that are in the market on a day to day basis is That take that is just unfortunately a natural time phase that that takes to execute. And once you've completed the PPQ campaign, You have to file that data along with the clinical data to the FDA and get approval and then the commercial volumes come. And of course, one of the other issues is, of course, nobody is going to put a PPQ campaign together with a supplier that doesn't have that So, it's really just a transition of the business as we've been trying to highlight from What was originally a clinical company that was with a significant large commercial demand into one that's got a very much more diverse customer base With a significant number of late phase programs, which we're just trying to get executed, get that data off and then obviously, I really Forward to at least an industry average of commercial approvals that we can then execute against. And Actually, we couldn't have asked for a better situation than we've got right now, which is as we're transferring one of those in, they've already got approval.

Speaker 2

So that's about As fast as it ever goes. So looking forward to that one.

Speaker 6

Got it. Thanks for that, Nick. And then Maybe I guess for my follow-up on what you just alluded to. I think in that deck, you suggest that these later stage Opportunities could be $100,000,000 to $200,000,000 revenue opportunities. I think the inevitable question is, what is the timeline Assuming all goes well, and I know that's impossible for any of us to handicap, but assuming all goes well, Is that a peak revenue that could be 5 years out?

Speaker 6

Or how should we think about the path to that kind of revenue potential?

Speaker 2

Well, again, without trying to get into each of the individual ones because they all have such different profiles to be frank with you in terms of The size of the markets they serve and also the probability of success. So I mean, you could have You could have 4 out of 8, for example, getting approval. And if all 4 of those are small ones and the impact is not that great, if all 4 of those are the large ones, the impact is enormous. Then there's all the different timelines. So that's a really difficult question to ask, but to answer rather.

Speaker 2

But I think in general terms, you look at the sort of growth that We've seen in this business in the past. I don't see we know the growth in the marketplace going forward and we know the capacity we've got and you draw those lines Anywhere between sort of I think on the fast side would be 3 years to fill that capacity. On the longer side, You're probably looking at somewhere like 6 years, but anywhere in that window, I think, is not unreasonable. Obviously, we're aiming for as quickly as we possibly could. But it's the fact that we've got so many is really, really A good strong indicator to us that we will be filling that capacity.

Speaker 6

Got it. I'll leave it there. Thanks for taking the question.

Speaker 2

Thanks, Jacob.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Matt Hewitt from Craig Hallum. Your question please.

Speaker 2

Good afternoon. Thank you for taking the questions.

Speaker 5

Maybe the first one, I think Matt, I think you mentioned in your prepared remarks that you did win a nice Cell and gene therapy contract during the quarter, I'm assuming that's on the manufacturing side or is that development and did that come through The new CRM relationship?

Speaker 4

That is an early stage project, Yes. And it's in our PD group and that's where it's going to span currently. There's potential in the future for that to grow obviously, but The only piece that they've contracted for at this point until further development is the early phase work.

Speaker 2

Got it. Thank you. It didn't come through CERN, Matt, either. It was independent of CERN.

Speaker 3

That's right.

Speaker 4

That's right. Sorry.

Speaker 5

Okay. I was going to say that was really quick when it came through the new partnership. All right. And then Nick, last quarter, I think you said that you had actually won a competitive displacement, those are my words, but you had won some business from a competitor from a large pharma customer. And I'm curious how has that business progressed?

Speaker 5

Is that opening up doors for other opportunities?

Speaker 2

I'm trying to remember a competitor from we've certainly won our business from large I'm from competitors, but I don't know that we won a large pharma bid from a competitor. I'm trying to think what that might have been, But no, so I don't remember it being from a big pharma, Matt. I think we've done both of those, but not together. So all I can say is that all our business with the ones that we've been winning are continuing to progress well. So no issues on any of those.

Speaker 2

Okay. Thank you. Thanks, Matt.

Operator

Thank you. One moment for our next question. And Our next question comes from the line of Paul Knight from KeyBanc. Your question please.

Speaker 7

Yes. Dan, did you mention $2,000,000 of CapEx Remaining in the fiscal year?

Speaker 3

I did, yes, Paul. Okay. And if I could break that down for you. So in the first half, We've spent $21,000,000 on CapEx and we've incurred 8,000,000 which has now been spent. But outside of those dollars, we have an additional 2 to incur.

Speaker 7

What's maintenance CapEx after this fiscal year?

Speaker 2

It's going

Speaker 3

to be really low. There's going to be some Systems that we're going to need to continue to invest into, but as far as the assets, most of the assets are brand new. So we would likely be 2% -ish, maybe sub-two percent of revenues?

Speaker 7

And your line of credit, the size on that?

Speaker 3

The size of our line of credit is $50,000,000

Speaker 7

Okay. And then Nick, On the cell and gene therapy portion of the business, Alliance for Regenerative Medicine is Showing finally some sequential growth in trial activity. Are you seeing that?

Speaker 2

Yes. I mean, we literally have just opened the GMP assets, Paul. So it's probably a little early I think we're seeing what we're seeing is reflective of the market. I think we've seen some good engagement. I think probably a lot of that is because we're here now and we've got the assets as opposed to a market indication, but we certainly have seen A good flurry of activity, obviously, signing another client there is and a meaningful one is also quite encouraging as we come out of the gate.

Speaker 2

And we have an ongoing engagement with a number of clients. So I'm certainly hoping that that's not going to be the last in the near future. So we are encouraged by what we generally hear in the marketplace, but I think we're We're hoping to see a lot more of that as we go forward for sure.

Speaker 7

And Nick, I think obviously this the industry issue for Avid has been centered around the lower level of early stage biotech financing. Are there any other features that Stand out like in a positive or a negative way is the capacity opening up globally, is that bad for you or does it not matter? And we've got a lot of approvals this year. I mean, what are the other factors that And last thing I would like I think we all think about right is, is there more insuring. So excluding biotech financing, You think the market dynamics are better or worse for you right now?

Speaker 2

So it's interesting. It's a good question and That one, Paul. But it's just trying to look at where how I'm looking at the marketplace as we sit today. I remember a few 6 months ago, sort of At the end of a really good year where we were feeling really positive about what we've just done and then I was looking forward at what was going on in the marketplace And obviously, I had to report lower guidance going forward for the following year for the first time. As I sit here today, we're clearly not happy with the last quarter and I don't think anybody around here is going to make any other calls on that one.

Speaker 2

But Contrary to that position that we had last year, at the beginning of the year, I actually feel more positive now about what's coming forward. So we've captured a good number of late phase programs. A lot of those are coming to us from other CDMOs, which sort of Says that we're doing the right things. We've got those because we've got the capacity. I can't control what happens in terms of FDA approval.

Speaker 2

I only wish I I wish I could sit here and tell you which ones of those are going to go forward. But the number of Phase 3 programs I've got is not a lot different from the number of Phase 1 programs. I don't in my 40 years, I've never known that happened. So we're very buoyed by that. Again, I think Matt highlighted That in our signings that we'd seen some early phase signings, which were completely devoid in quarter 1, which is again another positive sign.

Speaker 2

And we kind of have some leading indicators in the conversations in the pipeline that we see behind that and we started to see some positivity there. I'm not going to turn around and tell you that there's a recovery and there's a way an enormous tidal wave coming. That's not the case. But I do think that we see a much more positive outlook going forward. And if we hit the guidance that we've just given, which we obviously would intend to do because that's We've just provided that would be similar to the back end of last year.

Speaker 2

And if we can hit the record revenues that we saw at the end of 'twenty three and then continue that, then I think we're as I say at the beginning, We have a much more positive feeling to the business and the industry today than I did 6 months ago.

Operator

All right. Thank you. Thank you. One moment for our next question. And our next question comes from the line of Max Schmitt from William Blair.

Operator

Your question please.

Speaker 8

Hey, good afternoon. Thanks for taking our questions. Maybe just starting off here, I was wondering if you can give some more detail around what exactly the change Estimated variable consideration under a contract where uncertainties have been resolved relates to and what the impact was in the quarter? And then similarly, what was the impact of your customers'

Speaker 3

Sure, Max. I'll start off with that. So the change in variable consideration is another way to say that It was a change in estimate where the revenue recognized on certain programs was less than originally estimated at the beginning of that project. Under 606 revenue rec rules, we're a percentage of completion shop. So some of those estimates can change during the period.

Speaker 3

So the impact of that in the quarter was roughly $2,000,000 of gross profit, so around 8 percentage points. And as far as the Deferral was a similar gross profit hit of roughly 8 percentage points. And as far as the batches themselves, Nick, I don't know if you want to.

Speaker 2

Yes. No, I mean, the decision was a mutual decision. PPPQ campaigns are something where you're executing 3 batches identical. That's always a lot easier when you do them back to back to back. Where we were was that we would have had to split those across the shutdown, which we felt was better not to do that and keep them all in line or otherwise we would have Move the shutdown, which again was not an ideal situation.

Speaker 2

So it was a mutual decision between us and the customer. The program is now up and ongoing and going as planned. So again, not what we ideally would have wanted to do, but I would always prefer To run a PPQ with 3 batches literally back to back.

Speaker 8

Got it. That's helpful. Maybe just asking a follow-up to Jacobs Earlier in terms of the backlog, I'm just wondering how confident are you in the actual quality of that work that you have in backlog. If there's any detail you can provide around what portion of your backlog is currently on hold and how that relates to maybe last quarter when we spoke and Just in general, how you would characterize your visibility into whether or not that work is going to actually start to move forward here again in

Speaker 2

the near future? Thank you. Yes. Our backlog typically converts at, I would say, north of 95% and probably closer to Closer to the towards the 100 on that one. So we don't we really it's firm business.

Speaker 2

There's none of it on hold as per se. I do know I know of One program that I got news of last week that's actually been brought forward. So when Dan articulated it's not getting any longer, In part, I might argue that there's a little bit of pull in there, but there's always a little bit of switch and swell forward and backwards, but No material change. And certainly from a conversion perspective, we expect the vast majority, as I said, more than 95%, If not closer to 100 of that to execute.

Speaker 8

Okay. And then if I could just sneak one more in here. I think previously when we talked, Nick, you talked about holding backlog flat year over year as being kind of a win here in fiscal 2024. It's actually stepped up a little bit relative to where you're at the end of last year just because revenue was a little bit light here in the quarter. But wondering how you're thinking about the outlook for bookings growth In the back half of the year, given your commentary, in particular around seeing a return of early stage projects in the mix during the quarter and whether or not you're still thinking about Flat backlog year over year is kind of the goal for fiscal 2024.

Speaker 2

Yes. I mean, My crystal ball is a little cloudy on that one. The difficulty I have, Max, Signing from quarter to quarter, as we've talked in the past and I've mentioned also publicly, it's lumpy. We do we've seen 69,000,000 signings in a quarter, and I think I've seen 29,000,000 signings in a quarter. So it can be very erratic.

Speaker 2

I think to be frank with you, if we can hold the backlog where we Mentioned before, it would be would still be a reasonable result. I would say that there's a bit of optimism, but again, some of these Some of the opportunities that we're talking on and working on are quite significant and they're binary. And when you come second, you don't get 30% or 60%, You get 0. So it's always a little difficult in the short term to predict where that will be due to the lumpiness, but I don't think necessarily our opinions changed, but if it was going to go anywhere, it would certainly be going up and not down, I would have said.

Speaker 8

Got it. Thank you again for taking our questions.

Speaker 2

No problem. Thanks for the answer questions.

Operator

Thank you. One moment for our final question for today. And our final question comes from the line of Sean Dodge from RBC Capital Markets. Your question please.

Speaker 2

Hey, good afternoon.

Speaker 3

This is Thomas Keller on for Sean. Thanks for taking the questions. Just one for me. On gross margins, how should we think about progression there over the balance of the year? Are there any specifics you can point to or are there kind of one time items we need to consider?

Speaker 2

Yes, Thomas.

Speaker 3

So taking the first half aside, it's still The second half at the revenue levels to hit, call it, the midpoint of guide is still similar to what we've talked about going into Last quarter and that there's going to be a gross margin impact for the additional cost and additional depreciation that we have this year That would put it into the mid teens area, which I would expect to be Plus and minus that mid teens area as you hit that top line for the second half of the year, so that's going to be diluted by the first half. All right. Appreciate it. Thanks, Dave. I'll leave it there.

Operator

Thank you. This does conclude the question and answer session of today's Program, I'd like to hand the program back to Nick Green for any further remarks.

Speaker 2

Yes. Thank you, operator, and thank you to everybody participating on today's call. As we approach the end of calendar 2023, we look forward with some optimism to the second half of our fiscal year and the beginning of 2024 And what the beginning of 2024 will hold for the business. We feel that the business is well positioned to generate cash from operations And in the near term, we sustain sustainable profitability within reach. We thank our customers for their trust and partnership, our investors for their continued support, And we wish to recognize Arctic Social employees who continue to drive the success.

Speaker 2

Thank you again for participating today and for your continued support of Avid Bioservices.

Remove Ads
Powered by Quartr
Earnings Conference Call
Avid Bioservices Q2 2024
00:00 / 00:00
Remove Ads