Avid Bioservices Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
June 21, 2023

There are 9 speakers on the call.

Operator

Day, ladies and gentlemen, and welcome to the Abbott Bioservices 4th Quarter and Year End Fiscal 2023 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 turn the conference over to Tim Bruns of Abbott Investor Relations Group.

Operator

Please go ahead.

Speaker 1

Thank you. Good afternoon and thank you for joining us. On today's call, we have Nick Green, 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 year ended April 30, 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, June 21, 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 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. With that, I will turn the call over to Nick Green, Avid's President and CEO.

Speaker 2

Thank you, Tim, And thank you to everybody participating today via webcast. Both the Q4 and 2023 full fiscal year were record setting for the company As we achieved record high revenues during both periods and ended the fiscal year with a record high backlog of $191,000,000 a 25% increase over last year. With respect to business development, bookings for the quarter and the full fiscal year as a whole was strong, And our teams continue to have success bringing in new customers and winning project expansions with existing customers. In operations, our MiFID expansion, including our new process development capabilities, are now in full operation and actively fulfilling customer requirements. And we continue to make progress with our cell and gene therapy facility and remain on schedule to bring this building online later this year.

Speaker 2

Matt and I will provide additional details on business development and operations for the period following an overview of our Q4 and full year fiscal 2023 financial results. And for that, I'll turn the call over to Dan.

Speaker 3

Thank you, Nick. Before I begin, in addition to the brief financial overview I'll provide on the call today, additional details on our financial Results are included in our press release issued prior to this call and in our Form 10 ks, which was filed today with the SEC. I'll now provide an overview of our financial results from operations for the quarter fiscal year ended April 30, 2023. Revenues for the Q4 of fiscal 2023 were $39,800,000 representing a new single quarter high for the company and a 28% increase compared to $31,200,000 recorded in the prior year period. For the 2023 full fiscal year revenues were $149,300,000 representing a new full year high for the company and a 25% increase compared to $119,600,000 in the prior year period.

Speaker 3

For both the quarter and the full fiscal year, The increase in revenues can primarily be attributed to increased manufacturing runs and process development services provided to new customers. Gross margins for the Q4 of fiscal 2023 was 21% and in line as compared to gross margin of 22%

Speaker 2

for the Q4 of fiscal 2022.

Speaker 3

Gross margin for the 2023 full fiscal year was 21% compared to a gross margin of 31% for the same period during fiscal 2022. During the 3 12 months ended April 30, 2023, our labor overhead and depreciation expenses increased over the prior year periods, primarily due to the hiring of personnel and additional facility and equipment related costs ahead of our mammalian and cell and gene therapy facility expansions. Additionally, the current fiscal year margin benefited from revenue associated with the change in variable consideration under A contract where uncertainties have been resolved as compared to benefits from unutilized capacity fees recognized in the same prior year period. Excluding all these factors, our 4th quarter and fiscal year adjusted gross margins would have been 28% for the full period, an increase as compared to the prior year Q4 fiscal year adjusted gross margins, which would have been 22% 25%, respectively. We expect the expansion related costs incurred to date will continue to affect near term margins, especially the related increase in depreciation costs.

Speaker 3

Additionally, any incremental expansion related costs will only be added in line with for the Q4 of fiscal 2023 were $7,600,000 an increase of 29% compared to $5,900,000 recorded in the Q4 of fiscal 2022. SG and A expenses for the 2023 full fiscal year were $27,900,000 an increase of 32% as compared to $21,200,000 recorded in the prior year period. The increases in SG and A for both the quarter and the full fiscal year were primarily due to increases in compensation and benefits related costs, legal, accounting and other professional expenses. Before addressing net income, I would like to remind everyone that during our Q4 of fiscal 2022, We recorded a non cash income tax benefit of $115,000,000 or $1.63 per diluted share due to a release of our valuation allowance recorded against the company's deferred tax assets or DTAs. The company previously maintained a valuation allowance on the CTAs until there was sufficient evidence to support the reversal of all or some portion of those allowances.

Speaker 3

During the prior year Q4, the company determined that it was more likely than not that the DTAs would be realized and released the valuation allowance related to federal and state DTAs as of April 30, 2022. During the Q4 of fiscal 'twenty three, the company recorded a net loss of approximately $300,000 or $0.00 per basic and diluted share. That's compared to net income of $115,600,000 were $1.87 per basic and $1.65 per diluted share for the Q4 of fiscal 2022. For the 2023 full fiscal year, the company recorded a net income of approximately $600,000 or $0.01 per basic and diluted share. That's compared to net income of $127,700,000 or $2.08 per basic and $1.84 per diluted share respectively during the prior year period.

Speaker 3

Excluding the non cash income tax benefit of $115,000,000 Recorded during the Q4 of fiscal 2022, the company's net income was approximately $600,000 or $0.01 per basic and diluted share for the prior year quarter and $12,700,000 or $0.21 per basic and diluted share for the full fiscal year 2022. For the Q4 and the 2023 full fiscal year, the company achieved an adjusted EBITDA of $6,300,000 and $21,700,000 respectively. Our cash and cash equivalents on April 30, 23 were $39,000,000 compared to $126,000,000 on April 30, 2022. We have made great progress on our facility expansions. As of the end of Q4, we have completed our mammalian expansions, including process development and manufacturing capacity.

Speaker 3

We look to complete our cell and gene therapy expansion by the end of calendar Q3 of 2023. We estimate our fiscal year 2024 cash required for expansion related capital expenditures to be approximately $30,000,000 Upon completion of these expansion projects, we estimate that our combined facilities will have the potential to bring our total revenue generating capacity to up to approximately $400,000,000 annually depending on the mix of future customer projects. This concludes my financial overview. I'll now turn the call over to Matt for an update on commercial activities during the quarter.

Speaker 4

Thanks, Dan. Fiscal 2023 was a great year for our commercial team. During the past year, we made substantial changes to our organization, including the expansion of our sales team with additions in both our mammalian and our cell and gene therapy offerings. We created a new function dedicated to And other large pharma companies have conducted audits or are planning to visit our facilities in the near term. During the year, Our team enhanced its visibility at conferences and industry events and we continue to expand our outreach and presence in the leading value of technology regions in North America.

Speaker 4

Combined, these strategic moves significantly improved our team's productivity in fiscal 2023 as compared to prior years. This is evidenced in our bookings for both the Q4 of fiscal 2023 as well as the full fiscal year. Avid recorded 4th quarter bookings of $55,000,000 and as a result, we ended fiscal 'twenty three with a new record high backlog of $191,000,000 representing an increase of 25% as compared to $153,000,000 at the end of fiscal 2022. Changing market dynamics have resulted in the biotech sector focusing resources on later phase projects over earlier phase assets. These projects tend to take longer to complete, but are larger and have a much higher probability of regulatory approval leading to recurring commercial revenues.

Speaker 4

This market dynamic provides a strong long term benefit for the business and should help stabilize Avid's future revenue base and long term growth. As a result, a growing portion of the backlog will extend beyond a year. With a shift to larger and later stage programs, Ali, with the increasing commercial manufacturer contributing to backlog, we would expect this trend to continue. The successes of the past year have allowed us to continue to expand and diversify our client base, an ongoing priority for the company. We are also beginning to utilize our new capacity and we continue to engage with potential customers for cell and gene therapy offering, which includes process development and soon to be online, CGMP Manufacturing Services.

Speaker 4

And finally, we continue to respond to demand for proposals, which we believe will drive our new business successes in the future. In summary, we could not be more pleased with The growth and productivity of our commercial organization in fiscal 2023. The team's dedication and hard work have elevated Avid's reputation and visibility within the industry, And we look forward to leveraging this standing in fiscal 2024. This concludes my overview of commercial activities. 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. Fiscal 2023 has been nothing short of extraordinary. During the year, we have opened Each of our expansions in the Vemurium part of the business in the same quarter, we have seen the backlog equal or exceed our prior capacity. As planned, fiscal 2023 has seen Avid transition to a fully disposable platform with more than 20,000 leaders of state of the art capacity, most of which is new. With the completion of these mammalian cell capacity expansion projects, Currently, Avid's only remaining expansion effort includes the build out of its new cell and gene therapy facility, which will support early stage development through commercial manufacturing.

Speaker 2

The company has already launched analytical and process development capabilities at this facility and remains on track to launch the cGMP manufacturing suite by the end of Q3 of calendar 2023. Upon completion of the cell and gene therapy facility, We estimate that our combined facilities will have the potential to bring a total revenue generating capacity to approximately $400,000,000 annually. Our business development team achieved signings during the quarter of more than $55,000,000 bringing total signings for the second half alone to $122,000,000 all of which bodes well for LaVieche. Equally, however, it is impossible to ignore some of the changes we have seen in the market dynamics. Reduced resources from investors being applied to early phase Customers have certainly resulted in lower portions of preclinical and early phase projects in our backlog.

Speaker 2

However, the focus of customers on late phase and pre commercial projects provides longer term upside. As one of the few CDMOs with close to 2 decades of commercial manufacturing under our belt, this has resulted in an increase in later phase and commercial business in During 2023, signings associated with late phase projects defined internally as Phase 3 and PPQ campaigns increased by approximately 34%. The increase in late phase projects also have the effect of extending the project duration and associated revenues. Quite simply, there's significantly more work involved in the late stage project than there is in an early stage project. However, this also means in the medium term, we have in effect more shots on goal.

Speaker 2

By this, I mean, we hope the increase in late phase projects will lead to an increase in the number of BLAs being filed for products manufactured with Avid. And we would expect the results of the increase in commercial products and revenues assuming their subsequent approval. This trend we feel is a result of Avid being recognized as a partner capable of meeting the complete lifecycle of our customers' needs. I believe given the increase in later stage projects, the probability of adding additional commercial projects in the future has been significantly enhanced. On the other hand, the reduced number of early phase projects does make the short term less clear.

Speaker 2

Each quarter, we would typically expect to register new customer wins with early phase projects that can be recognized in the short term, I. E, upcoming quarters. Although Avid is to some degree insulated from this as a significant proportion of our business is already commercial, this does in the short term impact the speed at which we can attract new customers. It is as a result of this level of uncertainty as to when exactly funding will return to the broader biotech Next sector and the impact it has on our short term revenue, we have felt compelled to broaden our guidance for fiscal 2024 to to $145,000,000 to $165,000,000 In closing, fiscal 2023 was a record setting year. The company recorded its highest single quarter revenue, its highest annual revenue and the largest backlog to date.

Speaker 2

It is highly encouraging to begin fiscal 2024 with a strong backlog and a mature pipeline. And while we acknowledge the situation created by today's challenging financial markets, we believe as in fiscal 2023, Avid's reputation as a flexible, reliable and truly commercial great partner will continue to position Avid in an ideal place to take advantage of the medium to longer term market fundamentals that underpin the SIP business. This concludes my prepared remarks for today, And we can now open the call for questions. Operator?

Operator

Thank Our first question for today will be coming from Matt Hewitt of Craig Hillham. Your line is open.

Speaker 5

Good afternoon. Thank you for taking the questions. Maybe first up, And Sean sorry, Nick, thank you for providing a little bit of detail on what you're hearing from the customers. But maybe a little bit more detail on What's transpiring on the short or the near term opportunities? Because your guidance implies mid single digit growth at the midpoint this year, a pretty dramatic slowdown from what we saw here in Fiscal 2023.

Speaker 5

So just a little bit more color on what you're seeing in the market.

Speaker 2

Yes, Matt, thanks for the question. What's going on, I think, at least from what we can see is that clearly with the amount of investment going into early phase projects, I'm talking preclinical Phase 1, which are relatively small in size. Those funds are certainly being, at least from our perspective, Being diverted towards later phase. So the big impact for us there is that we would pick up a number of those in a quarter And we can execute those immediately. So they go straight into the process development and small scale manufacture.

Speaker 2

And you can get those in and out very, very quickly. They're being replaced. And as I said, we as I highlighted in my commentary, that By an increase in 34% in our late phase, that's Phase 3 and PPQ campaigns, which Just by virtue of the phase that they're in, they involve more batches, they involve the PPQ and the validation exercises and they just take longer to execute. Now frankly, if I had a choice, would I prefer a Phase 1 preclinical or a Phase 3? I think the answer to that is quite obvious.

Speaker 2

I mean, the revenues in the Phase 3 obviously are larger, but they take longer to execute. But I think the big fundamental for me is that they want to stay away from approval. And the probability of approval of those products is the likelihood of approval of the Stage 3 project versus the Phase 1 project is significantly higher. So that drives us much closer towards commercial revenues. And fundamentally, the whole purpose of building a pipeline of projects and diversification of that It's to give you more hits on our shops on goal, more products get approved, more products get approved, more commercial revenues.

Speaker 2

And I think that You could look at this in a number of different ways. If you're not a commercial manufacturer, how do you benefit from those late stage projects because Most people are probably not going to trust you with those. Whereas if you have got that track record, which Avid does have, then we've seen that 34% increase, which It's kind of everything that you'd want. It does create some short term uncertainty. I don't know any way of getting around that, which I did.

Speaker 2

But I'm sure as the funding goes back into the early phase projects, we'll see that lift back up and hopefully that's sooner rather than later. Again, there's a trade off between a preclinical Phase I and a Phase III. I'd like to see what we've got, which is the Phase IIIs and Those will result in not only larger revenues, as you can see in the backlog, at $191,000,000 and $122,000,000 signed in the second half of the year. So I think that shows the underlying sort of robustness of the business. And as those converse, again, I can't be case whether they do get approved or they don't.

Speaker 2

Assuming industry averages, we can look forward to some additional commercial products being added to our pipeline and then results in growth in those The one normally sees in commercial approved products.

Speaker 5

Got it. All right. That's very helpful. And maybe a follow-up question for me and I'll hop back in the queue. But Regarding your backlog, dollars 191,000,000 obviously, congratulations on the growth there in the second half of the year in particular.

Speaker 5

But And I don't know if you have this, but a split between how much of that you would qualify as commercial versus late stage versus early stage? Do you have some type of a split there for us?

Speaker 2

I don't off my end. I don't think we've ever reported on the exact split. But So I don't unfortunately, Matt, I don't have that detail with me.

Speaker 5

All right. Thank you.

Operator

Thank you. One moment for the next question. And our next question will be coming from Paul Knight of KeyBanc Capital. Your line is open.

Speaker 6

Hi, Nick. You mentioned that the later stage projects were up 34%. So I have 2 questions around that. Is leader stage Phase 3 and beyond? Is it a third of the business?

Speaker 6

Do you have a rough idea? And then the second question Is regarding for the team, I guess, How quickly can you kind of move into these later stage programs relative to what was a pretty robust The Phase 1 pipeline before. So how quickly can you win over large customers?

Speaker 2

So we don't have a breakdown, Paul, unfortunately, on the individual components of the pipeline. But I mean, I think Just in general terms, Avid has a pretty robust commercial pipeline. And I think we've talked before that we do tend to attract later phase projects generally in a probably a slightly more favorable manner than one might see the overall Clinical pipeline landscape, I. E, the typical landscape is a lot of early Phase 3 clinical, less Phase 1, less Phase 2 and less Phase 3. I was certainly would be more advantageous for us, the later phase than one would typically see.

Speaker 2

And I think That trend is what I've alluded to today in my comments, has moved even further that way as we've seen a significant increase. And it's not a significant increase on a couple of dollars, it's Significant increase on a reasonable number of dollars. So we're very happy with that sort of general dynamic. In terms of execution, I mean, it just is physically the time to execute. So in terms of winning these projects, obviously, they do take a little bit longer to land Most people don't sign a $15,000,000 check for argument's sake versus compared to a $2,000,000 check-in the same amount of time.

Speaker 2

People tend to We have a bit more navel gazing and sitting before they sign those size checks. But by virtue of the fact that the backlog has gone up 34% in that area, Those are signed because that's how you get into the backlog. And we can clearly see other opportunities in our what we call our pipeline where we could attract even more of those. So attracting them, I don't think is the biggest issue. I mean, obviously, there is the time as I've said in signing the checks Now all the orders of those large assumptions, which just take a little bit longer, as we've mentioned before, but also then executing.

Speaker 2

And To executing a large project with a PPQ campaign, for example, there's a lot of documentation, a lot of diligence, A lot of hard work in making sure all the hypotheses across on absolutely every aspect because literally this is formally part and parcel of the filing to the FDA. And it involves obviously initially the tech concern and the scale up and then the demonstration and engineering batches and PPGs. So It just takes longer to execute that. It's nothing unusual to have it. It's the same for anybody who's doing late phase projects.

Speaker 2

But signing that piece of business, we just have to go through that process. But I'll take one of those every Single day because the next thing that happens after that is the BLA gets filed with the FDA and with the following win that gets And then we've got another commercial product. And last time I checked, most commercial products, if we start with 1 batch, they move to 2, 3, 4, 5, 6, 7 and off we go. So you then get repeatable business more going forward, which is exactly the fundamental and Why we try to build a pipeline into this?

Speaker 6

And last question, Nick, would be this. You obviously have a lot of industry experience along with Team, what's the situation with Phase 3 and later stage pipelines? It seems like the large CDMOs like Lonza, Catalent are putting in a ton of capacity to Demand, do you think this later stage environment is good, great, tight? What's your view on this late stage world?

Speaker 2

I mean, I've said this on numerous occasions, Avid isn't necessarily a bellwether for the whole industry. But from what we can see, we're seeing A growing proportion of those coming to Avid, it's always difficult to determine exactly why is it because Funds have been moving towards late phase from early phase. I think that certainly has to be a contributor as I highlighted. Well, there are other people. I mean, ultimately, the Phase III project is coming to have it.

Speaker 2

It's coming from somewhere else. So somebody, I guess, has done something Wrong. Who that is, is not always clear to us. So but people don't normally move late phase projects just for the fun of it. But I think in the case of Amit, I can only talk about ourselves is that we do we have got almost 20 years, I think it's 18 plus years now of late Commercial manufacturing experience and clearly that I think goes a long way to making your clients feel comfortable that It's not your first rodeo, is it?

Speaker 2

Okay, thanks.

Operator

Thank you. One moment while we prepare for the next question. And our next question today will be coming from Jacob Johnson of Stephens. Your line is open.

Speaker 7

Hey, good afternoon. Next, maybe on the later stage customers, Is there any way to outline how many of these projects you have? Because obviously, you outlined And the trade off for these later stage and that they can turn into commercial. So I'm just trying to think about kind of how many commercial therapy Opportunities there are as you look at a couple of years. It sounds like it's not one we're talking about.

Speaker 2

No, it's not one, Jacob, and good afternoon, by the way. No, it's not one. We don't go into the detail and break down each number of projects by phase or clients. But no, it's not one. It is multiple and there are multiple In the pipeline.

Speaker 2

So it's very encouraging. I mean, if you stand here And look to the expansion that we put on, the things that are going to fill that expansion are late phase projects. I might fill the expansion with 3 or 4 commercial products, but it might be 40 Phase 1s to fill the same capacity. So It's a dynamic that is encouraging, and I think it kind of underpins the absolute basic fundamentals of this sector in this business is that Ovid is a full lifecycle CDMO partner that can take you all the way through. And when dynamics such As we see in the financial markets and biotech funding happen and funds get focused towards later It's good to see Abid benefit from that.

Speaker 2

But equally, there is less funding going into biotech and That affects everybody, assuming that you're still picking up Phase 1s and Phase 2s. And we all at least I believe that all CDMOs are also interested in picking those up. And I don't know how you get away from that fact at the end of the day, but the fact that it actually gets covered, albeit slightly longer going out slightly longer By later phase projects, we're one of the few people who I get who I think can benefit from that because of that commercial pedigree. So medium to long term, I think we got a boost in the next couple of quarters. Clearly, we would have liked to have seen Much more bullish investments and therefore continued growth as we have done.

Speaker 2

But I don't know how to get away from Some of those smaller projects not being funded and therefore not being able to pick them up.

Speaker 7

Got it. Thanks for that, Nick. And then maybe my follow-up For Dan, could you just talk about the outlook for margin in FY 2024, given kind of mid single digit ish Growth, but I'm guessing a larger cost base with the capacity additions online. And then just along the same lines, can you just touch on kind of the state of the balance If we see maybe a little bit of margin pressure this year, along with some continued investments on the viral vector side? Thank you.

Speaker 3

Sure, Jacob. As I noted in my prepared remarks, We've invested in our people and our facilities over the last fiscal year, which is also including establishing our cell and gene therapy business. Looking forward, any further investment would be to support any additional growth or the fulfilling of capacity. Looking at those gross margins for last year as a starting point, as I noted, Once you if you were to normalize for those costs and for the some of the benefits that went through, we saw roughly 7 percentage point impact, positive impact for both the Q4 and the full year of fiscal 2023. I would say looking ahead on a comparable basis, our gross margins will continue to be impacted by the increase in the fixed cost base We established during fiscal 2023 and also an increased level of depreciation related to the new completed expansion.

Speaker 3

For instance, the increase in depreciation, which will more than double next year for these assets, those impact Margins by approximately 5 percentage points. In the long term, we still strongly believe that our margins will be strengthened as capacity utilization increases. As far as the balance sheet looking forward, on the cash side, we still feel confident that our cash from operations will fund the business. In the event we needed to, we could pull from a revolver that we have in place, but we believe cash from operations will satisfy Where we're at going forward and we're comfortable where we're at as far as the balance sheet. And looking at Viral Vector, we're still 100% into moving into the viral vector space and we'll continue to fund that similar to the mammalian side As it grows, we'll continue to increase labor and related costs around that.

Speaker 7

Got it. Thanks for all that.

Operator

Thank you. One moment for our next question. And our next question, we have a follow-up from Matthew Hewitt Craig Hillman, your line is open.

Speaker 2

Thank you. Just one follow-up

Speaker 5

for me. Maybe on the bookings side, is there a breakdown Between your gross bookings versus cancellations in the quarter, just if you've got that number handy?

Speaker 2

As far as I was there was I think there was virtually no cancellations in the quarter.

Speaker 5

That's fantastic. All right. That's it for me. Thank you.

Operator

Thank you. One moment for our next question. And our next question will be coming from Sean Dodge of RBC Capital Markets. Your line is open.

Speaker 2

Hey, good afternoon. This is Thomas Keller on

Speaker 8

for Sean. Thanks for taking the questions. Thanks for another one of the guidance. There's notable disconnection backlog in the fiscal 2024 outlook. Is it fair to say that you all have a particularly high level of visibility on this year's guidance?

Speaker 8

Or maybe say in a different way, how much of this is already Kind of effectively contracted versus the go get portion?

Speaker 2

I don't think we actually comment on that one Sure. I mean, out of $191,000,000 particularly a significant portion of that In the first year, I think Dan has always sort of made the comment that the majority is in the next 12 to 15 months. I think if you were looking at the next 15 months, the majority is Certainly, over 50%. So over 50% of that in the next 15 12 to 15 months is a significant number of that guidance. So that's the best way I can probably answer that.

Speaker 2

In regards to the prior question from Matt, I said virtually no cancellations. The reason I have I know it's kind of a strange answer, but I do recall there being a change of scope, which was a very small number. So that Comes as a negative in our signings. So just for clarification, I don't think there was any cancellations. I think there was a change in scope, which was some

Speaker 3

of them just fine.

Speaker 2

So just wanted to clarify on the previous question from Matt as well. All right. Thanks. And then just a quick one on CapEx, and Apologize if

Speaker 8

you answered it already, but how much more do you have left to spend on these expansions in fiscal 2024? And then is there any sort of like a good rule of thumb for annual maintenance Spend going forward?

Speaker 3

Sure, Thomas. As far as cash outlay, we have roughly $30,000,000 fiscal point forward to spend, which will be over the entire year with a significant majority of that over the next three quarters. So there is that component. Thank you. So as far as maintenance CapEx, I apologize.

Speaker 3

Maintenance CapEx, in the long term, I would imagine we're going to get to the 4% or 5% of revenues. But in the short term, since The assets are brand new. That's going to be a smaller ramp up to those levels. So I will start with a lower number, call it $2,000,000 to $5,000,000 on an annual basis and that would ramp up over some period of time. All right, perfect.

Speaker 3

All right. Thanks guys. That's all for me.

Operator

Thank you. That concludes the Q and A session for today. I would like to turn The call back over to Nick Green for closing remarks. Please go ahead.

Speaker 2

Yes. Thank you, operator, and thank you to everybody participating on today's call. In closing, as we mark COVID's 30th year in business, we acknowledge the substantial progress made in recent years. We thank our customers for their trust and partnership and our investors for their continued support. And I would like to thank and recognize our exceptional employees who Continue to drive our success.

Speaker 2

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

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