Avid Bioservices (NASDAQ: CDMO) reported Q1 EPS of ($0.03), $0.02 better than the analyst estimate of ($0.05). Revenue for the quarter came in at $18.3 million versus the consensus estimate of $14.25 million.

Financial Highlights and Guidance

• The company is confirming prior revenue guidance for the full fiscal year 2020 of $64 million - $67 million.
• Revenue was $18.3 million for the second quarter of fiscal 2020, an increase of 80% as compared to $10.2 million for the second quarter of last fiscal year. For the six months ended October 31, 2019, revenues were $33.6 million, a 47% increase as compared to revenues of $22.8 million during the prior period. Increases during both current-year periods were primarily due to an increase in the number of in-process and completed manufacturing runs as a result of growing demand from a more diversified client base.
• As of October 31, 2019, revenue backlog was approximately $52 million, a decrease of 16% as compared to the first quarter of fiscal 2020. The company expects to recognize the majority of this backlog within the next 12 months.
• Gross margin for the second quarter of fiscal 2020 of 18% was up significantly compared to a gross margin of 3% in the prior period. Gross margin for the six months ended October 31, 2019 was 13%, up significantly compared to 7% in the prior period. These increases were primarily attributed to the increased number of manufacturing runs, partially offset by costs associated with the hiring of personnel to accommodate growth in production demand, increases in other compensation expenses, and equipment repairs.
• Selling, general and administrative expenses (“SG&A”) for the second quarter of fiscal 2020 were $3.5 million compared to $2.8 million for the second quarter of last year. The increase was primarily attributed to payroll and related costs, and stock-based compensation. For the first six months of fiscal 2020, SG&A expenses were $8.0 million compared to $6.0 million for the first six months of fiscal 2019. The increases in SG&A during the six-month period were primarily attributed to payroll and related costs, including one-time employee separation-related expenses, and increased stock-based compensation.
• In September 2019, the company recognized a one-time loss of $0.4 million in connection with the termination of a non-manufacturing facility lease, which reduces our future lease and related payments by approximately $1.3 million over the next four years. Additionally, the lease termination released $0.3 million of restricted cash that was pledged as collateral under a letter of credit required by the terminated lease back to the company. The lease termination of this redundant warehouse space has no impact on our future expansion plans, as the company continues to have 42,000 square feet available within our Myford facility.
• For the second quarter of fiscal 2020, the company recorded a consolidated net loss attributable to common stockholders of $1.9 million or $0.03 per share, compared to a consolidated net loss attributable to common stockholders of $2.9 million or $0.05 per share, for the prior year period. For the first six months of fiscal 2020, the company recorded a consolidated net loss attributable to common stockholders of $6.1 million or $0.11 per share, compared to a consolidated net loss attributable to common stockholders of $5.9 million or $0.11 per share, for the prior year period.
• Avid reported $34.0 million in cash and cash equivalents as of October 31, 2019, compared to $32.4 million on April 30, 2019.

“During the second quarter of 2020, we strengthened multiple core areas of our business,” said Rick Hancock, interim president and chief executive officer of Avid. “Our business development effort continues to be wide reaching and robust. Our reputation in the industry for quality and regulatory success continues to grow allowing us to engage with a broadening pool of potential new customers and expand our relationships with existing customers.

“Operationally, we continue to improve and enhance our equipment, facilities and systems. The opening of our new process development lab, the successful completion of our annual maintenance overhaul, and the planned installation of a new pharmaceutical grade water system in calendar 2020 all reflect the dedication we have to maintaining the highest standards possible.

“The revenues for this quarter were the highest since Avid transitioned to a pure-play CDMO in January 2018, and we achieved 18% gross margin, which represents a significant increase year-over-year as well as quarter-over-quarter. Expenses remained in line with expectations and our backlog continues to be strong. Also important, during the quarter we approached breakeven income from operations.

“Productivity and efficiency contributed significantly to Avid’s strong second quarter results, and we expect that our financial performance will continue to track positively with these factors. We believe that Avid has turned an important corner, creating a stronger platform from which to achieve sustainable profitability.”

GUIDANCE:

Avid Bioservices sees FY2020 revenue of $64-67 million, versus the consensus of $65.38 million.

For earnings history and earnings-related data on Avid Bioservices (CDMO) click here.