Q4 2024 Avid Bioservices Inc Earnings Call

July 2, 2024

[inaudible]

Operator: Thank you for standing by, and welcome to the Avid Bioservices fourth quarter fiscal year 2024 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Tim Brons, Avid's investor relations. Please go ahead, sir.

Operator: Thank you for standing by, and welcome to the Avid Bioservices 4th quarter fiscal year 2024 for an Angel Results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. If your question has been answered, and you'd like to remove result from the cues, simply press star 1-1 again.

Speaker Change: Thank you for standing by and welcome to the Avid Bioservices 4th Quarter Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone.

Speaker Change: If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Tim Brons, Avid's Investor Relations. Please go ahead, sir. Thank you.

Tim Brons: As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Tim Brons, Avid's Investor Relations.

Tim Brons: Please go ahead, sir. Thank you.

Tim Brons: 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 Kwietniak, Avid's Chief Commercial Officer. Today, we will be providing an overview of Avid Bioservices contract development and manufacturing, including updates on corporate activities and financial results for the quarter and fiscal year ended April 30th, 2024. After our prepared remarks, we will welcome your questions. Before we begin, I'd like to caution that comments made during this conference call today, July 2nd, 2024, will contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the current beliefs of the company, which involve 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.

Tim Brons: 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 Kwietniak, 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 and fiscal year ended April 30th of 2024.

Speaker Change: 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 Kwietniak, Avid's Chief Commercial Officer.

Speaker Change: 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 and fiscal year ended April 30th of 2024. After our prepared remarks, we will welcome your questions.

Tim Brons: After our prepared remarks, we will welcome your questions.

Tim Brons: Before we begin, I'd like to caution that comments made during this conference call today, July 2nd, 2024, 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 includes discussion of certain non-GAAP information.

Speaker Change: Before we begin, I'd like to caution that comments made during this conference call today, July 2nd, 2024, will contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker Change: concerning the current belief of the company which involves a number of assumptions, risks, and uncertainties.

Speaker Change: 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.

Tim Brons: 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 includes discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website at avidbio.com. With that, I will turn the call over to Nick Green, Avid's President and CEO.

Speaker Change: Our earnings press release includes discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website at avidbio.com.

Tim Brons: You can find our earnings press release, including relevant non-GAAP reconciliation, on our corporate website at AvidBio.com.

Nicholas Green: With that, I will turn the call over to Nick Green, Avid's President and CEO. Thank you, Tim, and thank you to everyone participating today via webcast. The fourth quarter of fiscal 2024 was a high point for the company. We generated the highest quarterly revenues in Avid's history, meeting our current revenue expectations for the year. We also signed multiple new project agreements, and we continue to see positive signs in the broader business environment, which pose well for the business development in the year ahead. In operations, our additional capacity has been put to good use. New projects in all of our facilities are being onboarded, and as a result, our gross margin for quarter four is approximately double that report for quarter three.

Speaker Change: With that, I will turn the call over to Nick Green, Avid's President and CEO .

Nicholas Stewart Green: Thank you, Tim, and thank you to everyone participating today via webcast. The fourth quarter of fiscal 2024 was a high point for the company. We generated the highest quarterly revenues in Avid's history, meeting our current revenue expectations for the year. We also signed multiple new project agreements, and we continue to see positive signs in the broader business environment, which bodes well for business development in the year ahead. In operations, our additional capacity is being put to good use.

Nicholas Stewart Green: Thank you, Tim, and thank you to everyone participating today via webcast.

Nicholas Stewart Green: The fourth quarter of fiscal 2024 was a high point for the company. We generated the highest quarterly revenues in Avid's history, meeting our current revenue expectations for the year.

Nicholas Stewart Green: We also signed multiple new project agreements, and we continue to see positive signs in the broader business environment, which bodes well for the business development in the year ahead.

Nicholas Stewart Green: In operations, our additional capacity is being put to good use. New projects in all of our facilities are being onboarded and as a result, our gross margin for quarter four is approximately double that reported for quarter three.

Nicholas Stewart Green: New projects in all of our facilities are being onboarded, and as a result, our gross margin for quarter four is approximately double that reported for quarter three. While rebuilding our margins will take time, we are pleased to see this movement in the right direction, as new bookings remain strong and capacity utilisation increases. Matt and I will provide additional details on business development and operations for the period following an overview of our fourth quarter fiscal year 2024 financial results. And for that, I'll turn the call over to Dan.

Nicholas Green: While rebuilding, our margins will take time. We are pleased to see this movement in the right direction. There's new bookings, remains strong, and capacity utilization increases.

Nicholas Stewart Green: While rebuilding our margins will take time, we are pleased to see this movement in the right direction, as new bookings remain strong and capacity utilization increases.

Nicholas Green: Matt and I will provide additional details on business development and operations for the period following an overview of our fourth quarter fiscal year 2024 financial results.

Speaker Change: Matt and I will provide additional details on business development and operations for the period following an overview of our fourth quarter fiscal year 2024 financial results.

Daniel Hart: And for that, I'll tell the call over to Dan. Thank you, Nick. Before I begin, in addition to the brief financial overview, I'll provide on the call today.

Daniel R. Hart: 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-K, which was filed today with the SQA. I'll now provide an overview of our financial results from operations for the quarter and fiscal year ended April 30th, 2024. Revenues for the fourth quarter of fiscal 2024 were $43 million, representing an 8% increase as compared to revenues of $39.8 million recorded in the same prior year period.

Daniel R. Hart: And for that, I'll turn the call over to Dan.

Daniel Hart: Additional details on our financial results are included in our press release, issued prior to this call, and in our form 10-K, which was filed today with the SEC. I'll now provide an overview of our financial results from operations for the quarter and fiscal year ended April 30th, 2024. Revenues for the fourth quarter of fiscal 2024 were $43 million, representing an 8% increase as compared to revenues of $39.8 million, recorded in the same prior year period. The increase in revenue for the fourth quarter as compared to the same prior year period was primarily due to increases in the mix and scale of manufacturing runs and process development services, primarily associated with the onboarding of new programs. For the 2024 full fiscal year, revenues were $139.9 million, a decrease of approximately 6% compared to $149.3 million in the same prior year period.

Daniel R. Hart: I'll now provide an overview of our financial results from operations for the quarter and fiscal year ended April 30th, 2024.

Daniel R. Hart: Revenues for the fourth quarter of fiscal 2024 were $43 million, representing an 8% increase as compared to revenues of $39.8 million recorded in the same prior year period.

Daniel R. Hart: The increase in revenue for the fourth quarter, as compared to the same prior year period, was primarily due to increases in the mix and scale of manufacturing runs and process development services primarily associated with the onboarding of new programs.

Daniel R. Hart: The increase in revenue for the fourth quarter as compared to the same prior year period was primarily due to increases in the mix and scale of manufacturing runs, and process development services primarily associated with the onboarding of new programs.

Daniel R. Hart: For the 2024 full fiscal year, revenues were $139.9 million, a decrease of approximately 6% compared to $149.3 million in the same prior-year period. The decrease in revenues for the fiscal year ended April 30, 2024, compared to the same prior-year period, was primarily attributed to fewer manufacturing runs, a reduction in process development services, primarily from early stage programs, and by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.

Daniel R. Hart: For the 2024 full fiscal year, revenues were 139.9 million dollars.

Daniel R. Hart: A decrease of approximately 6% compared to $149.3 million in the same prior year period.

Daniel Hart: The decrease in revenues for the fiscal year ended April 30th, 2024, compared to the same prior year period, was primarily attributed to fewer manufacturing runs, a reduction in process development services primarily from early stage programs, and by a reduction of revenue for her changes in estimated variable consideration under contract where uncertainties have been resolved. Gross profit for the fourth quarter of fiscal 2024 was $5.5 million, or 13% gross margin, compared to $8.4 million, or 21% gross margin, in the fourth quarter of fiscal 2023. Gross profit for the 2024 full fiscal year was $7.3 million, or 5% gross margin, compared to gross profit of $31.5 million, or 21% gross margin, for the 2023 full fiscal year.

Daniel R. Hart: The decrease in revenues for the fiscal year ended April 30, 2024, compared to the same prior year period, was primarily attributed to fewer manufacturing runs, a reduction in process development services, primarily from early stage programs.

Daniel R. Hart: and by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.

Daniel R. Hart: Gross profit for the fourth quarter of fiscal 2024 was $5.5 million, or 13% gross margin, compared to $8.4 million, or 21% gross margin, in the fourth quarter of fiscal 2023. Gross profit for the 2024 full fiscal year was $7.3 million, or 5% gross margin, compared to a gross profit of $31.5 million, or 21% gross margin, for the 2023 full fiscal year. The decrease in gross profit for the fourth quarter and fiscal year ended April 30, 2024, compared to the same prior year periods, was primarily driven by fewer manufacturing runs, partially offset by increases in the mix and scale of manufacturing runs, a reduction in process development services, and an increase in costs related to expansions of both our company's capacity and technical capabilities.

Daniel R. Hart: Gross profit for the fourth quarter of fiscal 2024 was $5.5 million, or 13% gross margin, compared to $8.4 million, or 21% gross margin, in the fourth quarter of fiscal 2023.

Daniel R. Hart: Gross profit for the 2024 full fiscal year was $7.3 million, or 5% gross margin, compared to a gross profit of $31.5 million, or 21% gross margin, for the 2023 full fiscal year.

Daniel Hart: The decrease in gross profit for the fourth quarter of fiscal year ended April 30th, 2024, compared to the same prior year periods, was primarily driven by fewer manufacturing runs, partially offset by increases in the mix and scale of manufacturing runs, a reduction of process development services, and an increase in costs related to expansions of both our companies' capacity and technical capabilities. Gross profit during the fiscal year ended April 30th, 2024, was also impacted by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.

Daniel R. Hart: The decrease in gross profit for the fourth quarter of fiscal year ended April 30, 2024, compared to the same prior year periods, was primarily driven by fewer manufacturing runs.

Daniel R. Hart: partially offset by increases in the mix and scale of manufacturing runs, a reduction of process development services, and an increase in costs related to expansions of both our company's capacity and technical capabilities.

Daniel R. Hart: Gross profit during the fiscal year ended April 30, 2024, was also impacted by a reduction in revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved, a terminated project related to the insolvency of one of our company's smaller customers, and a delay in the ability to recognize revenues of a customer product pending the implementation of a process. ST&A expenses for the fourth quarter of fiscal 2024 were $6.8 million, a decrease of 10 percent compared to $7.6 million recorded in the fourth quarter of fiscal 2023.

Daniel R. Hart: Gross profit during the fiscal year ended April 30, 2024, was also impacted by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.

Daniel Hart: A terminated project related to the insolvency of one of our company's smaller customers, and a delay in the ability to recognize revenues of a customer product pending the implementation of a process change. SDNA expenses for the fourth quarter of fiscal 2024 were $6.8 million, a decrease of 10%, compared to $7.6 million recorded in the fourth quarter of fiscal 2023. SDNA expenses for the 2024 full fiscal year were $26 million, a decrease of approximately 7%, compared to $27.9 million recorded in the same prior year periods. The decrease in SDNA for both the fourth quarter and the fiscal year ended April 30th, 2024, compared to the same prior year periods, was primarily due to decreases in compensation and benefit-related expenses, facility expenses, and consulting fees.

Daniel R. Hart: A terminated project related to the insolvency of one of our company's smaller customers.

Daniel R. Hart: and a delay in the ability to recognize revenues of a customer product pending the implementation of a process change.

Daniel R. Hart: ST&A expenses for the fourth quarter of fiscal 2024 were $6.8 million, a decrease of 10% compared to $7.6 million recorded in the fourth quarter of fiscal 2023.

Daniel R. Hart: ST&A expenses for the 2024 full fiscal year were $26 million, a decrease of approximately 7% compared to $27.9 million recorded in the same prior year period. The decrease in SG&A for both the fourth quarter and the fiscal year ended April 30, 2024, compared to the same prior year periods, was primarily due to decreases in compensation and benefit-related expenses.

Daniel R. Hart: ST&A expenses for the 2024 full fiscal year were $26 million, a decrease of approximately 7% compared to $27.9 million recorded in the same prior year period.

Daniel R. Hart: The decrease in SG&A for both the fourth quarter and the fiscal year into the April 30, 2024, compared to the same prior year periods, was primarily due to decreases in compensation and benefit-related expenses, facility expenses, and consulting fees.

Daniel R. Hart: Facility Expenses and Consulting. Income tax expense for the fourth quarter of fiscal 2024 was $117.9 million, an increase as compared to $0.9 million in the fourth quarter of fiscal 2023. Income tax expense for the 2024 full fiscal year was $113.8 million, an increase of $1.3 million for the prior year period. During the fourth quarter of fiscal 2024, we recorded an evaluation allowance of $118.5 million against our deferred tax assets. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

Daniel Hart: Income tax expense for the fourth quarter of fiscal 2024 was $117.9 million, an increase of compared to $0.9 million in the fourth quarter of fiscal 2023. Income Tax Expense for the 2024 full fiscal year was $113.8 million and increased its comparative $1.3 million for the prior year period. During the fourth quarter of fiscal 2024, we recorded a valuation allowance of $118.5 million against our deferred tax assets. We recognize the deferred tax assets to the extent that we believe these assets are more likely than not to be realized. On a periodic basis, management assesses the available positive and negative evidence to estimate whether sufficient future income will be generated to permit use of the existing deferred tax assets.

Daniel R. Hart: Income tax expense for the fourth quarter of fiscal 2024 was $117.9 million, an increase as compared to $0.9 million in the fourth quarter of fiscal 2023.

Daniel R. Hart: Income tax expense for the 2024 full fiscal year was $113.8 million, an increase as compared to $1.3 million for the prior year period.

Daniel R. Hart: During the fourth quarter of fiscal 2024, we recorded an evaluation allowance of $118.5 million against our deferred tax assets.

Daniel R. Hart: We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

Daniel R. Hart: On a periodic basis, management assesses the available positive and negative evidence to estimate whether sufficient future income will be generated to permit the use of the existing deferred tax assets. In making such a determination, we consider all available positive and negative evidence.

Daniel R. Hart: On a periodic basis, management assesses the available positive and negative evidence.

Daniel R. Hart: to estimate whether sufficient future income will be generated to permit use of the existing deferred tax assets.

Daniel Hart: In making such a determination, we consider all available positive and negative evidence. A significant piece of the objective negative evidence evaluated was the net loss in fiscal 2024, resulting in a net cumulative loss incurred over the three-year fiscal period ended April 30, 2024. A significant contributor to the loss has been the costs associated with our strategy to expand our available capacity and add technical capabilities over this three-year period, which included an increase in incremental costs associated with increased labor, facility costs, and depreciation, accumulating into a net loss in fiscal 2024. On the basis of this evaluation, as of April 30, 2024, an evaluation allowance of $118.5 million has been recorded to recognize the portion of the deferred tax asset that is more likely than not to be realized.

Daniel R. Hart: In making such a determination, we consider all available positive and negative evidence.

Daniel R. Hart: A significant piece of the objective negative evidence evaluated was the net loss in fiscal 2024, resulting in a net cumulative loss incurred over the three-year fiscal period ended April 30, 2024. A significant contributor to the loss has been the cost associated with our strategy to expand our available capacity and add technical capabilities over this three-year period, which included an increase in incremental costs associated with increased labor. Facility Costs and Depreciation, accumulating to a net loss in fiscal 2020.

Daniel R. Hart: A significant contributor to the loss has been the costs associated with our strategy to expand our available capacity and add technical capabilities over this three-year period, which included an increase in incremental costs associated with increased labor, facility costs, and depreciation.

Daniel R. Hart: accumulating into a net loss in fiscal 2024.

Daniel R. Hart: On the basis of this evaluation, an evaluation allowance of $118.5 million has been recorded to recognize the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable could be adjusted in future quarters if objective positive evidence in the form of cumulative income is provided and additional weight is given to subjective evidence, such as our projections for growth.

Daniel R. Hart: On the basis of this evaluation, as of April 30, 2024, an evaluation allowance of $118.5 million has been recorded to recognize the portion of the deferred tax asset that is more likely than not to be realized.

Daniel Hart: The amount of the deferred tax asset considered realizable, however, could be adjusted in the future quarters if objective, positive evidence in the form of cumulative income and additional weight is given to subjective evidence such as our projections for growth. During the fourth quarter of fiscal 2024, the company's net loss was $123.1 million, or $1.94 per basic cumulative share, compared to a net loss of $0.3 million, or $1 per basic cumulative share, for the fourth quarter of fiscal 2023. For the 2024 or full fiscal year, the company recorded a net loss of $140.8 million or $2.23 per basic cumulative share, as compared to the net income of approximately $0.3 million or $0.0 per basic cumulative share during the same prior year period.

Daniel R. Hart: The amount of the Deferred Tax Asset considered realizable, however, could be adjusted in the future quarters if objective, positive evidence in the form of cumulative income and additional weight is given to subjective evidence, such as our projections for growth.

Daniel R. Hart: During the fourth quarter of fiscal 2024, the company's net loss was $123.1 million, or $1.94 per basic and diluted share, compared to a net loss of $0.3 million, or $0.01 per basic dealer's share, for the fourth quarter of fiscal 2023. For the 2024 full fiscal year, the company recorded a net loss of $140.8 million, or $2.23 per basic diluted share, as compared to a net income of approximately $0.3 million, or 0 cents per basic diluted share, during the same prior year.

Daniel R. Hart: During the 4th quarter of fiscal 2024, the company's net loss was $123.1 million.

Daniel R. Hart: or $1.94 per basically diluted share.

Daniel R. Hart: compared to a net loss of $0.3 million, or one cent per basic and delivered share, for the fourth quarter of fiscal 2023.

Daniel R. Hart: For the 2024 full fiscal year, the company recorded a net loss of $140.8 million.

Daniel R. Hart: or $2.23 per basic diluted share as compared to the net income of approximately $0.3 million or $0.00 per basic diluted share during the same prior year period.

Daniel Hart: Excluding the income tax provision recorded due to our evaluation allowance of $118.5 million recorded during the fourth quarter of fiscal 2024, the company's adjusted net loss was approximately $4.6 million or $0.7 per basic cumulative share for the quarter, and the adjusted net loss of $22.3 million or $0.35 per basic cumulative share for the full fiscal year 2024. Our cash and cash equivalents on April 30, 2024, were $38.1 million compared to $38.5 million on April 30, 2023.

Daniel R. Hart: Excluding the income tax provision recorded due to our evaluation allowance of $118.5 million recorded during the fourth quarter of fiscal 2024, the company's adjusted net loss was approximately $4.6 million, or $0.07 per basic and diluted share for the quarter, and an adjusted net loss of $22.3 million, or $0.35 per basic and diluted share for the full fiscal year 2024. Our cash and cash equivalents on April 30, 2024 were $38.1 million, compared to $38.5 million on April 30, 2023. This concludes my financial overview. I'll now turn the call over to Matt for an update on commercial activities during the quarter and year.

Daniel R. Hart: Excluding the income tax provision recorded due to our evaluation allowance of $118.5 million.

Daniel R. Hart: recorded during the fourth quarter of fiscal 2024. The company's adjusted net loss was approximately $4.6 million, or $0.07 per basic and diluted share, for the quarter, and an adjusted net loss of $22.3 million, or $0.35 per basic and diluted share, for the full fiscal year 2024.

Daniel R. Hart: Our cash and cash equivalents on April 30, 2024 were $38.1 million.

Daniel R. Hart: compared to $38.5 million on April 30, 2023.

Daniel Hart: This concludes my financial overview.

Matthew Kwietniak: I'll now turn the call over to Matt for an update on commercial activities during the quarter and in the year. Thanks, Dan. During the fourth quarter, the company signed multiple new projects spanning a wide range of capabilities, capping off a successful year for our commercial team. With new project agreements of $30 million during the period, we entered the quarter and fiscal year with a strong backlog of $193 million. For the fiscal year 2024, we not only added a significant number of new projects to our production pipeline, but we added multiple new customers as well. This includes the addition of another big pharma customer during the year.

Daniel R. Hart: This concludes my financial overview. I'll now turn the call over to Matt for an update on commercial activities during the quarter and year.

Matthew Kwietniak: Thanks, Dan. During the fourth quarter, the company signed multiple new projects spanning a wide range of capabilities, capping off a successful year for our commercial team. With new project agreements of $30 million during the period, we ended the quarter and fiscal year with a strong backlog of $193 million. For the fiscal year 2024, we not only added a significant number of new projects to our production pipeline, but we added multiple new customers as well.

Matthew Kwietniak: Thanks, Dan. During the fourth quarter, the company signed multiple new projects spanning a wide range of capabilities, capping off a successful year for our commercial team.

Matthew Kwietniak: With new project agreements of $30 million during the period, we ended the quarter and fiscal year with a strong backlog of $193 million.

Matthew Kwietniak: This includes the addition of another big pharma customer during the year. While the sales cycle for big pharma business takes time, we are actively engaged in discussions with other pharma companies and optimistic with respect to these potential opportunities. In addition, we are beginning to see improvements in the biotech financial markets overall, which we are hopeful will allow for the advancement of manufacturing programs that were deferred by drug developers due to cash conservation strategies implemented last year.

Matthew Kwietniak: For the fiscal year 2024, we not only added a significant number of new projects to our production pipeline, but we added multiple new customers as well. This includes the addition of another big pharma customer during the year.

Matthew Kwietniak: While the sales cycle for big pharma business takes time, we are actively engaged in discussions with other pharma companies and optimistic with respect to these potential opportunities. In addition, we are beginning to see improvements in the biotech financial markets overall, which we are hopeful will allow for advancement of manufacturing programs that were deferred by drug developers due to cash conservation strategies implemented last year. With respect to building Avid's visibility and positive reputation in the industry, we recently chose Ecovatus, one of the most trusted providers of business sustainability ratings, to assist the company in not only evaluating our supply chain, but also ourselves.

Matthew Kwietniak: In addition, we are beginning to see improvements in the biotech financial markets overall, which we are hopeful will allow for advancement of manufacturing programs that were deferred by drug developers due to cash conservation strategies implemented last year.

Matthew Kwietniak: With respect to building Avid's visibility and positive reputation in the industry, we recently chose EcoBotus, one of the most trusted providers of business sustainability ratings, to assist the company in not only evaluating our supply chain, but also ourselves. The ECOVADIS assessment evaluates 21 sustainability criteria across four core themes: Environment, Labor, and Human Rights, Ethics, and Sustainable Procurement.

Matthew Kwietniak: With respect to building Avid's visibility and positive reputation in the industry, we recently chose EcoVotus, one of the most trusted providers of business sustainability ratings to assist the company in not only evaluating our supply chain, but also ourselves.

Matthew Kwietniak: The Ecovatus assessment evaluates 21 sustainability criteria across four core themes: environment, labor and human rights, ethics and sustainable procurement, and more than 125,000 companies globally have been rated by Ecovatus. The core themes are not only important to Avid, but also our employees as well as other stakeholders, including investors and customers. The company was delighted to have earned a score of 56 from Ecovatus, placing the company in the 62nd percentile globally, which recognizes the culture and values of the business. Equally important, this exercise has enabled the business to identify areas of improvement, and we look forward to continuing Avid's journey of continuing to make our impact on those with whom we interact a more and more positive one.

Matthew Kwietniak: The ECOVADIS assessment evaluates 21 sustainability criteria across four core themes. Environment,

Matthew Kwietniak: Labor and Human Rights, Ethics and Sustainable Procurement, and more than 125,000 companies globally have been rated by ECOBODIS.

Matthew Kwietniak: And more than 125,000 companies globally have been rated by ECOBOTUS. The core themes are not only important to Avid but also to our employees, as well as to other stakeholders, including investors and customers. The company was delighted to have earned a score of 56 for Minko Vadas, placing the company in the 62nd percentile globally, which recognizes the culture and values of the business.

Matthew Kwietniak: The core themes are not only important to Avid, but also our employees, as well as other stakeholders, including investors and customers.

Matthew Kwietniak: The company was delighted to have earned a score of 56 from ECOBODYS, placing the company in the 62nd percentile globally, which recognizes the culture and values of the business.

Matthew Kwietniak: Equally important, this exercise has enabled the business to identify areas of improvement, and we look forward to continuing Avid's journey of continuing to make our impact on those with whom we interact increasingly positive. In conclusion, despite facing some challenging headwinds in the market during the year, our team continued to perform and deliver. Today, Avid has the largest and most diverse customer base than at any point in its history.

Matthew Kwietniak: In conclusion, despite facing some challenging headwinds in the market during the year, our team continued to perform and deliver. Today, Avid has the largest and most diverse customer base in any point in history. Our production pipeline is the largest and most valuable ever, and our backlog remains strong going into the year ahead. We are pleased with the performance of our commercial team in fiscal 2024 and look forward to the new opportunities we anticipate in fiscal 2025.

Matthew Kwietniak: In conclusion, despite facing some challenging headwinds in the market during the year, our team continued to perform and deliver.

Matthew Kwietniak: Today, Avid has the largest and most diverse customer base than at any point in its history.

Matthew Kwietniak: Our production pipeline is the largest and most valuable ever, and our backlog remains strong going into the year ahead. We are pleased with the performance of our commercial team in fiscal 2024 and look forward to the new opportunities we anticipate in fiscal 2025. 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 quarter and year.

Matthew Kwietniak: This concludes my overview of commercial activities.

Nicholas Green: I will now turn the call back over to Nick for an update on operations and other achievements during the quarter and year. Thanks, Matt. Fiscal 2024 was a challenging but validating year for Avid. There's no doubt that the status of the financial market came back to our results; are most notably the first half. There is also no doubt that we recovered extremely well during the balance of the year. Achieving an upward trend with higher revenues during the second half, ending with quarter four revenues of $43 million, the highest in the company's history. History.

Matthew Kwietniak: 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 quarter and year.

Nicholas Stewart Green: Fiscal 2024 was a challenging but validating year for us. There is no doubt that the state of the financial market impacted our results, and most notably in the first half. However, there is also no doubt that we recovered extremely well during the balance of the year.

Nicholas Stewart Green: Thanks, Matt.

Speaker Change: Fiscal 2024 was a challenging but validating year for Avid.

Nicholas Stewart Green: There's no doubt that the status of the financial markets impacted our results, and most notably the first half.

Nicholas Stewart Green: There is also no doubt that we recovered extremely well during the balance of the year.

Nicholas Stewart Green: Achieving an upward trend with higher revenues during the second half, ending with quarter four revenues of $43 million, the highest in the company's history. Given this momentum, combined with our strong backlog, we are looking ahead to a promising 2025 and providing 2025 full fiscal year revenue guidance of between $160 and $168 million, representing a 17% growth year-over-year at the mid-pandemic. Supporting our optimism is the growing interest we've seen in our newly completed facilities and expanded capabilities.

Nicholas Stewart Green: achieving an upward trend with higher revenues during the second half, ending with quarter four revenues of $43 million, the highest in the company's history.

Nicholas Green: Given this momentum, combined with our strong backlog, we are looking ahead to promising 2025 and providing 2025 full fiscal year revenue guidance of between 160 and 168 million dollars, representing a 17% growth year over year at the midpoint. Supporting our optimism is the growing interest we've seen in our newly completed facilities and expanded capabilities. In late fiscal 2023, we unveiled our completed mammalian self-assilities expansion, and during fiscal 2024, the company completed and launched its new challenging therapy manufacturing facility. With the completion of this three-year construction programme, as well as the associated capital expense, the company has dramatically expanded its capacity and technical capabilities and increased the company's annual revenue generating capacity from approximately $120 million annually in fiscal 2021 to more than $400 million today.

Nicholas Stewart Green: Given this momentum, combined with our strong backlog, we are looking ahead to a promising 2025.

Nicholas Stewart Green: and providing 2025 full fiscal year revenue guidance of between $160 and $168 million, representing a 17% growth year-over-year at the midpoint.

Nicholas Stewart Green: Supporting our optimism is the growing interest we've seen in our newly completed facilities and expanded capabilities.

Nicholas Stewart Green: In late fiscal 2023, we unveiled our completed mammalian cell facility expansion, and during fiscal 2024, the company completed and launched its new cell and gene therapy manufacturing facility. With the completion of this three-year construction program, as well as the associated capital expenditure, the company has dramatically expanded its capacity and technical capability and increased its annual revenue generating capacity from approximately $120 million annually in fiscal 2021 to more than $400 million today. The enhancements and expansion not only allow Avid to better service new and existing biotech customers but, importantly, enable the company to address the needs of large farmers as well.

Nicholas Stewart Green: In late fiscal 2023, we unveiled our completed mammalian cell facilities expansion, and during fiscal 2024, the company completed and launched its new cell and gene therapy manufacturing facility.

Nicholas Stewart Green: With the completion of this three-year construction program, as well as the associated capital expense,

Nicholas Stewart Green: The company has dramatically expanded its capacity and technical capabilities and increased the company's annual revenue generating capacity from approximately $120 million annually in fiscal 2021 to more than $400 million today.

Nicholas Green: The enhancements and expansion not only allow Avid to better serve its new and existing biotech customers, but importantly enable the company to address the needs of large farmers as well. The expanded addressable market and improvements in the broader business environment have resulted in an increase in the larger and later stage programmes in our production pipeline. With respect to capacity, our utilisation has expected to increase as we onboard and execute new programmes in both the mammalian and CGT facilities. As we've discussed in prior quarters, this expected increase in utilisation should improve our margins, and we are pleased to see an approximate doubling of our gross margin in quarter four as compared to quarter three of this year.

Nicholas Stewart Green: The enhancements and expansion not only allow Avid to better serve its new and existing biotech customers.

Nicholas Stewart Green: But importantly, enable the company to address the needs of large farmers as well.

Nicholas Stewart Green: The expanded addressable market and improvements in the broader business environment have resulted in an increase in larger and later stage programs in our production pipeline. With respect to capacity, our utilization is expected to increase as we onboard and execute new programs in both our mammalian and CGT facilities. As we've discussed in prior quarters, this expected increase in utilisation should improve our margins, and we are pleased to see an approximate doubling of our gross margin in Quarter 4 as compared to Quarter 3 of this year.

Nicholas Stewart Green: The expanded addressable market and improvements in the broader business environment have resulted in an increase in the larger and later stage programs in our production pipeline.

Nicholas Stewart Green: With respect to capacity, our utilization is expected to increase as we onboard and execute new programs in both our mammalian and CGT facilities.

Nicholas Stewart Green: As we've discussed in prior quarters, this expected increase in utilization should improve our margins. And we are pleased to see an approximate doubling of our gross margin in quarter four as compared to quarter three of this year.

Nicholas Green: We expect the capacity utilisation will further increase in connection with the series of ongoing PPQ campaigns for several of our late phase customers. While the execution of a PPQ campaign is only the beginning of a one to two-year journey toward commercial approval and subsequent manufacture, we are pleased to be partner in so many of these late phase programmes, which we anticipate will contribute to the future stability and growth of the business.

Nicholas Stewart Green: We expect that capacity utilisation will further increase in connection with a series of ongoing PPQ campaigns for several of our late-phase customers, and while the execution of a PPQ campaign is only the beginning of a one- to two-year journey toward commercial approval and subsequent manufacturing.

Nicholas Stewart Green: We expect that capacity utilization will further increase in connection with a series of ongoing PPQ campaigns for several of our late phase customers.

Nicholas Stewart Green: And while the execution of a PPQ campaign is only the beginning of a one to two year journey toward commercial approval and subsequent manufacture, we are pleased to be partnering in so many of these late phase programs which we anticipate will contribute to the future stability and growth of the business.

Nicholas Stewart Green: We are pleased to be partners in so many of these late phase programs, which we anticipate will contribute to the future stability and growth of the business. In closing, I wish to highlight the company's resilience and execution in the face of difficult market environments. We end the year in a position of strength, with positive revenue momentum building, particularly in the second half of fiscal 2024, continued new business wind, and Line of Sight to Margin Expansion.

Nicholas Green: In closing, I wish to highlight the company's resilience and execution in the face of a difficult market environment. We end the year in a position of strength with positive revenue, momentum building, particularly in the second half of fiscal 2024, continued new business wins, and line of sight to margin expansion. We recorded our highest ever quarterly revenue of $43 million in quarter four, logged our highest record backlog of $206 million in quarter three, and ended the year with double our gross margin in Q4 as compared to Q3 of the year. We are encouraged by the proving financial market for biotech companies, along with a continued trend of ensuring a good manufacturing back to the year.

Nicholas Stewart Green: In closing, I wish to highlight the company's resilience and execution in the face of difficult market environment.

Nicholas Stewart Green: We end the year in a position of strength, with positive revenue momentum building, particularly in the second half of fiscal 2024, continued new business wins, and line of sight to margin expansion.

Nicholas Stewart Green: We recorded our highest ever quarterly revenue of $43 million in the quarter, logged our highest record backlog of 206 million in Q3 and ended the year with double our gross margin in Q4 as compared to Q3. We are encouraged by the improving financial market for biotech companies, along with the continued trend of on-shoring of drug manufacturing back to the U.S.

Nicholas Stewart Green: We recorded our highest ever quarterly revenue of $43 million in Q4.

Nicholas Stewart Green: logged our highest record backlog of 206 million in Q3, an end of the year with double our gross margin in Q4 as compared to Q3 of the year.

Nicholas Stewart Green: We are encouraged by the improving financial market for biotech companies, along with the continued trend of onshoring of drug manufacturing back to the U.S.

Operator: Press.

Operator: This concludes my prepared remarks for today, and we can now open the call for questions.

Nicholas Stewart Green: This concludes my prepared remarks for today, and we can now open the call for questions, Operator. Thank you.

Nicholas Stewart Green: This concludes my prepared remarks for today and we can now open the call for questions.

Sean Dodge: Operator? Certainly. One moment for our first question. And our first question for today. Comes from the line of Sean Dodge from RBC Capital. Your question, please. Yes, thanks. Good afternoon.

Operator: Certainly. One moment for our first question, and our first question for today comes from the line of Sean Dodge from RBC Capital. Your question, please.

Speaker Change: Certainly. One moment for our first question.

Speaker Change: And our first question for today.

Speaker Change: comes from the line of Sean Dodge from RBC Capital. Your question please.

Sean Wilfred Dodge: Yeah, thanks. Good afternoon.

Nicholas Green: Maybe just starting with the fiscal 25 revenue guidance with all the shifts and in makes of late stage versus early stage that you've been signing. Can you give us a sense of high level what proportion of that 168 million is expected to come from your existing backlog and maybe how that compares to previous years with some of your comments around growing interest in your new capacity. It sounds like a lot more that guidance is kind of dependent on stuff that you intend on signing in the years. Is that true, or do you have kind of similar coverage ratios that 150 to 150 that you had before?

Sean Wilfred Dodge: Yeah, thanks. Good afternoon. Maybe, Nick, just starting with the Fiscal 25 Revenue Guidance.

Speaker Change: With all the shifts in mix of late stage versus early stage that you've been signing, can you give us a sense of high level, what proportion of that $160-$168 million is expected to come from your existing backlog and maybe how that compares to previous years with some of your comments around

Nicholas Stewart Green: Maybe, Nick, just starting with the Fiscal 25 Revenue Guidance. With all the shifts and mix of late stage versus early stage that you've been signing, can you give us a sense at a high level of what proportion of that $160 million to $168 million is expected to come from your existing backlog and maybe how that compares to previous years with some of your comments around growing interest in your new capacity? It sounds like a lot more of that guidance is kind of dependent on stuff that you intend on signing in the years. Is that true, or do you have kind of similar coverage ratios to the $160 to $168 that you had before?

Speaker Change: growing interest in your new capacity, it sounds like a lot more of that guidance is kind of dependent on stuff that you intend on signing in the year. Is that true, or do you have kind of similar coverage ratios, that 160 to 168 that you had before?

Nicholas Stewart Green: I don't have the number off the top of my head, Sean, but I would say that it's not markedly different. I think, you know, the confidence that we've had over the forecasting for the last four years, obviously, the first two quarters last year, we were a bit down on that. But apart from that, I think it's come out pretty much where we expected, and I think that's probably a reasonable measure of the amount booked versus to get or go get that we saw in those periods as well.

Nicholas Green: I don't have the number off the top of my head, Sean, but I would say that it's not markedly different. I think, you know, the confidence that we've had over the forecasting for the last four years; obviously, the first two quarters last year were a bit down on that, but apart from that, I think it's come out pretty much where we expected. And I think that's probably a reasonable measure of the amount book versus to get or go get that we saw in those periods as well. Okay.

Speaker Change: I don't have the number off the top of my head, Sean, but I would say that it's not markedly different.

Speaker Change: I think, you know, the confidence that we've had over the forecasting for the last four years, obviously the first two quarters last year, we're a bit down on that. But apart from that, I think it's

Speaker Change: It's come out pretty much where we expected and I think that's probably a reasonable measure of the amount booked for us to get or go get that we saw in those periods as well.

Nicholas Stewart Green: OK. And then, just around the book, you mentioned growing interest you've been seeing in the newly completed capacity. Is there any more color you can give on that, and then maybe any timelines on when you think that interest will begin to convert into new business?

Nicholas Green: And then just around the book until you mentioned growing interest, you've been, you've been seen in the newly completed capacity. It's really more color you can give on that, and then maybe any timelines on when you think that interest will begin to convert into signing new business. I mean, it's converting already. I mean, we've completed or in the final stages of completing the second PPQ campaign in the new facility. Which is incredible when you think that we've only been open just for a year or just over a year. So we've done numerous batches in there, but as you know, you know, there's the time between doing a PPQ campaign and ultimately getting the commercial volume. Obviously, you've got to complete the campaign.

Speaker Change: Okay.

Speaker Change: And then just around the book, you mentioned growing interest you've been seeing in the newly completed capacity. Is there any more color you can give on that, and then maybe any timelines on when you think that interest will begin to convert into signed new business?

Nicholas Stewart Green: I mean, it's converting already, I mean, we've completed or are in the final stages of completing the second PPQ campaign in the new facility, which is incredible when you think that it's only been open for a year or just over a year. So we've done numerous batches in there, but as you know, there's the time between doing a PPQ campaign and ultimately getting the commercial volume. Obviously, you've got to complete the campaign, that data's got to be taken by the client, converted into a filing with the FDA, FDA approval, and hopefully that ends up with a commercial product, and then you start commercial revenues on there.

Speaker Change: I mean, it's converting already. I mean, we've completed or in the final stages of completing the second PPQ campaign in the new facility.

Speaker Change: which is incredible when you think that it's only been open just for a year or just over a year. So we've done numerous batches in there but as you know you know there's

Speaker Change: The time between doing the PPQ campaign and ultimately getting the commercial volume, obviously you've got to complete the campaign, that data's then got to be taken by the client.

Nicholas Green: You've got to, that data's then got to be taken by the client converted into a filing with the FDA. FDA approval. And hopefully that ends up with a commercial product, and then you start commercial revenues on there. So if I had a way of speeding that process up, I'd be a very wealthy man. But, you know, the fact that we've already completed two, we've got a range of those that would continue to do going forward. It bodes really well for fulfilling that capacity.

Speaker Change: converted into a filing with the FDA, FDA approval, and hopefully that ends up with a commercial product and then you start commercial revenues on there.

Nicholas Stewart Green: So if I had a way of speeding that process up, I'd be a very wealthy man, but you know the fact that we've already completed two, and we have a range of those that we're continuing to do going forward, it bodes really well for fulfilling that capacity.

Speaker Change: If I had a way of speeding that process up I'd be a very wealthy man, but the fact that we've already completed two and we've got a range of those that we're continuing to do going forward, it bodes really well for fulfilling that capacity.

Nicholas Stewart Green: Okay, great. And then you mentioned, you know, kind of increasing capacity utilization, which is certainly helping with margins. Aside from that, is there anything else you can do or are doing at this point to help with margin recovery?

Nicholas Green: Okay, great. And then you mentioned, you know, okay, increasing capacity utilization certainly helping with margins. Aside from that, is there anything else you can do or are doing, you know, at this point to help with margin recovery? I mean, I think it is generally, frankly, the utilization of the capacity as we obviously see. I think at the midpoint, we highlighted guidance is 17% growth; that increased utilization that facility will certainly improve the margins as long as we execute efficiently. You know, I think in light of filling the facility, I don't think it's a cost-coding exercise to try to improve margin in the short term, which is the right strategy.

Speaker Change: Okay, great. And then you mentioned...

Speaker Change: Bye.

Speaker Change: you know kind of increasing capacity utilization certainly helping with margins. Aside from that is there anything else you can do or are doing you know at this point to help with with a margin recovery?

Nicholas Stewart Green: I think it is generally, frankly, the utilization of the capacity, as we obviously see. I think at the midpoint, we highlighted guidance of 17% growth, that increased utilization, that facility will certainly improve the margins as long as we execute efficiently. You know, in light of filling the facility, I don't think it's a cost-cutting exercise to try to improve margins in the short term, which is the right strategy. So obviously, we're always cost conscious, but we're trying to facilitate growth.

Speaker Change: I mean, I think it is generally, frankly, the utilization of the capacity as we obviously see, I think at the midpoint we highlighted guidance is 17% growth, that increased utilization of that facility will certainly improve the margins as long as we execute efficiently.

Speaker Change: You know, I think in light of

Speaker Change: filling the facility. I don't think it's a cost-cutting exercise to try to improve margin in the short term, which is...

Nicholas Green: So obviously we're always cost conscious, but we're trying to facilitate growth. So I would say the vast majority of the margin impact will come out of improved utilization and some efficiency in the way that we do things. But not necessarily cost-coding to try to get to just margins for the sake of margins it were.

Nicholas Stewart Green: So I would say the vast majority of the margin impact will come out of improved utilization and some efficiency in the way that we do, not necessarily cost-cutting to try to get to just margins for the sake of margins, as it were.

Speaker Change: the right strategy so obviously we're always cost conscious but uh

Speaker Change: We're trying to facilitate growth. So I would say the vast majority of the margin impact will come out of improved utilization and some efficiency in the way that we do things.

Speaker Change: but not necessarily cost-cutting to try to get to just margins for the sake of margins as it were.

Sean Wilfred Dodge: Great. Thanks again for your time.

Sean Dodge: Thank you for the time. Thank you.

Speaker Change: Great. Thanks again for the time.

Jacob K. Johnson: And our next question comes from the line of Jacob Johnson from Stevens. Your question, please.

Jacob Johnson: And our next question comes from the line of Jacob Johnson from Stevens. Your question, please. Hey, good afternoon, everybody. Maybe Nick just going back to bookings again. I think 30 million in the quarters may be a little bit lighter than we would have expected, but this is maybe a couple of months old. And obviously a lot of things going on in the end markets this year that you play in. So I'm just curious, are there any other metrics or any other maybe anecdotes you could share just on what you're seeing on the business development side.

Sean Wilfred Dodge: We hear you, Sean.

Speaker Change: Thank you. And our next question comes from the line of Jacob Johnson from Stevens. Your question please.

Jacob K. Johnson: Hey, good afternoon, everybody. Maybe Nick, I'm just going back to bookings again.

Speaker Change: Hey, good afternoon, everybody. Maybe Nick, just

Speaker Change: Going back to bookings again.

Speaker Change: Yeah, I think $30 million in the quarter is maybe a little bit lighter than we would have expected, but this is, you know, maybe a couple months old, and obviously a lot of things going on in the end markets this year that you play in. So I'm just curious.

Nicholas Stewart Green: Yeah, I think 30 million in the quarter is maybe a little bit lighter than we would have expected, but this is maybe a couple months old and obviously, there are a lot of things going on in the end markets this year that you play in. So I'm just curious, are there any other metrics or any other anecdotes you could share just on what you're seeing on the business development side? You mentioned you're seeing some things in the market that bode well for future business development. So is there anything else you can flush out there for us?

Speaker Change: Are there any other metrics or any other maybe anecdotes you could share just on what you're seeing on the business development side? You mentioned you're seeing some things in the market that bode well for future business development. Is there anything else you can flush out there for us?

Nicholas Green: You mentioned you're seeing some things in the market that bowed well for future business development. So is there anything else you can flesh out there for us. Yeah, I mean, I think we said this on numerous occasions, Jacob, which is, you know, quarter by quarter back bookings that can be fairly erratic. I've always been a proponent of the long term trend. I think we saw good growth in our backlog last year. And I anticipate seeing that going forward into the future year. According to this current year, should I say, certainly in terms, I think might alluded to it in terms of the pipeline behind the backlog.

Nicholas Stewart Green: Yeah, I mean, I think we've said this on numerous occasions, Jacob, which is, you know, quarter by quarter back bookings can be fairly erratic. I've always been a proponent of the long-term trend. I think we saw good growth in our backlog last year, and I anticipate seeing that going forward into the future year, or into this current year, should I say. Certainly, in terms of the pipeline behind the backlog, we see positive dynamics in that area.

Speaker Change: Yeah, I mean, I think we've said this on numerous occasions, Jacob, which is, you know, quarter by quarter back bookings can be fairly erratic.

Speaker Change: I've always been a proponent of the long-term trend, I think we saw good results.

Speaker Change: Good growth in our backlog last year and I anticipate seeing that going forward into the future year, or into this current year should I say.

Speaker Change: Certainly, I think Matt alluded to it, in terms of the pipeline behind the backlog, we see positive dynamics in that area. Customer interest, the amount of on-shoring, we certainly see an easing in the financial markets.

Nicholas Green: We see positive positive dynamics in that area, customer interest, the amount of ensuring we certainly see anything in the financial markets for biotech. So, you know, being very frank, if I go back over the last couple of years, you know, last year I was sat here looking at finishing a really good year and looking at a tough year ahead of us, which took the shine off of fiscal 23.

Nicholas Stewart Green: Customer interest, the amount of on-shoring, we certainly see an easing in the financial markets for biotech. So, you know, being very frank, if I go back over the last couple of years, you know, last year I was sitting here looking at finishing a really good year and looking at a tough year ahead of us, which took the shine off fiscal 23. As we sit here today, you know, there's no question about it that fiscal 24 was a tough year, but I sit here with much more optimism looking forward to almost every aspect of the market and the dynamics there.

Speaker Change: for Biotech. So, you know, being very frank, if I go back over the last couple of years, you know, last year I was sat here looking at finishing a really good year and looking at a tough year ahead of us.

Nicholas Green: As we sit here today, you know, there's no question about if fiscal 24 was a tough year, but sat here with much more optimism looking forward into almost every aspect to the market and the dynamics there. And obviously, you know, it always takes time in the farmer industry to convert conversations to orders, but from what we can see at this moment in time, we were feeling pretty good about fiscal 25 and also what that could mean for 26 and forward.

Speaker Change: which took the shine off of fiscal 23. As we sit here today, you know, there's no question about it, fiscal 24 was a tough year but...

Speaker Change: sat here with much more optimism looking forward into almost every aspect of the market and the dynamics there.

Nicholas Stewart Green: And obviously, you know, it always takes time in the pharma industry to convert conversations to orders. But from what we can see at this moment in time, we're feeling pretty good about fiscal 25 and also what that could mean for 26 and forward.

Speaker Change: You know, it always takes time in the pharma industry to convert conversations to orders, but from what we can see at this moment in time, we're feeling pretty good about fiscal 25 and also what that could mean for 26 and forward.

Jacob K. Johnson: Got it. That's helpful. And maybe sticking with business development, I think Matt mentioned you picked up another large pharma customer in FY24. Can you just update us on how that large pharma strategy is going?

Nicholas Green: That's helpful, and maybe sitting with business development, I think Matt mentioned you picked up another large farmer customer in FY 24. Can you just update us on how that large farmer strategy is going? Yeah, again, I think Matt mentioned it; I've mentioned it before. It's a slow process, obviously, to get into big farmer. They're looking at key suppliers, people they can trust. Obviously, first and foremost, they don't just throw anybody on there, so it's normally a matter of displacing somebody else, unless there's a specific need. So you could be doing all the right things and still not jumping on that list, but all the indicators, all the interaction, the number of customer visits, quality audits, interactions, and proposals that were being asked to look at and things like that have been very strong and very positive.

Speaker Change: Got it, that's helpful. And maybe sticking with business development, I think Matt mentioned you picked up another large pharma customer in FY24. Can you just update us on how that large pharma strategy is going?

Nicholas Stewart Green: Yeah, again, I think Matt's mentioned it before. I've mentioned it before.

Speaker Change: Yeah, again, I think Matt's mentioned it, I've mentioned it before, it's a slow process obviously to get into Big Pharma. They're looking at key suppliers, people they can trust.

Nicholas Stewart Green: It's a slow process, obviously, to get into Big Pharma. They're looking for key suppliers, people they can trust. Obviously, first and foremost, they don't just throw anybody on there, so it's normally a matter of displacing somebody else unless there's a specific need. So you could be doing all the right things and still not jumping on that list. But all the indicators, all the interactions, the number of customer visits, quality audits, interactions, and proposals that we're being asked to look at, and things like that have been very strong and very positive.

Speaker Change: Obviously, first and foremost, they don't just throw anybody on there, so it's normally a matter of displacing somebody else unless there's a specific need.

Speaker Change: So you could be doing all the right things and still not jumping on that list, but all the indicators, all the interaction, the number of customer visits, quality audits.

Speaker Change: interactions and proposals that we're being asked to look at and things like that.

Nicholas Green: You know, we keep picking them up. It may only be in singles at the moment, but I feel that that's a part of the marketplace that we're exposing that we haven't been able to capitalize on in the past, that we will be capitalizing on in the future. Feeling good about where that's going, as well as the biotech sector, so it's not one or the other. both. I'll leave it there.

Nicholas Stewart Green: And we keep picking them up. It may only be in singles at the moment, but I feel that that's a part of the marketplace that we're exploring that we haven't been able to capitalise on in the past that we will be capitalising on in the future. So I feel good about where that's going as well as the biotech sector. So it's not one or the other.

Speaker Change: have been very strong and very positive and we keep picking them up. It may only be in singles at the moment.

Speaker Change: I feel that that's a part of the marketplace that we're exposing that we haven't been able to

Speaker Change: to capitalize on in the past that we will be capitalizing on in the future, so feeling good about where that's going as well as the biotech sector, so it's not one or the other, it's both.

Jacob K. Johnson: Got it. I'll leave it there. Thanks for taking the questions.

Operator: Thanks, David. Questions next. Thank you.

Speaker Change: Got it. I'll leave it there. Thanks for taking the questions. Thanks.

Paul Richard Knight: Thank you, and our next question comes from the line of Paul Knight from KeyBank. Your question, please.

Paul Knight: And our next question comes from the line, Paul Knight, from Keyback. Your question, please. Hi, Nick.

Speaker Change: Thank you. And our next question comes from the line of Paul Knight from KeyBank. Your question, please.

Paul Richard Knight: Hi Nick, what's the capacity of the CGT portion of the business? How is inquiry or business activity there developing?

Nicholas Green: What's the capacity of the CGT portion of the business and how is inquiry or business activity there developing? Yeah, so the capacity of that's about 80 million of the 400 or so that we've got. In terms of interest and activity in that area, I think it continues to be where we've seen it in the past. It's lagging the mammalian by a few months, probably a quarter, maybe a quarter and a half, but certainly picking up. I think we've seen some very encouraging signs in the last quarter in terms of interactions with clients, customer visits. And so again, I would, the best way I could categorize it is about four or five months behind the mammalian side, but picking up nicely, which, you know, we started to see that pick up in, I would say, November, December last year in the mammalian side.

Paul Richard Knight: Hi Nick, what's the capacity of the CGT portion of the business?

Paul Richard Knight: How is inquiry or business activity there developing?

Nicholas Stewart Green: Yeah, so the capacity of that's about 80 million of the 400 or so that we've got. You know, in terms of interest and activity in that area, I think it continues to be where we've seen it in the past. It's lagging the mammalian by a few months, probably a quarter, maybe a quarter and a half, but certainly picking up. I think we've seen some very encouraging signs in the last quarter in terms of interactions with clients, customer visits, and so again, I would, the best way I could categorize it is about four or five months behind the mammalian side, but picking up nicely, which, you know, we started to see that pick up in, I would say, November, December last year in the mammalian side, and that's continued all the way through, so kind of back in the sort of January, February sort of era where we were then, and I think you started to hear some optimism in my tone and my comments around that time in the mammalian side.

Nicholas Stewart Green: Yeah, so the capacity of that is about 80 million of the 400 or so that we've got.

Nicholas Stewart Green: In terms of interest and activity in that area, I think it continues to be where we've seen it in the past. It's lagging the mammalian by a few months, probably a quarter, maybe a quarter and a half.

Nicholas Stewart Green: But certainly picking up, I think we've seen some very encouraging signs in the last quarter in terms of interactions with clients, customer visits, and so again, I would

Nicholas Stewart Green: The best way I could categorize it is about four or five months behind the mammalian side, but picking up nicely, which, you know, we started to see that.

Nicholas Stewart Green: pick up in, I would say, November-December last year in the mammalian side, and that's continued all the way through. So, kind of back in the sort of January-February sort of era where we were then, and I think you started to hear some optimism in my tone and my comments around that time in the mammalian side.

Nicholas Green: And that's continued all the way through. So kind of back in the sort of January, sort of where we were then. And I think you started to hear some optimism in my, in my tone and my comments around that time in the mammalian side.

Paul Richard Knight: And then the process development was what in the quarter, and what's your takeaway from that process development number?

Nicholas Green: And then process development was what in the quarter and what year read from that process development number? Yeah, I mean, PD, I do see the activity on a day-to-day basis. The revenues don't always reflect the activity, but I can see what's going through there. It can vary quite enormously depending on the type of project that's coming in. Some lay-face programs need very little because they've already been well developed where they were before and therefore don't really need a lot of PD activity. In other cases, they're not so well developed, and we have to do a lot of polishing to get them up to speed and they're ready for PPQ.

Speaker Change: And then process development was what in the quarter, and what's your read from that process development number?

Nicholas Stewart Green: Yeah, I mean, PD, I do see the activity on a day to day basis. The revenues don't always reflect the activity, but I can see what's going on there.

Speaker Change: Yeah, I mean PD, I do see the activity on a day-to-day basis. The revenues don't always reflect the activity, but I can see what's going through there. It can vary quite enormously depending on the type of project that's coming in, you know.

Nicholas Stewart Green: It can vary quite enormously depending on the type of project that's coming in. You know, some late phase programs need very little because they've already been well developed where they were before and therefore don't really need a lot of PD activity. In other cases, they're not so well developed, and we have to do a lot of polishing to get them up to speed and ready for PPQ. So it can fluctuate.

Speaker Change: Some late phase programs need very little because they've already been well developed where they were before and therefore don't really...

Speaker Change: need a lot of PD activity. In other cases, they're not so well developed and we have to do a lot of polishing to get them up to speed and ready for PPQ.

Nicholas Green: So it can fluctuate, but just looking at what I've seen in the PD area and the level of activity we're seeing, that's looking very positive at the moment.

Nicholas Stewart Green: But just looking at what I've seen in the PD area and the level of activity we're seeing, that's looking very positive at the moment. And I think we'll see, or I expect to see, a jump in that throughout this year, which is, again, very project-dependent.

Speaker Change: So, it can fluctuate, but just looking at what I've seen in the PD area and the level of activity we're seeing, that's looking very positive at the moment, and I think we'll see, or I expect to see a jump in that throughout this year, which, again, it's very project dependent there.

Nicholas Green: And I think we'll see; I expect to see a jump in that throughout this year, which again, it's very project dependent there.

Paul Richard Knight: We hear that CDMO capacity is still fairly tight, so how do you feel about that dynamic in the industry? Or do really your customers need capital?

Nicholas Green: We hear that the CDMO capacity is still fairly tight. So what do you feel about that dynamic in the industry, or is it really your customers need capital? I think, I mean, I think there's obviously one thing between customers getting funded, but then there's also them spending that funding. So, you know, I mean, if you've been short of money for quite a while, I don't think you know just because you get some, you don't immediately rush out and spend it all. But I think that, you know, capacity and certainly in, I would say, the sort of what I would call a high-quality, late-phase commercial grade CDMO capacity is in relatively short supply, should I say.

Nicholas Stewart Green: [inaudible]

Speaker Change: We hear that the CDMO capacity is still fairly tight.

Speaker Change: What do you feel about that dynamic in the industry, or is it really your customers need capital?

Nicholas Stewart Green: I think, I mean, I think there's obviously one thing between customers getting funded, but then there's also them spending that funding. So, you know, I mean, if you've been short of money for quite a while, I don't think you necessarily, just because you get some, you don't immediately rush out and spend it all. But I think that, you know, capacity and, certainly, what I would call the sort of high quality late phase commercial grade CDMO capacity is in relatively short supply.

Speaker Change: I think, I mean, I think there's obviously, there's one thing between customers getting funded, but then there's also them spending that funding.

Speaker Change: So, you know, I mean, if you've been short of money for quite a while, I don't think, you know, just because you get some, you don't immediately rush out.

Speaker Change: and spend it all.

Nicholas Green: I would say that the market is again picking up, but it's a speed that with these transactions go. We see more and more conversations around ensuring, but again, you know, we've all heard of biosecure and drivers like that, but that doesn't, I don't expect to see that turning up in backlog probably until the second or third quarter this year. That's not to say that none of it would turn up in there, but hopefully meaningful amounts would take a little bit longer to come. Thank you.

Nicholas Stewart Green: I would say that the market is again picking up, but it's the speed at which these transactions go. We're seeing more and more conversations around on-shoring, but again, we've all heard of Biosecure and drivers like that, but I don't expect to see that turning up in backlog until the second or third quarter this year. That's not to say that none of it would turn up in there, but hopefully, meaningful amounts would take a little bit longer to come through.

Speaker Change: I would say that the market is again picking up, but it's the speed at which these transactions go. We're seeing more and more conversations around on-shoring, but again, you know, we've all heard of Biosecure and drivers like that, but that doesn't...

Speaker Change: I don't expect to see that turning up in backlog probably until the second or third quarter this year. That's not to say that none of it would turn up in there, but hopefully meaningful amounts would take a little bit longer to come through.

Matthew Gregory Hewitt: Thank you. And our next question comes from the line of Matt Hewitt from Craig Hallam. Your question, please.

Matthew Hewitt: And our next question comes from the line of Matthew It from Craig Hallum. Your question, please. Good afternoon. Thank you for taking the questions. Maybe first up on continuing on the business development front. Could you talk a little bit about the cadence of inbound calls or the conversations you're having since, you know, Q4 indicate or, you know, from Q3 fiscal Q3 indicate for, you know, even to current day. Have you seen an increase? You know, is that because of the Ensuring and the Biosecure Act or is it tied more to just the better sensor on the funding environment?

Speaker Change: Thank you. And our next question comes from the line of Matt Hewitt from Craig Hallam. Your question, please.

Matthew Gregory Hewitt: Good afternoon, thank you for taking the questions. Maybe first up, continuing on the business development front, could you talk a little bit about the cadence of inbound calls or the conversations you've had since Q4, from fiscal Q3 into Q4, even to the current day? Have you seen an increase? Is that because of outsourcing and the Biosecure Act, or is it tied more to just a better understanding around the funding environment? Any additional metrics that you could provide would be helpful.

Matthew Gregory Hewitt: Good afternoon. Thank you for taking the questions. Maybe first up, continuing on the business development front, could you talk a little bit about the the cadence of inbound calls and the conversations you're having since

Speaker Change: Q4, from fiscal Q3 into Q4, even to current day, have you seen an increase? Is that because of the on-shoring in the Biosecure Act, or is it tied more to just the better

Matthew Hewitt: Any additional metrics that you could provide there will be helpful.

Speaker Change: the funding environment. Any additional metrics that you could provide there would be helpful.

Matthew Hewitt: Yes, thanks for the question. It is definitely up for sure. I think we are seeing a more positive outlook in terms of our customers, and that obviously is leading to more positive conversations. We don't give actual metrics on our pipeline behind the backlog, but I can say that that is continuing to grow. The source of those is varied. I would say not all clients are telling you straight off the bat that they're transferring from offshore to onshore, but obviously, as you get deeper and deeper into the conversation, that becomes more and more apparent. So what we see isn't always the perfect mirror into what's actually happening, but there is increasing amounts of onshoring. I think introducing amounts of early phase programs, being coming out there in terms of opportunities from biotech.

Nicholas Stewart Green: Yes, thanks for the question, Matt. It is definitely up, for sure.

Matt: Yes, thanks for the question Matt. It is definitely up for sure. I think we are seeing a more positive outlook in terms of our customers and that obviously is leading to more positive conversations.

Nicholas Stewart Green: I think we are seeing a more positive outlook in terms of our customers, and that obviously is leading to more positive conversations. We don't give actual metrics on our pipeline behind the backlog, but I can say that that is continuing to grow. The source of those is varied. I would say not all clients are telling you straight off the bat that they're transferring from offshore to onshore, but obviously, as you get deeper and deeper into the conversation, that becomes more and more apparent.

Matt: We don't give actual metrics on our pipeline behind the backlog, but I can say that that is continuing to grow. The source of those is varied.

Matt: I would say not all clients are telling you straight off the bat that they're transferring from...

Matt: onshore, offshore to onshore.

Matt: But obviously, as you get deeper and deeper into the conversation, that becomes more and more apparent. So, what we see isn't always a perfect mirror into what's actually happening. But there is increasing amounts of on-shoring, I think introducing amounts of early phase programs.

Nicholas Stewart Green: So what we see isn't always a perfect mirror into what's actually happening, but there is increasing amounts of onshoring, and I think there are increasing amounts of early phase programs being coming out there in terms of opportunities from biotech. Obviously, we already just talked about signing another big pharma. You know, I would have to say that, outside inflation reduction and interest rates coming down, pretty much all the indicators, for the vast majority of this calendar year, I think, have been generally positive. And so I think you see that in our guidance for next year and in our general optimism, I think, for the future, as we sit today.

Matt: being coming out there in terms in terms of opportunities from biotech. Obviously we already just talked about signing another big pharma so

Matthew Hewitt: Obviously, we already just talked about signing another big farmer. So, you know, I would have to say that outside inflation reduction and interest rates coming down, pretty much all the indicators for the vast majority of this calendar year, I think, have been generally positive.

Matt: You know, I would have to say that outside inflation reduction and interest rates coming down, pretty much all the indicators.

Matt: for the vast majority of this calendar year, I think, have been generally positive. And so I think you see that in our guidance for next year and in our general optimism, I think, for the future, as we sit today.

Matthew Hewitt: And so I think that's seen; you see that in our guidance for next year and in our general optimism, I think, for the futures we said today. Got it.

Matthew Gregory Hewitt: Got it. And then maybe one separate comment or question regarding gross margins with some of the increased opportunities in the later stage. I would think that those contracts tend to be larger runs and should help boost or help the gross margins rebound maybe a little bit quicker on similar size type revenues. Is that a fair assessment, or is there something else that would cause kind of a more gradual rebound in gross margins? Thank you. Thanks for the question, Matt.

Matthew Hewitt: And then maybe once a separate comment or question regarding gross margins, with some of the increased opportunities in the later stage, I would think that those contracts tend to be larger runs and should help boost or help the gross margins rebound maybe a little bit quicker. On similar size type revenues, is that a fair assessment, or is there something else that would cause kind of a more gradual rebound in the gross margins? Thank you. Thanks for the question, Matt. Yeah, I mean, typically they are larger runs because there's more effort going into those runs, which do command a slightly higher margin.

Speaker Change: Got it and then maybe one separate comment or question regarding gross margins with some of the increased opportunities on in the later stage

Speaker Change: I would think that those contracts tend to be larger runs and should help boost or help the gross margins rebound maybe a little bit quicker on similar size type revenues. Is that a fair assessment or is there something else that would cause kind of a more gradual rebound in the gross margins? Thank you.

Nicholas Stewart Green: Thanks for the question, Matt. Yeah, I mean, typically, they are larger runs because there's more effort going into those runs, which do command a slightly higher margin, but I think on a blended basis. Margins will be fairly similar as far as the run of margins and how those margins come through as an incremental with the revenue load. As you can see, for the 4th quarter, with the approximately 27% increase in revenues from the 3rd quarter, we nearly doubled our gross margin. So, that proves that the model proves the model in providing incremental margin as we increase the top line, which, you know, I think that's the metric that we should look at going forward.

Speaker Change: Thanks for the question Matt. Yeah I mean typically they are larger runs because there's more effort going into those runs which do command a slightly higher margin but I think on a blended basis

Matthew Hewitt: But I think, on a blended basis, margins will be fairly similar as far as the run of margins and how those margins come through as an incremental with the revenue load. As you can see, for the fourth quarter, with the approximately 27% increase in revenues from the third quarter, that we nearly doubled our gross margins. So that proves that it proves the model in providing incremental margin as we increase the top line, which I think that's the metric that we had looked at going forward. Thank you.

Speaker Change: Margins will be fairly similar as far as the run of margins and how those margins come through as an incremental with the revenue load.

Speaker Change: As you can see, for the fourth quarter, with the approximately 27% increase in revenues from the third quarter, we nearly doubled our gross margin.

Speaker Change: That proves the model in providing incremental margin as we increase the top line, which I think that's the metric that we would look at going forward.

Speaker Change: Got it. Thank you.

Maxwell Smock: And our next question comes from the line of Max Smock from William Blair. Your question, please. Hey, good afternoon, guys. Thanks for taking our questions. Maybe just following up on Sean's question and trying to get at it a different way here. So backlog was essentially flat year over year, but your guide for 25 calling for about 17% revenue growth at the midpoint. Can you just help us bridge the gap between those two data points, especially in light of your comment earlier about not needing to go out and win more work this year than you would in a typical year.

Speaker Change: Thanks a lot.

Maxwell Andrew Smock: Thank you, and our next question comes from the line Max Smock from William Blair. Your question, please.

Speaker Change: Thank you. And our next question.

Speaker Change: comes from the line of Max Smock from William Blair. Your question, please.

Maxwell Andrew Smock: Hey, good afternoon, guys. Thanks for taking our questions. Maybe just following up on Sean's question and trying to get at it a different way here. So, backlog was essentially flat year over year, but your guide for 25 is calling for about 17% revenue growth at the midpoint. Can you just help us bridge the gap between those two data points, especially in light of your comment earlier about not needing to go out and win more work this year than you would in a typical year? And maybe it would be helpful just to hear what you think you have to hit in terms of growth and net bookings this year to support your top line outlook for fiscal 2025.

Speaker Change: Hey, good afternoon guys. Thanks for taking our questions. Maybe just following up on Sean's question and trying to get at it a different way here, so

Maxwell Andrew Smock: Backlog was essentially flat year over year, but your guide for 25 calling for about 17% revenue growth at the midpoint. Can you just help us bridge the gap between those two data points, especially in light of your comment earlier about not needing to go out and win more work this year than you would in a typical year?

Nicholas Green: And maybe it would be helpful just to hear what you think you have to hit in terms of growth and net booking this year to support your top line outlook for fiscal 2020. Yeah, so I mean, I think one of the things that we've suffered from in prior periods, Max, has been obviously an expanding backlog in terms of the period of time to recognize revenue. But, as I've kind of alluded to in the past, is that if a PPQ campaign, for argument, say, takes 15 months and you've booked all PPQ campaigns, once you hit 50 months, it no longer expands any further.

Maxwell Andrew Smock: And maybe it would be helpful just to hear what you think you have to hit in terms of growth and net bookings this year to support your top line outlook for fiscal 2025.

Nicholas Stewart Green: Yeah, so I mean, one of the things that we've suffered from in prior periods, Max, has been obviously an expanding backlog in terms of the period of time to recognize revenue. But as I've kind of alluded to in the past, if a PPQ campaign, for argument's sake, takes 15 months, and you've booked all PPQ campaigns, once you hit 15 months, it no longer expands any further. So you can only go so far.

Maxwell Andrew Smock: Yeah, so I mean, I think one of the things that we've suffered from in prior periods, Max, has been obviously an expanding backlog in terms of the period of time to recognize revenue, but as I've kind of alluded to in the past, is that

Maxwell Andrew Smock: If a PPQ campaign, for argument's sake, takes 15 months, then you've booked all PPQ campaigns. Once you hit 15 months, it no longer expands any further. So you can only go so far. So as you start to introduce earlier phase business, or even maintain the mix...

Nicholas Green: So you can only go so far. So as you start to introduce earlier phase business or even maintain the mix, then you get more drop through from your revenue, from your backlog into your revenue. So I think that largely explains the dynamic that you see there. And then obviously, in terms of the forecast going forward, I mean, I don't actually comment on the amount book versus to go get articulated that it's in a similar field, but it also, you know, in terms of the confidence, there are a lot of things that create confidence. So we can be having negotiations going on for six or seven months before it, or even longer in some cases, before it actually appears in a booking.

Nicholas Stewart Green: So as you start to introduce earlier phase business, or even maintain the mix, then you get more drop through from your revenue, from your backlog, into your revenue. So I think that largely explains the dynamic that you see there. And then obviously, in terms of the forecast going forward, I mean, I don't actually comment on the amount booked versus to go get. I've articulated that it's in a similar field, but it also, you know, in terms of confidence, there are a lot of things that create confidence.

Maxwell Andrew Smock: then you get more drop-through from your backlog into your revenue. So I think that largely explains...

Maxwell Andrew Smock: and the Dynamic that you see there. And then obviously in terms of the forecast going forward, I mean, I don't actually comment on the amount booked versus to go get.

Maxwell Andrew Smock: I've articulated that it's in a similar field, but it also, you know, in terms of the confidence.

Nicholas Stewart Green: So we can be having negotiations going on for six or seven months before it, or even longer in some cases, before it actually appears in the booking. So it doesn't have to be in bookings. It doesn't even have to be in backlogs for us to be having a view of what's coming in on the go.

Maxwell Andrew Smock: There are a lot of things that create confidence, so we can be having negotiations going on for

Maxwell Andrew Smock: 6 or 7 months before it, or even longer in some cases, before it actually appears.

Nicholas Green: So it doesn't have to be in bookings; it doesn't even have to be in backlogs for us to be having a view of what's coming in on the go, get as it were.

Maxwell Andrew Smock: in a booking, so it doesn't have to be in bookings, it doesn't even have to be in backlogs for us to be having a view of what's coming in on the go-get as it were.

Daniel Hart: Okay, it makes sense. On margins, you talked a lot about rebuilding margins and just thinking about the incremental drop through to maybe give us a sense for like some sort of target for adjusted EBITDA this year. Is it reasonable just to take the margins in 4Q as a baseline and then think about, you know, I think in the past, we've talked about a 40 to 60% incremental drop-through on revenue. Is that a reasonable way to think about margins here in fiscal 2025? I think it's a start, Max. Clearly, we'll still have some full-year items coming through our cost, you know, such as depreciation.

Maxwell Andrew Smock: Okay, makes sense. On margins, you talked a lot about rebuilding margins and just thinking about the incremental drop through to maybe give us a sense for some sort of target for adjusted EBITDA this year. Is it reasonable just to take the margins and 4Q as a baseline and then think about, you know, I think in the past we've talked about a 40 to 60% incremental drop in revenue. Is that a reasonable way to think about margins here in fiscal 2025?

Speaker Change: Okay, makes sense. On margins, you talked a lot about rebuilding margins and just thinking about the incremental drop-through to maybe give us a sense for like

Speaker Change: some sort of target for adjusted EBITDA this year. Is it reasonable just to take the margins in 4Q as a baseline and then think about, you know, I think in the past we've talked about a 40 to 60 percent incremental drop through on revenue. Is that a reasonable way to think about margins here in fiscal 2025?

Nicholas Stewart Green: I think it's a start, max. Clearly, we'll still have some full-year items coming through our costs, such as depreciation. Depreciation is probably going to go up somewhere around 40-45% over fiscal 24. So that's going to eat away at some of the margin, though it's not a cash component of the margin. So, you know, I still like the 40-60% fall through, but I think, you know, we've just kind of surpassed, as you saw from Q3 to Q4, and if we maintain those levels, I would imagine the margin will be plus or minus where we ended in the fourth quarter. But, you know, as we continue to grow that top line, we'll start to see more of that margin fall through.

Maxwell Andrew Smock: I think it's a start max.

Speaker Change: Clearly, we'll still have some full year items coming through our costs, you know, such as depreciation, you know, depreciation is probably going to go up somewhere around 40-45% over fiscal 24, so that's going to eat away at some of the margin, though it's not a cash component of the margin.

Daniel Hart: You know, depreciation is probably going to go up somewhere around 40, 45% over fiscal 24. So that's going to, that's going to eat away at some of the margins, though it's not a cash component of the margins. So, you know, I still like the 40 to 60% fall through, but I think, you know, we've just kind of surpassed, as you saw from Q3 to Q4. You know, if we maintain those levels, I would imagine the margin will be plus or minus where we ended in the fourth quarter. But, you know, as we continue to grow that top line, we'll start to see more of that margin fall through.

Speaker Change: You know, I still like the 40 to 60% fall through, but I think, you know, we've just kind of surpassed, as you saw from Q3 to Q4, you know, if we maintain those levels, I would imagine the margin will be plus or minus

Speaker Change: where we ended in the fourth quarter. But as we continue to grow that top line, then we'll start to see more of that margin fall through.

Maxwell Andrew Smock: Sorry, again, just to confirm, when you're saying you'd expect to see margins kind of in line with the fourth quarter, are you saying that if revenue comes through like you expect this year, on a total basis for the year, like 9% adjusted, you'd let the margin be posted in the fourth quarter, that's a reasonable target for fiscal 2025?

Daniel Hart: Sorry, Dan, just to confirm, when you're saying you'd expect to see margins kind of in line with the fourth quarter, are you saying that if revenue comes through, like, you expect this year on a total basis for the year, like, 9% adjusted you like the margin like you posted in the fourth quarter, that's a reasonable target for fiscal 2025.

Speaker Change: Sorry, again, just to confirm, when you're saying you'd expect to see margins kind of in line with the fourth quarter, are you saying that if revenue comes through like you expect this year, on a total basis for the year, like 9% adjusted, you bet the margin might be posted in the fourth quarter, that's a reasonable target for fiscal 2025?

Nicholas Stewart Green: Let's talk in gross margins. Not necessarily in line, but it'll be plus and minus, kind of where we ended in the fourth quarter. And we typically don't guide to even a margin.

Daniel Hart: Let's talk in gross margins. Not necessarily in line, but it'll be plus and minus kind of where we ended in the fourth quarter. And you know, we typically don't guide to the EBIT of margins. Gotcha.

Speaker Change: Let's talk in gross margins. Not necessarily in line, but it'll be plus and minus kind of where we ended in the fourth quarter.

Speaker Change: And, you know, we typically don't guide to even a margin.

Maxwell Andrew Smock: Gotcha. And then maybe just one question for me on revenue composition. Can you give us an update on Halozyme growth this year and then growth from non-Halozyme customers, and then how you're thinking about growth from each of those two major buckets here moving forward? And also, a reset on how much revenue is coming from Halozyme in total for fiscal 2024 would also be helpful.

Maxwell Smock: And then maybe just last one for me on revenue composition. Can you give us an update on Halo's I'm growth this year and then growth from non Halo's I'm custom urgent and how you're thinking about growth from each of those two major buckets to move forward. And also a reset on how much revenue was coming from Halo's. I'm in total crookfish for 2024 would also be helpful. From my expectation, vast majority of the growth going into physical 25 will come up with sources, as it has done frankly last year. So we've continued to grow and diversify the business, and that continues to drive the growth in the business.

Speaker Change: Gotcha. And then maybe just last one for me on revenue composition.

Speaker Change: Can you give us an update on Halozyme growth this year and then growth from non-Halozyme customers, and then how you're thinking about growth from each of those two major buckets here moving forward? And also a reset on how much revenue is coming from Halozyme in total for fiscal 2024 would also be helpful.

Nicholas Stewart Green: From my expectation, the vast majority of the growth going into Fiscal 2025 will come from profit sources, as it did, frankly, last year. So we've continued to grow and diversify the business, and that continues to drive growth in the business.

Speaker Change: From my expectation, the vast majority of the growth going into Fiscal 2025 will come from profit sources, as it has done, frankly, last year. So we've continued to grow and diversify the business and that continues to drive the growth in the business.

Maxwell Smock: And they said, thanks for taking our questions. Thank you.

Maxwell Andrew Smock: And as I said, thanks for taking our questions.

Nicholas Stewart Green: Thank you. This does include the question and answer session of today's program. I'd like to hand the program back to Nick Green, President and CEO, for any further remarks.

Speaker Change: And as I said, thanks for taking our questions.

Operator: This does include the question and answer session of today's program.

Speaker Change: 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, President and CEO , for any further remarks.

Nicholas Green: I'd like to hand the program back to Nick Green, President's CEO, for any further remarks. Thank you, operator, and thank you to everyone participating on today's call. As we look ahead to fiscal 25, we are encouraged by multiple indicators, including our revenue momentum and backlog. And we believe we are well positioned to generate cash from operations during the year. We thank our customers for their trust and partnership. Our investors for their continued support. And we wish to recognize our exceptional employees who continue to drive our success. I thank you again for participating today and for your continued support of our environmental services.

Nicholas Stewart Green: Thank you, Operator, and thank you to everyone participating on today's call. As we look ahead to Fiscal 2025, we are encouraged by multiple indicators, including our revenue momentum and backlog, and we believe we are well positioned to generate cash from operations during the year.

Nicholas Stewart Green: Thank you, Operator, and thank you to everyone participating on today's call. As we look ahead to Fiscal 25, we are encouraged by multiple indicators, including our revenue momentum and backlog, and we believe we are well positioned to generate cash from operations during the year.

Nicholas Stewart Green: We thank our customers for their trust and partnership, our investors for their continued support, and we wish to recognize our exceptional employees who continue to drive our success. I thank you again for participating today and for your continued support of Avid Bioservices. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. [inaudible]

Nicholas Stewart Green: We thank our customers for their trust and partnership, our investors for their continued support and we wish to recognise our exceptional employees who continue to drive our success.

Nicholas Stewart Green: I thank you again for participating today and for your continued support of Avid Bioservices.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does include the program.

Speaker Change: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Operator: You may now disconnect today. Thank you.

Operator: ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? [inaudible] Thank you for standing by and welcome to the Avid Bioservices fourth quarter fiscal year 2024 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session.

Speaker Change: Thank you for watching!

Operator: Thank you for standing by, and welcome to the Avid Bioservices 4th quarter fiscal year 2024 for an Ansel results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press Star 11 on your telephone. If your question has been answered and you'd like to remove the result from the queue, simply press star 11 again.

Operator: To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Tim Brons, Avid's Investor Relations. Please go ahead, sir.

Speaker Change: Thank you for standing by and welcome to the Avid Bioservices fourth quarter fiscal year 2024 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone.

Tim Brons: As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Tim Brons, Avid's Investor Relations.

Tim Brons: Please go ahead, sir. Thank you.

Tim Brons: 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 Kwietniak, 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 and fiscal year ended April 30th of 2024.

Tim Brons: After our prepared remarks, we will welcome your questions.

Tim Brons: You can find our earnings press release, including relevant non-GAAP reconciliation, on our corporate website at AvidBio.com.

Nicholas Green: With that, I will turn the call over to Nick Green, Avid's President and CEO. Thank you, Tim, and thank you to everyone participating today by our webcast. The fourth quarter of fiscal 2024 was a high point for the company. We generated the highest quarterly revenues in Avid's history, meeting our current revenue expectations for the year. We also signed multiple new project agreements, and we continue to see positive signs in the broader business environment, which bodes well for the business development in the year ahead. In operations, our additional capacity has been put to good use. New projects in all of our facilities are being onboarded, and as a result, our gross margin for quarter four is approximately double that report for quarter three.

Nicholas Green: While rebuilding, our margins will take time. We are pleased to see this movement in the right direction, as new bookings remain strong, and capacity utilization increases.

Nicholas Green: Man and I will provide additional details on business development and operations for the period following an overview of our fourth quarter fiscal year 2024 financial results.

Daniel Hart: And for that, I'll tell the call over to Dan.

Daniel Hart: 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-K, which was filed today with the SEC. I'll now provide an overview of our financial results from operations for the quarter and fiscal year ended April 30th, 2024. Revenues for the fourth quarter of fiscal 2024 were $43 million, representing an 8% increase as compared to revenues of $39.8 million, recorded in the same prior year period. The increase in revenue for the fourth quarter has compared to the same prior year period was primarily due to increases in the mix and scale of manufacturing runs and process development services primarily associated with the onboarding new programs. For the 2024 full fiscal year, revenues were $139.9 million, a decrease of approximately 6% compared to $149.3 million in the same prior year period.

Daniel Hart: The decrease in revenues for the fiscal year ended April 30th, 2024, compared to the same prior year period was primarily attributed to fewer manufacturing runs, a reduction in process development services primarily from early stage programs, and by a reduction of revenue for the changes in estimated variable consideration under contract, where uncertainties have been resolved. Gross profit for the fourth quarter of fiscal 2024 was $5.5 million or 13% gross margin compared to $8.4 million or 21% gross margin in the fourth quarter of fiscal 2023. Gross profit for the 2024 full fiscal year was $7.3 million or 5% gross margin compared to a gross profit of $31.5 million or 21% gross margin for the 2023 full fiscal year.

Daniel Hart: The decrease in gross profit for the fourth quarter of fiscal year ended April 30th, 2024, compared to the same prior year periods, was primarily driven by fewer manufacturing runs, partially offset by increases in the mixing scale of manufacturing runs, a reduction of process development services, and an increase in costs related to expansions of both our company's capacity and technical capabilities. Gross profit during the fiscal year ended April 30th, 2024 was also impacted by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved. A terminated project related to the insolvency of one of our companies' smaller customers in a delay in the ability to recognize revenues of a customer product pending the implementation of a process change.

Daniel Hart: SCNA expenses for the fourth quarter of fiscal 2024 were $6.8 million, a decrease of 10% compared to $7.6 million recorded in the fourth quarter of fiscal 2023. SCNA expenses for the 2024 full fiscal year were $26 million, a decrease of approximately 7% compared to $27.9 million recorded in the same prior year period. The decrease in SCNA for both the fourth quarter and the fiscal year ended April 30th, 2024, compared to the same prior year periods was primarily due to decreases in compensation and benefit related expenses.

Daniel Hart: Facility expenses and consulting of Peace. Income tax expense for the fourth quarter of fiscal 2024 was $117.9 million, an increase of compared to $0.9 million in the fourth quarter of fiscal 2023. Income tax expense for the 2024 full fiscal year was $113.8 million, an increase compared to $1.3 million for the prior year period. During the fourth quarter of fiscal 2024, we recorded a valuation allowance of $118.5 million against our deferred tax assets. We recognize the deferred tax assets to the extent that we believe these assets are more likely than not to be realized. On a periodic basis, management assesses the available positive and negative evidence to estimate whether sufficient future income will be generated to permit use of the existing deferred tax assets.

Daniel Hart: In making such a determination, we consider all available positive and negative evidence. A significant piece of the objective negative evidence evaluated was the net loss in fiscal 2024, resulting in a net cumulative loss incurred over the three-year fiscal period ended April 30th, 2024. A significant contributor to the loss has been the cost associated with our strategy to expand our available capacity and add technical capabilities over this three-year period, which included an increase in incremental costs associated with increased labor, facility costs, and depreciation, accumulating into a net loss in fiscal 2024. On the basis of this evaluation, as of April 30th, 2024, an evaluation allowance of $118.5 million has been recorded to recognize the portion of the deferred tax asset that is more likely than not to be realized.

Daniel Hart: The amount of the deferred tax asset considered realizable, however, could be adjusted in the future quarters if objective positive evidence in the form of cumulative income and additional weight is given to subjective evidence such as our projections for growth. During the fourth quarter of fiscal 2024, the company's net loss was $123.1 million, or $1.94 for basic and diluted share. Compared to a net loss of $0.3 million or $1 per basic and diluted share for the fourth quarter of fiscal 2023. For the 2024 full fiscal year, the company recorded a net loss of $140.8 million, or $2.23 per basic and diluted share, as compared to the net income of approximately $0.3 million, or $0.0 per basic and diluted share during the same prior year period.

Daniel Hart: Excluding the income tax provision recorded due to our evaluation allowance of $118.5 million recorded during the fourth quarter of fiscal 2024, the company's adjusted net loss was approximately $4.6 million or $0.7 per basic and diluted share for the quarter, and the adjusted net loss of $22.3 million or $0.35 per basic and diluted share for the full fiscal year 2024.

Daniel Hart: Our cash and cash equivalents on April 30, 2024 were $38.1 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million or $0.3 million $38.5 million on April 30, 2023.

Daniel Hart: This concludes my financial overview.

Matthew Kwietniak: I'll now turn the call over to Matt for an update on commercial activities during the quarter in year. Thanks, Dan. During the fourth quarter, the company signed multiple new projects spanning a wide range of capabilities, capping all these successful year for our commercial team. With new project agreements of $30 million during the period, we entered the quarter and fiscal year with a strong backlog of $193 million. For the fiscal year 2024, we not only added a significant number of new projects to our production pipeline, but we added multiple new customers as well. This includes the addition of another big pharma customer during the year.

Matthew Kwietniak: With respect to building average visibility and positive reputation in the industry, we recently chose ECOVOTUS, one of the most trusted providers of business sustainability ratings, to assist the company and not only evaluating our supply chain, but also ourselves. The ECOVOTUS assessment evaluates 21 sustainability criteria across four core themes. Environment, labor and human rights, ethics and sustainable procurement, and more than 125,000 companies globally have been rated by ECOVOTUS. The core themes are not only important to AVID, but also our employees as well as other stakeholders, including investors and customers. The company was delighted to have earned a score of 56 from ECOVOTUS, placing the company in the 62nd percentile globally, which recognizes the culture and values of the business.

Matthew Kwietniak: Equally important, this exercise has enabled the business to identify areas of improvement, and we look forward to continuing AVID's journey of continuing to make our impact on those with whom we interact a more and more positive one.

Matthew Kwietniak: In conclusion, despite facing some challenging headwinds in the market during the year, our team continued to perform and deliver. Today, AVID has the largest and most diverse customer base at any point in its history. Our production pipeline is the largest and most valuable ever, and our backlog remains strong going into the year ahead. We are pleased with the performance of our commercial team in fiscal 2024, and look forward to the new opportunities we anticipate in fiscal 2025.

Matthew Kwietniak: This concludes my overview of commercial activities.

Nicholas Green: I will now turn the call back over to Nick for an update on operations and other achievements during the quarter and year. Thanks, Matt. Fiscal 2024 was a challenging but validating year for AVID. There's no doubt that the status of the financial market took back to the results, and most notably the first half. There is also no doubt that we recovered extremely well during the balance of the year, achieving an upward trend with higher revenues during the second half, ending with quarter-four revenues of $43 million, the highest in the company's history. Given this momentum, combined with our strong backlog, we are looking ahead to promising 2025 and providing 2025 full fiscal year revenue guidance of between $160 million and $168 million, representing a 17% growth year over year at the midpoint.

Nicholas Green: Supporting our optimism is the growing interest we've seen in our newly completed facilities and expanded capabilities. In late fiscal 2023, we unveiled our completed mammalian cell facilities expansion, and during fiscal 2024, the company completed and launched its new cell and gene therapy manufacturing facility. With a completion of this three-year construction program, as well as the associated capital expense, the company has dramatically expanded its capacity and technical capabilities, and increased the company's annual revenue-generating capacity from approximately $120 million annually in fiscal 2021 to more than $400 million today. The enhancements and expansion not only allow our VIT to better serve its new and existing biotech customers, but importantly enable the company to address the needs of large farmers as well.

Nicholas Green: The expanded addressable markets and improvements in the broader business environment have resulted in an increase in the larger and later-stage programs in our production pipeline. With respect to capacity, our utilisation is expected to increase as we onboard and execute new programs in both the mammalian and CGT facilities. As we've discussed in prior quarters, this expected increase in utilisation should improve our margins, and we are pleased to see an approximate doubling of our gross margin in quarter four as compared to quarter three of this year. We expect the capacity utilisation will further increase in connection with the series of ongoing PPQ campaigns for several of our late phase customers.

Nicholas Green: And while the execution of a PPQ campaign is only the beginning of a one-to-two-year journey toward commercial approval and subsequent manufacture, we are pleased to be partner in so many of these phase programs, which we anticipate will contribute to the future stability and growth of the business.

Nicholas Green: In closing, I wish to highlight the company's resilience and execution in the face of a difficult market environment. We end the year in a position of strength with positive revenue momentum building, particularly in the second half of fiscal 2024. Continued new business wins and line of sight to margin expansion. We recorded our highest ever quarterly revenue of $43 million in quarter four, logged our highest record backlog of 206 million in quarter three, and ended the year with double our gross margin in Q4 as compared to Q3 of the year. We are encouraged by the improving financial market for biotech companies, along with a continued trend of ensuring of drug manufacturing back to the US.

Operator: This concludes my prepared remarks for today, and we can now open the call for questions.

Sean Dodge: Operator? Certainly, one moment for our first question. And our first question for today comes from the line of Sean Dodge from RBC Capital. Your question, please. Yeah, thanks. Good afternoon.

Nicholas Green: Maybe just starting with the fiscal 25 revenue guidance, with all the shifts in makes of late stages, early stages you've been signed, can you give us a sense of high-level proportion of that 168 million is expected to come from your existing backlog and maybe how that compares to previous years with some of your comments around growing interest in your new capacity. It sounds like a lot more that guidance is kind of dependent on stuff that you intend on signing in the years. Is that true, or do you have kind of similar coverage ratios that 150 you don't want to see if that you had before?

Nicholas Green: I don't have the number of the top of my head, Sean, but I would say that it's not markedly different. I think, you know, the confidence that we've had over the forecasting for the last four years. Obviously, the first two quarters last year were a bit down on that, but apart from that, I think it's come out pretty much where we expected, and I think that's probably a reasonable measure of the amount booked versus to get or go get that we saw in those periods as well.

Nicholas Green: Okay. And then just around the book, until you mentioned growing interest, you've been seen in the newly completed capacity. It's really more color you can give on that, and then maybe any timelines on when you think that interest will begin to convert into signing new business. I mean, it's converting already. I mean, we've completed, during the final stages of completing the second PPQ campaign in the new facility, which is incredible when you think that we've only been open just for a year or just over a year. So we've done numerous batches in there, but as you know, the time between doing a PPQ campaign and ultimately getting the commercial volume, obviously, you've got to complete the campaign.

Nicholas Green: You've got to; that data's then got to be taken by the client, converted into a filing with the FDA approval, and hopefully that ends up with a commercial product, and then you start commercial revenues on there. So if I had a way of speeding that process up, I'd be a very wealthy man. But the fact that we've already completed two, we've got a range of those that we're continuing to do going forward, it bodes really well for fulfilling that capacity.

Nicholas Green: Okay. Increasing capacity utilization, certainly helping with margins. Aside from that, is there anything else you can do or are doing at this point to help with a margin recovery? I think it is generally, frankly, the utilization of the capacity as we obviously see. I think at the midpoint we highlighted guidance is 17% growth. That increased utilization, that facility will certainly improve the margins as long as we execute efficiently. I think, in light of filling the facility, I don't think it's a cost-coding exercise to try to improve margin in the short term, which is the right strategy.

Nicholas Green: Obviously, we're always cost-conscious, but we're trying to facilitate growth. I would say the vast majority of the margin impact will come out of improved utilization and some efficiency in the way that we do things, but not necessarily cost-coding to try to get to margins for the sake of margins, as it were.

Sean Dodge: Great. Thank you.

Jacob Johnson: Thank you, Sean. Thank you. Our next question comes from the line of Jacob Johnson from Stevens. Your question, please. Hey, good afternoon, everybody. Maybe Nick just going back to bookings again, I think 30 million in the quarters, maybe a little bit lighter than we would have expected, but this is maybe a couple months old, and obviously a lot of things going on in the end markets this year that you play in. I'm just curious; are there any other metrics or any other maybe anecdotes you could share just on what you're seeing on the business development side?

Nicholas Green: You mentioned you're seeing some things in the market that boded well for future business development, so is there anything else you can flash out there for us? Yeah, I mean, I think we've said this on numerous occasions, Jacob, which is quarter by quarter, bookings can be fairly erratic. I've always been a proponent of the long-term trend. I think we saw good growth in our backlog last year, and I anticipate seeing that going forward into the future year, or into this current year, shall I say. Certainly in terms, I think might alluded to it in terms of the pipeline behind the backlog. We see positive dynamics in that area, customer interest, the amount of onshoring. We certainly see anything in the financial markets for biotech.

Nicholas Green: So, you know, being very frank, if I go back over the last couple of years, you know, last year I was starting here looking at finishing a really good year and looking at a tough year ahead of us, which took the shine off fiscal 23. As we sit here today, you know, there's no question about it. Fiscal 24 was a tough year, but sat here with much more optimism looking forward into almost every aspect of the market and the dynamics there.

Nicholas Green: And obviously, you know, it always takes time in the farmer industry, so it's a convert conversations to orders, but from what we can see at this moment in time, we're feeling pretty good about fiscal 25 and also what that could mean for 26 and forward. That's helpful. And maybe sitting with business development, I think Matt mentioned you picked up another large farmer customer in FY24. Can you just update us on how that large farmer strategy is going? Yeah, again, I think Matt mentioned it. I've mentioned it before. It's a slow process, obviously, to get into big farmer.

Nicholas Green: They're looking at key suppliers, people they can trust. Obviously, first and foremost, they don't just throw anybody on there. So it's normally a matter of displacing somebody else, unless there's a specific need. So you could be doing all the right things and still not jumping on that list. But all the indicators, all the interaction, the number of customer visits, it's quality or it's interactions and proposals that were being asked to look at and things like that have been very strong and very positive. And you know, we keep picking them up. It may only be in singles at the moment, but I feel that that's a part of the marketplace that we're exposing that we haven't been able to capitalize on in the past, that we will be capitalizing on in the future.

Nicholas Green: So feeling feeling good about where that's going. As well as the biotech sector. So it's not one or the other. It's both.

Operator: I'll leave it there. They say the question's next. Thank you.

Paul Knight: And our next question comes from the line of Paul Knight from Keyback. Your question, please. Hi Nick.

Nicholas Green: What's the capacity of the CGT portion of the business and how is inquiry or business activity there developing? Yeah, so the capacity of that's about 80 million of the 400 or so that we've got. You know, in terms of interest and activity in that area, I think it continues to be where we've seen it in the past. It's lagging the mammalian by a few months, probably a quarter, maybe a quarter and a half, but certainly picking up. I think we've seen some very encouraging signs in the last quarter in terms of interactions with clients, customer visits.

Nicholas Green: And so again, it's I would the best way I could categorize it is about four or five months behind the mammalian side, but picking up nicely, which, you know, we started to see that pickup in I would say November, December last year in the mammalian side. And that's continued all the way through, so kind of back in the sort of January, February, sort of the where we were then. And I think you started to hear some optimism in my tone and my comments around that time in the mammalian side.

Nicholas Green: And then process development was what in the quarter and what year read from that process development number? Yeah, I mean, PD, I do see the activity on a day-to-day basis. The revenues don't always reflect the activity, but I can see what's going through there. It can vary quite enormously depending on the type of project that's coming in. You know, some lay face programs lead need very little because they've already been well developed where they were before and therefore don't really need a lot of PD activity. In other cases, they're not so well developed and we have to do a lot of polishing to get them up to speed and ready for PPQ.

Nicholas Green: So it can fluctuate, but just looking at what I've seen in the PD area and the level of activity we're seeing, that's looking very positive at the moment.

Nicholas Green: And I think we'll see, or I expect to see, a jump in that throughout this year, which again, it's very project dependent.

Nicholas Green: We hear that the CDMO capacity is still fairly tight, so what do you feel about that dynamic in the industry, or is it really your customers' need capital? I think there's obviously one thing between customers getting funded, but then there's also them spending that funding. So if you've been short of money for quite a while, I don't think you need to, just because you get some, you don't immediately rush out and spend it all. But I think that, you know, capacity and certainly in, I would say the sort of what I would call a high-quality, late-phase commercial grade CDMO capacity is in relatively short supply, shall I say.

Nicholas Green: I would say that the market is again picking up, but it's a speed at which these transactions go. We see more and more conversations around ensuring, but again, you know, we've all heard it by a secure and drivers like that, but that doesn't, I don't expect to see that turning up in backlog, probably until the second or third quarter this year, and that's not to say that none of it would turn up in there, but hopefully meaningful amounts would take a little bit longer to come through.

Matthew Hewitt: Okay. Thank you, and our next question comes from the line of Matthew from Quick Halum. Your question, please. Good afternoon. Thank you for taking the questions.

Matthew Hewitt: Maybe first up, continuing on the business development front, could you talk a little bit about the cadence of inbound calls and the conversations you're having since, you know, from Q3, fiscal Q3, in the Q4, you know, even to current day? Have you seen an increase, you know, is that because of the Ensuring and the Biosecure Act, or is it tied more to just the better sensor on the funding environment? Any additional metrics that you could provide there would be helpful. Yes. Thanks for the question. It is definitely up for sure. I think we are seeing a more positive outlook in terms of our customers, and that obviously is leading to more positive conversations.

Matthew Hewitt: We don't give actual metrics on our pipeline behind the backlog, but I can say that that is continuing to grow. The source of those is varied. I would say not all clients are telling you straight off the bat that they're transferring from offshore to onshore, but obviously, as you get deeper and deeper into the conversation, that becomes more and more apparent. So what we see isn't always a perfect mirror into what's actually happening, but there is increasing amounts of onshoring, I think, introducing amounts of early phase programs, being coming out there in terms of opportunities from biotech, obviously we already just talked about signing into the big farmers.

Matthew Hewitt: I would have to say that outside inflation reduction and interest rates coming down, pretty much all the indicators for the vast majority of this calendar year, I think, have been generally positive. I think you see that in our guidance for next year and in our general optimism, I think for the future, as we said today.

Matthew Hewitt: Got it.

Matthew Hewitt: And then maybe once a separate comment or a question regarding gross margins, with some of the increased opportunities in the later stage, I would think that those contracts tend to be larger runs and should help boost or help the gross margins rebound maybe a little bit quicker on similar size type revenues. Is that a fair assessment, or is there something else that would cause kind of a more gradual rebound in the gross margins? Thank you. Thanks for the question, Matt. Yeah, I mean, typically they are larger runs because there's more effort going into those runs, which do command a slightly higher margin. But I think on a blended basis, margins will be fairly similar as far as the run of margins and how those margins come through as an incremental with the revenue load.

Matthew Hewitt: And as you can see for the fourth quarter, with the approximately 27% increase in revenues from the third quarter, that we nearly doubled our gross margins. So that proves that it proves the model in providing incremental margin as we increase the top line, which I think that's the metric that we had looked at going forward.

Matthew Hewitt: Got it. Thank you. Thanks.

Maxwell Smock: Thank you, and our next question comes from the line of Max from William Blair. Your question, please. Hey, good afternoon, guys. Thanks for taking our questions.

Nicholas Green: Maybe just following up on Sean's question and trying to get at it a different way here. So backlog was essentially flat year over year, but your guide for 25 calling for about 17% revenue growth at the midpoint. Can you just help us bridge the gap between those two data points, especially in light of your comment earlier about not needing to go out and win more work this year than you would in a typical year. And maybe it would be helpful just to hear what you think you have to hit in terms of growth and networking this year to support your top line outlook for fiscal 2025.

Nicholas Green: Yeah, so I mean, I think one of the things that we've suffered from in prior periods, Max, has been obviously an expanding backlog in terms of the period of time to recognize revenue. But, as I've kind of alluded to in the past, is that if a PPQ campaign, for argument, say, takes 15 months and you booked all PPQ campaigns, once you hit 15 months, it no longer expands any further. So you can only go so far. So as you start to introduce earlier phase business or even maintain the mix, then you get more drop-through from your revenue from your backlog into your revenue.

Nicholas Green: So I think that largely explains the dynamic that you see there. And then, obviously, in terms of the forecast going forward, I mean, I don't actually comment on the amount book versus to go get. I've articulated that it's in a similar field, but it also, you know, in terms of the confidence, there are a lot of things that create confidence. So we can be having negotiations going on for six or seven months before it, or even longer in some cases, before it actually appears in a booking. So it doesn't have to be in bookings. It doesn't even have to be in backlogs for us to be having a view of what's coming in on the go, get as it were.

Nicholas Green: Okay, make sense.

Daniel Hart: On margins, you talked a lot about rebuilding margins and just thinking about the incremental drop through to maybe give us a sense. for some sort of target for adjusted EBITDA this year. Is it reasonable just to take the margins in 4Q as a baseline and then think about, you know, I think in the past, we've talked about a 40 to 60 percent income and it'll drop through on revenue. Is that a reasonable way to think about margins here in fiscal 2025? I think it's a start, Max. Clearly, we'll still have some full-year items coming through our costs, you know, such as depreciation.

Daniel Hart: You know, depreciation is going to go up somewhere around 40, 45 percent over fiscal 24. So that's going to eat away at some of the margin, though it's not a cash component of the margin. So, you know, I still like the 40 to 60 percent fall through, but I think, you know, we've just kind of surpassed, as you saw from Q3 to Q4. You know, if we maintain those levels, I would imagine the margin will be plus or minus where we needed in the fourth quarter. But, you know, as we continue to grow that top line, then we'll start to see more of that margin fall through.

Daniel Hart: Sorry, again, just to confirm, when you're saying you'd expect to see margins kind of in line with the fourth quarter, are you saying that if revenue comes through, like you expect this year, on a total basis for the year, like 9 percent adjusted to the margin, like you posted in the fourth quarter, and that's a reasonable target for fiscal 2025. Let's talk in gross margins. Okay. Not necessarily in line, but it'll be plus or minus kind of where we ended in the fourth quarter.

Daniel Hart: And, you know, we typically don't guide to the EBITDA margin. Gotcha.

Daniel Hart: And then maybe just the last one for me on revenue composition. Can you give us an update on Halo's I'm growth this year, and then growth from non-Halo's I'm customers, and then how you're thinking about growth from each of those two major buckets to moving forward. And then also a reset on how much revenue is coming from Halo's I'm in total, purpose for 2024 would also be helpful. From my expectation, the vast majority of the growth going into fiscal 2025 will come from other sources, as it has done, frankly, last year. So we've continued to grow and diversify the business, and that continues to drive the growth in the business.

Maxwell Smock: Okay.

Maxwell Smock: So thanks for taking our questions. Thank you.

Operator: This does include the question and answer session of today's program.

Nicholas Green: We thank our customers for their trust and partnership, our investors for their continued support, and we wish to recognize our exceptional employees who continue to drive our success. I thank you again for participating today, and for your continued support of having bioservices.

Operator: Thank you, ladies and gentlemen, for your participation at today's conference. This does include the program.

Operator: You may now disconnect. Good day.

Q4 2024 Avid Bioservices Inc Earnings Call

Request a DemoDemo

CDMO

Avid Bioservices

Earnings