Good day, ladies and gentlemen, and welcome to the Avid Bioservices Q2 fiscal 2023 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call may be recorded. I would now like to hand the conference over to Tim Brons of Avid's Investor Relations Group. Please go ahead. 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 business, including updates on corporate activities and financial results for the quarter ended October 31st, 2022. After our prepared remarks, we will welcome questions. Before we begin, I'd like to caution that comments made during this conference call today, December 6, 2022, 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 of the company's filings with the Securities and Exchange Commission concerning these and other matters. Our earnings press release and this call will include discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website at avidbio.com. 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. Based on the company's performance during the first six months, we anticipate that fiscal 2023 will be another strong year for Avid. During the Q2, the company recorded record revenues for any Q2 period, reflecting increases in both process development and manufacturing work. On the new business front, we signed multiple new customer agreements with both existing and new customers, contributing to our strong backlog. With respect to the company's facilities, we continue to make progress with our expansions and at the same time successfully concluding both our Franklin and Myford annual shutdowns. We remain on track to have the Myford expansion complete by the end of quarter one calendar 2023. We also expect the new cell and gene therapy facility to come online mid-calendar 2023. Finally, to manage our growing business and capabilities, during the period, we added significant talent across a broad range of functions, along with some notable additions to the senior management team in operations, process development, and human resources. Matt and I will provide additional details on business developments and operations for the period following an overview of our Q2 and first 6 months of fiscal 2023 financial results. For that, I'll turn 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, additional details on our financial results are included in our press release issued prior to this call and in our Form 10-Q, which was filed today with the SEC. I'll now provide an overview of our financial results from operations for the quarter and first six months ended October 31st, 2022. Revenues for the Q2 of fiscal 2023 were $34.8 million, representing a 33% increase compared to $26.1 million recorded in the prior year period. For the first six months of fiscal 2023, revenues were $71.4 million, a 26% increase compared to $56.9 million in the prior year period. For both the quarter and the year-to-date periods, the increase in revenues can primarily be attributed to increases in process development and manufacturing revenues as compared to the prior year periods. Notably, our Q2 process development revenues were at an all-time high, representing a year-over-year increase of 74%. Gross margin for the Q2 of fiscal 23 was 12%, compared to a gross margin of 35% for the Q2 of fiscal 22. Gross margin for the first six months of fiscal 23 was 19%, compared to a gross margin of 36% for the same period during fiscal 22. For both the quarter and six-month periods, the decreases in gross margins were primarily due to increases in costs associated with our growth of our business and our facility expansions. The primary drivers of these costs were increases in labor, overhead, and depreciation, which accounted for incremental decreases in margins of approximately 11% and 9% for the quarter and six-month periods, respectively, split roughly 50/50 between our mammalian and cell and gene therapy operations. It is also important to note that the prior year's gross margins included benefits from unutilized capacity. Excluding all of these factors, our Q2 and year-to-date gross margins were in line with the same period the prior year. We expect the expansion-related costs incurred to date will continue to affect near-term margins. In the coming quarters, we foresee incrementally incurring additional expansion-related costs in line with anticipated growth. Total SG&A expenses for the Q2 of fiscal 23 were $6.8 million, an increase of 36% compared to $5 million recorded in the Q2 of fiscal 22. SG&A expenses for the first six months of fiscal 23 were $13.2 million, an increase of 39% compared to $9.5 million recorded in the prior year period. The increases in SG&A for both the quarter and year-to-date periods were primarily due to increases in compensation and benefits-related costs, legal, accounting, and other professional fees. For the Q2 of fiscal 23, the company recorded a net loss of $1.2 million or $0.02 per basic and diluted share, as compared to a net income of $3.5 million or $0.06 per basic and diluted share for the Q2 of fiscal 22. For the first six months of fiscal 2023, the company recorded net income of $400,000 or $0.01 per basic and diluted share, as compared to net income of $9.8 million or $0.16 and $0.15 per basic and diluted share, respectively, during the prior year period. For the Q2 and the first six months of fiscal 2023, the company achieved an adjusted EBITDA of $1.9 million and $8.1 million, respectively. Our cash and cash equivalents on October 31, 2022 were $77.3 million compared to $126.2 million on April 30, 2022. This concludes my financial overview. I'll now turn the call over to Matt for an update on commercial activities during the quarter. Thanks, Dan. The Q2 was both busy and productive. We continued to see strong demand in the marketplace for Avid's current offerings, as well as interest in the cell and gene therapy capabilities online and coming online in the near term. Our expanded team continues to build visibility within the industry, regularly interfacing with potential as well as existing customers. We've seen an increase in client interaction through face-to-face meetings, as well as through our increased presence at trade show conferences. As a result, we continue to add to our client base. Our new business pipeline continues to be strong, and our proposal values and other leading indicators continue to develop in a very positive manner. During the Q2, our team signed $26 million in net new project orders, bringing the total new business for the first six months of this fiscal year to $67 million. Our backlog at the end of the quarter was $147 million, representing a 23% increase compared to the backlog of $120 million at the end of the Q2 of fiscal 2022. We expect to recognize the majority of our current backlog over the next 12 months. We are already starting to see the impact of the investments made earlier this year in our commercial team as it relates to the leading indicators we measure internally. We anticipate these opportunities converting into backlog as we bring on our new capacity and capabilities. Looking ahead, we believe that the momentum generated during the first half of this year will continue, and the team is ready to embrace the challenge and looking forward to a successful H2 of the year. This concludes my overview of commercial activities. I will now turn the call back over to Nick for an update on operations and other achievements during the period. Thanks, Matt. I am pleased to report that our team continues to execute according to plan. Our business development team continues to fill our project pipeline on top of a significant year-over-year revenue growth. Our manufacturing team continues to produce and deliver on time while employing the highest quality standards. Our facilities and capabilities expansions remain on track, and we continue to invest in the talent required to ensure success across the business. This consistent execution has strengthened and expanded our customer base and significantly improved the company's financial position as compared to prior years. This is perhaps most evident through our revenue growth. In the first six months of fiscal 2023, our revenues of $71.4 million represent a 26% increase compared to the same prior year period. It is very important to note that this growth is not simply a result of expanding the company's core manufacturing business. During the Q2, we had a particularly strong revenues from process development services. Specifically, revenues from PD during the Q2 of 2023 exceeded PD revenues from the Q1 by 37% and exceeded our prior high PD revenue mark by 23%. This is particularly encouraging as PD is where the majority of new customers and new projects are on board, and it bodes well for the future growth of the business as a whole and validates our decision to invest in further expansions of both capacity and capabilities in this key element of our business. As we look forward to the new calendar year and the new capacity we have coming online, we are excited to report that our recruitment of staff required to operate these facilities is progressing well. Our assets require high-quality, well-trained individuals, and in many cases, these must be brought in and trained ahead of time. As we forecast, these investments have impacted and will continue to impact our margins in the short term. This investment in personnel is essential to meet anticipated customer demand. What is particularly gratifying is, as we have been making these investments, we have seen continued growth and growing interest in Avid's offerings, further validating the decision taken almost two years ago to move ahead with phase two of our expansions. With the expansions progressing to plan and coming online at the end of Q1 2023, we will be in a great position to start to consume this capacity and at this stage, look forward to seeing positive margin development towards our longer-term targets. During the Q2, we continued to make progress with our cell and gene therapy expansion. As we announced during quarter one, we have already launched the analytical and process development capabilities for this business, which has allowed us to escalate our dialogue with prospective new customers. We are pleased to report that our first customer is already onboarding in this facility. With respect to the GMP suites for our cell and gene therapy business, construction continues on schedule, and we expect them to be completed by mid-calendar 2023. Based on discussions with prospective customers, we believe this timing will align well with our customers' needs to advance early projects into GMP suites. Likewise, our mammalian cell business capacity expansion is progressing according to plan. During the Q1, much of the downstream equipment was positioned in the facility and validation of this equipment was initiated. During quarter two, we installed the upstream equipment. As we stand today, the facility is mechanically largely complete and validation well underway as we remain on schedule for release to operations during quarter one, calendar 2023. Finally, expansion of our process development capacity is also well underway. As we announced during quarter one, this PD capacity will provide additional space to onboard future customers, ultimately seeking to utilize the new manufacturing capacity. I am pleased to report that we remain on track to have all the current mammalian expansions complete by the end of quarter one, calendar 2023. During the quarter, we successfully completed both annual shutdowns in Myford and Franklin alike. It is also worthwhile noting that our shutdown this year was extended slightly to accommodate tie-ins of certain services and the new central utilities plant. It is an incredibly busy time at Avid. The company is transforming, expanding and growing. In order to manage this transformation, we recognize the need to bring on expertise and experience to manage and lead our growing workforce. As you have seen during the quarter, we've continued to strengthen our management team. In September, Avid promoted Michael Olson Jr. to the position of Vice President of Operations. Mr. Olson was promoted from Avid's director of project engineering, a role in which he led all of the company's ongoing facility expansions. Mr. Olson has more than 15 years of experience spanning operational and capital management responsibilities, supporting GMP manufacturing, facilities, engineering, and environmental health and safety functions. Oksana Lukash also joined Avid as Vice President, People. Ms. Lukash has more than 20 years of human resource experience with both established and entrepreneurial organizations across a range of industries. Prior to joining Avid, Ms. Lukash served as Vice President, People and Culture at Oncocyte Corporation, a precision diagnostics company. In closing, I wish to again highlight our accomplishments in the first half of fiscal 2023. Our top line revenues remain strong. Our backlog is substantial and has grown 23% year-over-year. Given the demand we continue to see in the market, we expect it to continue to grow. As we approach full utilization of our current capacity and with additional capacity and services soon to come online, we expect this momentum to continue. For all of these reasons, I am pleased to report that Avid is increasing its revenue guidance for the full fiscal year 2023 from between $140 million and $145 million to between $145 million and $150 million. This concludes my prepared remarks for today, and we can now open the call for questions. Operator? Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Sean Dodge with RBC Capital Markets. You may proceed. Yeah, thanks. Good afternoon. Maybe just starting with the macro backdrop, you know, there continues to be a lot of concern around biotech funding, the extent to which that's affecting demand, kind of broadly. Nick, it sounds like client interest continues to be strong, but the $26 million you signed a new business in the quarter is lower than it had been running at. I guess, is there anything notable you can share there around, you know, are you seeing a change in behavior, body language around spending, anything around delays in placing new work, reprioritizations, et cetera? Is this just new business can be lumpy quarter to quarter and this doesn't necessarily represent a trend or a theme? Yeah. Hi, Sean. I think, you know, the latter point is really the overall overarching comment that I would make is that it is about the lumpiness quarter to quarter. We've talked about this before in terms of, you know, sometimes people will sign just before the quarter end, which is always great. Some people will sign just afterwards, which is not so great when it comes to reporting quarterly numbers. If we look at the sort of backdrop behind that, you know, we're very happy with the amount of interest and the demand that's for at least for Avid services that we see in the marketplace. You know, general trends in the marketplace, do we see some of the smaller players who are more cash-strapped than others, maybe doing a little bit more navel gazing and taking a little longer? I think that's probably the case sometimes. It's always difficult to To determine whether that's a macro impact as we only see a relatively small subset of everybody. You know, overall, in general, we wouldn't be raising guidance and if we weren't seeing continued strong demand. I would highlight that, you know, we saw the same thing in the last quarter, the same quarter last year as we did in this one. It was a little lower, but not. It again was no, there was no general inference of the strength of the market as we see. We remain optimistic as far as the interest in Avid. Okay. Great. Then, Dan, just on margins and trajectory over the next several quarters. I guess the question is, are we pretty much at the bottom here? You talked about, you know, Myford Phase Two set to open very soon and the weight that the growth-related investments are adding to margin. As those facilities open and become revenue producing, you know, I guess should the trajectory of margins, the direction of margins from here be upward? Hey, Sean, thanks for the questions. Good question. As far as looking forward, I'm still confident that we will see incremental margins as we start to fill new capacity and start to absorb some of the costs that we brought on. You know, we've invested aggressively through the Q2 in getting the folks in place and some other operational costs for the expansions and the standing up of the cell and gene therapy business. You know, going forward on the cost side, you know, we plan to make some further investments, but we're gonna make that investment in line with the anticipated growth. Essentially, you know, as we start to roll out the new capacity and start to fill that new capacity, we should be able to move towards incremental margins and ultimately get to that margin goal that we've discussed in the past. Okay. great. Thanks, thanks again for taking the questions. Thanks, Sean. Thank you. One moment for questions. Our next question comes from Matthew Hewitt with Craig-Hallum Capital Group. You may proceed. Good afternoon. Thank you for taking the questions and congratulations on the progress on the building out the new capacity. Maybe the first one for me, as you talk to customers. Well, I guess let's back up. You made a comment in response to one of the prior questions about some orders coming in late in the quarter, some coming in right after the quarter's closed. Can you talk about has anything closed already this quarter? Mark, I can't really talk about the next quarter, as we just conclude the prior quarter. Again, I just go back. We've raised guidance. We've obviously brought in the labor ahead of the capacity coming online for a reason. We remain, you know, very optimistic regarding the interest in the business that we see. Again, we see lumpy quarters. We've had them in the past. We have some lumpy good ones, and we have some lumpy not so good ones. It's not a trajectory of the overall business, which I think is pretty clear. Got it. Thank you for that. Maybe one of your peers had talked a little bit about not just kind of delays or dragging of the feet in signing new contracts, but even on the payment side. Now, looking at your DSOs for the quarter, I think I've come up with 54 for the DSO here in Q2. Are you seeing any of that from customers or are, you know, payments coming in as you would anticipate? From our side, Matt, payments continue to come in as we would anticipate. I do see some more conversation than we've had in the past. Yeah, as you can see with the DSO dropping, I think it's approximately 20 days or so from the prior quarter, you know, people are still paying. Fantastic. Then maybe one last one, then I'll hop back in the queue. As far as your conversations with customers, both existing and new customers, as they look at this new capacity and the timelines for those to come on, are you hearing from those prospects, you know, some excitement that, hey, this is gonna work out perfectly with our internal timelines? Is anybody pushing you to maybe try and get something done a little bit faster? I guess, just what are you hearing from your customers? Thank you. Yeah. I mean, I think Matt alluded to that, and I'll let him add to any comments I make if you've got anything further, Matt. I mean, I think we've had some really good response to the, to the facilities. It's just been really quite nice over the last few months, probably the last five months or six months, if not more, to be able to tour people around without having to gown up and go and see every little bit of it and walk them around the flows and the like. I think we've had nothing but good comments, positive comments, and people very happy that this sort of high-quality capacity, alongside Avid's offering is gonna be available shortly. We're delighted to be standing that up in the very near future. I think, you know, timing is pretty close to ideal. I mean, you know, obviously, I think on the first phase expansion that we did last year with DS1, DSP2, our backlog actually hit our capacity in the same quarter we brought it online. We'd love to do that again this next quarter coming up. If we did that, then I don't think we could've timed it any better. Again, my summary would be lots of really good interest and just excited to have it online and then starting to fill it. Then absorb some of those costs that we've invested in ahead of time and see that progression in margin. Matt, anything further on your side? No, I think well said. You know, I think it's accurate. You know, a lot of client interest, in the, in the build-out and the additional space, and a lot of excitement, and positive, really great feedback. We've had a number of clients come out and actually tour the site as was early on in construction and eager to get back and see how the progress is going and get engaged. It shows very well, and there has been a lot of interest, so, remain optimistic for sure. That's great. Thank you very much. Thanks, Matt. Thank you. One moment for questions. Our next question comes from Jacob Johnson with Stephens. You may proceed. Hey, thanks. Good afternoon. As we think about kind of forward-looking KPIs, you know, I think backlog was a bit shy of what many of us expected, but you also had a record quarter in process development. Can you just talk about what that record quarter in process development could mean as we think about looking forward? Just a related question, can you remind us kind of how much process development capacity you have today and maybe where you are in the PD capacity expansion on the biologic side? The PD is in my view, a really encouraging sign. I mean, when somebody transfers a project into the business, typically we'll go in, we'll do some small scale runs in PD. Depending on the client, obviously, we may do some work on their process or if the process is already well developed, we're just basically sort of demonstrating what they've already told us, ready for moving it across into the manufacturing facility. It's really the front end of the business where things are coming in. To see those sort of revenues in there for me is a good indication that people are getting in. Obviously we hope to see those people move from small two-liter scales up to the larger 2,000 ultimately. That to me is a really good indicator for where the business is heading. In terms of the capacity, the $7 million this quarter is actually over capacity. I think we've often talked about, you know, capacity is a little bit of a fungible number because it's not a perfect science. It can vary between certain different activities and whether you're doing campaigns and all that sort of thing. We actually beat our capacity. We would have had our capacity down somewhere around $5 million for the quarter, and we hit seven. That was really sort of a super quarter. In terms of where the capacity is going, 5 million would give us 20 million a year annual. We are doing the expansion that comes on in quarter one as well. That would give us then, effectively 40 million or 10 million a quarter. You know, obviously give or take based on the super performance in the last quarter. Got it. Thanks for that, Nick. Just as a follow-up to maybe put a finer point on the gross margin discussion. You know, I think cost of goods sold up sequentially, you called out a variety of things, but it sounds like a lot of hiring. I don't know if there's a way to quantify kind of the number of people you have and the revenue that would support, but could you just talk about maybe as we think about the journey of staffing up the various capacity expansions, how much you accomplished during this quarter and maybe how much is left to go going forward? Jacob, on the gross margin front, you know, as far as heads, you know, we ended the quarter of approximately 360 folks, which is up significantly over where we were last year. Looking forward as far as how many heads do we need to bring in, you know, that's kind of a function of what the anticipated growth looks like. And as we start to fill and, you know, backfill or add the specific needs that we see in the different groups. Yeah, I think that's essentially kinda where we're at, why we see that, we'll as we start to fill these expansions and start to load some of that additional revenue within that capacity, we'll be able to absorb some of those costs, as we move forward. I think the other, the other part I'd add as well, Jacob, is that you've seen the sort of costs come into the organization in different areas. You know, for example, we started beefing up the commercial organization with additional BD representation. We also increased marketing and increased proposal writers and all those sort of things that are all on the front end with 0 revenue associated with those. The initial BD calls, the marketing stuff, all of that doesn't get any revenue. That certainly hits the margins in the short term. Again, I don't think we need very large numbers of increases in those areas to fill out those facilities, so we don't need to repeat those as we go forward. That sort of goes then also through the organization as you start to bring in project management and things like that have got to onboard these in PD. Ultimately, as we see going forward, and I think this is where you'll see more of the growth as we go forward, is in the more hands-on operational people where they're actually making the batches. What you've seen is the early investment and effectively the hit on margin is by standing up all the things that you need to get the business in. Then as we go forward now, then we'll start to just supply the people, which is kind of the, you know, the variable cost that's associated with the manufacture. Got it. That's helpful context. Thank you, Nick and Dan. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from Paul Knight with KeyBank. You may proceed. Nick, I didn't quite catch the number of process development revenues and how much that number was up in the quarter? process development revenues, I think, is about $7 million, Dan. $7.1 million for the quarter, and it was up 74% year-over-year. Okay. Then is this in cell and gene therapy development or monoclonal or both? It's in both, but primarily in monoclonal. Okay. I guess the question for Matt and then that is, what are customers responding to well? What's giving Avid the maybe edge on some of the larger competitors today? Yeah, I think the available capacity, I think the track record of success, the quality background, I think resonates very, very well. You know, I think our approach to dealing with clients is unique in that we're accommodating and flexible and a good partner to work with. Clients respond well to that. A lot of active engagement for sure. Matt, what's your customer? Is it large biopharma, medium, small? Is there a profile that they like or they fit in your, in your view? At this point, it's all the above, every that you mentioned. You know, we had brought on someone to manage key accounts for us, six months, nine months ago, and we're already seeing an impact there. Always had already previously been engaged with the small and emerging biotechs, and that continues. We're encouraged by the add each quarter of new client base, as well as additional work from existing client base. Okay. Nick, a question for you, and that is, can you talk to... in your opinion, is there stressed type supply in monoclonal manufacturing? Secondly, how is the supply chain for you in getting things brought online and produced? Yeah. I mean, I think, when you know, you've always got to look at the mammalian, capacity in sort of the segments that you operate in. When it comes to sort of commercial grade, high quality, mammalian capacity, we still see plenty of, a shortage of capacity, I would say. We see lots of demand for what we're doing, and I think that's the only explanation you can have really to see the demand that we are doing. In terms of the supply chain itself, again, it's one of those things that just seems to continue to slowly get better. I wouldn't say it's perfect by any stretch of the imagination. You know, we still do scramble for things here and there. We are able to anticipate some customer demands. You know, we do find that customers will come here where there maybe is a shortage in the market, and fortunately, we actually have the various components available, so we can move quickly on that one. It continues to get better, not where it needs to be, and still a little bit variable because it's not always in the same place where you see the shortage, which makes it difficult to manage. Again, quarter-on-quarter better than previous. Okay. Thanks. Thank you. I'm not showing any further questions. I would now like to turn the call back over to Nicholas Green for any closing remarks. Thank you, operator. Thank you to everyone participating on today's call. In closing, I would like to emphasize our excitement as we draw closer to launching our new capacity and capabilities. This could not be possible without the hard work of our many talented employees who drive and take pride in Avid's continued success. Thank you again for participating on today's call and for your continued support of Avid Bioservices. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.