Daniel Hart

Thank you, Nick. Before I begin, in addition to the brief financial overview I’ll provide on the call today, the additional details on our financial results are included in our press release issued on April 24 and in our Form 10-Q, which was also filed on April 24 with the SEC.
Before I begin, I would like to quickly touch upon the new acceleration that Nick mentioned in his opening remarks. First, there was a default stemming from a technical requirement relating to Legend removal that led to the acceleration of our convertible senior notes due 2026. As a result of the note acceleration in March, we conducted and closed an offering of $160 million aggregate principal amount of 7% convertible senior notes due on March first, 2029, we used approximately $146 million of the net proceeds from the offering to repurchase and repay our 2026 notes. As disclosed in our recent filings with the SEC, we undertook an evaluation of our financial statements spending for the period October 31st, 2022 to October 31, 2023, including the 10 K for the year ended April 30th, 2023, the Company's audit committee determined based on management's recommendation that certain recent periods would require restatement to reclassify the 2026 notes from long-term liabilities to current liabilities on our balance sheet and to account for incremental interest associated with our 2026 notes. There were no other material adjustments to our financial statements for each of the restated periods. I'll now provide an overview of our financial results from operations for the quarter and nine months ended January 31st, 2020, for revenues for the third quarter of fiscal '24 were $33.8 million, representing an 11% decrease as compared to revenues of $38 million recorded in the same prior year period. For the first nine months of fiscal 24, revenues were $96.9 million, a decrease of approximately 11% compared to $109.5 million in the same prior year period. The decreases in revenues for the third quarter and nine months ended January 31st, 2024 compared to the same prior year periods were primarily attributed to fewer manufacturing runs and a reduction in process development services from early stage customers. Additionally, during the first nine months, revenues were also impacted by a reduction of revenue for changes in estimated variable consideration under contract where uncertainties have been resolved.
Gross profit for the third quarter of fiscal '24 was $2.4 million, or 7% gross margin, compared to $9.8 million, or 26% gross margin in the third quarter of fiscal '23. Gross profit for the first nine months of fiscal '24 was $1.8 million, or 2% gross margin, compared to a gross profit of $23.1 million, or 21% gross margin for the same period during fiscal '23. Decreases in gross margin for the three and nine months ended January 31, 2024 compared to the same prior year periods, primarily primarily driven by fewer manufacturing runs a reduction in process development services from early-stage customers and an increase in our costs related to expansions for both the company's capacity and technical capabilities.
Gross margin during the nine months ended January 31, 2024 were 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 the companies, smaller customers and a delay in the ability to recognize revenues of a customer product pending the implementation of a process change.
SG&A expenses for the third quarter of fiscal '24 were $6.4 million, a decrease of 10% compared to $7.1 million recorded in the third quarter of fiscal '23. SG&A expenses for the first nine months of fiscal '24 were $19.2 million, a decrease of approximately 6% compared to $20.3 million recorded in the same prior year period. Decreases in SG&A for both the three and nine months ended January 31, 2024 compared to the same prior year periods were primarily due to decreases in compensation and benefit related expenses and consulting fees.
Operating loss for the third quarter of fiscal '24 was $4 million, the decrease compared to operating income of $2.7 million recorded in the third quarter of fiscal 23. Operating loss for the first nine months of fiscal 24 was $17.4 million compared to the operating income of $2.8 million for the first nine months of fiscal 23. The decreases in operating income for the three and nine months ended January 31st, 2024 compared to the same prior year periods were driven by a decrease in gross profit, partially offset by reduced SG&A during the third quarter of fiscal 24 the Company's net loss was $6 million, or $0.09 per basic and diluted share compared to a net loss of $0.2 million or zero per basic and diluted share for the third quarter of fiscal 23. For the first nine months of fiscal 24, the Company recorded a net loss of $17.6 million or $0.28 per basic and diluted share as compared to net income of approximately $0.6 million or $0.01 per basic and diluted share during the same prior year period.
Our cash and cash equivalents on January 31, 2024 were $30.7 million compared to $38.5 million on April 30, 2023. This concludes my financial overview. I will now turn the call over to Matt for an update on commercial activities during the quarter.

Matthew Kwietniak

by Stan, during the third quarter, we were encouraged by the strengthening of our bookings for the period with new project agreements of $41 million during the period. We ended the quarter with a backlog of $206 million, another record high for the Company. The quarter's bookings include new customer projects as well as expansions from existing customers. The resulting backlog, which includes projects spanning a broad range of the company's capabilities represents an increase of 17% as compared to 176 million at the end of the third quarter of fiscal 2023 it is important to highlight the composition of these new bookings. As we reported earlier in the year. During the first and second quarters, Avid's new bookings were comprised primarily of later-stage projects with a notable decline in earlier stage programs. Today, our pipeline remains weighted towards later-stage programs, which generally take longer to execute. And as a result, we expect that recognition of our backlog for these projects will extend beyond one year. Later-stage programs have certain key advantages, including a significantly higher probability of regulatory approval and the recurring and ramping commercial revenues associated with such approvals. These later-stage programs are exactly the type of projects that Avid was targeting in initiating its expansion strategy. We believe they will be important contributors to filling our new capacity, not only as a result of the larger project values, but also in terms of the longer term and growing demand associated with the commercial supply. So they gain regulatory approval having said that, we were also pleased to see an incremental improvement in our pipeline mix during the third quarter marked by an increase in the value of early-stage project bookings. Early stage programs, many of which have been postponed industry-wide due to the challenging financing environment, which prevailed for much of calendar 2023, provide their own set of advantages, including balance to our pipeline, broader capacity usage and shorter term revenue generation. While our pipeline remains weighted towards later-stage work, we are encouraged by the levels of engagement we are now seeing with early-stage customers about their programs and hope we are observing an improvement in the financing environment for the biotech sector as a whole.
During the third quarter, we continued to make progress which with each of our active programs successfully translating backlog into revenue.
Looking ahead, we see a healthy pipeline of opportunity in the market and we continue to pursue these programs aggressively through consistent engagement with both existing and prospective customers and elevating Avid's brand recognition in the industry. We are very pleased with our progress during the period and remain on track to have an even stronger fourth quarter.
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.

Nicholas Green

Thanks, Matt. We are pleased to report that during the third quarter, we achieved significantly stronger revenues and an increase in bookings as compared to Q2 2024. This momentum is in keeping with the revenue and bookings ramp that we projected in the second half of the second half of the year. As we look ahead, we believe the fourth quarter revenues will be even stronger, making our second half 2020 for revenues, one of the best in the Company's history with the opening of our cell and gene therapy facility located just five miles from Avid's mammalian operations. We have not only upgraded our capabilities but expanded the breadth of our offerings. We can now service a larger market that includes CGT. products, and we are better positioned to address the needs of large pharma customers. Of note, the PPQ campaign we delayed until after our Q2 late Q2 maintenance shutdown has now been successfully completed. This is the first of a number of PPQ campaigns slated for our new Romanian line Myford South, also known as line three in coming quarters. These expanded capabilities are already paying dividends successfully attracting the larger and later-stage clients that we have discussed. And while our investment has impacted our current margins, we expect the growing utilization of our new capacity and capabilities will strengthen margins in the near term, establishing a new baseline for growth in the years ahead.
In closing, I would like to acknowledge Avid's many successes during his 30-year history, achieving an industry leader, leading regulatory track record and delivering more than 220 commercial batches to its customers. There are few CDMOs in our peer space who can claim such achievements. However, it has been our goal to elevate the organization beyond the size and capabilities of the past. To that end, we have worked diligently over the past three years to bring Avid into the future with significantly expanded opportunity. And today, we are delighted to see our strategic plan come to fruition over the past three years. The Company has remained steadfast in its commitment to transformation that is now complete today. The business is a larger, more capable world-class organization poised to service multiple CDMO markets, including our largest segment of the pharma market than at any time in the Company's past. The late-stage programs in our pipeline are making great progress. One of these high-value programs has already achieved FDA approval and then others continue to advance through the approval process when we combine the state-of-the-art facilities and expanded technical capabilities with the value of our late-stage pipeline and the strength of our commercial team, we believe we are well positioned to realize the strategic objectives of our expansion plan as we continue to fill capacity and attract additional customers. We expect to achieve consistent growth and sustainable profitability and believe we are well on our way to establishing Avid as a supplier of choice for the industry has come close.
My prepared remarks for today and we can now open the call to the operator for questions. Operator?

Question and Answer Session

Operator

Jacob Johnson, Stephens.

Jacob Johnson

Hey, thanks. Good afternoon, everybody. Nick so a lot of positive commentary around the funding backdrop and I guess the end markets in general, I guess I'd be curious about some of the other unique dynamics that are going on in the end markets right now, most notably bias here and then the Novo catalyst deal. I'm just curious, are you seeing additional opportunities present themselves that after those events which I think largely happened.
Bakker, you concluded the quarter you just reported and yes, you're right.

Nicholas Green

It's a it's an interesting one. We don't always at the beginning of the conversation necessarily understand exactly where the opportunities coming from, as you mentioned, two to, I guess, tailwinds in terms of potential tailwinds in terms of our sector. So a client comes to us with a new opportunity. It is not always obvious that we whether it's something to do with bio secure or whether it has to do with with Scotland. But I think it's fair to say that there seems to be some correlation between those events and the number of opportunities that we're seeing materialize at the early stage of discussions is the beginning of this year and obviously, the turnaround cycle of those instantaneous, we're not widgets that we sell. So it's there's an ongoing discussion regarding those. Obviously, that's putting work statements together and converting those to revenues. But am I think it's fair to say that with the dynamics that we see, we look forward with some optimism? And I think aside maybe from the inflation number that we saw a couple of weeks ago, most of the data we've seen out of the marketplace generally from November onwards, it has been positive.

Jacob Johnson

Can I ask RadNet and then maybe for Dan, you guys reiterated your FY 24 guidance. I think I heard Matt and Nick both talked about strong 4Q, just given where we are in the quarter. And for those of us who have models, do you want to give us any more specific detail on kind of how the quarters playing out relative to the guidance you have maybe that give you the opportunity?

Nicholas Green

Yes, Jack, I'll take that one. I mean the we have the guidance of the range that we did because that's what we've done in our prior press release to be frank with you. So we wanted to be consistent with what we've pre-released. I think again, with consensus out there, we're comfortable with that. And then we were kind of just I think restating where we were restating what you guys have been saying. So I wouldn't necessarily change it any differently than than where we were last quarter. And we still expect to come in in that range. And I think the consensus that we see out there looks looks in line with expectations. So hopefully we can now we can meet. Those will be those. But that's certainly where we look. We're looking at this stage.
I have to check.

Jacob Johnson

I'll leave it there if there are any questions, just thank you.

Operator

Sean Dodge, RBC Capital Markets.

Nicholas Green

Yes, thanks, Al.

Sean Dodge

Maybe just follow on just Ken Jacobs line of questioning there and more specifically on the bookings, you had $41 million in new business you signed last quarter. We're a day away from wrapping this quarter of I guess when it comes to bookings, can you give us some sense of how those have trended here? Recently you made some direction on how to think about where that will land this quarter?

Nicholas Green

Yes, I can go on the quarter for sure is the Q3 call, I know albeit late. But again, I think we've kind of highlighted core Q4 revenues being a meeting, consensus will be a really a nice uplift on Q3, which was a good lift from Q4.
And in terms of revenues, in terms of bookings of the 41 million was and we were pleased with that. And I think as we go and record backlog and as we go forward, I think my comments on the market would suggest that we are we're optimistic about those continuing to grow. But I would also just highlight that, you know, with the size of orders that we are that we book and the timings between one quarter and the other is not always a smooth ride so far, and I am optimistic about continuing to see growing bookings and revenues. But I also expect to see some ups and downs along the way as we go forward. And again, I can't comment on Q4. I know we're very close to the end of that, but this is a Q3 call, so a little awkward is it does it may be I still have to respect the quarter.

Sean Dodge

Okay.
And if we think about the Q3 results of $41 million, are there anything notable or worth calling out there? Or were there any wins that shifted or slipped out of the quarter into the current one and were there any meaningful cancellations, anything that would affect how we should think about trends or comparability there?

Nicholas Green

Yes. I mean, again, we're looking at we're looking back now to the end of January. So you know, I was quite pleased with that considering where we were facing at the beginning of the quarter in November. So I thought that number was good in itself and obviously, we'll always take higher. But I think the other thing that we saw was early phase opportunities increasing, which we hadn't seen. So you know, we had zero in Q1 we had an increase in Q2. We had an increase again in Q3, which was kind of the sort of precursor to the to the slump that we saw going back to this time last year as it were or just let it just slightly after. And so that was a positive from my perspective, no major losses or cancellations or anything. And I think I've alluded to this in the prior conversations, the tone of conversations in the marketplace I feel is positive. I've had more conversations about bringing forward programs or accelerating than I have delays or pushing off for conserving cash. And so it's nice to have those conversations. And again, I'd just reiterate that the gestation period of programs and projects and decisions in this industry is not the most rapid due to the regulatory environment, but it's good to see the tone made making quite a significant change, I think.

Sean Dodge

Okay. And then if we take more our early phase signings the last couple of quarters, you also talked about some of the later stage stuff that you'd signed earlier progressing beginning to flow through. If we take kind of all of that you can you kind of help us walk through how should we think about backlog, conversion, backlog burn going forward?

Nicholas Green

Yes, I don't think I mentioned this before, you know, kind of once you've got, you've got the majority of your revenue now into that sort of a later phase and the resistance then through the excitatory elongating because 100 effectively 100% of your revenues in late phase and it took 15 months or so to convert, then 15 months is what it is. So I think as you start to see early phase business come into it, unless it's materially offset by late phase, which wouldn't be a bad thing, you'd expect to see it get worse, staying where it is and potentially shortening and getting better. So that's another positive. I think that would hopefully be materializing as we look into our next fiscal year. We would like to see.

Sean Dodge

Okay. Great. Thanks again, and to thank you.

Operator

Matt Hewitt, Craig Hallum Capital Group.

Matt Hewitt

Good afternoon and thanks for taking the questions. Maybe to dig in a little bit more on the catalyst and bio secure opportunity. You've had a couple large pharma companies come out here over the past week or so kind of talking about it. They're having the conversations now, but maybe walk us through that process and have you seen any change in maybe the sense of urgency from last quarter to where we sit today, not asking for specific numbers, but are you hearing those conversations kind of changing as more and more companies are looking to possibly use a new provider?

Nicholas Green

Yes. I mean, I think, Matt, the as you look, it's somebody who's maybe looking at that facing that problem of D&O, do I want to switch a supplier. It can be very varied from one to another. I mean somebody new somebody may have been considering to place an order there. So that I guess depending on their time line, they may already be committed to that until in terms of meeting clinical so that that could be one scenario if you're already that you've already spent a significant amount of money in tech, transferring it into another facility. And we've always talked about this industry being sticky and others that there are quite big resistance to moving. But equally, I guess ultimately, if one's looking at the future, are you concerned that you're not going to have a supply, then you have to start making some of those decisions?
So I think it's it's an interesting dilemma, I think was the first the first comment is going to be the first point, if you're going to look at moving or switching is who we're going to go to. So we do feel good about that quality track record that we have being commercial in the commercial experience that we've that we've established. And so hopefully we're on the call list of that is going to be looking at facility fit and talking through through your capabilities and making sure that those match up with the programming question. And then it's obviously going through the detailed review work statement issue and those can take several months in terms of executing, I think the fastest I've ever seen, somebody Welcome to the door and say, could you do something and actually convert it into a written?
Signed order is about six weeks and that is extraordinarily unusual. I think you're probably talking more three to six months is the is a more normal phase. And so bigger programs that would go on longer than that. And again, depending on how severe they feel the situation being those things can be motivated so faster. Now I have seen MSAs take six to eight months to negotiate, and I've seen people moving a lot quicker than that recently. So I certainly feel that there's a motivation to move to get into some very serious conversations around programs.
And coming to Avid again, I'd just go back to my first comment it's not always clear to us as to whether or not as a result of either one of those two factors, but we may have our suspicions.

Matt Hewitt

Got it. And then maybe shifting gears here a little bit with the cell and gene therapy facility up and running or Ribbon cut ready to go. How how is the pipeline of opportunities looking there? How are those discussions going on, best guess on when we could see our first commercial run out of that facility? Anything along those lines would be helpful. Thank you.

Nicholas Green

Yes. So first commercials, and I'm going to leave that one either. I don't know when that would be, but I what I would we'd be happy making GMP clinical material for the foreseeable future. I think it's you know, again, which will bring a new facility and expect into a commercial product in the in the short term is a bit of a long, a long push. But what we're seeing in that part of the market is similar to the Vermilion side, which as I say, is has been very positive, a very positive indicator since November aside from the one I mentioned, I think it's fair to say that the cell and gene therapy sector is lagging behind, but moving at a similar rate will be probably a quarter or two behind it or quarter to quarter and a half behind that would be my my estimation. So we're seeing more proposals. They requested more interaction, better interaction, talking about and the programs and where how they would fit. So we were feeling the optimism across the whole business. I think it's a it's lagging in the cell and gene therapy, but nonetheless improving. So don't gone from a situation where, you know, at the end of quarter two in the home and the whole business, we were disappointed in the in the year to date and felt like the Q2 should be the end than the low point?
I think in Q3, I was I was holding shorter as we went into Q3. I was holding sort of cautiously optimistic being a statement. But I think it would be fair to say that as we see it at this moment, if it continues and optimistic is not an unreasonable and unreasonable word to use, Rick, regarding what we're seeing at the moment. So long may that continue.

Matt Hewitt

Well, that's good to hear. Thank you.

Operator

Max Smock, William Blair.

Max Smock

Hey, good afternoon, guys. Thanks for taking our questions. To ask one on overcapacity in the small-scale 1 million drug substance space over there month or so. Here we've seen London Fuji both divest some assets, their move away from smaller scale bioreactors. You also heard Sartorius last week say that this is really where there's overcapacity or weak demand currently. So with that backdrop, how concerned are you about the impact of overcapacity in the drug substance spatial play? And what do you think insulates you from some of those concerns that we've heard from others other players in the space?

Nicholas Green

It's really difficult for me to comment on on what they're seeing. So if they're seeing that as overcapacity. And again, I kind of I would say, contradicts a little bit of what I've just been saying. And so we're seeing good demand for Avid's of IT services and capabilities. I'm not going to suggest for a minute that Avid is a bellwether for the whole industry so you know where we're not we aren't that big that we could suggest that we are a perfect representation for the market, but we're certainly not seeing an overcapacity situation and so it's difficult for me to comment on people who are I understand.

Max Smock

I appreciate that commentary there. Nick, maybe just asking the bookings question another way here. So looking back over the last couple of years, bookings stepped down sequentially in the fiscal fourth quarter. Can you just help us think through any potential seasonality associated with bookings and then what that implies here potentially for the fourth quarter of this year?

Nicholas Green

Again, kind of comment on our Q4 this year than this call, but there's no seasonal no reason to suspect seasonality in the quarter. And it's there is a degree of lumpiness in the way that orders get get lodged. I mean, again, I think I've said this on numerous occasions, you can if you're looking at a late phase PPQ campaign, I'll use a number somewhere between 15 and 25 million or whatever. It just is there as an indication as an indication. And if one of those falls in oil falls out of the quarter. When you said when you're booking 41 million, that's quite a big difference. So, you know, 41 turns into 60 or 41 turns into 2021. So those are a pretty big spread by one one event that can be days apart. And so I until we have the critical mass to smooth those out and soften those, which obviously is every year that goes by that we grow.
That's the case. And I don't know how to or how to how to change that. So but we don't I don't see any particular reason why Q4 should be any better or any worse than any other quarter in terms of signings.

Max Smock

Understood. I had to I had to tie it. Maybe one just quick question here on the margin on the margin side. So your revenue and bookings are good in the quarter. Margins again, a little lighter than we were expecting. Can you just help us think through the margin ramp from here? Is it fair to think about the most recent quarter being a reasonable jumping off point moving forward? And if it is a reasonable jumping off point, how do you think about drop-through to EBITDA from incur incremental revenue moving forward from here?

Daniel Hart

Yes, thanks, Matt max. As far as looking at the revenues from second quarter third quarter, I think we had a reasonable flow through of our margin quarter over quarter. But going forward, you know, until we hit ultimate capacity, you know, at a call it 40% plus or minus gross margin. And there we always say that if you do a straight line from now till then that's kind of how we're going to get there. As we continue to and grow the top line, it is going to be lumpy and we do have some additional expense that we've had this year that we've added on from our expansions that has, I would say, depressed the margin a little bit. And there is a fair amount of non-cash in that margin. But over time, our margin expansion is expected as top line grows and we benefit from our operating leverage.

Max Smock

And I said, thanks, guys, appreciate you.

Operator

Paul Knight, KeyBanc.

Paul Knight

Again, I Nick, thanks for the time on, Dan, want to what's the where are we with Cap Ex? I think that's more frankly, the most common question from clients right now, what about 4.7 in the January quarter. What should we think about in the current quarter and years upcoming?

Nicholas Green

Sure, Paul, great question. The expansion CapEx is done. So going forward, any CapEx that comes through will be more, you know, software or what have you and maintenance the maintenance, though, because most of our equipment is brand-new will start fairly light and grow over the next couple of years. But I think the main question is as far as the growth in the expansion CapEx, that's now complete. And I still think that this fiscal year we're going to end out at roughly around $32 million of CapEx.

Paul Knight

Okay. And what a fraction of that going forward annually?

Nicholas Green

That's right. That's right. We've said 2% to 5% of revenues. Clearly the first couple of years we're going to be at the low end.

Paul Knight

Okay. And then, Nick, on I know it's a different beast with Lonza buying the bulk of they'll love facility, but is there anything good or bad about a West Coast operation like that?

Nicholas Green

Down being owned by Lonza and we like the West Coast locations. So I mean, I think it's a much larger capacity than we are. My understanding is I think the smaller reactors are the 12,000 liter outputs, but you know, that's done. That's my understanding and up to 20,000 liters. So it's a market segment. We don't operate in. Nobody really makes too many products in a 2000 liter platform that will be made at a 20,000 liter stainless steel. So I don't think there's a lot of overlap in the markets that we're serving, and they did recently announce the that exiting from the San Francisco facility a few months prior, I believe, which was the small-scale facility. So that would probably be more notable for us that they haven't got a small scale offering on the West Coast. So hopefully that's some of our advantage, but it wouldn't surprise me as well. They did highlight, I think $2.5 billion with the spending on the Vacaville site. So they may be putting some of that capability that a wood into into that facility. So again, it's I don't think there's anything negative from our perspective in all of that news, if anything, might trying to read a little bit positive from it. But I'm no longer a good company in a capable organization, and I'm sure we'll be competing with them for a long time going forward, hopefully well.

Paul Knight

Okay. Thank you.

Operator

Thank you. And with no further questions in the queue, I'll turn it over to our CEO, Nick Green, for any closing remarks.

Nicholas Green

Yes. So I'd like to thank everybody for participating on the call today and for their continued support on a personal level. I'd just also like to thank my father who passed away three weeks ago and four was for Motional in my bringing in this industry having one of the first CMOs in the world and sorry to see him go. But I thought I would just say thanks in that regard again, we really appreciate everybody who's interested in Avid and the support for Avid from employees and also from our investors. And we look forward to speaking to you in the not-too-distant future over 4Q 20 and fiscal year 25 ahead.
So far, again, thanks very much and look forward to speaking to you shortly.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect, and everyone have a great day.