Avid Bioservices, Inc. (NASDAQ:CDMO) Q4 2023 Earnings Call Transcript

Avid Bioservices, Inc. (NASDAQ:CDMO) Q4 2023 Earnings Call Transcript June 21, 2023

Avid Bioservices, Inc. beats earnings expectations. Reported EPS is $0.05, expectations were $-0.02.

Operator: Good day, ladies, and gentlemen, and welcome to the Avid Bioservices Fourth Quarter and Year-End Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call may be recorded. I would now like to turn the conference over to Tim Brons of Abbott Investor Relations Group. Please go ahead.

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 business, including updates on corporate activities and financial results for the quarter and year ended April 30, 2023. 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, June 21st, 2023 will contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, concerning the current belief of the company, which involves a number of assumptions, risks, and uncertainties.

Actual results could differ from these statements and the company undertakes no obligation to revise or update any statement made today. I encourage you to review all the Company’s filings with the Securities and 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.

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

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

Dan 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, 2023. Revenues for the fourth quarter of fiscal ’23 were $39.8 million, representing a new single quarter high for the company and a 28% increase, compared to $31.2 million recorded in the prior year period. For the 2023, full fiscal year revenues were $149.3 million, representing a new full-year high for the company and a 25% increase, compared to $119.6 million in the prior year period.

For both the quarter and the full fiscal year, the increase in revenues can primarily be attributed to increased manufacturing runs and process development services provided to new customers. Gross margins for the fourth quarter of fiscal 2023 was 21% and in line, as compared to gross margin of 22% for the fourth quarter fiscal ‘22. Gross margin for the ‘23 full fiscal year was 21%, compared to a gross margin of 31% for the same period during fiscal ‘22. During the three and 12 months ended April 30th, 2023, our labor overhead and depreciation expenses increased over the prior year periods, primarily due to the hiring of personnel additional facility and equipment related costs ahead of our mammalian and cell and gene therapy facility expansions.

Additionally, the current fiscal year margin benefited from revenue associated with the change in variable consideration under a contract where uncertainties have been resolved, as compared to benefits from unutilized capacity fees recognized in the same prior year period. Excluding all these factors, our fourth quarter and fiscal year adjusted gross margins would have been 28% in both periods, an increase as compared to the prior year fourth quarter of fiscal year adjusted gross margins, which would have been 22% and 25%, respectively. We expect the expansion related costs incurred to-date will continue to affect near-term margins, especially the related increase in depreciation cost. Additionally, any incremental expansion related cost will only be added in line with anticipated growth and to support future increases in capacity.

Total SG&A expenses for the fourth quarter of fiscal ‘23 were $7.6 million, an increase of 29%, compared to $5.9 million recorded in the fourth quarter of fiscal ’22. SG&A expenses for the ‘23 full fiscal year were $27.9 million, an increase of 32%, as compared to $21.2 million recorded in the prior year period. The increases in SG&A for both the quarter and the full fiscal year were primarily due to increases in compensation and benefits related costs, legal, accounting, and other professional expenses. Before addressing net income, I would like to remind everyone that during our fourth quarter of fiscal ‘22, we recorded a non-cash income tax benefit of $115 million or $1.63 per diluted share, due to a release of our valuation allowance recorded against the company’s deferred tax assets or DTAs. The company previously maintained a valuation allowance on its DTAs until there were sufficient evident to support the reversal of all or some portion of those allowances.

During the prior year fourth quarter, the company has determined that it was more likely than not that the DTAs would be realized and released the valuation allowance related to federal and state DTAs as of April 30th, 2022. During the fourth quarter of fiscal ‘23, the company recorded a net loss of approximately $300,000 or $0.00 per basic and diluted share. As compared to net income of $115.6 million or $1.87 per basic and $1.65 per diluted share for the fourth quarter of fiscal ‘22. For the ‘23 full fiscal year, the company recorded a net income of approximately $600,000 or $0.01 per basic and diluted share, as compared to net income of $127.7 million or $2.08 per basic and $1.84 per diluted share, respectively, during the prior year period.

Excluding the non-cash income tax benefit of $115 million recorded during the fourth quarter of fiscal ‘22, the company’s net income was approximately $600,000 or $0.01 per basic and diluted share for the prior year quarter and $12.7 million or $0.21 per basic and diluted share for the full fiscal year ‘22. For the fourth quarter and the ‘23 full fiscal year, the company achieved an adjusted EBITDA of $6.3 million and $21.7 million, respectively. Our cash and cash equivalents on April 30, ‘23 were $39 million, compared to $126 million on April 30th, 2022. We have made great progress on our facility expansions. As of the end of the fourth quarter, we have completed our mammalian expansions, including process development and manufacturing capacity.

We look to complete our cell and gene therapy expansion by the end of calendar Q3 of 2023. We estimate our fiscal year ‘24 cash required for expansion-related capital expenditures to be approximately $30 million. Upon completion of these expansion projects, we estimate that our combined facilities will have the potential to bring our total revenue-generating capacity to up to approximately $400 million annually, depending on the mix of future customer projects. This concludes my financial overview. I’ll now turn the call over to Matt for an update on commercial activities during the quarter.

Matt Kwietniak: Thanks, Dan. Fiscal 2023 was a great year for our commercial team. During the past year, we made substantial changes to our organization, including the expansion of our sales team with additions in both our mammalian and our cell and gene therapy offerings. We created a new function dedicated to the specific needs of large pharma customers, and this investment is already paying off. We were recently named a preferred partner for a top pharma company and other large pharma companies have conducted audits or are planning to visit our facilities in the near-term. During the year, our team enhanced its visibility at conferences and industry events, and we continue to expand our outreach and presence in the leading value of technology regions in North America.

Combined, these strategic moves significantly improved our team’s productivity in fiscal 2023, as compared to prior years. This is evidenced in our bookings for both the fourth quarter of fiscal ‘23, as well as the full fiscal year. Avid recorded fourth quarter bookings of $55 million and as a result, we ended fiscal ‘23 with a new record high backlog of $191 million, representing an increase of 25%, as compared to $153 million at the end of fiscal ‘22. Changing market dynamics have resulted in the biotech sector focusing resources on later phase projects over earlier phase assets. These projects tend to take longer to complete, but are larger and have a much higher probability of regulatory approval, leading to recurring commercial revenues.

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

And finally, we continue to respond to demand for proposals, which we believe will drive our new business successes in the future. In summary, we could not be more pleased with the growth and productivity of our commercial organization in fiscal 2023. The team’s dedication and hard work have elevated Avid’s reputation and visibility within the industry, and we look forward to leveraging their standing in fiscal ‘24. This concludes my overview of commercial activity. I will now turn the call back over to Nick for an update on operations and other achievements during the period.

Nick Green: Thanks, Matt. Fiscal ‘23 has been nothing short of extraordinary. During the year, we have opened each of our expansions in the mammalian part of the business. In the same quarter, we have seen the backlog equal or exceed our prior capacity. As planned, fiscal ‘23 has seen Avid transition to a fully disposable platform with more than 20,000 liters of state-of-the-art capacity, most of which is new. With the completion of these mammalian cell capacity expansion projects, currently, Avid’s only remaining expansion effort includes the build-out of its new cell and gene therapy facility, which will support early-stage development through commercial manufacturing. The company has already launched analytical and process development capabilities at this facility and remains on track to launch the CGMP manufacturing sites by the end of the third quarter of calendar 2023.

Upon completion of the cell and gene therapy facility, we estimate that our combined facilities will have the potential to bring a total revenue generating capacity to approximately $400 million annually. Our business development team achieved signings during the quarter of more than $55 million, bringing total signings for the second-half alone to $122 million, all of which bodes well for the future. Equally, however, it is impossible to ignore some of the changes we have seen in the market dynamics. Reduced resources from investors being applied to early phase customers has certainly resulted in lower proportions of preclinical and early phase projects in our backlog. However, the focus of customers on late-phase and pre-commercial projects provides longer-term upside.

As one of the few CDMOs with close to two decades of commercial manufacturing under our belt. This has resulted in an increase in later phase and commercial business in our backlog. During 2023, signings associated with late-phase projects defined internally as Phase 3 and PPQ campaigns increased by approximately 34%. The increase in late-phase projects also have the effect of extending the project duration and associated revenues. Quite simply, there’s significantly more work involved in the late-stage projects than there is in an early phase project. However, this also means in the medium term, we have in effect more shots on goal. By this, I mean, we hope the increase in late-phase projects will lead to an increase in the number of BLAs being filed for products manufactured with Avid.

And we would expect the resulted increase in commercial products and revenues, assuming their subsequent approval. This trend, we feel is a result of Avid being recognized as a partner capable of meeting the complete life cycle of our customers’ needs. I believe given the increase in later stage projects, the probability of adding additional commercial projects in the future, has been significantly enhanced. On the other hand, the reduced number of early phase projects just make the short-term less clear. Each quarter, we would typically expect to register new customer wins with early phase projects that can be recognized in the short-term, i.e., upcoming quarters. Although I believe to some degree insulated from this as a significant proportion of our business is already commercial, is just in the short-term, impact the speed at which we can attract new customers.

It is as a result of this level of uncertainty as to when exactly funding will return to the broader biotech sector, and the impact it has on our short-term revenue. We have felt compelled to broaden our guidance for fiscal 2024 to $145 million to $165 million. In closing, fiscal 2023 was a record setting year. The company recorded its highest single quarter revenue, its highest annual revenue, and the largest backlog to-date. It is highly encouraging to begin fiscal ‘24 with a strong backlog and a mature piping. And while we acknowledge the situation created by today’s challenging financial markets, we believe, as in fiscal ‘23, Avid’s reputation is a flexible, reliable, and truly commercial-grade partner will continue to position Avid in an ideal place to take advantage of the medium to longer-term market fundamentals that underpin the business.

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

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question for today will be coming from Matt Hewitt of Craig-Hallum. Your line is open.

Matt Hewitt: Good afternoon. Thanks for taking the questions. Maybe first up and Sean — sorry, Nick, thank you for providing a little bit of detail on what you’re hearing from the customers, but maybe a little bit more detail on what’s transpiring on the shore the near-term opportunities, because your guidance implies basically what mid-single-digit growth at the midpoint this year, a pretty dramatic slowdown from what we saw here in fiscal ‘23. So just a little bit more color on what you’re seeing in the market?

Nick Green: Yes, Matt, thanks for the question. What’s going on, I think, at least from what we can see is that clearly, with the amount of investment going into early phase projects, I’m talking preclinical Phase 1, which are relatively small in size. Those funds have certainly been leased from our perspective, being diverted towards later phase. So the big impact for us there is that we would pick up a number of those in a quarter, and we can execute those immediately. So they go straight into the process development and small-scale manufacturer. And you can get those in and out very, very quickly. They’re being replaced. And as I said, we — as I highlighted in my commentary, that by an increase of 34% in our late-phase at Phase 3 and PPQ campaigns, which just by virtue of the phase that they’re in, they involve more batches, they involve the PPQ and the validation exercises and they just take longer to execute.

Now frankly, if I had a choice to would prefer a Phase 1 preclinical or a Phase 3, I think the answer is that is quite obvious. I mean the revenues in a Phase 3, obviously, are larger, but it take longer to execute, but I think the base fundamental for me is that want to stage away from approval and the probability of approval of those products are likelihood of approval of the Stage 3 project versus the Phase 1 project is significantly higher. So that drives us much closer towards commercial revenues. And fundamentally, the whole purpose of building a pipeline of projects and diversification of that is to give you more hits on our shops on go, more products get approved, more products get approved, more commercial revenues. And I think that you could look at this in a number of different ways.

If you’re not a commercial manufacturer, how do you benefit from those late-stage projects because — most people are probably not going to trust you in those. Whereas if you have got that track record, which I think does have, then we’ve seen that 34% increase, which is kind of everything that you want. It does create some short-term uncertainty. I don’t know any way of getting around that, which I did. But I’m sure as the funding goes back into the early phase projects, we’ll see that lift back up and hopefully that sooner rather than later. But again, if there’s a trade-off between a preclinical Phase 1 and a Phase 3, I’d like to see what we’ve got, which is the Phase 3 and those will result in not only larger revenues. As you can see in the backlog at $191 million and $122 million signed in the second-half of the year.

And so I think that shows the underlying, sort of, robustness of the business. And as those convert, again, I can’t dictate whether they can do get approved or we don’t. But assuming industry averages, we can look forward to some additional commercial products being added to our pipeline and then the results of growth in those that one normally sees in the commercial approved product.

Matt Hewitt: Got it. All right. That’s very helpful. And maybe a follow-up question for me and I’ll hop back in the queue. But regarding your backlog, $191 million, obviously, congratulations on the growth there in the second-half of the year in particular. But — and I don’t know if you have this, but a split between how much of that you would qualify as commercial versus late stage versus early stage? Do you have some type of a split there for us?

Nick Green: I don’t off mind. I don’t think we’ve ever reported on the exact split. But — so I don’t — unfortunately, I don’t have that detail with me.

Matt Hewitt: Alright. Thank you.

Operator: Thank you. [Operator Instructions] And our next question will be coming from Paul Knight of KeyBanc Capital. Your line is open.

Paul Knight: Hi, Nick, you mentioned that the later-stage projects were up 34%. So I have put two questions around that. Is leader stage Phase 3 and beyond? Is it one-third of the business? Do you have a rough idea? And then the second question is regarding for the team, I guess, how quickly can you kind of move into these later-stage programs relative to what was a pretty robust Phase 1 pipeline before. So how quickly can you win over large customers?

Nick Green: So we don’t have a breakdown or unfortunately, on the individual components of the pipeline. But I mean, I think just in general terms Avid has a pretty purposed commercial pipeline. And I think we’ve talked before that, you know, we did tend to attract later place projects generally in probably a slightly more favorable manner than one might see the overall clinical pipeline landscape, i.e., the typical landscape is a lot of early Phase 3 clinical, less Phase 1, less Phase 2, and less Phase 3, I would — certainly would be more advantageous towards the later days than one we typically see. And I think that trend is what I’ve alluded to today in my comments, has moved even further that way as we’ve seen a significant increase.

And it’s not a significant increase on a couple of dollars. It’s a significant increase on a reasonable number of dollars. So we’re very happy with that sort of general dynamic. In terms of execution, I mean, it just is physically the time to execute. So in terms of winning these projects, obviously, they do take a little bit longer to allow, because most people don’t sign a $15 million check for argument’s sake, compared to a $2 million check in the same amount of time. People tend to give a bit more naval gazing and sitting before they sign those size checks. But by virtue of the fact that the backlog has gone up 34% in that area, those are signed, because that’s how you get into the backlog. And we can clearly see other opportunities in our — what we call our pipeline where we could attract even more of those.

So attracting them, I don’t think is the biggest issue. I mean, obviously, there is the time, as I’ve said in signing the checks or the orders for those larger sums, which just take a little bit longer as we’ve mentioned before, but also then executing. And to executing a large project with the PPQ campaign, for example, there’s a lot of documentation, a lot of diligence. We own hard work in making sure all the high deductities across on absolutely every aspect, because literally, this is a formal part and parcel of your filing to the FDA that involves, obviously, initially the tech come and then the scale up on me administration and engineering batches and [Indiscernible]. So it just takes longer to execute that. It’s nothing unusual to have it.

It’s the same for anybody who’s doing late based projects. But assigning that piece of business, we just have to go through that process. But I’ll take one of those every single day, because the next thing that happens after that is the BLA gets filed to the FDA. And with the following win, that gets approved, and then we’ve got another commercial product, and last time I checked most commercial products as they start with one batch, they moved to two, three, four, five, six, seven and off we go. So you then get repeatable business more going forward, which is exactly the fundamental and why we try to build the pipeline in the first.

Paul Knight: And last question, Nick, would be this. You obviously have a lot of industry experience along with your team what’s the situation with Phase II and later-stage pipelines, it seems like the large CDMOs like Lonza Catalent are putting in a ton of capacity to meet demand. Do you think this later-stage environment is good, great, tight. What’s your view on this late-stage world?

Nick Green: I mean, I’ve said just on numerous occasions, because it isn’t necessarily a bellwether for the whole industry. But from what we can see, we’re seeing a growing proportion of those coming to averages. It’s always difficult to determine exactly why is it because funds have been moving towards late phase from early phase. I think that certainly has to be a contributor, as I highlighted. Whether other people — I mean, ultimately, the Phase 3 project is coming to Avid is coming from somewhere else. So somebody, I guess, has done something wrong, who that is, is not always clear to us. So — but people don’t normally move late-phase projects just from the front of it. But I think in the case of, you know, I think, I can only talk about ourselves is that — we do — we have got almost 20-years.

I think it’s 18-plus years now of late-phase, commercial manufacturing experience. And clearly, that I think goes a long way to making your clients feel comfortable that — it’s not your first revenue.

Paul Knight: Okay, thanks.

Operator: Thank you. [Operator Instructions] And our next question today will be coming from Jacob Johnson of Stephens. Your line is open.

Jacob Johnson: Hey, good afternoon. Nick, maybe on the later-stage customers, is there any way to outline how many of these projects you have because obviously, you outlined the trade-off for these later stage and that they can turn into commercial. So I’m just trying to think about kind of how many commercial therapy opportunities there are as you look out a couple of years. It sounds like it’s not one we’re talking about.

Nick Green: No, it’s not one, Jacob, and good afternoon, by the way. No, it’s not one. We don’t go into the detail and break down each number of projects by phase or clients. But no, it’s not one. It is multiple and there are multiple in the pipeline. So it’s very encouraging. I mean, if you stand here and looked at the expansion that we put on, the things that are going to fill that expansion of late-case projects. I might fill the expansion with three or four commercial products, but it might be 40 Phase 1 is to fill the same capacity. So it’s a dynamic that is encouraging, and I think it, kind of, underpins the absolute basic fundamentals of this sector in this business is that Avid is a full life cycle CDMO partner that can take you all the way through.

And when dynamics such as we see in the financial markets in biotech funding happens and funds get focused towards later phase. It’s good to see how we benefit from that. But equally, there is less funding going into biotech, and that affects everybody, assuming that you’re still picking up Phase 1s and Phase 2s. And we all at least, I believe, all CDMOs are also interested in picking those up. And I don’t know how you get away from that fact at the end of the day. But the fact that it actually gets covered, albeit slightly longer — going out slightly longer by later phase projects. We’re one of the few people that I think can benefit from that because of that commercial pedigree. So medium to long-term, I think we got a boost in the next couple of quarters.

Clearly, we would have liked to have seen much more bullish investment and therefore, a continued growth as we have done. But I don’t know how to get away from some of those smaller projects not being funded and therefore not being able to pick them up.

Jacob Johnson: Got it. Thanks, Nick. And then maybe my follow-up for Dan. Dan, could you just talk about the outlook for margin in FY ‘24, given kind of mid-single-digit-ish growth, but I’m guessing a larger cost base with the capacity additions online? And then just along the same lines, can you just touch on kind of the state of the balance sheet if we see maybe a little bit of margin pressure this year along with some continued investments on the viral vector side. Thank you.

Dan Hart: Sure, Jacob. As I noted in my prepared remarks, we’ve invested in our people and our facilities over the last fiscal year, which is also including establishing our cell and gene therapy business. Looking forward, any further investment would be to support any additional growth or fulfilling of capacity. Looking at those gross margins for last year as a starting point, as I noted, once you — if you were to normalize for those costs and for the — some of the benefits that went through, we saw roughly a 7 percentage point impact — positive impact for both the fourth quarter and the full-year of fiscal ‘23. I would say, looking ahead on a comparable basis, our gross margins will continue to be impacted by the increase in the fixed cost base that we established during fiscal ‘23 and also an increased level of depreciation related to the new completed expansion.

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

Jacob Johnson: Got it. Thanks for all that.

Operator: Thank you. [Operator Instructions] And our next question, we have a follow-up from Matthew Hewitt of Craig-Hallum. Your line is open.

Matt Hewitt: Thank you. Just one follow-up for me. Maybe on the bookings side, is there a breakdown between your gross bookings versus cancellations in the quarter? Just if you’ve got that number handy?

Nick Green: As far as that was a — I think there was virtually no cancellations in the quarter.

Matt Hewitt: That’s fantastic. Alright, that’s it from me. Thank you.

Operator: Thank you. [Operator Instructions] And our next question will be coming from Sean Dodge of RBC Capital Markets. Your line is open.

Thomas Kelliher: Yes, good afternoon. This is Thomas Kelliher on for Sean. Thanks for taking the questions. [Technical Difficulty] guidance, there’s a notable disconnection backlog in the fiscal ‘24 outlook. Is it fair to say that you all have a particularly high level of visibility on the serious guidance or maybe say in a different way, how much of this is already kind of effectively contracted versus a go-get portion?

Nick Green: I don’t think we actually comment on that one, normally, I’m sure. But I mean out of $191 million, clearly a significant portion of that in the first year. I think Dan has always sort of made the comment that the majority is in the next 12 to 15 months. I think if you were looking in the next 15 months, the majority is certainly over 50%. So over 50% of that in the next 15 — 12 to 15 months is a significant number of that guidance. So that’s the best way I can probably answer that. In regards to the prior question from Matt, I said virtually no cancellations. The reason I hesitate to say [Technical Difficulty] in those kind of a strange answer. But I do recall there being a change in scope, which was a very small number.

So that comes as a negative in our signings. So just for clarification, I don’t think there was any cancellations. I think there was a change in scope, which was something to [Technical Difficulty]. So I just wanted to clarify on the previous question from Matt as well.

Thomas Kelliher: Alright, thanks. And then just a quick one on CapEx and I apologize if you answered it already, but how much more do you have left to spend on these expansions in fiscal ‘24? And then is there any sort of like a good rule of thumb for annual spend going forward?

Dan Hart: Sure, Thomas. As far as cash outlay, we have roughly $30 million fiscal ’24 to spend, which will be over the entire year with a significant majority of that over the next three quarters. So there’s that component. So as far as maintenance CapEx, I apologize. Maintenance CapEx, in the long-term, I would imagine we’re going to get to the 4%, 5% of revenues. But in the short-term since the assets are brand new, that’s going to be a smaller ramp up to those levels. So I would, I will start with a lower number, call it, $2 million to $5 million on an annual basis, and that would ramp up over some period of time.

Thomas Kelliher: Alright, perfect. Thank, guys. That’s all from me.

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

Nick Green: Yes; thank you, operator, and thank you to everybody for participating on today’s call. In closing, as we mark on its 30th year in business, we acknowledge the substantial progress made in recent years. We thank our customers for their trust and partnership and our investors for their continued support. And I would like to thank and recognize our exceptional employees who continue to drive our success. Thank you again for participating today and for the continued support of Avid Bioservices.

Operator: This concludes today’s conference call. Thank you all for joining. You may disconnect and everyone, enjoy your evening.