Hi Westy,
To hopefully cheer you up a bit, I'm going to repost a message from Stockaxe that was made after the last qtr. cc. I personally believe Stockaxe is one of our most sage posters when it comes to the workings of business and the markets. I've bolded the most notable piece of the post as far as I'm concerned. From 9/8, post number 344490.
Funny enough...I thought this quarter was pretty good in the context of the industry environment. They continue to grow revenue and maintain backlog despite a large portion of their bookings (early stage) basically at zero because of the environment. They are winning projects from other CDMOs that should reap major dividends in 18-24 months and could very well fill the facilities. If biotech funding were to actually come back, I think you'd see another $30-$50mm in revenue from early stage projects start to pile in. If funding is weak through the end of 2025 (which would be 4 years...kind of unprecedented), I still think Avid grows and will generate good EBITDA. What people here can't seem to understand is that incremental revenue has a 70% margin. Do that math. If they add $50mm in revenue from today's base, that's an incremental $35mm of gross profit. Gross margin and profits will very quickly rebound because of this operating leverage. The Company had decent bookings and continued on its path in a weak environment and in what is usually a slower quarter for bookings. Absent the slowdown in biotech funding, I think they would have filled facilities by the end of calendar 2024. I think that has probably been pushed by a year, but the stock will react well before they fill the facilities.
I've been involved in a few capacity expansions over the years. They usually don't ramp up as cleanly as the planners projected when they justified the project. It usually takes a bit more time. But, once they take off, the ramp goes quicker than thought. The key to it all is the part highlighted above.
Hope things improve soon. I still have some, but I'm now going to have to jump in harder once I see things turn.
Regards,
WH
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