Inotiv (NOTV) 3 Dec 242024 Q4 Earnings call transcript

Good day, everyone, and welcome to today's Inotiv Fiscal 2024 Fourth Quarter Financial Results. [Operator Instructions] Today's conference is being recorded. I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Steven Halper.

Thank you, Marjorie, and good afternoon, everyone. Thank you for joining today's quarterly call with Inotiv's management team.

about like management everyone call plans. will forward-looking including I'd the some are begin, operating statements, that future statements make statements we to results that remind of considered and Before financial company's and the on this statements and that actual to could materially different risks to or achievements be subject from are cause Such uncertainties performance those projected. management's expectations date. as today's represent of statements such Any

additional in update undertake investors. or or and information, forward-looking not forward-looking website, Commission. statements, the on in and guidance any to been matter. Management also Form place Securities obligation company's non-GAAP does company future refer X-K on to the the should for as to filed of to You reconciliations with whether will further Investors the the effort has these discuss of company's not available and revise new earnings comparable Definition GAAP Exchange statements, filings measures a www.inotiv.com, are and otherwise. an undue the most of section non-GAAP posted for certain SEC is the release, also which measures this to reliance provide in result Please events, measures these company's included information the financial

copy you to do so website. release the Inotiv's of by Investors obtained If haven't yet, a going press today's you could section of

after over fiscal we'll now Bob year September of Leasure, Bob, call your open the go Sagartz, XX, to will Financial the John Bob call company's XXXX, some the please are CEO. for remarks, which Chief Joining of to is Bob Officer. and Strategy our join fourth afternoon and Taylor, quarter the Leasure, full begin then President call. and summary us Chief this ended pleasure the questions. It present ahead. Beth the with portion for company turn and my from financial Executive Officer; Officer, opening question-and-answer results a Beth will us Chief will for

during joining everyone are quarter good our for believe to accomplished again, afternoon productive We good and quarter Steve, Inotiv. position XXXX. was, goals Fourth we call you, Thank the our and today. into of going in many

I'd we NHP As our the to our a designed over our within continued while customers last cash reduce new all quarter experienced risk improve model, few RMS address volatility you saw put customer related flow. during the business, model to year and we to and we cash challenges on volatility, business enhancing aware, the place was spending experience, our results Volatility minutes spend and like and business the in in mainly to 'XX conservative industry. The biotech also calendar XXXX. are fourth flow earnings XXXX, were in the highlights. within draw initiatives within fiscal but 'XX

$XXX.X quarter compared revenue it down XXXX For to the total million of $XXX.X in fourth X.X% fiscal a in the representing was to the third XXXX. quarter revenue, in XX% though was fourth fiscal compared increase XXXX, quarter, million quarter-over-quarter

continued the fourth our RMS improving XXXX, of transportation to North and we make systems. in business, During quarter the American distribution progress

closure facility increase completed doubled QX, U.K. our investments to Blackthorn and X facility. announced improvements in QX. sold site we we as years saw Hillcrest completed also number We consolidation in than a We ago planned compared NHPs in we of the the in as the the and RMS significant the QX sold almost U.K. facility our in more

QX our which XXXX. impact of cost margins in sold higher NHP in continue During impacted quarter QX, much we margins will fiscal and the of to inventory,

purchases also strong commitments We have already both and XXXX. new existing from customers calendar for for

as and income services, and enrichment in our discovery as and compared diet, to business operating safety U.K. QX revenue XXXX mix NHP bedding, the to Within study the management lower the QX business, lines. DSA European RMS service XXXX revenue. well saw assessment and also performances we line, RMS business due strong colony decreased as in

QX were trend we revenue in of our and for consistent new DSA facility XXXX, strong related income revenue relatively revenue to continued to From operating and services discovery in compared XXXX QX XXXX. at a XXXX services. saw a Rockville However, QX decrease to QX

the us continued expenses to side, drive a general year-over-year On basis. and on operational further efficiency, we our reduce allowed which to administrative

the created biotech liquidity. which closely the some improve general quarter, we this in balance monitor evaluate overall our through. incremental business impacted to While continue balance include sheet enhance we we made sheet same trends saw conditions quarters, opportunities pressures previous and and some price still continue experienced of industry improvements These in our in and to business. navigate to our the In we QX, further to

for funding the increased biotech development. cost of of and in first the the that early-stage the X Although biotech in to influence spending funding and increased XXXX reduced clients' believe calendar research in during the market XXXX, we has and patterns market months XXXX our continued capital

on market our some in me and Now on comments business today thoughts we provide forward-looking segments. what some seeing let the are different

to pipeline to companies take use of the prioritize conservative in short approach a to capital products restrained, continue projects. We most to order term biopharma the expect their in to important the preclinical

product assist of clients of economic appropriate We improvement to and on will and speed the capitalize to in scientific our innovation continue development achieve our returns. expertise the

portfolio our new the in believe growing made base We to fiscal team cross-selling additional investments products existing benefit gain of continue us in share. through and to on customers our broad We our sales efforts services we've are will our in and XXXX market emphasizing attracting XXXX. customer

were pace new approximately year's orders XX, prior X%. September by XX ahead the For ended for DSA net months the of XXXX,

that XX% business. In see accomplish of we XX% we the in that approximate in in pleased we've XXXX. seen and are XXXX and are the segment, orders this an spite reduced to fiscal industry volatility able optimistic Discovery RMS in been will in price decline revenue we've We in pressure decline

calendar for about colony and services, 'XX. are management have We NHPs optimistic cautiously demand in based added NHP-related on customers. of our revenue new And we presales increased

base them next not to and health not welfare, existing which of our our $X RMS $X site with operating until be countries. improve our to program eliminate standards. In phase in the standards, phase margins facilities another continue the optimization projected continue of fiscal not to when we will improve those seen and another next further source program, completed. This multiple and work from to in to compliance-related expected these initiate supply newly-qualified improvements animal are our We million meet have NHP XXXX, who in and suppliers U.S. million expenses further suppliers RMS XXXX. financial the for will and important matters, NHP Most and consolidate is is cannot to non-HP do or in Critically, business we expanded audit

cost We some there market also America risks, reductions million industry. others our and of but believe are to and as our North incurred conditions, of uncertainties. our million several from going $X our 'XX, $XXX,XXX in we and can customers in continued and geopolitical, In we transportation XXXX, distribution XXXX recognize system. We're integration achieve another did into confident challenges,

creating As who proud I'm challenges, foundation Board, a suppliers, work business lenders for our our XXXX. address company, of customers, going these into people, to stronger leadership, together a our and

the we years, positioned overcome we past for future. the we've our X challenges As is business believe the over faced well

mitigate our facilities, initiatives challenges. to continued these have and optimize to related implemented acquisitions We integrate risks we our as have to also several

provide forward and customers, value is as that for quarter and our of for business over our improved look midsized, more a and CRO of and models, and call service responsiveness the research well-positioned to services. the lowered turn customers. shareholders, and have who our our a We synopsis year. employees, to diet, enrichment full-service will will Inotiv's to We remain a cost, bedding, and Beth, our committed Inotiv full detailed that, products I'll create XXXX. With results provider building to

Bob, everyone. Thank good and you, afternoon,

X.X%, the XX.X%, and million, XX.X% $X.X DSA actually in fiscal primarily or $XXX.X decrease X.X% our million, to to total revenue XXXX to sold $XX.X of of we in in XXXX, the increase quarter in the of $X.X an prior decrease also which of quarter, For revenue selling XXXX NHPs sold fourth to RMS million revenue. of increase or XXXX of average number sold XXX.X% due the saw XXXX, quarter. price we XXXX, increased and of number saw Israeli August $XXX.X was decrease a revenue to NHPs operation, RMS current the We X.X%. Compared revenue NHP during total a $XXX.X XXXX in Compared QX included million QX approximately quarter to selling was XXXX. The compared DSA in QX to revenue and our XXXX and revenue RMS our the from QX compared saw QX year fiscal million XXXX, QX period XX.X%. XXXX, revenue of our third fourth down million, compared compared X.X% in QX a versus increase was XXXX. in NHP and the of XX.X% in average higher in price was a

For in was revenue a in in activity million, in Discovery of facility. DSA the lines compared Rockville, year by QX XX, the decrease was of was were by the services $XX.X the our toxicology decrease revenue general decrease growth XXXX, decrease of The primarily well fiscal of the ended in by revenue quarter Israeli NHP change quarter a overall million. QX These in businesses market. due primarily of as to $XXX.X NHPs months in at XX, $XX.X Services million, Overall, service as a of and lower the a XXXX, in newer offset XX.X%, result were new X.X% a as in fiscal in orders Services the the result of of the in decline year. to was year the The million versus million XXXX. DSA million decrease compared revenue XXXX. activity biotech decrease this a $XX.X DSA revenue revenue lower $X net $XXX.X XX compared impacts sold DSA last XXXX, was partially mix to for in and $XX.X in market. million, prior to quarter Discovery revenue decrease million $XXX.X in a XXXX in XX $XX driven and in $XXX.X months same down Maryland revenue August the prior DSA mainly biotech QX consolidated fourth the September driven million overall XXXX, XXXX QX million ended pricing sale due to September period in in study from for as in

versus The DSA XX, XX% and approximately lower fourth were slightly change compared orders approximately XX% million $XX.X in less for fiscal year or down the XXXX were million quarter than in in revenue to in in cancellations the year XXXX to and quarter negative same The QX compared fiscal in prior XXXX. of increased ended to to and the million as mainly decrease year period, quarter in September declined fourth quarter XX%, million, the XX a XXXX, XX% period. by September XXXX, from $XX.X and XX.X%, prior the product in the XX, we XXXX. rate quarter the new orders $XX.X of XXXX conversion was fiscal of net the XXXX. RMS to fourth to revenue, compared X.X% the compared fiscal of fourth lower booked fourth result NHP-related quarter $XXX $XXX.X pricing. million same The for For XXXX service ended was months due XXXX

model decline QX in Israeli sale with of in decrease RMS in the the fiscal a remaining animal primarily revenue was decrease result of a XXXX, QX in businesses a small fiscal there as Additionally, due our of sales. to XXXX,

primarily XXXX product in fiscal demand, and offset increase small NHP the animal compared $XX.X to and bedding, an remaining sales XX the decrease in and services RMS to partially due sales as of RMS million decrease an and U.S. in in result lower $XXX.X in XXXX, lower XX.X% $XX.X $XXX.X the of revenue revenue U.S. sale XXXX. volumes September of a outside lower revenue due animal to and increase business and For RMS enrichment sales by services The The decreases negative in was down sales million was due the lower million. fiscal small million to our diet, the Israeli to impact of ended was months of of pricing primarily XX, in

fiscal down Regarding of past we we NHP X quarters indicated the in in saw that QX on from conference the coming highs first pricing, our prices XXXX were and fiscal XXXX. calls NHP

in the slightly above, price compared NHPs QX QX average noted As XXXX to increase of sales XXXX. did of

XXXX were margins higher-cost and saw XXXX, As we sold year that in calendar XXXX. NHPs late we fiscal calendar in purchased early lower

year's of fourth to our attributable consolidated net last loss fourth operating compared revenue, revenue, operating Now quarter for fiscal to to that fiscal QX $X.X or total XXXX fourth improve. Overall, believe million, fourth through from XXXX due in we loss costs, of XXXX loss compared or loss was with margins $X.XX $XX.X shareholders Consolidated of $X fiscal inventory, impact loss common income $XX.X businesses, in our to segment in NHP per and reduced to segment compared higher-cost of $XX.X connection plan. Operating X.X% million, of were begin should restructuring a of shareholders the RMS the loss million reduced of the total in to worked to revenue, quarter Operating primarily million, closed to partially last income offset have of and quarter X.X% margins in the year in optimization last quarter. much $X.XX XXXX. quarter diluted calendar quarter million. by quarter and common our was the and sale $X.X or items or per in diluted quarter. RMS XXXX income our compared transportation sites for fourth The the of was costs we $X.X NHP costs fourth fourth of the site operating loss million was increased for $X.X on our quarter totaled from revenue, of in of total to This XXXX lower improved costs, decreases in related of on margins share. or revenue. million, our revenue in fourth X.X% year's in lower of DSA decreases operating share the DSA or net attributable of Israeli from $XX.X fourth million, year's million, These fiscal X.X% total

total fourth $X.X million, to year's of total the of quarter, fiscal last fourth compared revenue, or was XX.X% revenue, for For adjusted $XX.X million, EBITDA quarter. or X.X%

million, months EBITDA compared ended to attributable fiscal XX, loss XXXX, million, XX, XX net X% the operating compared to $XX.X to loss compared income million, diluted of fiscal to ended operating per share of was $XX.X quarter fiscal for adjusted September net X.X% months for or $XX.X $X.XX adjusted or last X.X% common Non-GAAP revenue, DSA This revenue. was September For $XXX.X our per for in X.X% total segment for quarter. the XXXX fourth million, diluted revenue, fourth XXXX XXXX, total EBITDA XXXX. Non-GAAP fiscal of Consolidated total XXXX. loss to year's $XX.X or or of revenue, $XXX.X XX.X% total income revenue, fiscal to our common or total for compared $X.X shareholders of $X.XX DSA for of was totaled consolidated XX the million, or loss $XX.X or shareholders segment a or of attributable in million, revenue, X.X% total share. of million, million,

in newly-added operating for capacity, fourth DSA the services DSA improvement and was book-to-bill to As we margin of fill fiscal see XXXX will X.XXx our through X. new come fully we to begin leverage. The we online, believe quarter

revolving related $XX.X of RMS costs, in and offset most or partially X.XXx the our cost book-to-bill fiscal to to last to debt, million by QX backlog segment, DSA million, September XXXX year XXXX million XXXX, our million period. revenue, to $XX.X reductions increased our additional interest in accounted XXXX of of in or XX, or periodic fiscal August operating total compared in X.X% an to year's $XX.X due of Israeli favorable fourth fiscal Again, fourth these quarter from lien fiscal income million, for NHP RMS at restructuring fiscal up margins million, In or $XXX.X pricing last our quarter the income million, increase at for $XXX.X Our of the changes. Interest facility. revenue, was $XX.X XXXX. draws and and X. in compared XXXX XX% operating was to expense year's businesses rates, in non-GAAP second $XX.X XX.X% for credit non-GAAP September sale to XXXX, XXXX. on XX, was total of segment, was full X%, $XX compared million, In

$XX.X in with XX, costs into the note cash It $XXX XX, XX, This revenue. million a and $X.X during operations convertible notes on capital amendment million our amendment seventh January with XXXX, into debt X.X% resolution by minimum compared to limit In paid of adjusted million, in as of of of June of fiscal million or effective additional and financial the XXXX, EBITDA XXXX. and under a used until to September June of amendment cash XXXX. extended on we the entered XXXX, test included includes million Cash September of compared XXXX, $XXX.X quarters compared The the XXXX. our and as September to established XXXX, XX, in $XX.X expenditure the of agreement lien OBRC a XX, covenants starting XX, September date $XX.X September for the million, approximately maximum covenants XXXX, used months credit financial was ended XX, September entered of for seller XX, sheet third agreement $X.X new DOJ. cash XX, and total equivalents XXXX, net fourth expenditures $X.X October XXXX. million. Net payable million new debt the Total to from XXXX, fiscal million September as the $XX.X quarter and were issuance XXXX at thereafter. Capital previously seventh waived cash million XX, existing balance $XXX.X established XX, as September to second operations included XX Our operations of the provided debt in was in XXXX.

$XX.X to total the finalizing investments expenditures X.X% X.X% for in laboratory year improvements were expenditures capital experience. animal to $XX.X million, XXXX, fiscal of XX, enhancements The facility improvements, site welfare, September the as compared to Hillcrest ended and or reflect U.K. months XXXX. expansion, the enhancements client capital revenue for technology, or improve XX million, the For approximately system

of report our improvements investments initiatives capital that and started and terms In year XXXX. pleased mid-calendar plans, to site we've completed I'm optimization the

less to than after results. in QX withdrew you expect XXXX. With We respect guidance XXXX we of fiscal fiscal reported CapEx fiscal we financial our spend guidance, for revenue XXXX as to X% know,

to have the While annual are XXXX provide fiscal comprehensive progress our and quarter, improve most made latest base has greater at designed the demand. guidance we above. continue a optimize the turn recent clarity to agreement Management this we with compliance for hope we that once about capital on operator in the operating allocation we overview, and our discussed XXXX over feel plan plan expense The credit to amendment We results operating to as under juncture. in updated with call customer not covenants fiscal we providing September the XXXX. And questions. forecasts developed good market our the to and will financial our guidance

take Instructions] from [Operator Street We'll Markets. Lake question our Takkinen first Capital Frank from

all of a lagging get feel more gross of one progress. into in higher was that, and on it like margin dollar to NHPs. question how headwind really in volume for of quantify what seems the was Congrats environment? around that once I'm Anything just normalized you reason around do hoping much a And margins really old exactly you there that gross mature it both gross some good inventory. there quantify help into give to is anything I clarifying improvement sequential I units. margins, in a to can quarter? is we margin kind may with us was The that start asking But think because that of gross can

the you achieve. that if we articulate I of normally half least I'm way see that can at do that? way guessing what would my to probably can don't have a we're those. you a Beth, of But Beth, have off head. you top

to Yes. we quarter If and look about quarter-over-quarter, the we percentage this last margin half were 'XX fourth year's, of dollars.

our to to was boarding really a that move from But cost it inventory, the And bottleneck us to needed additional two, needed move out. room as in start to One, that move lower higher-cost is make to how needed we much capacity for inventory. and space we have. important Yes. really standpoint, we bringing we

important those was that so market to The move move it we could So able that we out. out. were was there, there, was demand

us just going like Can What next year? that was be speak the to how your business any for that half. other that a of And stabilize. just It NHPs now can inventory much XXXX? we're seeing commentary second you customers, commentary around really is you feels about say contracted, feel give my from maybe to any to

yes, definitely that than includes we NHP 'XX, multiple going have 'XX and business, into into Well, did going presold we new the customers. one, more

what growing been we've it's related addition, with a growing of us. good services, and our really last around a couple for boarding year, very In that. done is and which management years revenue reoccurring XX% job pretty the is good colony It's XX%, over mainly services

expanding So those we've boarding and capabilities been services.

will So year. next continue we to that grow expect

caught and does better with with year that them. happen. And demand. lower fiscal And job So have think sales working was I I QX we we that sure for doing weak make communicating It think not of that had as we see somewhat that us, base X our it's year of reoccurring customers consistent, and we're more we're a had -- that, last a quarters. by our QX important really surprise to this us

sold quarter what forward. So should be quarter much I cycle. more And reoccurring demand think going we'll I consistent we a see more a think of last

in fiscal normalized we think today. we early 'XX. much be I But have saw still in in we'll more and will base, I like after margins we're the probably our think QX, some 'XX quarter that, depressed a much

over a bigger you to NHP for feel to XX% into? midterm range. just the XX% the is you've still reasonable, business it, contracted EBITDA into In mature you've call margins time period for all site optimizations that, last business, to my of light XX% XX% that over the one, a done, maybe target longer target the of to in do then, time question. a picture talked the past, I adjusted maturing know And

do. I

some there's business enrichment issues I to have see Europe, because pricing the of to of seeing of you we're our in U.K. some optimization next the we're those U.S., think DSA small in seeing of to out the we'd currently, and our diet to see in the because look we've one business, improvements to see demand and probably did, volume what our services and DSA business what the I what where of that areas. in we're some take right year, and higher our recovery in in we we'll things NHP some the But been new at get combined I in animals some business, we're transportation some the recovery next grow. year, with able in pressure costs going industry the to we're from in that, site then overall what if now improvements do end expect in because seeing of the able and some think other the things from that

think get back be industry. optimistic I'm that get the anyway, that to of the it's higher to But to that, able I require recovery in going we'll XX% So to XX%. to to end

question Craig-Hallum. Matt from from Hewitt Our next comes

growth that Maybe first 'XX should is it of a that providing to you're guidance, low up, watermark? in and 'XX's we but not kind of assume I off safe appreciate anticipate

Yes.

growth. we'll think see I NHPs, the just some on

I Europe. it the And the completely diet, continued we in in surprise starting also in me think bedding, wouldn't growth some now U.K. recovery. We'll and Discovery. to next see year the and believe enrichment. believe, that growth, of right see see I see maybe it U.S. bottom that and and I seeing we're hopefully that also we'll

So growth pricing. see of don't we'll lot I think growth all I will think areas. we in see a those in

NHP I will the business. it mainly think be in

from I mainly think it'll come volume.

to want just to of little even come but to competition. retain some white-glove times. or couple your your having up the pick you have I perfectly or maybe touch customer of so you a on It's incremental to you're Or of Are down you share? treatment a you're match. match seeing incremental you're to bit, are and forced customers, highlight able relationships. up to pick able the being and still because to some come then up share And price. price Maybe not strong retain treatment Obviously,

Well, some pricing of have because think margin couple coming been down down, down come compression the also. come all, so One, coming NHP pricing's prices costs have is I a people's I think second of reasons. down. for and there's And

So in DSA more been pricing. business the think of And also general, pricing businesses. some in there's so business, the I drove that's think mainly than some I NHP down. the other But that

one of to mesh last But for queue. hop want back a just into And maybe and the me, I I'll comments. couple one

first to, margins should the you're inventory in get that the you've correctly? Once over that got Beth, think prepared lift alluding you gross of through. are Is I then, that Bob, you So impact some some to 'XX. earlier through have improve in that course your that, maybe start commented you hearing for to just as I gross the NHPs see in of you quarter, 'XX. that gross the going that were comments, over you're higher-cost of Bob, had to And segment you stated margins Am expecting higher-cost year. RMS margins to remainder that,

Yes, Matt.

that think that calendar should much what we in think some this we quarter, XXXX saying in we're there'll I but be margin be is will pressure stronger. what see

out issue. But we sure was this fiscal what -- quarter. we calendar think optimistic left, we But that in versus calendar to clear make think a into we're yes, I want 'XX. have fairly I a it going

over to closing questions, the Bob further turn any Leasure for back Mr. I'd with remarks. call no And like to

All right. Well, thank you, everyone, for joining today's call.

In into continue needs. We'll third-party high-touch, of NHPs capabilities build pay on details. and to going have I better position put expenses, to our reduce site a presales to integration, a Inotiv think ability as the provider flexible us continue customer with we'll much attention scientific strong our XXXX, our optimization, our fiscal in focused XXXX. to

Thank and you Our metrics our delivery quality, better in believe industry, for young are service, get our We're time customer your related best improve, and to today. a day. every to ahead. days we continue still company to are continuing and we

does And, you. ladies your for program. conclude you that Thank Thank today's participation. gentlemen, and

any You disconnect at may time.