Inotiv(NOTV) - 2025 Q3 - Quarterly Results

Introduction and Highlights Company Overview Inotiv, Inc. is a CRO for nonclinical and analytical drug discovery and research models, reporting Q3 and YTD FY2025 results - Inotiv, Inc. is a leading contract research organization specializing in nonclinical and analytical drug discovery and development services and research models and related products and services[1] - The company announced financial results for the three months ('Q3 FY 2025') and nine months ('YTD FY 2025') ended June 30, 2025[1] Management Commentary Management reported improved Q3 FY2025 revenue and margins, with 25% DSA net awards growth from integration and optimization - Revenue and margins improved over the second quarter, and the year-over-year quarterly revenue increase of 23.5% was in line with expectations[3] - DSA net awards for Q3 FY2025 increased 25% versus the same period last year, following a 27% year-over-year improvement in the second quarter[4] - Growth was driven by benefits of integration, optimization, and startup investments, particularly in Discovery, Medical Device, Biotherapeutics, and Genetic Toxicology businesses[4] Q3 FY2025 Highlights Q3 FY2025 saw 23.5% revenue growth to $130.7 million (driven by RMS), reduced net loss, and significantly improved Adjusted EBITDA Q3 FY2025 Key Financial Highlights | Metric | Q3 FY2025 | Q3 FY2024 | Change ($) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Revenue | $130.7 million | $105.8 million | $24.9 million | 23.5% | | Consolidated Net Loss | $(17.6) million | $(26.1) million | $8.5 million | (32.6%) | | Adjusted EBITDA | $11.6 million | $0.1 million | $11.5 million | 11,500% | | DSA Book-to-bill ratio | 1.07x | N/A | N/A | N/A | | DSA Backlog (as of June 30) | $134.3 million | $139.4 million | $(5.1) million | (3.7%) | - The increase in Q3 FY2025 revenue was driven by a $21.0 million (34.1%) increase in Research Models and Services (RMS) revenue and a $3.9 million (8.9%) increase in Discovery and Safety Assessment (DSA) revenue[8] YTD FY2025 Highlights YTD FY2025 total revenue grew 4.0% to $374.9 million, significantly reducing net loss and improving Adjusted EBITDA YTD FY2025 Key Financial Highlights | Metric | YTD FY2025 | YTD FY2024 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | Revenue | $374.9 million | $360.3 million | $14.6 million | 4.0% | | Consolidated Net Loss | $(60.1) million | $(90.0) million | $29.9 million | (33.2%) | | Adjusted EBITDA | $22.1 million | $12.8 million | $9.3 million | 72.7% | | DSA Book-to-bill ratio | 1.03x | N/A | N/A | N/A | - The YTD FY2025 revenue increase was primarily driven by a $13.8 million (6.1%) increase in RMS revenue and a $0.8 million (0.6%) increase in DSA revenue[15] Detailed Financial Results Three Months Ended June 30, 2025 (Q3 FY2025) Q3 FY2025 revenue grew 23.5% from RMS and DSA services; operating loss significantly decreased due to RMS improvement and no prior year DOJ charge Q3 FY2025 Revenue by Segment | Segment | Q3 FY2025 Revenue | Q3 FY2024 Revenue | Change ($) | Change (%) | | :------ | :---------------- | :---------------- | :--------- | :--------- | | DSA | $48.2 million | $44.2 million | $3.9 million | 8.9% | | RMS | $82.5 million | $61.6 million | $21.0 million | 34.1% | | Total | $130.7 million | $105.8 million | $24.9 million | 23.5% | - Increase in RMS revenue was primarily due to increased NHP-related product and service revenue[13] - DSA revenue increased primarily due to an increase in general toxicology services revenue, as well as biotherapeutic and medical device services revenue[13] Q3 FY2025 Operating Loss | Metric | Q3 FY2025 | Q3 FY2024 | Change ($) | | :------------- | :-------- | :-------- | :--------- | | Operating Loss | $(5.7) million | $(20.8) million | $15.1 million | - The decrease in operating loss was primarily driven by RMS segment's improvement from an operating loss of $7.4 million in Q3 FY2024 to an operating income of $6.4 million in Q3 FY2025, an improvement of $13.8 million[14] - The decrease in operating expenses was primarily due to the $2.0 million charge related to the DOJ Resolution Agreement and Plea Agreement that was incurred during Q3 FY2024, which did not repeat during Q3 FY2025[14] Nine Months Ended June 30, 2025 (YTD FY2025) YTD FY2025 revenue grew 4.0% (RMS NHP-related products); operating loss narrowed significantly from RMS income, no DOJ charge, and a legal settlement YTD FY2025 Revenue by Segment | Segment | YTD FY2025 Revenue | YTD FY2024 Revenue | Change ($) | Change (%) | | :------ | :----------------- | :----------------- | :--------- | :--------- | | DSA | $136.3 million | $135.5 million | $0.8 million | 0.6% | | RMS | $238.6 million | $224.8 million | $13.8 million | 6.1% | | Total | $374.9 million | $360.3 million | $14.6 million | 4.0% | - The increase in RMS revenue was primarily due to higher NHP-related product and service revenue[16] YTD FY2025 Operating Loss | Metric | YTD FY2025 | YTD FY2024 | Change ($) | | :------------- | :--------- | :--------- | :--------- | | Operating Loss | $(24.1) million | $(73.2) million | $49.1 million | - The decrease in operating loss was primarily driven by RMS segment's improvement from an operating loss of $33.0 million in YTD FY2024 to an operating income of $16.6 million in YTD FY2025, an improvement of $49.6 million[17] - Key drivers for the RMS improvement include the non-recurrence of a $28.5 million charge related to the Resolution Agreement and Plea Agreement from YTD FY2024, increased RMS revenue, and a $7.6 million settlement payment received from Freese and Nichols Inc (FNI)[17] Cash and Debt Position Cash and Debt Position (as of June 30, 2025) | Metric | June 30, 2025 | September 30, 2024 | Change ($) | | :-------------------------------- | :-------------- | :----------------- | :--------- | | Cash and cash equivalents | $6.2 million | $21.4 million | $(15.2) million | | Cash used in operating activities (YTD) | $24.8 million | $4.4 million | $20.4 million | | Capital expenditures (YTD) | $13.9 million | $17.0 million | $(3.1) million | | Total debt, net of debt issuance costs | $396.5 million | $393.3 million | $3.2 million | - As of June 30, 2025, there were no borrowings on the Company's $15.0 million revolving credit facility, though a draw of $3,000 was recently requested[18] Recent Developments SEC Investigation Related to NHP Importations SEC's Division of Enforcement concluded its NHP importations investigation and will not recommend enforcement action against Inotiv - On June 2, 2025, the SEC's Division of Enforcement concluded its previously disclosed investigation related to non-human primate (NHP) importations from Asia[15] - Based on the information available, the Division does not intend to recommend an enforcement action by the SEC against the Company[15] Property Optimization and Sales Inotiv sold one property in Q3 FY2025 as part of its U.S. optimization plan, with another remaining under contract - During Q3 FY2025, one property previously reported as held for sale was sold[15] - One property remains under contract to be sold and is held for sale as of June 30, 2025, in connection with the U.S. optimization plan[15] Shareholder Lawsuits and Accrual Inotiv accrued $10.0 million for shareholder lawsuits, expecting full insurance recovery, with final terms subject to negotiation - The Company and certain of its current and former directors and officers have been named as defendants in a putative securities class action lawsuit and two consolidated shareholder derivative lawsuits[15] - The Company has recorded a $10.0 million accrual for these lawsuits as of June 30, 2025, and expects to recover the full amount under its existing insurance policies[15] - There can be no assurance that final agreements will be reached, and final amounts payable or recoverable may be materially different than the amounts recorded[15] Non-GAAP Financial Measures Note on Non-GAAP Financial Measures Inotiv uses non-GAAP measures like Adjusted EBITDA to provide supplemental investor information, aiding in evaluating operations and trends by excluding non-cash and unusual charges - Non-GAAP measures, including Adjusted EBITDA, exclude items such as interest expense, income tax benefit, depreciation and amortization, stock compensation, startup costs, restructuring costs, unrealized foreign exchange, amortization of inventory step up, loss/gain on disposition of assets, legal settlement amounts, other unusual costs, and charges related to the Resolution Agreement and Plea Agreement[20] - These measures provide useful information to investors for evaluating ongoing operations, making meaningful period-over-period comparisons, and identifying operating trends[21] - Investors should consider these non-GAAP measures as supplemental and in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP[21] Reconciliation of GAAP to Non-GAAP Select Business Segment Information Non-GAAP reconciliation shows significant operating income improvements for DSA and RMS, with RMS moving from GAAP loss to positive non-GAAP income after adjustments Non-GAAP Operating Income by Segment | Segment | Q3 FY2025 Non-GAAP Op Income | Q3 FY2024 Non-GAAP Op Income | YTD FY2025 Non-GAAP Op Income | YTD FY2024 Non-GAAP Op Income | | :------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | DSA | $7.18 million (14.9% of DSA Rev) | $7.79 million (17.6% of DSA Rev) | $19.29 million (14.2% of DSA Rev) | $22.94 million (16.9% of DSA Rev) | | RMS | $16.85 million (20.4% of RMS Rev) | $6.53 million (10.6% of RMS Rev) | $41.85 million (17.5% of RMS Rev) | $31.66 million (14.1% of RMS Rev) | | Total | $11.45 million (8.8% of Total Rev) | $0.25 million (0.2% of Total Rev) | $21.49 million (5.7% of Total Rev) | $13.24 million (3.7% of Total Rev) | - Adjustments for Q3 and YTD FY2025 include depreciation and amortization, stock compensation, restructuring costs (primarily non-cash impairment charges), startup costs for new service offerings, and for YTD FY2025, a legal settlement payment from FNI[35][36][37] - For YTD FY2024, significant adjustments included a $28.5 million charge related to the Resolution Agreement and Plea Agreement, which did not repeat in YTD FY2025, contributing to the improved operating income[38] Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA Adjusted EBITDA for Q3 FY2025 significantly increased to $11.6 million (8.9%) and YTD FY2025 to $22.1 million (5.9%), reflecting non-GAAP adjustments Adjusted EBITDA Performance | Metric | Q3 FY2025 (in thousands) | Q3 FY2024 (in thousands) | YTD FY2025 (in thousands) | YTD FY2024 (in thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------------ | | GAAP Consolidated Net Loss | $(17,577) | $(26,087) | $(60,073) | $(89,994) | | Adjusted EBITDA | $11,576 | $124 | $22,143 | $12,816 | | Adjusted EBITDA as % of total revenue | 8.9% | 0.1% | 5.9% | 3.6% | - Key adjustments contributing to Adjusted EBITDA include interest expense, income tax benefit, depreciation and amortization, stock compensation, startup costs, restructuring costs, and the non-recurrence of the Resolution Agreement and Plea Agreement charge from the prior year[40] Additional Company Information About the Company Inotiv, Inc. is a CRO for nonclinical and analytical drug discovery and research models, aiming to accelerate new drugs and medical devices to market - Inotiv is a leading contract research organization dedicated to providing nonclinical and analytical drug discovery and development services and research models and related products and services[24] - The Company's products and services focus on bringing new drugs and medical devices through the discovery and preclinical phases of development, increasing efficiency, improving data, and reducing costs[24] Forward-Looking Statements Forward-looking statements are subject to risks and uncertainties including strategic plans, demand, NHP supply, debt, costs, and litigation outcomes - Forward-looking statements are subject to risks and uncertainties including strategic plans, demand for services and products, NHP supply and demand, and compliance with agreements[25] - Other risks include the ability to service indebtedness, manage costs, execute restructuring plans, fill expanded capacity, retain key talent, develop new services, negotiate credit agreement amendments, and the potential outcome of litigation[25] - Further discussion of these risks, uncertainties, and other matters can be found in the Risk Factors detailed in the Annual Report on Form 10-K and other SEC filings[25] Webcast and Conference Call Management hosted a conference call on August 6, 2025, at 4:30 pm ET to discuss Q3 FY2025 results, with an online replay available - Management hosted a conference call on Wednesday, August 6, 2025, at 4:30 pm ET to discuss third fiscal quarter of 2025 results[19] - Interested parties could participate by dialing domestic or international numbers with the conference ID 'INOTIV'[22] - An online replay will be available in the Investors section of Inotiv's web site[19] Company Contact / Investor Relations Contact information for Inotiv's CFO, Beth A. Taylor, and Investor Relations (LifeSci Advisors, Steve Halper) is provided - Company Contact: Beth A. Taylor, Chief Financial Officer, (765) 497-8381, beth.taylor@inotiv.com[26] - Investor Relations Contact: Steve Halper, LifeSci Advisors, (646) 876-6455, shalper@lifesciadvisors.com[26] Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations Total revenue was $130.7 million (Q3 FY2025) and $374.9 million (YTD FY2025), with consolidated net losses of $17.6 million and $60.1 million respectively Condensed Consolidated Statements of Operations (Key Figures) | Metric | Q3 FY2025 (in thousands) | Q3 FY2024 (in thousands) | YTD FY2025 (in thousands) | YTD FY2024 (in thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------------ | | Total revenue | $130,683 | $105,786 | $374,882 | $360,322 | | Operating loss | $(5,675) | $(20,752) | $(24,120) | $(73,239) | | Consolidated net loss | $(17,577) | $(26,087) | $(60,073) | $(89,994) | | Basic loss per common share | $(0.51) | $(1.00) | $(1.89) | $(3.46) | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $759.7 million (down from Sep 2024), with cash down, inventories up, and total liabilities at $616.0 million Condensed Consolidated Balance Sheets (Key Figures) | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | | Total assets | $759,737 | $781,361 | | Cash and cash equivalents | $6,215 | $21,432 | | Inventories, net | $45,074 | $18,173 | | Total liabilities | $615,952 | $610,857 | | Total equity | $143,785 | $170,504 | Condensed Consolidated Statements of Cash Flows YTD FY2025 net cash used in operating activities increased to $24.8 million, with $12.4 million in investing and $22.1 million from financing Condensed Consolidated Statements of Cash Flows (Key Figures) | Metric | YTD FY2025 (in thousands) | YTD FY2024 (in thousands) | | :-------------------------------- | :------------------------ | :------------------------ | | Net cash used in operating activities | $(24,760) | $(4,433) | | Net cash used in investing activities | $(12,416) | $(11,583) | | Net cash provided by (used in) financing activities | $22,083 | $(4,889) | | Net decrease in cash and cash equivalents | $(15,217) | $(21,058) | | Cash and cash equivalents at end of period | $6,215 | $14,434 | - Financing activities for YTD FY2025 included $20.0 million in borrowings and payments on the revolving credit facility, and $27.5 million from the issuance of common shares[32]