Core Insights - The company views New Approach Methodologies (NAMS) and AI as long-term enabling technologies rather than immediate disruptors to regulated safety assessment environments [1] - The acquisition of KF Cambodia is aimed at internalizing the NHP supply chain to secure future annual requirements and reduce volatile sourcing costs [2] Manufacturing Segment - Growth in the manufacturing segment was hindered by the loss of a major commercial cell therapy client, although Microbial Solutions maintained strong performance across all testing platforms [1] DSA Segment Performance - DSA segment demand showed non-linear recovery, with net book-to-bill improving to 1.12x in Q4, primarily driven by small and mid-sized biotech clients [2] - Revenue declines in Discovery Services were noted, while pricing and mix remained stable across the broader segment [1] Future Outlook - Performance stabilization in 2025 is expected as global biopharma clients resume pipeline urgency after 2024 spending pauses, alongside a late-year surge in biotech funding [2] - Guidance anticipates a return to organic revenue growth in the second half of 2026 for both the DSA segment and the consolidated company [2] Margin and Cost Management - Operating margin expansion is expected from the KF Cambodia acquisition, projected to contribute over 100 basis points to DSA margins for the full year, with improvements beginning in the second half [2] - The 2026 framework includes at least $100 million in incremental cost savings to offset annual cost inflation and protect margins during revenue recovery [2] RMS Revenue Projection - RMS revenue is projected to decline at a low-to-mid-single-digit rate due to the timing of NHP shipments and subdued CRADL occupancy from early-stage biotech [2] Capital Allocation Strategy - Capital allocation will focus on debt repayment and maintaining 'dry powder' for M&A opportunities in areas like bioanalysis and geographic expansion into China [2]

Financial Data and Key Metrics Changes - For Q2 of fiscal 2025, total revenue was $124.3 million, up from $119.0 million in Q2 of fiscal 2024, representing a year-over-year increase of $5.3 million or 4.4% [9][26] - Adjusted EBITDA for Q2 was $8.0 million, or 6.4% of total revenue, compared to $3.1 million, or 2.6% of total revenue in the prior year [28][29] - Consolidated net loss attributable to common shareholders was $14.9 million, or a loss of $0.44 per diluted share, compared to a loss of $48.1 million, or $1.86 per diluted share in Q2 of fiscal 2024 [28] Business Line Data and Key Metrics Changes - RMS segment revenue increased by $6.6 million or 9.1% year-over-year, primarily due to higher NHP revenue [9][26] - DSA revenue decreased to $45.3 million from $46.6 million in Q2 of fiscal 2024, driven by a decline in general toxicology services revenue [27] - DSA net new orders were $44.5 million, a 27% increase over Q2 of fiscal 2024, with a book-to-bill ratio of 1.01:1 [27][30] Market Data and Key Metrics Changes - The company noted geopolitical and macroeconomic risks affecting the industry, but expects continued year-over-year revenue growth for the next two quarters [9][24] - The company has not seen significant changes in demand due to current tariffs, although there is some cost inflation linked to them [23][24] Company Strategy and Development Direction - The company is focused on client satisfaction, integration of scientific services, and optimizing RMS site operations [8][10] - A revised RMS site optimization plan is expected to yield annual cost savings of $6 million to $7 million, with completion anticipated by March 2026 [11][12] - The company is adapting to FDA goals of reducing animal testing and is investing in technologies that align with these objectives [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth in the upcoming quarters and a potential reversal in declines in discovery business [49] - The company is closely monitoring NIH funding impacts but has not yet seen significant effects on business [52][55] - Management remains confident in the ability to improve DSA margins and overall operational efficiency [62][69] Other Important Information - The company plans to hold an Investor Day on May 29 to discuss its strategic plan and focus on client excellence [90] - The company has settled a litigation case for approximately $7.6 million, which positively impacted its financials [8] Q&A Session Summary Question: Changes in marketing post-FDA announcement - Management has integrated new services into the discovery sales process and is seeing some growth, but not at the expected pace [36][37] Question: Focus areas in RMS optimization plan - The revised plan aims to improve efficiencies and reduce costs, with a focus on maximizing existing resources rather than expanding capacity [40][41] Question: Current demand and quoting activity - Management reported a positive start to the current quarter with good quoting and closing activity [45][47] Question: Impact of NIH funding on customer mix - No significant impact has been observed yet, although the company is monitoring the situation closely [52][55] Question: DSA margin improvement timeline - Management expects to see benefits from margin improvement efforts sooner rather than later, with some improvements already noted [67][69] Question: Pricing discounting trends - Price discounting has decreased compared to six to twelve months ago, with a more stable pricing environment currently [71][72] Question: Integration of scientific services - The integration involves improving project management systems and enhancing service delivery speed to add value for clients [79][80]

Financial Data and Key Metrics Changes - For Q2 of fiscal 2025, total revenue was $124.3 million, a 4.4% increase from $119 million in Q2 of fiscal 2024, primarily driven by an increase in RMS segment revenue [8][25] - Adjusted EBITDA for Q2 was $8 million, or 6.4% of total revenue, compared to $3.1 million, or 2.6% of total revenue in the same quarter last year [27][28] - Consolidated net loss attributable to common shareholders was $14.9 million, or a loss of $0.44 per diluted share, compared to a loss of $48.1 million, or $1.86 per diluted share in Q2 of fiscal 2024 [27] Business Line Data and Key Metrics Changes - RMS segment revenue increased by $6.6 million, or 9.1%, compared to Q2 of fiscal 2024, mainly due to higher NHP volumes sold [25][26] - DSA revenue decreased to $45.3 million from $46.6 million in Q2 of fiscal 2024, primarily due to a decline in general toxicology services revenue [26] - DSA net new orders were $44.5 million, a 27% increase over Q2 of fiscal 2024, with a book to bill ratio of 1.01:1 [26][28] Market Data and Key Metrics Changes - The company noted geopolitical and macroeconomic risks affecting the industry, but expects continued year-over-year revenue and adjusted EBITDA growth for the next two quarters [9][23] - The company has not seen material changes in demand due to current tariffs, although there is some cost inflation linked to tariffs [22][23] Company Strategy and Development Direction - The company is focused on client satisfaction, integration of scientific services, and site optimization plans to improve operational efficiency and margins [7][10] - A revised RMS site optimization plan is expected to yield annual cost savings of $6 million to $7 million, with completion anticipated by March 2026 [11][12] - The company is adapting to FDA announcements regarding drug development and animal testing, positioning itself to leverage new methodologies [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the level of quoting and awards in the DSA segment, expecting improvements in margins starting in Q3 of fiscal 2025 [49][86] - The company is monitoring NIH funding impacts but has not seen significant changes in business yet [52][54] - Management remains confident in the company's ability to navigate geopolitical and macroeconomic uncertainties while creating value for clients and shareholders [23][24] Other Important Information - The company plans to hold an Investor Day on May 29 to further discuss its strategic plan and focus on client excellence [87] - The company has made significant investments in acquisitions and site optimizations to prepare for future growth [7][10] Q&A Session Summary Question: Changes in marketing strategies post-FDA announcement - Management has integrated new services into their discovery sales process and is seeing some growth, though not as rapid as expected [35][36] Question: Focus areas in the revised RMS optimization plan - The revised plan aims to improve efficiencies and reduce costs, with a focus on maximizing existing resources rather than expanding capacity [40][41] Question: Current demand trends and quoting activity - Management reported a positive start to the current quarter, with strong quoting and closing activity [46][49] Question: Impact of NIH funding on customer mix - There has been no dramatic impact from NIH funding yet, with some customers increasing orders while others have reduced them [52][54] Question: DSA margin improvement timeline - Management expects to see benefits from identified margin improvement areas sooner rather than later, with some improvements already noted [66][68]