Inotiv(US:NOTV)2024-08-09 02:55Financial Data and Key Metrics Changes - For Q3 2024, total revenue was $105.8 million, a decrease of 33% from $157.5 million in the prior year, primarily due to a decrease in NHP sales and a 35% reduction in NHP average price [17] - For the nine months ended June 30, 2024, consolidated revenue was $360.3 million, down 16.5% from $431.7 million for the same period last year [17] - Adjusted EBITDA for Q3 was $0.1 million, less than 1% of total revenues, compared to $30.5 million or 19.4% of total revenue for the same quarter last year [24] Business Line Data and Key Metrics Changes - DSA revenues in Q3 2024 decreased by approximately 6% to $44.2 million compared to $46.8 million in the prior year, driven by a decrease in general toxicology services [18] - RMS revenue for Q3 was down 44.4% to $61.6 million compared to $110.7 million in the same quarter last year, primarily due to lower NHP-related product and service revenue [20] - Year-to-date RMS revenue was down 24.3% to $224.8 million compared to $296.8 million in the same period last year [20] Market Data and Key Metrics Changes - The DSA segment saw net new orders running ahead of last year’s pace by approximately 5% for the nine months ended June 30, 2024 [12] - The average sales price of NHPs in Q3 2024 decreased approximately 23% sequentially from Q2 2024 and 35% compared to the same period in fiscal 2023 [21] - The company is beginning to see early signs of recovery in the NHP market, with expectations to potentially double the volume of NHPs sold in Q4 2024 compared to Q3 2024 [8] Company Strategy and Development Direction - The company aims to be a leading mid-sized preclinical CRO and is focusing on diversifying its customer base and migrating to long-term recurring contracts [9] - The company has completed significant investments to grow its service offerings and improve operational efficiencies [15] - The company is committed to building a business that creates value for customers, employees, and shareholders while addressing legal challenges and industry headwinds [16] Management's Comments on Operating Environment and Future Outlook - Management noted that improved funding levels for biotech companies in early 2024 have positively impacted project awards, but biopharma companies are expected to remain conservative in their preclinical pipeline investments [11] - The company anticipates a significant improvement in Q4 2024, with potential sales of NHPs expected to increase by 120% to 130% compared to Q3 2024 [34] - Management expressed confidence in the future of the industry and the company, emphasizing the importance of focusing on customer service and operational improvements [59] Other Important Information - The company reached a resolution of the Virginia DOJ investigation and related settlement, which is expected to reduce legal expenses by approximately $2 million to $3 million per quarter [31] - The company amended its loan agreement with senior debt holders for the DOJ settlement and received a waiver for non-compliance with financial covenants as of June 30, 2024 [9] Q&A Session Summary Question: What does the resolution of the Florida DOJ situation mean for legal expenses? - Legal expenses are expected to decrease significantly, potentially by $2 million to $3 million per quarter [31] Question: When can improvements in NHP sales be expected? - Q4 is expected to show improvements, with potential sales of NHPs increasing significantly compared to Q3 [34] Question: How is the company addressing pricing pressures in the market? - The company is focusing on differentiating its services and has seen some success in maintaining demand despite pricing pressures [36] Question: Can you elaborate on the customer base and inventory levels? - The company has diversified its customer base, with no single customer representing over 10% of sales, and is seeing good inquiry levels for NHPs [40] Question: What is the outlook for long-term contracts? - The company expects a significant portion of its sales to be committed to long-term contracts, potentially over 75% [49]