Inotiv(US:NOTV)2022-08-11 03:12Financial Data and Key Metrics Changes - Total revenue for Q3 2022 grew sevenfold to $172.7 million, with adjusted EBITDA increasing to $37 million or 21.4% of total revenues [11][35] - Consolidated net loss totaled $3.8 million or a negative $0.16 per share compared to net income of $2.6 million or $0.18 per share in Q3 2021 [42] - Interest expense increased to $8.4 million from $0.4 million in the prior year due to higher debt balance and interest rates [41] Business Segment Data and Key Metrics Changes - DSA segment revenue reached $49.2 million, a 114.8% increase from $22.9 million in Q3 2021, driven by organic growth and acquisitions [35][11] - RMS segment revenue was $123.4 million, reflecting strong incremental revenue from acquisitions [21][36] - DSA gross profit was $21.8 million or 44.3% of segment revenue, up from $7.6 million or 33.2% in the prior year [37] Market Data and Key Metrics Changes - DSA backlog at the end of Q3 was $143.2 million, up 7% from $133.6 million on March 31, 2022, and up 131% from $62 million on June 30, 2021 [44] - The book-to-bill ratio for the DSA segment was 1.19x for Q3 2022, with net awards remaining the same as the previous quarter [43] Company Strategy and Development Direction - The company is focused on expanding capacity and developing new service lines in response to client demand, with significant investments in recruiting and facilities [9][10] - A site optimization plan is being implemented to enhance services and improve margins in the RMS business [9][22] - The acquisition of Protypia adds capabilities in large molecule bioanalytical services, particularly in immuno-oncology and gene therapy [13][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledged recent market concerns but noted continued high demand for services and a strong backlog [28][29] - The company is amending its fiscal year 2022 revenue guidance to at least $550 million, up from $510 million, reflecting positive sales trends [26] - Management remains cautious about the economic environment but is committed to disciplined capital allocation and ongoing investments [32][33] Other Important Information - Capital expenditures for the quarter totaled $16.1 million or 9.3% of revenue, with year-to-date CapEx at $31.3 million or 7.9% of revenue [46] - The company has increased headcount by 13.5% over the last six months to support growth, with plans for an additional 8.5% increase in the next six months [33] Q&A Session Summary Question: Clarification on DSA organic growth rate - Management confirmed the organic growth rate of 91.3% and attributed it to increased capacity, favorable pricing, and acquisitions [50][51] Question: Cancellations related to biotech funding - Management indicated that cancellations were primarily due to molecules not being ready rather than broader funding issues [54][55] Question: Future network optimization - Management stated that no significant further optimization or closures are planned at this time [57] Question: Service gross margin outlook - Management noted that favorable pricing and product mix contributed to the current gross margin, but future quarters may see variability [61][62] Question: Demand and supply in nonhuman primate business - Management reported that demand continues to outstrip supply, with no immediate changes expected [70][71] Question: Interest rate exposure and capital structure - Management discussed the variable rate exposure and options for locking in rates, indicating that refinancing to a fixed rate would be expensive [78][82]