Inotiv(US:NOTV)2021-08-12 00:34Financial Data and Key Metrics Changes - Inotiv's revenue grew by approximately 45% year-over-year to $22.9 million, driven by internal growth of $2.9 million and $4.3 million from acquisitions [27][34] - Gross profit increased approximately 51% year-over-year to $7.6 million due to higher revenue [27] - Adjusted EBITDA increased approximately 148% to $2.2 million from $894,000 in the prior year quarter [28][39] - The book-to-bill ratio for the third quarter was 1.3 times, with a backlog of $62 million, up 15% from $53.9 million in March 2021 [29][40] Business Line Data and Key Metrics Changes - Service segment revenue increased 47.6% to $21.9 million from $14.9 million in the prior year period, with service gross margin rising to 33% from 31.9% [34] - Product segment revenue increased 6% to $968,000, with product gross margin increasing to 43.7% from 35.6% [35] Market Data and Key Metrics Changes - The company reported a significant increase in demand across all service lines, with a notable improvement in the ability to handle larger programs due to expanded service offerings [75] Company Strategy and Development Direction - The company is focused on building a complete suite of contract research services, supported by three strategic growth pillars: acquisitions, expansion of existing operations, and new service startups [9][25] - Recent acquisitions of HistoTox Labs and Bolder BioPATH are expected to enhance service offerings and client base, particularly in cell and gene therapy [10][11] - The company is actively pursuing additional acquisitions and expanding facilities to meet growing demand [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, highlighting a strong demand for services and a robust backlog [29][32] - The company aims to achieve a long-term adjusted corporate G&A of 6% to 7% of revenue as it scales [48] - Management noted challenges in the labor market but emphasized efforts to maintain a low turnover rate and improve company culture [71] Other Important Information - The company completed equity and debt financings in April 2021, providing net proceeds of approximately $49 million and $17 million, respectively [26] - The PPP loan of $4.9 million has been forgiven, improving the company's financial position [26][44] Q&A Session Summary Question: Margin contribution from Bolder and HistoTox acquisitions - Management indicated that the EBITDA contribution from both acquisitions is about 32%, exceeding expectations [47] Question: G&A expenses and future leverage - Management expects unallocated corporate G&A to decrease to 6% to 7% as the company grows, despite current increases due to acquisitions and new business initiatives [48][49] Question: Targeting organic and inorganic growth rates - Management noted a historical organic growth rate of over 35% and indicated that they expect to maintain this pace [51][52] Question: M&A strategy and prioritization - Corporate culture alignment is critical in M&A decisions, with a focus on companies that share similar service-oriented values [53][54] Question: Sustainability of the book-to-bill ratio - Management expressed uncertainty about the sustainability of the current high book-to-bill ratio but noted strong demand and increasing backlog [56][57] Question: St. Louis facility build-out timeline - The St. Louis facility is expected to be operational by early 2022, with potential phased openings starting in October [59] Question: Capacity and revenue potential without acquisitions - Management indicated that there is potential for additional revenue growth from existing facilities, with ongoing efforts to expand capacity [64][66] Question: Labor market challenges - The company has successfully increased headcount but continues to face challenges in recruiting scientific talent [70][71] Question: Demand across service areas - Demand remains strong and balanced across all service lines, with an increase in larger programs due to expanded service capabilities [75]