Inotiv(US:NOTV)2023-05-12 00:50Financial Data and Key Metrics Changes - Total revenues increased by 8% to $151.5 million from $140.3 million in the same quarter last year [50] - Adjusted EBITDA was $17.1 million, down from $25.3 million in the same period last year, but improved from a negative $5.5 million in Q1 of fiscal 2023 [78] - Consolidated net loss attributable to common shareholders totaled $10 million or a negative $0.39 per share, compared to a net loss of $6.1 million or a negative $0.24 per diluted share in the same quarter of 2022 [77] Business Line Data and Key Metrics Changes - DSA segment revenues increased by 20.2% to $47 million from $39.1 million in the same quarter last year, driven by new customers and increased sales in genetic toxicology services [55][72] - RMS segment revenues rose by 3.3% to $104.5 million from $101.2 million in the same quarter last year, with favorable pricing for multiple product lines offsetting lower NHP volumes [58][72] Market Data and Key Metrics Changes - The book-to-bill ratio at DSA in Q2 was 0.95 times, with a backlog of $145.7 million, up from $133.6 million in Q2 of 2022 [57] - NHP volumes were significantly below historical levels, but pricing benefits were realized during the quarter [52][72] Company Strategy and Development Direction - The company is focusing on expanding service offerings in the DSA segment and optimizing the RMS operating footprint to improve production efficiencies and animal welfare [51][52] - The company is committed to maintaining a leadership role in helping clients discover and develop life-changing therapies, with expectations of margin and earnings improvements from ongoing expansions and integrations [69][71] Management's Comments on Operating Environment and Future Outlook - Management noted that customers are cautious in spending, which may lead to continued cancellations, but there has been a 20% increase in new orders and quoting activity [90][92] - The company expects to generate significant cash in the second half of the year and remains optimistic about compliance with financial covenants [17][63] Other Important Information - General and administrative expenses rose to $29 million, reflecting $6.7 million in legal and third-party fees primarily related to Cambodian NHP matters [75] - The company reiterated its full-year fiscal 2023 revenue guidance of at least $580 million and updated adjusted EBITDA guidance to at least $70 million [63] Q&A Session Summary Question: Can you quantify the duplicative operating costs? - Management indicated that quantifying duplicative costs is challenging due to hidden costs involved, but they expect significant cost reductions as integration progresses [21][27] Question: What is the outlook for free cash flow in the second half of the year? - Management expressed a positive outlook for Q3 and Q4, expecting to generate significant cash as site optimization projects wind down [17][18] Question: How is the demand and cancellation trend? - Cancellations in Q2 were reportedly less than in Q1, but management remains cautious about future spending behavior from customers [14][15] Question: What is the status of NHP imports and testing? - Management stated that they are prepared to import NHPs once allowed and have made significant progress in testing and auditing [88][90] Question: How is the staffing situation as new services roll out? - Management believes they are in a good position with staffing and do not anticipate significant increases in headcount for projected growth [93]