— Second quarter fiscal 2024 revenue down 21.5% to
— Year-to-date fiscal 2024 revenue down 7.2% to
— Agreement in principle reached with the
— Site optimization projects near completion
— Conference call begins today at
Revenue by Segment
(in millions of USD) | Three Months Ended | % change | Six Months Ended | % change | |||||||
2024 | 2023 | 2024 | 2023 | ||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||
DSA (Discovery & Safety Assessment) | (0.9)% | 3.6% | |||||||||
RMS (Research Models & Services) | 72.4 | 104.5 | (30.7)% | 163.2 | 186.1 | (12.3)% | |||||
Total | (21.5)% | (7.2)% | |||||||||
Management Commentary
Agreement in Principle
As it relates to the matter of the
For the three and six months ended
Financial Highlights
Q2 FY 2024 Highlights
- Revenue was
$119.0 million in Q2 FY 2024 as compared to$151.5 million during the three months endedMarch 31, 2023 (“Q2 FY 2023”), driven primarily by a decrease of$32 .1 million, or 30.7%, in Research Models and Services (“RMS”) revenue. - Consolidated net loss for Q2 FY 2024 was
$48 .1 million, or 40.4% of total revenue, compared to consolidated net loss of$9 .6 million, or 6.4% of total revenue, in Q2 FY 2023. Consolidated net loss for Q2 FY 2024 included a$26 .5 million charge related to the Agreement in Principle as it relates to a matter with the DOJ as discussed above. - Adjusted EBITDA1 in Q2 FY 2024 was
$3.1 million , or 2.6% of total revenue, compared to$17.1 million , or 11.3% of total revenue, in Q2 FY 2023. - Book-to-bill ratio for Q2 FY 2024 was 0.77x for the DSA services business.
- DSA backlog was
$142.1 million atMarch 31, 2024 , down from$145.7 million atMarch 31, 2023 , and down from$152.3 million atDecember 31, 2023 .
YTD FY 2024 Highlights
- Revenue was
$254 .5 million during the YTD FY 2024 compared to$274 .2 million during the six months endedMarch 31, 2023 ("YTD FY 2023"), driven by a$22 .9 million decrease in RMS revenue and partially offset by a$3 .2 million increase in DSA revenue. - Consolidated net loss for YTD FY 2024 was
$63 .9 million, or 25.1% of total revenue, compared to consolidated net loss of$96 .6 million, or 35.2% of total revenue for YTD FY 2023. Consolidated net loss for YTD FY 2024 included a$26 .5 million charge related to the Agreement in Principle as it relates to a matter with the DOJ as discussed above. Consolidated net loss for YTD FY 2023 included a$66 .4 million non-cash goodwill impairment charge related to the RMS segment. - Adjusted EBITDA1 in YTD FY 2024 was
$12 .7 million, or 5.0% of total revenue, compared to$11 .6 million, or 4.2% of total revenue, in YTD FY 2023. - Book-to-bill ratio was 1.11x for the DSA services business.
1 This is a non-GAAP financial measure. Refer to “Non-GAAP to GAAP Reconciliation” in this release for further information.
DSA and RMS Highlights
- In
December 2023 , the Company announced that it would be partnering withVanguard Supply Chain Solutions LLC , one of the Company’s then-current provider of transportation services, to enable the in-house integration of Inotiv’s North American transportation operations. The Company completed this in-house integration in the second quarter of fiscal 2024. The Company is now working on further route optimization projects, designed for further efficiencies and cost reductions. - The expansion activities at
Fort Collins, CO , were completed by the end ofOctober 2023 and the expanded site completed the validation of the facility and equipment which became operational in the second quarter of fiscal 2024. - During Q2 FY 2024, the Company closed the sale of its RMS facilities in Blackthorn,
U.K. , andDublin, Virginia . - The Company continues to execute on its site optimization plan for its Blackthorn,
U.K. site, which the Company is leasing back until its operations are relocated to its Hillcrest,U.K. site. The relocation of operating activities from Blackthorn into its Hillcrest,U.K. site is expected to be completed by the end ofSeptember 2024 . - The Company's facility in
Cumberland, Virginia , is under contract to be sold and continues to be held for sale as ofMarch 31, 2024 .
Second Quarter Fiscal 2024 Financial Results (Three Months Ended
Revenue decreased 21.5% to
Operating loss was
Cash and cash equivalents as of
Year-to-Date Fiscal 2024 Financial Results (Six Months Ended
Revenue decreased 7.2% to
Operating loss was
Cash and cash equivalents of
1Cost of revenue includes cost of services provided and cost of products sold excluding depreciation and amortization of intangible assets
2Operating expenses include selling, general and administrative and other operating expenses.
Subsequent Events
- The Company closed on the sale of its
Haslett, Michigan , facility in April of 2024. - The Company listed for sale an additional 85 acres in
Pennsylvania which consists of excess property not being fully utilized. - On
May 14, 2024 , the Company, certain subsidiaries and the lenders party thereto entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement. The Fourth Amendment provides that any charges or expenses attributable to or related to the Agreement in Principle may be added back to the Company’s Consolidated EBITDA (up to$26 .5 million) for purposes of the financial covenants under the Credit Agreement.
Strategic Update and Withdrawal of Fiscal 2024 Outlook
Due to the significant impact that NHP revenue has on our consolidated revenue and margins, and the current uncertainty in customer demand for NHPs, we are withdrawing financial guidance for fiscal year 2024.
We remain steadfast in the execution of our long-term strategic plan to achieve our financial goals. In the DSA segment, we are focused on optimizing our market share and increasing awards to utilize new services and additional capacity to grow DSA segment revenue. We believe that our strategic initiatives to increase our sales force, optimize sales territory coverage and focus on sales in Discovery Services put us in a position to gain market share and increase awards when biopharma companies begin to increase their level of investment in preclinical studies. We will also continue to stay focused on client satisfaction through innovation and the development of nimble solutions and custom offerings.
Webcast and Conference Call
Management will host a conference call on
Interested parties may participate in the call by dialing:
- (888) 886-7786 (Domestic)
- (416) 764-8658 (International)
- 38070700 (Conference ID)
The live conference call webcast will be accessible in the Investors section of the Company’s web site and directly via the following link:
https://viavid.webcasts.com/starthere.jsp?ei=1665042&tp_key=9a4ab0e562
For those who cannot listen to the live broadcast, an online replay will be available in the Investors section of Inotiv’s web site at: https://www.inotivco.com/investors/investor-information/.
Non-GAAP to GAAP Reconciliation
This press release contains financial measures that are not calculated in accordance with generally accepted accounting principles in
The Company believes that these non-GAAP measures provide useful information to investors. Among other things, they may help investors evaluate the Company’s ongoing operations. They can assist in making meaningful period-over-period comparisons and in identifying operating trends that would otherwise be masked or distorted by the items subject to the adjustments. Management uses these non-GAAP measures internally to evaluate the performance of the business, including to allocate resources. Investors should consider these non-GAAP measures as supplemental and in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.
Management has chosen to provide this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of our results and to illustrate our results giving effect to the non-GAAP adjustments. Management strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and cautions investors that the non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
About the Company
This release contains forward-looking statements that are subject to risks and uncertainties including, but are not limited to, statements regarding our intent, belief or current expectations with respect to (i) our strategic plans; (ii) trends in the demand for our services and products; (iii) trends in the industries that consume our services and products; (iv) market and company-specific impacts of NHP supply and demand matters; (v) the investigations by the
Company Contact | Investor Relations |
(765) 497-8381 | (516) 428-8577 |
btaylor@inotivco.com | bob@lifesciadvisors.com |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
Service revenue | $ | 56,961 | $ | 58,752 | $ | 110,824 | $ | 108,800 | |||||||
Product revenue | 62,074 | 92,711 | 143,712 | 165,417 | |||||||||||
Total revenue | 119,035 | 151,463 | 254,536 | 274,217 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of services provided (excluding depreciation and amortization of intangible assets) | 38,663 | 36,803 | 77,740 | 70,804 | |||||||||||
Cost of products sold (excluding depreciation and amortization of intangible assets) | 53,694 | 65,926 | 116,645 | 129,189 | |||||||||||
Selling | 5,403 | 4,764 | 10,751 | 9,265 | |||||||||||
General and administrative | 19,796 | 28,293 | 39,723 | 56,591 | |||||||||||
Depreciation and amortization of intangible assets | 14,155 | 12,990 | 28,405 | 26,253 | |||||||||||
Other operating expense | 30,440 | 4,812 | 33,759 | 8,451 | |||||||||||
— | — | — | 66,367 | ||||||||||||
Operating loss | $ | (43,116 | ) | $ | (2,125 | ) | $ | (52,487 | ) | $ | (92,703 | ) | |||
Other (expense) income: | |||||||||||||||
Interest expense | (11,088 | ) | (10,515 | ) | (22,452 | ) | (20,965 | ) | |||||||
Other (expense) income | (239 | ) | 545 | 1,174 | (1,333 | ) | |||||||||
Loss before income taxes | $ | (54,443 | ) | $ | (12,095 | ) | $ | (73,765 | ) | $ | (115,001 | ) | |||
Income tax benefit | 6,364 | 2,466 | 9,858 | 18,440 | |||||||||||
Consolidated net loss | $ | (48,079 | ) | $ | (9,629 | ) | $ | (63,907 | ) | $ | (96,561 | ) | |||
Less: Net income (loss) attributable to noncontrolling interests | — | 365 | (440 | ) | 756 | ||||||||||
Net loss attributable to common shareholders | $ | (48,079 | ) | $ | (9,994 | ) | $ | (63,467 | ) | $ | (97,317 | ) | |||
Loss per common share | |||||||||||||||
Net loss attributable to common shareholders: | |||||||||||||||
Basic | $ | (1.86 | ) | $ | (0.39 | ) | $ | (2.46 | ) | $ | (3.79 | ) | |||
Diluted | $ | (1.86 | ) | $ | (0.39 | ) | $ | (2.46 | ) | $ | (3.79 | ) | |||
Weighted-average number of common shares outstanding: | |||||||||||||||
Basic | 25,831 | 25,687 | 25,797 | 25,645 | |||||||||||
Diluted | 25,831 | 25,687 | 25,797 | 25,645 | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) | |||||||
2024 | 2023 | ||||||
(Unaudited) | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 32,695 | $ | 35,492 | |||
Trade receivables and contract assets, net of allowances for credit losses of | 65,757 | 87,383 | |||||
Inventories, net | 45,406 | 56,102 | |||||
Prepaid expenses and other current assets | 36,821 | 33,408 | |||||
Assets held for sale | — | 1,418 | |||||
Total current assets | 180,679 | 213,803 | |||||
Property and equipment, net | 191,423 | 191,068 | |||||
Operating lease right-of-use assets, net | 46,796 | 38,866 | |||||
94,286 | 94,286 | ||||||
Other intangible assets, net | 291,331 | 308,428 | |||||
Other assets | 10,863 | 10,079 | |||||
Total assets | $ | 815,378 | $ | 856,530 | |||
Liabilities, shareholders' equity and noncontrolling interest | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 28,381 | $ | 32,564 | |||
Accrued expenses and other current liabilities | 31,102 | 25,776 | |||||
Revolving credit facility | — | — | |||||
Fees invoiced in advance | 41,675 | 55,622 | |||||
Current portion of long-term operating lease | 11,413 | 10,282 | |||||
Current portion of long-term debt(1) | 380,358 | 7,950 | |||||
Total current liabilities | 492,929 | 132,194 | |||||
Long-term operating leases, net | 37,218 | 29,614 | |||||
Long-term debt, less current portion, net of debt issuance costs | 275 | 369,795 | |||||
Other long-term liabilities | 38,055 | 6,373 | |||||
Deferred tax liabilities, net | 39,739 | 50,064 | |||||
Total liabilities | 608,216 | 588,040 | |||||
Shareholders’ equity and noncontrolling interest: | |||||||
Common shares, no par value: | |||||||
Authorized 74,000,000 shares at | 6,438 | 6,406 | |||||
Additional paid-in capital | 717,139 | 715,696 | |||||
Accumulated deficit | (517,185 | ) | (453,278 | ) | |||
Accumulated other comprehensive income | 770 | 330 | |||||
Total equity attributable to common shareholders | 207,162 | 269,154 | |||||
Noncontrolling interest | — | (664 | ) | ||||
Total shareholders’ equity and noncontrolling interest | 207,162 | 268,490 | |||||
Total liabilities and shareholders’ equity and noncontrolling interest | $ | 815,378 | $ | 856,530 | |||
(1)In connection with | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
Six Months Ended | |||||||
2024 | 2023 | ||||||
Operating activities: | |||||||
Consolidated net loss | $ | (63,907 | ) | $ | (96,561 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities, net of acquisitions: | |||||||
Depreciation and amortization | 28,405 | 26,253 | |||||
Employee stock compensation expense | 3,781 | 3,827 | |||||
Changes in deferred taxes | (10,391 | ) | (21,303 | ) | |||
Provision for expected credit losses | (245 | ) | 1,333 | ||||
Amortization of debt issuance costs and original issue discount | 1,686 | 1,512 | |||||
Non-cash interest and accretion expense | 3,336 | 2,870 | |||||
Other non-cash operating activities | (655 | ) | 1,113 | ||||
— | 66,367 | ||||||
Changes in operating assets and liabilities: | |||||||
Trade receivables and contract assets | 22,265 | 22,836 | |||||
Inventories | 10,781 | 7,125 | |||||
Prepaid expenses and other current assets | (3,565 | ) | 1,862 | ||||
Operating lease right-of-use assets and liabilities, net | 807 | 429 | |||||
Accounts payable | (3,119 | ) | 5,018 | ||||
Accrued expenses and other current liabilities | 5,276 | (3,474 | ) | ||||
Fees invoiced in advance | (14,100 | ) | (13,720 | ) | |||
Other asset and liabilities, net | 30,018 | (61 | ) | ||||
Net cash provided by operating activities | 10,373 | 5,426 | |||||
Investing activities: | |||||||
Capital expenditures | (12,594 | ) | (16,840 | ) | |||
Proceeds from sale of property and equipment | 3,964 | 276 | |||||
Net cash used in investing activities | (8,630 | ) | (16,564 | ) | |||
Financing activities: | |||||||
Payments on revolving credit facility | — | (21,000 | ) | ||||
Payments on senior term notes and delayed draw term loans | (1,382 | ) | (1,375 | ) | |||
Borrowings on revolving credit facility | — | 6,000 | |||||
Borrowings on delayed draw term loan | — | 35,000 | |||||
Other financing activities, net | (2,712 | ) | (1,401 | ) | |||
Net cash (used in) provided by financing activities | (4,094 | ) | 17,224 | ||||
Effect of exchange rate changes on cash and cash equivalents | (446 | ) | 1,052 | ||||
Net (decrease) increase in cash and cash equivalents | (2,797 | ) | 7,138 | ||||
Less: cash, cash equivalents, and restricted cash held for sale | — | (1,522 | ) | ||||
Cash, cash equivalents, and restricted cash at beginning of period | 35,492 | 18,980 | |||||
Cash, cash equivalents, and restricted cash at end of period, net of cash, cash equivalents and restricted cash held for sale | $ | 32,695 | $ | 24,596 | |||
Non-cash financing activity: | |||||||
Paid in kind debt issuance costs | $ | — | $ | 1,363 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 16,891 | $ | 16,374 | |||
Income taxes paid, net | $ | 1,175 | $ | 3,952 | |||
RECONCILIATION OF GAAP TO NON-GAAP SELECT BUSINESS SEGMENT INFORMATION (In thousands) (Unaudited) | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
DSA | |||||||||||
Revenue | 46,631 | 47,023 | 91,329 | 88,116 | |||||||
Operating income | 2,853 | 1,924 | 4,446 | 4,296 | |||||||
Operating income as a % of total revenue | 2.4 | % | 1.3 | % | 1.7 | % | 1.6 | % | |||
Add back: | |||||||||||
Depreciation and amortization | 4,363 | 3,611 | 8,772 | 7,591 | |||||||
Restructuring costs | 23 | 97 | 136 | 97 | |||||||
Startup costs | 967 | 2,281 | 1,797 | 3,786 | |||||||
Total non-GAAP adjustments to operating income | 5,353 | 5,989 | 10,705 | 11,474 | |||||||
Non-GAAP operating income | 8,206 | 7,913 | 15,151 | 15,770 | |||||||
Non-GAAP operating income as a % of DSA revenue | 17.6 | % | 16.8 | % | 16.6 | % | 17.9 | % | |||
Non-GAAP operating income as a % of total revenue | 6.9 | % | 5.2 | % | 6.0 | % | 5.8 | % | |||
RMS | |||||||||||
Revenue | 72,404 | 104,440 | 163,207 | 186,101 | |||||||
Operating income (loss) | (30,603 | ) | 12,725 | (25,525 | ) | (58,547 | ) | ||||
Operating income (loss) as a % of total revenue | (25.7 | %) | 8.4 | % | (10.0 | %) | (21.4 | %) | |||
Add back: | |||||||||||
Depreciation and amortization | 9,643 | 9,379 | 19,380 | 18,662 | |||||||
Restructuring costs | 1,345 | 1,643 | 2,266 | 1,909 | |||||||
Amortization of inventory step up | 58 | 183 | 160 | 427 | |||||||
Other unusual, third party costs | 1,272 | 469 | 2,358 | 1,140 | |||||||
Agreement in Principle | 26,500 | — | 26,500 | — | |||||||
— | — | — | 66,367 | ||||||||
Total non-GAAP adjustments to operating income (loss) | 38,818 | 11,674 | 50,664 | 88,505 | |||||||
Non-GAAP operating income | 8,215 | 24,399 | 25,139 | 29,958 | |||||||
Non-GAAP operating income as a % of RMS revenue | 11.3 | % | 23.4 | % | 15.4 | % | 16.1 | % | |||
Non-GAAP operating income as a % of total revenue | 6.9 | % | 16.1 | % | 9.9 | % | 10.9 | % | |||
Unallocated Corporate Operating Expenses | (15,366 | ) | (16,774 | ) | (31,408 | ) | (38,452 | ) | |||
Unallocated corporate operating expenses as a % of total revenue | (12.9 | )% | (11.1 | )% | (12.3 | )% | (14.0 | )% | |||
Add back: | |||||||||||
Depreciation and amortization | 149 | — | 253 | — | |||||||
Stock option expense | 1,884 | 1,781 | 3,781 | 3,827 | |||||||
Acquisition and integration costs | — | 105 | 70 | 1,088 | |||||||
Total non-GAAP adjustments to operating loss | 2,033 | 1,886 | 4,104 | 4,915 | |||||||
Non-GAAP operating loss | (13,333 | ) | (14,888 | ) | (27,304 | ) | (33,537 | ) | |||
Non-GAAP operating loss as a % of total revenue | (11.2 | )% | (9.8 | )% | (10.7 | )% | (12.2 | )% | |||
Total | |||||||||||
Revenue | 119,035 | 151,463 | 254,536 | 274,217 | |||||||
Operating loss | (43,116 | ) | (2,125 | ) | (52,487 | ) | (92,703 | ) | |||
Operating loss as a % of total revenue | (36.2 | )% | (1.4 | %) | (20.6 | )% | (33.8 | %) | |||
Add back: | |||||||||||
Depreciation and amortization | 14,155 | 12,990 | 28,405 | 26,253 | |||||||
Stock compensation expense | 1,884 | 1,781 | 3,781 | 3,827 | |||||||
Restructuring costs | 1,368 | 1,740 | 2,402 | 2,006 | |||||||
Acquisition and integration costs | — | 105 | 70 | 1,088 | |||||||
Amortization of inventory step up | 58 | 183 | 160 | 427 | |||||||
Startup costs | 967 | 2,281 | 1,797 | 3,786 | |||||||
Other unusual, third party costs | 1,272 | 469 | 2,358 | 1,140 | |||||||
Agreement in Principle | 26,500 | - | 26,500 | - | |||||||
- | - | - | 66,367 | ||||||||
Total non-GAAP adjustments to operating loss | 46,204 | 19,549 | 65,473 | 104,894 | |||||||
Non-GAAP operating income (loss) | 3,088 | 17,424 | 12,986 | 12,191 | |||||||
Non-GAAP operating income (loss) as a % of total revenue | 2.6 | % | 11.5 | % | 5.1 | % | 4.4 | % | |||
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA (In thousands) (Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
GAAP Consolidated Net Loss | $ | (48,079 | ) | $ | (9,629 | ) | $ | (63,907 | ) | $ | (96,561 | ) | |||
Adjustments (a) | |||||||||||||||
Interest expense | 11,088 | 10,515 | 22,452 | 20,965 | |||||||||||
Income tax benefit | (6,364 | ) | (2,466 | ) | (9,858 | ) | (18,440 | ) | |||||||
Depreciation and amortization | 14,155 | 12,990 | 28,405 | 26,253 | |||||||||||
Stock compensation expense | 1,884 | 1,781 | 3,781 | 3,827 | |||||||||||
Acquisition and integration costs (1) | — | 105 | 70 | 1,088 | |||||||||||
Startup costs | 967 | 2,281 | 1,797 | 3,786 | |||||||||||
Restructuring costs (2) | 1,368 | 1,740 | 2,402 | 2,006 | |||||||||||
Unrealized foreign exchange (gain) loss | 420 | (739 | ) | (609 | ) | 511 | |||||||||
Amortization of inventory step up | 58 | 183 | 160 | 427 | |||||||||||
(Gain) loss on disposition of assets | (193 | ) | (129 | ) | (859 | ) | 251 | ||||||||
Other unusual, third party costs | 1,272 | 469 | 2,358 | 1,140 | |||||||||||
Agreement in Principle (4) | 26,500 | — | 26,500 | — | |||||||||||
- | - | - | 66,367 | ||||||||||||
Adjusted EBITDA (b) | $ | 3,076 | $ | 17,101 | $ | 12,692 | $ | 11,620 | |||||||
GAAP consolidated net loss as a percent of total revenue | (40.4 | )% | (6.4 | )% | (25.1 | )% | (35.2 | )% | |||||||
Adjustments as a percent of total revenue | 43.0 | % | 17.6 | % | 30.1 | % | 39.5 | % | |||||||
Adjusted EBITDA as a percent of total revenue | 2.6 | % | 11.3 | % | 5.0 | % | 4.2 | % | |||||||
(a) Adjustments to certain GAAP reported measures for the three and six months ended
(1) For the three and six months ended
(2) For the three and six months ended
(3) For the six months ended
(4) For the three and six months ended
(b) Adjusted EBITDA - Consolidated net loss before interest expense, income tax benefit, depreciation and amortization, stock compensation expense, acquisition and integration costs, startup costs, restructuring costs, unrealized foreign exchange (gain) loss, amortization of inventory step up, (gain) loss on disposition of assets, other unusual, third party costs, the charge in connection with the Agreement in Principle and goodwill impairment loss.
Source:
2024 GlobeNewswire, Inc., source