Inotiv, Inc. Q2 FY2024 earnings call

Key Points

• Total revenue for Q2 2024 was $119 million, down 21.5% YOY. DSA revenue was $46.6 million (down <1% YOY), RMS revenue was $72.4 million (down 31% YOY) due to weak NHP demand and other factors.
• Industry faced challenges like U.S. Attorney's Office actions affecting NHP imports, leading to lower NHP availability and demand.
• Internally, RMS site optimization projects, transportation initiatives, new contracts in UK RMS, growth in DSA new service offerings, reduced operating expenses, and a small reduction in force were noted.
• Net new DSA orders for Q2 were $35 million, year-to-date net new orders $98.9 million. Capital investments were $7 million in Q2, $12.6 million YTD. Sold several facilities, with plans to sell Cumberland in Q3.

Total revenue for Q2 2024 was $119 million, down 21.5% YOY. DSA segment: Revenue was $46.6 million in Q2 2024, down less than 1% YOY. For the six months ended March 31, 2024, DSA revenue was $91.3 million, up 3.6% YOY. Non-GAAP operating income in Q2 was $8.2 million, 17.6% of segment revenue. RMS segment: Revenue in Q2 2024 was $72.4 million, down 30.7% YOY. For the six months ended March 31, 2024, RMS revenue was $163.2 million, down 12.3% YOY. Non-GAAP operating income in Q2 was $8.2 million, 11.3% of segment revenue.

Withdrew financial guidance for fiscal year 2024 due to NHP market uncertainty. Focus on optimizing DSA segment, increasing market share, and sales force initiatives. Mentioned potential non-compliance with covenants if revenue/margins don't improve, with plans to amend credit agreement.

• NHP market risks: Weak demand, inventory levels, and uncertainty in NHP import regulations.
• Legal risks: Ongoing DOJ investigation related to Cumberland facility, with a $26.5 million accrual.
• Covenant risks: Potential non-compliance with covenants if revenue/margins don't improve.

Q: Dave Windley on NHP pricing and volume A: Pricing down 2% in Q2 vs Q1, volume down, customers have inventory Q: Matt Hewitt on early stage discovery work A: Discovery work down, safety assessment relatively strong, sales team making progress Q: Frank Takkinen on NHP destocking process A: Uncertainty on destocking, waiting for better market clarity Q: Matt Hewitt on BIOSECURE Act A: Unfamiliar with recent developments, not betting on specific regulatory outcomes Q: Dave Windley on cash flow from asset sales A: Some asset sales closed, others in process, proceeds to offset expenses