Inotiv, Inc. Q1 FY2025 earnings call

• Enhanced liquidity through a recent equity offering that provided net proceeds of $27.5 million.
• Reduced RMS revenue volatility by expanding NHP client base for 2025 and pre-selling much of NHP inventory. Also expect increase in revenue from Colony Management Services in 2025 and continue to invest in NHP facilities.
• Made progress integrating and improving North America transportation distribution systems bought in house a year ago, which has helped improve client experience and efficiency.
• Continued site optimization program in North America for RMS business, including closing three additional sites and expanding an existing lease location, with an expected $5 million investment and estimated $4 - $5 million annual cost savings once completed by end of fiscal 2026.
• In DSA business, emphasize growing existing client base via cross - selling and attracting new clients, with investments in sales team expected to benefit in fiscal 2025 and 2026.
• In RMS segment, optimistic about increasing revenue in 2025 based on new clients, NHP pre - sales, current purchase orders, and demand for quality management services.

For the first quarter of fiscal 2025, total revenue was $119.9 million. RMS revenue decreased $13.7 million or 15.1% compared to Q1 of fiscal 2024, mainly due to lower NHP pricing. DSA revenue was $42.8 million compared to $44.7 million in Q1 of fiscal 2024, with the decrease primarily driven by a decline in Discovery Services revenue. RMS revenue contribution to total revenue and DSA revenue contribution to total revenue can be derived from the absolute figures, with RMS being a significant portion and DSA another portion.

• Currently not providing fiscal 2025 guidance, but have a comprehensive fiscal 2025 annual operating plan to optimize capital allocation and expense base and improve operating results.
• Plan forecasts compliance with updated covenants under the latest amendment to the credit agreement entered into in September 2024.
• Expect sales to grow year - over - year and have a positive outlook for adjusted EBITDA improvement as sales grow and margins improve.

• Geopolitical and market condition risks and uncertainties that all companies face.
• Impact of Cambodia NHP export situation on global NHP supply - demand dynamic, as Cambodia is an important part of the global supply base and its export decisions can affect supply availability.

Q: Have we worked through some of the higher cost NHPs throughout the first quarter or do we still have some of that to work through in the remainder of the year? And what about ordering patterns from customers?

A: Going into calendar '25 we have worked through all the higher cost NHPs. As for ordering patterns, we have significantly changed our approach. We have more solid commitments for this year, and we make some customers board so we can be less volatile. There can still be some slip in sales between quarters, but overall we're in a better position.

Q: With the contemplation of Cambodia NHP is being no longer being able to be exported worldwide, how could that impact your dynamic?

A: Cambodia is an important part of the global supply base. If they stop exporting, it puts more pressure on other supply bases. We have prepared for either event, have diversified suppliers and countries, and will comply with whatever they decide and adjust accordingly.

Q: How should we expect adjusted EBITDA cadence to flow into the fiscal second quarter ended March?

A: We expect sales to grow year - over - year. We're in good shape with respect to covenants, and as we move through the year, we should see adjusted EBITDA improvement on the back half of the year with increasing sales and improving margins Q: Did you have any lumpiness with NHP sales this quarter, did any of those sales slip out of Q1 into Q2?

A: Yes, we probably did. We could have some next quarter, and that could swing $3 million or $4 million of sales very easily. But overall, if it slips a few weeks, we're okay.

Q: The cancellations seemed to bounce back up here in Q1, is that just a function of what's going on with pharma company’s kind of re - prioritizing pipelines and kind of, acting quicker on the fill and kill decisions?

A: We saw it elevated because we had one large project that got canceled, which was over $4 million. Usually, we don't have those large projects canceled, and the 14% - 15% growth in discovery awards in Q1 is a positive sign.

Q: Are presales of inventory essentially commitments or are you -- is this a transaction that triggers rev rec in the first quarter when you presale inventory?

A: No, we don't recognize any revenue until there's a transition of ownership. We don't recognize revenue of orders when they come in; it's only after they are sold and the transaction is completed.