Inotiv, Inc. Q4 FY2025 earnings call

• During the fourth quarter of fiscal 2025, there were positive trends like strong year-over-year demand for Discovery & Safety Assessment business. - Executed on core goals from May 2025 Investor Day, including improving cash flow, margins, and focusing on customer metrics. - Addressed a cybersecurity incident in August, worked to restore operations, and the company maintained momentum. - In September, engaged Perella Weinberg Partners for financial advisory. - For Q4 2025, total revenue increased, with DSA being the main driver; for fiscal year 2025, total revenue also increased. - RMS site consolidation efforts continued, with 13 facilities closed over 3 years. - Advanced RMS management operation system providing data and metrics for future improvements. - Improved North American transportation fleet and operations, expecting 24% reduction in fleet in Q2 2026. - Transferred commercial operations to new CRM system, reduced number of IT systems from 249 to 162.

For the fourth quarter of fiscal 2025, total revenue was $138.1 million, an increase of $7.7 million or 5.9% compared to the fourth quarter of fiscal 2024. The DSA business was the primary driver of this increase. DSA revenue in the fiscal 2025 fourth quarter was $51.6 million compared to $44.6 million in Q4 of fiscal 2024, a year-over-year 15.7% increase. For fiscal year 2025, total revenue was $513 million, an increase of $22.3 million or 4.5% compared to fiscal 2024. RMS revenue for the fourth quarter of fiscal 2025 was $86.5 million, an increase of $700,000 or 0.8% compared to Q4 of fiscal year 2024. RMS revenue for fiscal 2025 was $325.1 million, an increase of $14.5 million or 4.7% compared to fiscal 2024. DSA revenue for fiscal 2025 was $187.9 million compared to $180.1 million for fiscal year 2024, a year-over-year 4.3% increase.

While we continue to feel positive about progress, we are not providing formal fiscal 2026 guidance at this time. We hope to resume providing guidance once there is greater clarity on the market and client demand and clarity on any impact to our business once there is more information on tariffs.

• On August 18, became aware of a cybersecurity incident which caused disruption to certain business operations, having some financial impact on quarterly results.

Q: I was hoping I could start with one on -- one of your previous comments in the prepared remarks about some headwinds in the quarter. Look like really nice top line, really great bookings, maybe a little bit more expense in the model than expected. Can you maybe kind of parse out what some of those headwinds were and maybe what revenue would have been without those headwinds or what those incremental expenses were in the quarter to kind of give us a better feel for maybe what some of the extra expenses in the model were and kind of parse out what the quarter could have been maybe without some of the extra cybersecurity expenses in the model?

A: Yes. Well, Frank, you identified what the major headwind was for us in the early August finding out the cybersecurity incident we reported. That was probably the most -- major thing we faced. And we can quantify some of those things, a lot of overtime, a lot of communication, a lot of third-party cost and some studies and some work that may have been redone. But it's the intangible cost that you can't really identify the toll it takes on the operation or the customers or people may be holding back on issuing an award until you get through it. And so it's hard to quantify that. And what happened, if you would have asked me, do you think you could have increased our award 63% during a quarter or come close to the $54 million in awards we had, I would have never expected that. So I think we did a great job, but I think it would also be naive for us to think that it didn't have some impact on our earnings, our expenses and some of our awards, that would be hard for me to quantify. If we could quantify, I would. But I think it's really those intangible costs and the time it takes for organization to focus on that. As you can see, we're very focused on the client service, we're very focused on integration, we're very focused on IT integration. And so that's a lot of diversion of time and effort when you have to go through something like that. But I was very pleased how quickly we recovered. I was very pleased with our ability. We have had other times before when we've had other suppliers hit or that we've had to go manual on paper. So we try to be prepared, but no matter how prepared you are, there are always things that you're not -- you're never prepared for. But overall, I was very pleased with how we responded. But yes, it'd be naive to think that it did have some impact that is not really that quantifiable. But I think we're getting through it nicely. And as I look at the last quarter and I look at the first 2 months of this quarter, the quoting and the awards and -- are moving forward nicely. So I think we've gotten through that.

Q: Maybe first up, and I'm sure you're sick of talking about this since April, but with the FDA now announcing formal guidance regarding new approach methodologies and trying to pare back on the use of large animal models in toxicology studies, I'm just curious if you could remind us how you're positioned, maybe your exposure to monoclonal antibodies, anything along those lines.

A: Yes. Well, our revenue related to monoclonal antibodies is minimal, very small if any. And so we're not really worried about that. With the amount of quoting activity we have going on, that's not going to, I think, have an impact. We do sell a lot of research models and NHPs. I could not tell you how all of our customers use those NHPs. I've seen some others that we've reached out and talked to, and I don't think it they see any impact. I think what we saw in the guidance that they're providing is just that guidance. The customers are still going to make their own decisions about what they're going to require for safety assessment testing. And I don't know -- so this one thing is guidance. Second, what are our customers going to want to do before they put a drug into a human in terms of safety assessment. And so we've not seen a big change in that. And right now, I wouldn't see it having really any impact. But I think it was a positive that they were able to clarify what they came out and said in April. But still, it's guidance. It doesn't mean that's what people are going to do or not do because they're all going to make their own decisions of what is safe and what they want to do from a safety assessment standpoint.

Q: Maybe another way to interrogate the DSA improvement in the environment would be to ask around your lead times. What -- how quickly can you start studies for clients and maybe flipping the coin, how quickly do clients want to start studies? And are you seeing any movement on that measure?

A: David, I guess some of that depends on studies. We typically in the DSA business, see our DSA business come in and start within weeks, not months. The larger animal safety assessment businesses tend to come in and -- with closer to a 3- to 9-month lead time. We have started a studies faster than that. But right now, we're operating -- our large animal safety assessment capacity is operating at a very high level of capacity at the moment. So I think we can generally see out a couple of quarters in terms of the large animal capacity and the usage of that capacity. But the -- for the discovery and for the smaller animals, we can generally start those much quicker.