Inotiv, Inc. (Nasdaq: NOTV) (the “Company”, “We”, “Our” or
“Inotiv”), a leading contract research organization
specializing in nonclinical and analytical drug discovery and
development services and research models and related products and
services, today announced financial results for the three months
(“Q2 FY 2023”) and six months (“YTD FY 2023”) ended March 31, 2023.
Financial Highlights
Q2 FY 2023 Highlights
- Revenue grew to $151.5 million in
Q2 FY 2023 from $140.3 million during the three months ended March
31, 2022 (“Q2 FY 2022”), driven by a $7.9 million, or 20.2%,
increase in Discovery and Safety Assessment (“DSA”) revenue and a
$3.3 million, or 3.3%, increase in Research Models and Services
(“RMS”) revenue.
- Consolidated net loss for Q2 FY
2023 was $(9.6) million, or (6.4)% of total revenue, compared to
consolidated net loss of $(6.7) million, or (4.7)% of total
revenue, in Q2 FY 2022.
- Adjusted EBITDA1 was $17.1 million,
or 11.3% of total revenue, compared to $25.3 million, or 18.0% of
total revenue, in Q2 FY 2022.
- Book-to-bill ratio was 0.95x for
the DSA services business.
- DSA backlog was $145.7 million, up
from $133.6 million at March 31, 2022.
YTD FY 2023 Highlights
- Revenue grew to $274.2 million in
YTD FY 2023 from $224.5 million during the six months ended March
31, 2022 (“YTD FY 2022”), driven by a $16.2 million, or 22.5%,
increase in DSA revenue and a $33.5 million, or 22.0%, increase in
RMS revenue.
- Consolidated net loss for YTD FY
2023 was $(96.6) million, or (35.2)% of total revenue, compared to
consolidated net loss of $(90.1) million, or (40.1)% of total
revenue, in YTD FY 2022. The YTD FY 2023 consolidated net loss
included a $66.4 million non-cash goodwill impairment charge
related to our RMS segment.
- Adjusted EBITDA1 was $11.6 million,
or 4.2% of total revenue, compared to $35.3 million, or 15.7% of
total revenue, in YTD FY 2022.
- Book-to-bill ratio was 0.98x 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.
Updating Select Financial Guidance for
the Full Fiscal Year Ending September 30, 2023 (“FY
2023”)
The Company's guidance takes into account a number of factors,
including existing DSA backlog, current sales pipeline, trends in
cancellations and delays, trends in pricing, the impact of new
products and services and efficiency initiatives including the
recent and planned facility consolidations in the U.S. and
globally. In addition, the guidance presented below represents the
Company’s best efforts to estimate the impact of the NHP supply
disruption that was identified and disclosed in the first quarter
of fiscal 2023. For FY 2023, we are confirming guidance of at least
$580 million of revenue and capital expenditures of no more than 5%
of revenue during FY 2023. However, as a result of the increased
legal and third party fees incurred during YTD FY 2023, we are
updating our guidance for Adjusted EBITDA to at least $70 million
down from previous guidance of $75 million. We continue to expect
that we will remain in compliance with our financial covenants for
FY 2023.
Management Commentary
Robert Leasure Jr., President and Chief
Executive Officer, commented, “We are very pleased with the pace
and progress of our integration and site optimization initiatives,
the growth we are achieving in new service lines, and the overall
positive returns being delivered by the investments we have made in
expanding our business over the last 12 to 18 months. We also
continue to address the current NHP supply disruption issues in the
U.S., which includes establishing procedures aimed at providing
additional assurances that future NHP imports are purpose-bred, and
pursuing alternative sourcing to meet client demand.”
Mr. Leasure continued, “Our recent investments
have expanded our services for the drug discovery and development
industry. These new services, including expanded genetic toxicology
and safety pharmacology offerings, new biotherapeutics services,
and enhanced proteomic technologies, increase our ability to
support the development of important new therapeutics including
cell and gene therapies, allow us to improve speed to market for
our clients, expand our market and client base, and help to reduce
our outsourcing expenses. We believe the completion of these growth
and consolidation activities will improve our ability to increase
sales and enhance margins. I am grateful for the continuing support
of the Inotiv team as we collectively address both the challenges
and opportunities facing our business and industry while continuing
to deliver a high level of client service.”
Q2 FY 2023 Review
Revenue (in millions)
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
Segment |
|
Q2 FY2023 |
|
|
Q2 FY2022 |
|
|
Difference |
|
|
%Change |
|
DSA |
|
$ |
47.0 |
|
|
$ |
39.1 |
|
|
$ |
7.9 |
|
|
|
+20.2 |
% |
RMS |
|
$ |
104.5 |
|
|
$ |
101.2 |
|
|
$ |
3.3 |
|
|
|
+3.3 |
% |
Total |
|
$ |
151.5 |
|
|
$ |
140.3 |
|
|
$ |
11.2 |
|
|
|
+8.0 |
% |
Higher total revenue was driven by a $7.9 million increase in
DSA revenue and a $3.3 million increase in RMS revenue. The
increase in the DSA revenue was primarily driven by increasing
revenue within the current operating structure. Additionally, we
are beginning to see increased revenue from genetic toxicology
services in connection with new business at our Rockville facility.
The increase in RMS revenue was due primarily to favorable pricing
across several products, particularly NHPs, partially offset by the
negative impact of lower volumes of NHP sales.
Gross Profit2 (in millions)
|
|
(unaudited) |
|
|
|
|
|
(unaudited) |
|
|
|
|
Segment |
|
Q2 FY2023 |
|
|
% ofSegmentRevenue |
|
|
Q2 FY2022 |
|
|
%
ofSegmentRevenue |
|
DSA |
|
$ |
15.1 |
|
|
|
32.1 |
% |
|
$ |
12.3 |
|
|
|
31.5 |
% |
RMS |
|
$ |
29.8 |
|
|
|
28.5 |
% |
|
$ |
32.4 |
|
|
|
32.0 |
% |
Total |
|
$ |
44.9 |
|
|
|
29.6 |
% |
|
$ |
44.7 |
|
|
|
31.9 |
% |
2 excludes amortization of intangible assets
Higher total gross profit in Q2 FY 2023 was the
result of a $2.8 million increase in DSA gross profit from Q2 FY
2022, and a $2.6 million decrease in RMS gross profit from Q2 FY
2022. The increase in DSA gross profit as a percent of DSA revenue
was driven primarily by increasing sales within the current
operating structure. The decrease in RMS gross profit as a percent
of RMS revenue was primarily due to the mix of products sold,
inflationary pressure on product expenses, energy and wages and
some duplication of expenses as we transfer production to implement
our site optimization plans, partially offset by favorable pricing
for several different RMS product lines. Additionally, the Company
experienced favorable margin impacts from the site closures of our
Cumberland and Dublin, VA, facilities, which partially offset the
inflationary pressures described above.
Consolidated Net Loss
Consolidated net loss for Q2 FY 2023 was $(9.6) million compared
to consolidated net loss of $(6.7) million in Q2 FY 2022.
Consolidated net loss for Q2 FY 2023 included $13.0 million of
depreciation and amortization expense, an increase of $3.1 million
from Q2 FY 2022, and $1.8 million of stock compensation expense, an
increase of $0.6 million from Q2 FY 2022. Other increases in
operating expenses were driven by increases in general and
administrative (“G&A”) and other operating expenses, reflecting
the integration of previous acquisitions, increases in start-up
costs related to our Rockville facility, higher compensation
expense and higher legal and third party fees, among other costs.
Net loss for Q2 FY 2023 included $6.7 million in legal and third
party fees. Based on current information, we expect legal and third
party fees to be lower in the third quarter of fiscal 2023. The
Company also incurred $10.5 million of interest expense during Q2
FY 2023 as compared to $7.5 million in Q2 FY 2022.
YTD FY 2023 Review
Revenue (in millions)
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
Segment |
|
YTD FY2023 |
|
|
YTD FY2022 |
|
|
Difference |
|
|
%Change |
|
DSA |
|
$ |
88.1 |
|
|
$ |
71.9 |
|
|
$ |
16.2 |
|
|
|
+22.5 |
% |
RMS |
|
$ |
186.1 |
|
|
$ |
152.6 |
|
|
$ |
33.5 |
|
|
|
+22.0 |
% |
Total |
|
$ |
274.2 |
|
|
$ |
224.5 |
|
|
$ |
49.7 |
|
|
|
+22.1 |
% |
Higher total revenue was driven by a $16.2 million increase in
DSA revenue and a $33.5 million increase in RMS revenue. The
increase in DSA revenue was primarily driven by additional YTD FY
2023 revenue generated from Integrated Laboratory Systems, LLC
(“ILS”), which was acquired on January 10, 2022, plus new services
related to genetic toxicicology and organic growth in general
toxicology services. The increase in the RMS revenue was due
primarily to favorable pricing, particularly NHPs, partially offset
by the negative impact of lower volumes of NHP sales. Additionally,
the increase in RMS revenue was impacted by the timing of
contributions from acquisitions. Envigo was acquired on November 5,
2021, RSI was acquired on December 29, 2021, and OBRC was acquired
on January 27, 2022. Gross
Profit2 (in millions)
|
|
(unaudited) |
|
|
|
|
|
(unaudited) |
|
|
|
|
Segment |
|
YTD FY2023 |
|
|
% ofSegmentRevenue |
|
|
YTD FY2022 |
|
|
%
ofSegmentRevenue |
|
DSA |
|
$ |
28.2 |
|
|
|
32.0 |
% |
|
$ |
24.6 |
|
|
|
34.2 |
% |
RMS |
|
$ |
38.4 |
|
|
|
20.6 |
% |
|
$ |
39.5 |
|
|
|
25.9 |
% |
Total |
|
$ |
66.6 |
|
|
|
24.3 |
% |
|
$ |
64.1 |
|
|
|
28.6 |
% |
2 excludes amortization of intangible assets
Higher total gross profit in YTD FY 2023 was the
result of a $3.6 million increase in DSA gross profit from YTD FY
2022, and a $1.1 million decrease in RMS gross profit from YTD FY
2022. The decrease in DSA gross profit as a percent of DSA revenue
was primarily due to laboratory capacity investments and costs
associated with the successful recruitment of scientists in YTD FY
2023, to begin adding services and capacity, some of which became
available in Q2 FY 2023 and some of which we expect to become
available during the remainder of FY 2023. The decrease in RMS
gross profit as a percent of RMS revenue was primarily due to
significantly reduced margins in the first fiscal quarter of 2023
due to the mix of products sold and inflationary pressure on
product expenses, energy and wages and some duplication of expenses
as we transfer production to implement our site optimization plans,
partially offset by favorable pricing for several different RMS
product lines which were effective beginning in Q2 FY 2023, and
favorable margin impacts from the site closures of our Cumberland
and Dublin, VA, facilities.
Consolidated Net Loss
Consolidated net loss for YTD FY 2023 was $(96.6) million
compared to consolidated net loss of $(90.1) million in YTD FY
2022. Consolidated net loss for YTD FY 2023 included: a previously
announced $66.4 million non-cash goodwill impairment charge related
to our RMS segment; $26.3 million of depreciation and amortization
expense, an increase of $10.4 million from YTD FY 2022; and $3.8
million of stock compensation expense, a decrease of $21.2 million
from YTD FY 2022. Other increases in operating expenses were driven
by higher selling costs, primarily due to increased revenue, higher
G&A expenses, reflecting various acquisitions, higher legal,
audit and third party fees and higher start-up costs related to our
Rockville facility, among other costs. Net loss for YTD FY 2023
included $10.1 million in legal and third party fees. Based on
current information, we expect legal and third party fees to be
lower in the third quarter of fiscal 2023. Consolidated net loss
for YTD FY 2022 also included one-time charges of $56.7 million of
fair value remeasurement of the embedded derivative component of
the convertible notes issued in September 2021 and $23.0 million of
post combination stock compensation expense relating to the
adoption of the Envigo Equity Plan. Further, consolidated net loss
included $21.0 million of interest expense during YTD FY 2023, up
from $12.4 million in YTD FY 2022.
Cash Provided by Operating and Financing Activities and
Financial Condition
As of March 31, 2023, the Company had $24.6
million in cash and cash equivalents and no borrowings on its $15.0
million revolving credit facility. Total debt, net of debt issuance
costs, as of March 31, 2023, was $374.1 million. We were in
compliance with our debt covenants as of March 31, 2023. Cash
provided by operating activities was $5.4 million for YTD FY 2023,
compared to cash provided by operating activities of $4.0 million
for YTD FY 2022. For YTD FY 2023, capital expenditures totaled
$16.8 million.
Update on DSA and RMS
Activities
- The Company will
be co-locating and further integrating its genetically engineered
models and services (“GEMS”) business with its existing
Pharmacology, Toxicology, Pharmacokinetic and Laboratory Sciences
operations in St. Louis, MO, allowing colleagues with similar
skills and expertise to collaborate more closely. We expect the
completion of this project to occur in the third fiscal quarter of
2023, and upon completion we will eliminate the need for one of our
leased facilities in St Louis. The lease expires in July 2023 and
will not be renewed.
- Within its DSA business segment, the
Company’s Rockville, MD, site is now operational with GLP
biotherapeutics analytical and genetic toxicology capabilities; the
facility expansion in Boulder, CO, has been completed; and the
expansion activities at Fort Collins, CO, remain on track and are
expected to become operational by the end of FY 2023.
- Within its RMS
business segment, as previously announced during the first fiscal
quarter of 2023, the Company completed the shutdown of its
Cumberland and Dublin, VA, facilities and initiated a relocation of
its operations in Haslett, MI, and Boyertown, PA, to its newly
refurbished facility in Denver, PA. The facility closures in
Haslett and Boyertown were completed as planned in March 2023, and
these facilities have been listed for sale.
- In the first fiscal quarter of 2023,
the Company initiated the relocation of two RMS facilities in
Indianapolis, IN, which are expected to be completed by June 30,
2023.
- The relocation of the Company’s RMS
facility in France to recently updated operations in The
Netherlands is now underway, and we expect to have this process
completed by the end of June 2023.
- The Company has completed its
consultations with employee representatives to relocate its
Blackthorne, U.K., facility to operations in Hillcrest, U.K., and
currently expects this relocation to be completed during the third
quarter of fiscal 2024.
- In conjunction with these RMS
changes, the Company is reviewing alternatives and route
enhancements to our transportation system and has begun to initiate
changes, which we expect will result in a reduction in the number
of vehicles required, a reduction in energy consumption and its
associated greenhouse gas emissions, and ultimately a reduction in
transportation expenses while maintaining and improving our service
levels.
- The previously announced sale of the
Company’s Israel operations is still in process and is expected to
be completed within this fiscal year.
Subsequent Events:
The Company extended by one year the maturity of a $3.7 million
unsecured seller payable pursuant to the stock purchase agreement
(“SPA”) with Orient Bio, Inc. The unsecured seller payable, which
was originally due on July 27, 2023, is now due July 27, 2024. This
extension did not affect the rights and remedies of any party to
the SPA, nor alter, modify or amend or in any way affect any of the
terms and conditions, obligations, covenants or agreements
contained in the SPA.
On May 4, 2023, the Company announced the
expansion of its safety pharmacology offering with the validation
and verification of a cardiopulmonary telemetry study model in
cynomolgus macaques. Offered through Inotiv’s DSA business,
telemetry allows for the continuous observation of ECG, respiratory
rate and volume, blood pressure and other cardiovascular parameters
during preclinical safety studies.
Management will host a conference call on
Thursday, May 11, 2023, at 4:30 pm ET to discuss second quarter
results for fiscal year 2023.
Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic)
- (201) 493-6739 (International)
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://event.choruscall.com/mediaframe/webcast.html?webcastid=j0NY3Nu6
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 United States (GAAP), including Adjusted EBITDA
and Adjusted EBITDA as a percentage of total revenue for the three
and six months ended March 31, 2023 and 2022 and selected business
segment information for those periods. Adjusted EBITDA as reported
herein refers to a financial measure that excludes from
consolidated net income (loss) statement of operations line items
interest expense and income tax (benefit) expense, as well as
non-cash charges for depreciation and amortization, stock
compensation expense, acquisition and integration costs, startup
costs, restructuring costs incurred in connection with the exit of
multiple facilities, unrealized foreign exchange gain/ loss, loss
on debt extinguishment, amortization of inventory step up,
loss/gain on disposition of assets, loss on fair value
remeasurement of convertible notes, other non-recurring third-party
costs and goodwill impairment loss. The adjusted business segment
information excludes from operating income and unallocated
corporate G&A these same expenses.
Adjusted EBITDA and Adjusted EBITDA margin
guidance for fiscal year 2023 and periods within the year are
provided on a non-GAAP basis. The Company cannot reconcile this
guidance to expected net income/loss or expected net income/loss
margin without unreasonable effort because certain items that
impact net income/loss and net income/loss margin are out of the
Company's control and/or cannot be reasonably predicted at this
time, which unavailable information could have a significant impact
on the Company’s GAAP financial results.
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
Inotiv, Inc. is a leading contract research
organization dedicated to providing nonclinical and analytical drug
discovery and development services and research models and related
products and services. The Company’s products and services focus on
bringing new drugs and medical devices through the discovery and
preclinical phases of development, all while increasing efficiency,
improving data, and reducing the cost of taking new drugs to
market. Inotiv is committed to supporting discovery and development
objectives as well as helping researchers realize the full
potential of their critical R&D projects, all while working
together to build a healthier and safer world. Further information
about Inotiv can be found here: https://www.inotivco.com/.
This release contains forward-looking statements
that are subject to risks and uncertainties including, but not
limited to, risks and uncertainties related to the impact of recent
events related to NHP matters on the Company’s business,
operations, results, financial condition, cash flows, and assets,
the Company’s ability to comply with covenants under its credit
agreement, Company’s ability to reduce its legal and third party
fees, changes in the market and demand for the Company’s products
and services, the development, marketing and sales of products and
services, changes in technology, industry and regulatory standards,
the timing of acquisitions and the successful closing, integration
and business and financial impact thereof, governmental
regulations, inspections and investigations, claims, investigations
and litigation against or involving the Company, its business
and/or its industry, the impact of site closures and
consolidations, expansion and related efforts, and various other
market and operating risks, including those detailed in the
Company's filings with the U.S. Securities and Exchange
Commission.
Company Contact |
Investor Relations |
Inotiv, Inc. |
The Equity Group Inc. |
Beth A. Taylor, Chief Financial Officer |
Devin Sullivan |
(765) 497-8381 |
(212) 836-9608 |
btaylor@inotivco.com |
dsullivan@equityny.com |
INOTIV, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except per share
amounts)(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
March 31, |
|
March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Service revenue |
$ |
58,752 |
|
|
$ |
49,584 |
|
|
$ |
108,800 |
|
|
$ |
87,760 |
|
Product revenue |
|
92,711 |
|
|
|
90,729 |
|
|
|
165,417 |
|
|
|
136,764 |
|
Total revenue |
$ |
151,463 |
|
|
|
140,313 |
|
|
$ |
274,217 |
|
|
$ |
224,524 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of services provided (excluding amortization of intangible
assets) |
|
38,143 |
|
|
|
33,305 |
|
|
|
73,573 |
|
|
|
57,514 |
|
Cost of products sold (excluding amortization of intangible
assets) |
|
68,387 |
|
|
|
62,282 |
|
|
|
134,026 |
|
|
|
102,959 |
|
Selling |
|
4,758 |
|
|
|
4,647 |
|
|
|
9,265 |
|
|
|
7,385 |
|
General and administrative |
|
29,035 |
|
|
|
21,347 |
|
|
|
58,004 |
|
|
|
34,599 |
|
Amortization of intangible assets |
|
8,453 |
|
|
|
6,414 |
|
|
|
17,234 |
|
|
|
9,810 |
|
Other operating expense |
|
4,812 |
|
|
|
4,450 |
|
|
|
8,451 |
|
|
|
38,030 |
|
Goodwill impairment loss |
|
— |
|
|
|
— |
|
|
|
66,367 |
|
|
|
— |
|
Operating income (loss) |
$ |
(2,125 |
) |
|
$ |
7,868 |
|
|
$ |
(92,703 |
) |
|
$ |
(25,773 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(10,515 |
) |
|
|
(7,547 |
) |
|
|
(20,965 |
) |
|
|
(12,375 |
) |
Other expense (income) |
|
545 |
|
|
|
(139 |
) |
|
|
(1,333 |
) |
|
|
(57,866 |
) |
(Loss) income before income
taxes |
$ |
(12,095 |
) |
|
$ |
182 |
|
|
$ |
(115,001 |
) |
|
$ |
(96,014 |
) |
Income tax benefit
(expense) |
|
2,466 |
|
|
|
(6,846 |
) |
|
|
18,440 |
|
|
|
5,939 |
|
Consolidated net loss |
$ |
(9,629 |
) |
|
$ |
(6,664 |
) |
|
$ |
(96,561 |
) |
|
$ |
(90,075 |
) |
Less: Net income (loss) attributable to noncontrolling
interests |
|
365 |
|
|
|
(577 |
) |
|
|
756 |
|
|
|
(941 |
) |
Net loss attributable to
common shareholders |
$ |
(9,994 |
) |
|
$ |
(6,087 |
) |
|
$ |
(97,317 |
) |
|
$ |
(89,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share |
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to
common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.39 |
) |
|
$ |
(0.24 |
) |
|
$ |
(3.79 |
) |
|
$ |
(3.84 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
25,687 |
|
|
|
25,315 |
|
|
|
25,645 |
|
|
|
23,197 |
|
INOTIV, INC.CONDENSED CONSOLIDATED
BALANCE SHEETS(In thousands, except share amounts) |
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
24,596 |
|
|
$ |
18,515 |
|
Restricted cash |
|
— |
|
|
|
465 |
|
Trade receivables and contract assets, net of allowances for credit
losses of $7,523 and $6,268, respectively |
|
74,014 |
|
|
|
100,073 |
|
Inventories, net |
|
64,286 |
|
|
|
71,441 |
|
Prepaid expenses and other current assets |
|
40,479 |
|
|
|
42,483 |
|
Assets held for sale |
|
7,270 |
|
|
|
— |
|
Total current assets |
|
210,645 |
|
|
|
232,977 |
|
|
|
|
|
|
|
Property and equipment,
net |
|
188,496 |
|
|
|
186,199 |
|
Operating lease right-of-use
assets, net |
|
42,014 |
|
|
|
32,489 |
|
Goodwill |
|
94,286 |
|
|
|
157,825 |
|
Other intangible assets,
net |
|
326,261 |
|
|
|
345,886 |
|
Other assets |
|
6,964 |
|
|
|
7,524 |
|
Total assets |
$ |
868,666 |
|
|
$ |
962,900 |
|
|
|
|
|
|
|
Liabilities,
shareholders' equity and noncontrolling interest |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
30,114 |
|
|
$ |
28,695 |
|
Accrued expenses and other liabilities |
|
30,958 |
|
|
|
35,801 |
|
Revolving credit facility |
|
— |
|
|
|
15,000 |
|
Fees invoiced in advance |
|
55,196 |
|
|
|
68,642 |
|
Current portion of long-term operating lease |
|
10,061 |
|
|
|
7,982 |
|
Current portion of long-term debt |
|
4,023 |
|
|
|
7,979 |
|
Liabilities held for sale |
|
2,101 |
|
|
|
— |
|
Total current liabilities |
|
132,453 |
|
|
|
164,099 |
|
Long-term operating leases,
net |
|
32,730 |
|
|
|
24,854 |
|
Long-term debt, less current
portion, net of debt issuance costs |
|
370,040 |
|
|
|
330,677 |
|
Other long-term
liabilities |
|
6,023 |
|
|
|
6,477 |
|
Deferred tax liabilities,
net |
|
54,785 |
|
|
|
77,027 |
|
Total liabilities |
|
596,031 |
|
|
|
603,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity and
noncontrolling interest: |
|
|
|
|
|
Common shares, no par value: |
|
|
|
|
|
Authorized 74,000,000 shares at March 31, 2023 and at September 30,
2022; 25,759,107 issued and outstanding at March 31, 2023
and 25,598,289 at September 30, 2022 |
|
6,491 |
|
|
|
6,362 |
|
Additional paid-in capital |
|
711,591 |
|
|
|
707,787 |
|
Accumulated deficit |
|
(444,838 |
) |
|
|
(348,277 |
) |
Accumulated other comprehensive income (loss) |
|
702 |
|
|
|
(5,500 |
) |
Total equity attributable to
common shareholders |
|
273,946 |
|
|
|
360,372 |
|
Noncontrolling interest |
|
(1,311 |
) |
|
|
(606 |
) |
Total shareholders’ equity and noncontrolling interest |
|
272,635 |
|
|
|
359,766 |
|
Total liabilities and shareholders’ equity and noncontrolling
interest |
$ |
868,666 |
|
|
$ |
962,900 |
|
INOTIV, INC.CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(In thousands)(Unaudited) |
|
|
|
|
|
|
|
Six Months Ended |
|
March 31, |
|
|
2023 |
|
|
|
2022 |
|
Operating activities: |
|
|
|
|
|
Consolidated net loss |
$ |
(96,561 |
) |
|
$ |
(90,075 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities, net of acquisitions: |
|
|
|
|
|
Depreciation and amortization |
|
26,253 |
|
|
|
15,866 |
|
Employee stock compensation expense |
|
3,827 |
|
|
|
20,300 |
|
Changes in deferred taxes |
|
(21,303 |
) |
|
|
(1,907 |
) |
Provision for doubtful accounts |
|
1,333 |
|
|
|
381 |
|
Amortization of debt issuance costs and original issue
discount |
|
1,512 |
|
|
|
1,203 |
|
Noncash interest and accretion expense |
|
2,870 |
|
|
|
2,512 |
|
Loss on fair value remeasurement of embedded derivative |
|
— |
|
|
|
56,714 |
|
Other non-cash operating activities |
|
8 |
|
|
|
603 |
|
Goodwill impairment loss |
|
66,367 |
|
|
|
— |
|
Loss on debt extinguishment |
|
— |
|
|
|
878 |
|
Non-cash amortization of inventory fair value step-up |
|
427 |
|
|
|
6,277 |
|
Non-cash restructuring costs |
|
678 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Trade receivables and contract assets |
|
22,836 |
|
|
|
(8,926 |
) |
Inventories |
|
7,125 |
|
|
|
(14,688 |
) |
Prepaid expenses and other current assets |
|
1,862 |
|
|
|
(10,149 |
) |
Operating lease right-of-use assets and liabilities, net |
|
429 |
|
|
|
1,457 |
|
Accounts payable |
|
5,018 |
|
|
|
5,222 |
|
Accrued expenses and other liabilities |
|
(3,474 |
) |
|
|
(11,510 |
) |
Fees invoiced in advance |
|
(13,720 |
) |
|
|
28,402 |
|
Other asset and liabilities, net |
|
(61 |
) |
|
|
1,467 |
|
Net cash provided by operating activities |
|
5,426 |
|
|
|
4,027 |
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
Capital expenditures |
|
(16,840 |
) |
|
|
(15,202 |
) |
Proceeds from sale of equipment |
|
276 |
|
|
|
283 |
|
Cash paid in acquisitions |
|
— |
|
|
|
(288,702 |
) |
Net cash used in investing activities |
|
(16,564 |
) |
|
|
(303,621 |
) |
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
Payments of long-term debt |
|
— |
|
|
|
(37,746 |
) |
Payments of debt issuance costs |
|
(54 |
) |
|
|
(9,887 |
) |
Payments on promissory notes |
|
(1,454 |
) |
|
|
(763 |
) |
Payments on revolving credit facility |
|
(21,000 |
) |
|
|
(10,000 |
) |
Payments on senior term notes and delayed draw term loans |
|
(1,375 |
) |
|
|
(601 |
) |
Borrowings on construction loan |
|
— |
|
|
|
1,184 |
|
Borrowings on revolving loan facility |
|
6,000 |
|
|
|
10,000 |
|
Borrowings on delayed draw term loan |
|
35,000 |
|
|
|
35,000 |
|
Proceeds from exercise of stock options |
|
107 |
|
|
|
93 |
|
Proceeds from issuance of senior term notes |
|
— |
|
|
|
205,000 |
|
Payments on capex line of credit |
|
— |
|
|
|
(1,749 |
) |
Net cash provided by financing activities |
|
17,224 |
|
|
|
190,531 |
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash and cash equivalents |
|
1,052 |
|
|
|
(392 |
) |
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents |
|
7,138 |
|
|
|
(109,455 |
) |
Less: cash, cash equivalents, and
restricted cash held for sale |
|
(1,522 |
) |
|
|
— |
|
Cash, cash equivalents, and
restricted cash at beginning of period |
|
18,980 |
|
|
|
156,924 |
|
Cash, cash equivalents, and
restricted cash at end of period, net of cash, cash equivalents and
restricted cash held for sale |
$ |
24,596 |
|
|
$ |
47,469 |
|
|
|
|
|
|
|
Noncash financing activity: |
|
|
|
|
|
Seller financed acquisition |
$ |
— |
|
|
$ |
6,325 |
|
Paid in kind debt issuance
costs |
$ |
1,363 |
|
|
$ |
— |
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information: |
|
|
|
|
|
Cash paid for interest |
$ |
16,374 |
|
|
$ |
5,989 |
|
Income taxes paid, net |
$ |
3,952 |
|
|
$ |
614 |
|
INOTIV, INC.RECONCILIATION OF GAAP TO
NON-GAAP SELECT BUSINESS SEGMENT
INFORMATION(In thousands)(Unaudited) |
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
March 31, |
|
|
March 31, |
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
DSA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
47,023 |
|
|
|
39,054 |
|
|
|
88,116 |
|
|
|
71,879 |
|
Operating income |
|
1,924 |
|
|
|
3,752 |
|
|
|
4,296 |
|
|
|
9,794 |
|
Operating income as a % of
total revenue |
|
1.2 |
% |
|
|
2.7 |
% |
|
|
1.5 |
% |
|
|
4.4 |
% |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
3,611 |
|
|
|
3,417 |
|
|
|
7,591 |
|
|
|
5,958 |
|
Restructuring costs |
|
97 |
|
|
|
- |
|
|
|
97 |
|
|
|
- |
|
Startup costs |
|
2,281 |
|
|
|
1,474 |
|
|
|
3,786 |
|
|
|
2,431 |
|
Total non-GAAP adjustments to
operating income |
|
5,989 |
|
|
|
4,891 |
|
|
|
11,474 |
|
|
|
8,389 |
|
Non-GAAP operating income |
|
7,913 |
|
|
|
8,643 |
|
|
|
15,770 |
|
|
|
18,183 |
|
Non-GAAP operating income as a
% of DSA revenue |
|
16.8 |
% |
|
|
22.1 |
% |
|
|
17.9 |
% |
|
|
25.3 |
% |
Non-GAAP operating income as a
% of total revenue |
|
5.2 |
% |
|
|
6.2 |
% |
|
|
5.8 |
% |
|
|
8.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
104,440 |
|
|
|
101,259 |
|
|
|
186,101 |
|
|
|
152,645 |
|
Operating income/(loss) |
|
12,725 |
|
|
|
22,562 |
|
|
|
(58,547 |
) |
|
|
22,642 |
|
Operating income/(loss) as a %
of total revenue |
|
8.4 |
% |
|
|
26.8 |
% |
|
|
(21.4 |
)% |
|
|
10.1 |
% |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
9,379 |
|
|
|
6,425 |
|
|
|
18,662 |
|
|
|
9,908 |
|
Restructuring costs |
|
1,643 |
|
|
|
- |
|
|
|
1,909 |
|
|
|
- |
|
Amortization of inventory step up |
|
183 |
|
|
|
2,609 |
|
|
|
427 |
|
|
|
6,277 |
|
Other non-recurring, third
party costs |
|
469 |
|
|
|
507 |
|
|
|
1,140 |
|
|
|
946 |
|
Goodwill impairment loss |
|
- |
|
|
|
- |
|
|
|
66,367 |
|
|
|
- |
|
Total non-GAAP adjustments to
operating income/(loss) |
|
11,674 |
|
|
|
9,541 |
|
|
|
88,505 |
|
|
|
17,131 |
|
Non-GAAP operating income |
|
24,399 |
|
|
|
32,103 |
|
|
|
29,958 |
|
|
|
39,773 |
|
Non-GAAP operating income as a
% of RMS revenue |
|
23.4 |
% |
|
|
31.7 |
% |
|
|
16.1 |
% |
|
|
26.1 |
% |
Non-GAAP operating income as a
% of total revenue |
|
16.1 |
% |
|
|
22.9 |
% |
|
|
10.9 |
% |
|
|
17.7 |
% |
|
Three Months Ended |
|
|
Six Months Ended |
|
|
March 31, |
|
|
March 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Unallocated Corporate G&A |
|
(16,774 |
) |
|
|
(18,445 |
) |
|
|
(38,452 |
) |
|
|
(58,209 |
) |
Unallocated corporate G&A
as a % of total revenue |
|
(11.1 |
)% |
|
|
(13.1 |
)% |
|
|
(14.0 |
)% |
|
|
(25.9 |
)% |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option expense |
|
1,781 |
|
|
|
1,141 |
|
|
|
3,827 |
|
|
|
25,073 |
|
Acquisition and integration costs |
|
105 |
|
|
|
2,085 |
|
|
|
1,088 |
|
|
|
10,893 |
|
Total non-GAAP adjustments to
operating income/(loss) |
|
1,886 |
|
|
|
3,226 |
|
|
|
4,915 |
|
|
|
35,966 |
|
Non-GAAP operating loss |
|
(14,888 |
) |
|
|
(15,219 |
) |
|
|
(33,537 |
) |
|
|
(22,243 |
) |
Non-GAAP operating loss as a %
of total revenue |
|
(9.8 |
)% |
|
|
(10.8 |
)% |
|
|
(12.2 |
)% |
|
|
(9.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
151,463 |
|
|
|
140,313 |
|
|
|
274,217 |
|
|
|
224,524 |
|
Operating income/(loss) |
|
(2,125 |
) |
|
|
7,869 |
|
|
|
(92,703 |
) |
|
|
(25,773 |
) |
Operating loss as a % of total
revenue |
|
(1.4 |
)% |
|
|
5.6 |
% |
|
|
(33.8 |
)% |
|
|
(11.5 |
)% |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
12,990 |
|
|
|
9,842 |
|
|
|
26,253 |
|
|
|
15,866 |
|
Stock compensation expense |
|
1,781 |
|
|
|
1,141 |
|
|
|
3,827 |
|
|
|
25,073 |
|
Restructuring costs |
|
1,740 |
|
|
|
- |
|
|
|
2,006 |
|
|
|
- |
|
Acquisition and integration costs |
|
105 |
|
|
|
2,085 |
|
|
|
1,088 |
|
|
|
10,893 |
|
Amortization of inventory step up |
|
183 |
|
|
|
2,609 |
|
|
|
427 |
|
|
|
6,277 |
|
Startup costs |
|
2,281 |
|
|
|
1,474 |
|
|
|
3,786 |
|
|
|
2,431 |
|
Other non-recurring, third party costs |
|
469 |
|
|
|
507 |
|
|
|
1,140 |
|
|
|
946 |
|
Goodwill impairment loss |
|
- |
|
|
|
- |
|
|
|
66,367 |
|
|
|
- |
|
Total non-GAAP adjustments to
operating loss |
|
19,549 |
|
|
|
17,658 |
|
|
|
104,894 |
|
|
|
61,486 |
|
Non-GAAP operating
income/(loss) |
|
17,424 |
|
|
|
25,527 |
|
|
|
12,191 |
|
|
|
35,713 |
|
Non-GAAP operating
income/(loss) as a % of total revenue |
|
11.5 |
% |
|
|
18.2 |
% |
|
|
4.4 |
% |
|
|
15.9 |
% |
INOTIV, INC.RECONCILIATION OF GAAP
NET LOSS TO NON-GAAP ADJUSTED EBITDA(In
thousands)(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
March 31, |
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
GAAP Consolidated net loss |
$ |
(9,629 |
) |
|
$ |
(6,664 |
) |
|
$ |
(96,561 |
) |
|
$ |
(90,075 |
) |
Adjustments (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
10,515 |
|
|
|
7,547 |
|
|
|
20,965 |
|
|
|
12,375 |
|
Income tax (benefit) expense |
|
(2,466 |
) |
|
|
6,846 |
|
|
|
(18,440 |
) |
|
|
(5,939 |
) |
Depreciation and amortization |
|
12,990 |
|
|
|
9,842 |
|
|
|
26,253 |
|
|
|
15,866 |
|
Stock compensation expense (1) |
|
1,781 |
|
|
|
1,141 |
|
|
|
3,827 |
|
|
|
25,073 |
|
Acquisition and integration costs (2) |
|
105 |
|
|
|
2, 085 |
|
|
|
1,088 |
|
|
|
10,893 |
|
Startup costs |
|
2,281 |
|
|
|
1,474 |
|
|
|
3,786 |
|
|
|
2,431 |
|
Restructuring costs (3) |
|
1,740 |
|
|
|
- |
|
|
|
2,006 |
|
|
|
- |
|
Unrealized foreign exchange (gain)/loss |
|
(739 |
) |
|
|
(134 |
) |
|
|
511 |
|
|
|
60 |
|
Loss on debt extinguishment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
877 |
|
Amortization of inventory step up |
|
183 |
|
|
|
2,609 |
|
|
|
427 |
|
|
|
6,277 |
|
Loss (gain) on disposition of assets |
|
(129 |
) |
|
|
12 |
|
|
|
251 |
|
|
|
(235 |
) |
Loss on fair value remeasurement of convertible notes (4) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
56,714 |
|
Other non-recurring, third party costs |
|
469 |
|
|
|
507 |
|
|
|
1,140 |
|
|
|
946 |
|
Goodwill impairment loss (5) |
|
- |
|
|
|
- |
|
|
|
66,367 |
|
|
|
- |
|
Adjusted EBITDA (b) |
$ |
17,101 |
|
|
$ |
25,265 |
|
|
$ |
11,620 |
|
|
$ |
35,263 |
|
GAAP Consolidated net loss as
a percent of total revenue |
|
(6.4 |
)% |
|
|
(4.7 |
)% |
|
|
(35.2 |
)% |
|
|
(40.1 |
)% |
Adjustments as a percent of
total revenue |
|
17.6 |
% |
|
|
22.8 |
% |
|
|
39.5 |
% |
|
|
55.8 |
% |
Adjusted EBITDA as a percent
of total revenue |
|
11.3 |
% |
|
|
18.0 |
% |
|
|
4.2 |
% |
|
|
15.7 |
% |
(a) |
Adjustments to certain GAAP reported measures for
the three and six months ended March 31, 2023 and 2022 include, but
are not limited to, the following: |
|
|
(1) |
For the six
months ended March 31, 2022, $23.0 million relates to post
combination non-cash stock compensation expense relating to the
adoption of the Envigo Equity Plan recognized in connection with
the Envigo acquisition. |
|
|
(2) |
For the three and six months ended March 31, 2023 and 2022,
represents charges for legal services, accounting services, travel
and other related activities in connection with various
acquisitions and the related integration of those
acquisitions. |
|
|
(3) |
For the three and six months ended March 31, 2023, represents
costs incurred in connection with the exit of multiple sites as
previously disclosed. |
|
|
(4) |
For the six months ended March 31, 2022, represents loss of
$56.7 million resulting from the fair value remeasurement of the
embedded derivative component of the convertible notes. |
|
|
(5) |
For the six months ended March 31, 2023, represents a non-cash
goodwill impairment charge of $66.4 million related to the RMS
segment. |
(b) |
Adjusted EBITDA - Consolidated net (loss)
income before interest expense, income tax expense (benefit),
depreciation and amortization, stock compensation expense,
acquisition and integration costs, startup costs, restructuring
costs, unrealized foreign exchange gain/loss, loss on debt
extinguishment, amortization of inventory step up, gain/loss on
disposition of assets, loss on fair value remeasurement of the
embedded derivative component of the convertible notes, other
non-recurring third party costs and goodwill impairment loss. |
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