Inotiv Reports First Quarter Financial Results for Fiscal 2024 and Provides Business Update

– First quarter fiscal 2024 revenue up 10.3% to $135.5 million – First quarter fiscal 2024 DSA revenue up 8.8% to $44.7 million and RMS revenue up 11.1% to $90.8 million – Shift to a renewed focus on sales and marketing as near-term infrastructure projects near completion – Conference call begins today at 4:30 pm ET WEST LAFAYETTE, Ind., Feb. 07, 2024 (GLOBE NEWSWIRE) — Inotiv, Inc. (Nasdaq: NOTV) (the “Company”), 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 (“Q1 FY 2024”) ended December 31, 2023. Revenue by Segment (in millions of USD)Three months endedDecember 31 %change  2023  2022   (unaudited) (unaudited)  DSA(Discovery & Safety Assessment)$44.7 $41.1 8.8%RMS(Research Models & Services)$90.8 $81.7 11.1%Total$135.5 $122.8 10.3% Management Commentary Robert Leasure Jr., President and Chief Executive Officer, commented, “Our transformation over the past 18 months has been significant, culminating in the optimization of our operational footprint from 35 to 24 locations, simultaneously expanding three existing facilities and then recently completing the transition of our transportation operations in-house. This will allow us to better service customer demand, add new complementary services and create a platform which will support growth and allow us to leverage our fixed cost structure and enhance margins. As we near the completion of these infrastructure projects, we have shifted to a renewed focus on sales and marketing. “Our first quarter improvement in the DSA backlog compared to last quarter was a positive. We expect some of this may reflect pent-up demand after a slow summer, but we remain encouraged. The critical groundwork has been completed and we plan to continue building on our strategic initiatives which should improve our efficiencies across our sites and positively impact top and bottom lines,” concluded Mr. Leasure. Financial Highlights Q1 FY 2024 Highlights Revenue was $135.5 million in Q1 FY 2024 as compared to $122.8 million during the three months ended December 31, 2022 (“Q1 FY 2023”), driven by an increase of $9.1 million, or 11.1%, in Research Models and Services (“RMS”) revenue and an increase of $3.6 million, or 8.8%, in Discovery and Safety Assessment (“DSA”) revenue.Consolidated net loss for Q1 FY 2024 was $15.8 million, or 11.7% of total revenue, compared to consolidated net loss of $86.9 million, or 70.8% of total revenue, in Q1 FY 2023.Adjusted EBITDA1 in Q1 FY 2024 was $9.6 million, or 7.1% of total revenue, compared to $(5.5) million, or (4.5%) of total revenue, in Q1 FY 2023.Net book-to-bill ratio for Q1 FY 2024 was 1.46x for the DSA services business.DSA backlog was $152.3 million at December 31, 2023 up from $147.9 million at December 31, 2022, and up from $132.1 million at September 30, 2023. 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 with Vanguard Supply Chain Solutions LLC, 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 expansion activities at Fort Collins, CO, were completed by the end of October 2023 and the expanded site completed the validation of the facility and equipment which became operational in the second quarter of fiscal 2024.During the three months ended December 31, 2023, the Company closed the sale of its RMS facilities in Spain and France.The Company continues to execute on its site optimization plan for its Blackthorn, UK site. The relocation of operating activities from Blackthorn into its Hillcrest, UK site is expected to be completed by the end of March 2024.The Company’s facilities in Cumberland and Dublin, Virginia; Haslett, Michigan; and Blackthorn, U.K. are all under contract to be sold and are held for sale as of December 31, 2023. First Quarter Fiscal 2024 Financial Results (Three Months Ended December 31, 2023) Revenue increased 10.3% to $135.5 million in Q1 FY 2024 as compared to $122.8 million in Q1 FY 2023. The higher total revenue in the first quarter was driven by a $9.1 million increase in RMS revenue and a $3.6 million increase in DSA revenue. Operating loss was $9.4 million in Q1 FY 2024 as compared to an operating loss of $90.6 million in Q1 FY 2023. The lower total operating loss in Q1 FY 2024 was primarily the result of an approximately $76.4 million increase in RMS operating income and a decrease in unallocated corporate expenses of approximately $5.7 million, partially offset by an approximately $0.7 million decrease in DSA operating income. The increase in RMS operating income was primarily due to a $66.4 million non-cash goodwill impairment charge in Q1 FY 2023 that did not recur in Q1 FY 2024. Cash and cash equivalents as of December 31, 2023, was $22.0 million and there were no borrowings on the Company’s $15.0 million revolving credit facility. Cash and cash equivalents of $22.0 million at December 31, 2023 compares to $35.5 million at September 30, 2023, the end of fiscal year 2023. Cash used in operating activities was $6.5 million for Q1 FY 2024, compared to cash used in operating activities of $7.4 million for Q1 FY 2023. For Q1 FY 2024, capital expenditures totaled $5.6 million compared to $8.4 million for Q1 FY 2023. Total debt, net of debt issuance costs, as of December 31, 2023, was $379.3 million. The Company was in compliance with its debt covenants as of December 31, 2023. Fiscal 2024 Outlook We reaffirm fiscal 2024 revenues are expected to be in the range of $580 to $590 million and adjusted EBITDA is expected to be in the range of $75 to $80 million. We expect to continue to remain in compliance with our financial covenants for the next 12 months. We reaffirm that capital expenditures are expected to be approximately 4.5% of revenue in fiscal 2024. Webcast and Conference Call Management will host a conference call on Wednesday, February 7, 2024, at 4:30 pm ET to discuss first quarter results for fiscal year 2024. Interested parties may participate in the call by dialing: (877) 704-4453 (Domestic)(201) 389-0920 (International)13744155 (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=1654236&tp_key=c90f5f4d4c 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 months ended December 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), statements 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, amortization of inventory step up, loss/gain on disposition of assets, other unusual 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 guidance for fiscal year 2024 is provided on a non-GAAP basis. The Company cannot reconcile this guidance to expected net income/loss 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 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) our ability to develop new services and products; (v) our ability to source animal research models; (vi) our ability to make capital expenditures, fund our operations and satisfy our obligations; (vii) global economic conditions, especially as they impact our markets; (viii) our cash position; (ix) our ability to successfully integrate the operations and personnel related to acquisitions; (x) our ability to effectively manage current expansion efforts or any future expansion or acquisition initiatives undertaken by us; (xi) our ability to develop and build infrastructure and teams to manage growth and projects; (xii) our ability to continue to retain and hire key talent; (xiii) our ability to market our services and products under our corporate name and relevant brand names; (xiv) our ability to service our outstanding indebtedness and to comply with financial covenants; (xv) our expectations regarding the volume of new bookings, pricing, operating income or losses and liquidity; (xvi) our ability to manage recurring and unusual costs; (xvii) our ability to execute on our restructuring and site optimization plans and to realize the expected benefits related to such actions; and (xviii) the impact of public health emergencies on the economy, demand for our services and products and our operations, including the measures taken by governmental authorities to address such public health emergencies, which may precipitate or exacerbate other risks and/or uncertainties, including those detailed in the Company’s filings with the U.S. Securities and Exchange Commission. Company ContactInvestor RelationsInotiv, Inc.LifeSci AdvisorsBeth A. Taylor, Chief Financial OfficerBob Yedid(765) 497-8381(516) [email protected]@lifesciadvisors.com INOTIV, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)(Unaudited)  Three Months EndedDecember 31  2023   2022 Service revenue$53,863  $50,048 Product revenue 81,638   72,706 Total revenue 135,501   122,754 Costs and expenses:   Cost of services provided (excluding depreciation and amortization of intangible assets) 39,077   34,001 Cost of products sold (excluding depreciation and amortization of intangible assets) 62,951   63,263 Selling 5,348   4,501 General and administrative 19,927   28,298 Depreciation and amortization of intangible assets 14,250   13,263 Other operating expense 3,319   3,639 Goodwill impairment loss —   66,367 Operating loss$(9,371) $(90,578)Other (expense) income:   Interest expense (11,364)  (10,450)Other income (expense) 1,413   (1,878)Loss before income taxes$(19,322) $(102,906)Income tax benefit 3,494   15,974 Consolidated net loss$(15,828) $(86,932)Less: Net (loss) income attributable to noncontrolling interests (440)  391 Net loss attributable to common shareholders$(15,388) $(87,323)    Loss per common share   Net loss attributable to common shareholders:   Basic$(0.60) $(3.41)Diluted$(0.60) $(3.41)Weighted-average number of common shares outstanding:   Basic 25,764   25,603 Diluted 25,764   25,603  INOTIV, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)  December 31, September 30,  2023   2023  (Unaudited)  Assets   Current assets:   Cash and cash equivalents$22,001  $35,492 Trade receivables and contract assets, net of allowances for credit losses of $6,313 and $7,446, respectively 89,849   87,383 Inventories, net 50,640   56,102 Prepaid expenses and other current assets 26,264   33,408 Assets held for sale 1,934   1,418 Total current assets 190,688   213,803     Property and equipment, net 191,536   191,068 Operating lease right-of-use assets, net 48,012   38,866 Goodwill 94,286   94,286 Other intangible assets, net 300,350   308,428 Other assets 10,638   10,079 Total assets$835,510  $856,530     Liabilities, shareholders’ equity and noncontrolling interest   Current liabilities:   Accounts payable$30,716  $32,564 Accrued expenses and other liabilities 23,436   25,776 Fees invoiced in advance 35,821   55,622 Current portion of long-term operating lease 11,105   10,282 Current portion of long-term debt 8,411   7,950 Total current liabilities 109,489   132,194 Long-term operating leases, net 38,074   29,614 Long-term debt, less current portion, net of debt issuance costs 370,931   369,795 Other long-term liabilities 17,967   6,373 Deferred tax liabilities, net 44,887   50,064 Total liabilities 581,348   588,040     Shareholders’ equity and noncontrolling interest:   Common shares, no par value:   Authorized 74,000,000 shares at December 31, 2023 and at September 30, 2023; 25,790,680 issued and outstanding at December 31, 2023 and 25,777,169 at September 30, 2023 6,409   6,406 Additional paid-in capital 715,282   715,696 Accumulated deficit (469,106)  (453,278)Accumulated other comprehensive income (loss) 1,577   330 Total equity attributable to common shareholders 254,162   269,154 Noncontrolling interest —   (664)Total shareholders’ equity and noncontrolling interest 254,162   268,490 Total liabilities and shareholders’ equity and noncontrolling interest$835,510  $856,530  INOTIV, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)  Three Months EndedDecember 31,  2023   2022 Operating activities:   Consolidated net loss$(15,828) $(86,932)Adjustments to reconcile net loss to net cash used in operating activities, net of acquisitions:   Depreciation and amortization 14,250   13,263 Employee stock compensation expense 1,897   2,046 Changes in deferred taxes (5,318)  (20,123)Provision for expected credit losses (438)  1,078 Amortization of debt issuance costs and original issue discount 846   732 Non-cash interest and accretion expense 1,688   1,446 Other non-cash operating activities (1,249)  1,028 Goodwill impairment loss —   66,367 Non-cash amortization of inventory fair value step-up 102   244 Changes in operating assets and liabilities:   Trade receivables and contract assets (1,497)  21,999 Inventories 6,058   (4,204)Prepaid expenses and other current assets 7,096   7,810 Operating lease right-of-use assets and liabilities, net 138   266 Accounts payable (2,845)  1,169 Accrued expenses and other liabilities (2,497)  (5,548)Fees invoiced in advance (20,012)  (7,796)Other asset and liabilities, net 11,064   (255)Net cash used in operating activities (6,545)  (7,410)    Investing activities:   Capital expenditures (5,572)  (8,369)Proceeds from sale of equipment 1,529   211 Net cash used in investing activities (4,043)  (8,158)    Financing activities:   Payments on revolving credit facility —   (15,000)Payments on senior term notes and delayed draw term loans (691)  (688)Borrowings on senior term notes and delayed draw term loans —   35,000 Other financing activities, net (2,230)  (928)Net cash (used in) provided by financing activities (2,921)  18,384     Effect of exchange rate changes on cash and cash equivalents 18   593     Net increase (decrease) in cash and cash equivalents (13,491)  3,409 Less: cash, cash equivalents, and restricted cash held for sale —   (1,569)Cash, cash equivalents, and restricted cash at beginning of period 35,492   18,980 Cash, cash equivalents, and restricted cash at end of period$22,001  $20,820     Supplemental disclosure of cash flow information:   Cash paid for interest$11,068  $8,491 Income taxes paid, net$298  $2,268  INOTIV, INC.RECONCILIATION OF GAAP TO NON-GAAPSELECT BUSINESS SEGMENT INFORMATION(In thousands)(Unaudited)  Three Months Ended December 31, 2023  2022 DSA   Revenue44,698  41,093 Operating income1,593  2,372 Operating income as a % of total revenue1.2% 1.9%Add back:   Depreciation and amortization4,409  3,980 Restructuring costs113  — Startup costs830  1,505 Total non-GAAP adjustments to operating income5,352  5,485 Non-GAAP operating income6,945  7,857 Non-GAAP operating income as a % of DSA revenue15.5% 19.1%Non-GAAP operating income as a % of total revenue5.1% 6.4%    RMS   Revenue90,803  81,661 Operating income (loss)5,078  (71,272)Operating income (loss) as a % of total revenue3.7% (58.1%)Add back:   Depreciation and amortization9,737  9,283 Restructuring costs921  266 Amortization of inventory step up102  244 Other unusual, third party costs1,086  671 Goodwill impairment loss—  66,367 Total non-GAAP adjustments to operating income (loss)11,846  76,831 Non-GAAP operating income16,924  5,559 Non-GAAP operating income as a % of RMS revenue18.6% 6.8%Non-GAAP operating income as a % of total revenue12.5% 4.5%    Unallocated Corporate Operating Expenses(16,042) (21,678)Unallocated corporate operating expenses as a % of total revenue(11.8)% (17.7)%Add back:   Depreciation and amortization104  — Stock option expense1,897  2,046 Acquisition and integration costs70  983 Total non-GAAP adjustments to operating loss2,071  3,029 Non-GAAP operating loss(13,971) (18,649)Non-GAAP operating loss as a % of total revenue(10.3)% (15.2)%    Total   Revenue135,501  122,754 Operating loss(9,371) (90,578)Operating loss as a % of total revenue(6.9)% (73.8%)Add back:   Depreciation and amortization14,250  13,263 Stock compensation expense1,897  2,046 Restructuring costs1,034  266 Acquisition and integration costs70  983 Amortization of inventory step up102  244 Startup costs830  1,505 Other unusual, third party costs1,086  671 Goodwill impairment loss-  66,367 Total non-GAAP adjustments to operating loss19,269  85,345 Non-GAAP operating income (loss)9,898  (5,233)Non-GAAP operating income (loss) as a % of total revenue7.3% (4.3%) INOTIV, INC.RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA(In thousands)(Unaudited)  Three Months EndedDecember 31  2023   2022 GAAP Consolidated Net Loss$(15,828) $(86,932)Adjustments (a):   Interest expense 11,364   10,450 Income tax benefit (3,494)  (15,974)Depreciation and amortization 14,250   13,263 Stock compensation expense 1,897   2,046 Acquisition and integration costs (1) 70   983 Startup costs 830   1,505 Restructuring costs (2) 1,034   266 Unrealized foreign exchange (gain) loss (1,029)  1,250 Amortization of inventory step up 102   244 (Gain) loss on disposition of assets (666)  380 Other unusual, third party costs 1,086   671 Goodwill impairment loss (3) –   66,367 Adjusted EBITDA (b)$9,616  $(5,481)GAAP consolidated net loss as a percent of total revenue(11.7)% (70.8)%Adjustments as a percent of total revenue 18.8%  66.4%Adjusted EBITDA as a percent of total revenue 7.1%  (4.5%) (a) Adjustments to certain GAAP reported measures for the three months ended December 31, 2023 and 2022 include, but are not limited to, the following: (1) For the three months ended December 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.(2) For the three months ended December 31, 2023, represents costs incurred in connection with the exit of multiple sites and the enablement of the in-house integration of Inotiv’s North American transportation operations as previously disclosed. For the three months ended December 31, 2022, represents costs incurred in connection with the exit of multiple sites as previously disclosed.(3) For the three months ended December 31, 2022, represents a non-cash goodwill impairment charge of $66.4 million related to the RMS segment. (b) Adjusted EBITDA – Consolidated net income (loss) 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, amortization of inventory step up, gain/loss on disposition of assets, other unusual third party costs and goodwill impairment loss.