NOTV - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to Inotiv Inc.'s Third Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kalle Ahl of The Equity Group. ahead. go please you, Thank

Kalle Ahl

can Thank you, quarter after Inotiv, third website earnings afternoon market section the of the and XXXX financial good Company's release the fiscal of today www.inotivco.com. A everyone. found results in closed. Investors Inc.’s at copy Donna be were the released

plans. the that to and and I forward-looking subject on make projected. risks this are considered different of results management's As remind that statements Such will a to formality, matter operating some management you including actual those Company's date. statements represent and are cause could expectations performance uncertainties about statements, today's as Any to from financial be that such statements need of or of future the statements achievements call materially

matter. on result place revise future update new to most included on financial these certain press measures measures statements not reconciliation any to release the corresponding an effort not these further for measures a and GAAP or events, does for Company's otherwise. should non-GAAP refer undue guidance as the of undertake additional whether forward-looking to Company Company's You definition and the will Please discuss information this SEC obligation in filings or provide non-GAAP investors. X-K. Form to financial in A also the is comparable Management information, of forward-looking statements, and reliance results

financial for remarks the we Sagartz, Bob Strategy after opening company Then, present are Chief Executive this open Leasure, the begin Officer; Beth from questions. will the call summary afternoon will of will Beth with Officer. Financial Chief and us John Company's a President Taylor, results. Joining which Officer; Bob and some Chief

over pleasure my the turn it's Now, to Bob. call to

Robert Leasure

you us for All afternoon right, everyone. you, good today. joining Kalle Thank to and thank

With process serving suite during expanded to and a expand quarter we continuum. to our increasingly more we are preclinical drug the in-house clinical earlier entire discovery make research in complete continued the significant and to to executing their contract drug development engaging journey development. of clients discovery needs build progress full strategy This capabilities services the comprehensively

Our expansion assets, operations three and startup growth existing the strategic and supported the three strategic and two acquisitions is with has success our of focus services. recent services, pillars. operations been new by of One

regarding First, I'll the talk about acquisitions. acquisitions, the

both $XX.X quarter performances to acquisitions business May client with nonclinical acquisitions pharmacology Boulder of This acquisitions offerings, our run million June BioPATH of base for Inotiv's Labs focus companies, consisting debut May closed Strategically during These and expand comprise which respectively. our rate HistoTox contributing services and and revenue enhanced on strong us we Bolder corresponds of highly meaningfully gene approximately revenue Inotiv, and April therapy. on now XXXX, our scaled delivered service histopathology approximately which XX million. biopharma $X.X predominantly Bolder X, cell many annualized bringing emerging operations Colorado the which of complementary and an are the and combined

capitalizing on growth. pleased Inotiv's integration of that cross-selling we Bolder bolster already existing and and the are HistoTox We overall BioPATH progress are opportunities the further will of with

We Avanza purchase ended, are XXXX, December based announced acquisition the will of with the Seventh in our After in Gateway of very Services likely much create also Pre-Clinical optimistic quarter accomplished that July clients and and substantial Missouri Research XXXX. Smithers value Laboratories. May shareholders these we Wave Pharmacology for XXXX acquisitions in the

operations. Gateway acquisition to operations of key expertise be and early disease. the and million Strategically, annual treatment revenue for small talent efficacy St. While our St. kidney heart brings the approximately at help evaluate activity clients us assist relatively it target Gateway's validation to is and Louis and our will rate and designed run entities molecular new of well $X part Louis does safety of to

Regarding client June our foot diversity St. In service XX,XXX construction and early leased to $X.X the commenced as discovery and will Louis vitro phase. the capability operations, expansion particular, laboratory biology will and for of DMPK million. the for facility In expansion facility. XXXX existing expansion The office increased in laboratories base toxicology approximately of as previously the space May we square at a delivering growing of drug in capacity the have in in offerings. purchased solutions well cell the accommodate molecular we new technology pharmacology capable of include unfinished shelf tools

capacity of St. Bolder including the year from the BioPATH another at our for Evansville expect than our that fiscal we growth design we beginning Fort second completion to we capacity, targeting initiated opportunities the to $X are are business services million In We expansion future Louis being recently of are the XX,XXX quarter this ad evaluating of new improvements, last support Collins over feet derived and and training to XXXX. square At approximately add more expansion. year invested our project we at further expansion and facility opportunities location. expand broaden make currently HistoTox

last are March to capacity there. additional plan went in We add our which We with expansion Evansville XXXX. pleased very in into operation

last expect just XX the acquisition. We to design, the within be the build validation months. prior In they and facilities Bolder, year expanded completed to

we support the square demand site the since to leased are feet the In strong in receiving an space XXXX increasing by beside our CRO additional that are acquisition. additional existing Services addition, we

additional and location. Finally that new to start looking for operations off in Gaithersburg growth are at address we opportunities space actively

Regarding the services. we announced operations safety quarter initiatives In been announced clinical three Each February the startups. startup orders announced services. that deliver were pathology in-house. fourth have we SEND will we initiatives third deliver in-house incoming believe and value of long and initiating we and we launched additional second revenue we announced our over the services, reporting data initiatives now We we to two recruited key launch third moving In starting of have are January accelerate term medical in began pharmacology quarters to outsourced June In announced new last announced these to three in-house the march, in device parties. and leaders contribute previously we additional fiscal we which validated quarter. services Inotiv. in these fiscal manage had new quarter and have we development pathology to startup capabilities. our commenced also significant the establishment cardiovascular of to In summary, which revenue for and and to of three In initiatives histology fiscal our have these

and currently people, and is to believe approximately clinical safety build arena. client substantial Rockville, a space as new Services, that July, we and $X.X this evaluation start into list. assets to physical this near from to Gopala we that in-house our of under in support be exploring require base. offering, genomic the of Swart Maryland. joins genetic bioanalytical Also toxicology Jackson, the developing cultures, across Of Kenneth experience to entry broad for MilliporeSigma’s expect lead we we lease Dr. genetic out medicines. In us Vice are and new current broadening acquired have We standard purchased drug led acquired biotherapeutics Parexel, organization, In he to XX-year our President, we our pharmaceutical with sales individualized accelerate of recent facilities we recruited assets completion than chemicals, plan services. we cell These provider Bioanalytical us. Swart agreement in as lab tenure service assets these instrumentation, in assets, consumables more million, portfolio of business veteran Kenneth our our will the operations who the on operation a operating and note, any not the include royalty biology and translational fair of toxicology will estimate July that three influenced Tennessee-based have which discovery Nicolette Simultaneously, investments did supporting a business. infrastructure, key at of value and well of regulated expansion pharmacology, office including we operations. MilliporeSigma’s BioReliance evolution furniture development, stock where ceased building control sciences our molecular decades new up industry global an a bench with based own expert of for regulated study in support expanded laboratory our work upfront laboratory locations as and data, and by well and broad biotherapeutics make G&A now procedures, for We market medical recruited that spearhead scientific in Inotiv's aspects which will historical to operation. including to appointed a Krishna, note, as acquired clinical all Of funding responsible continued initiative. device discount experience new pathology in systems client We from building teams biotherapeutics in execute

like the notice million make ended internal $X.X and fourth in summary, us startups, quarter, Bank that our in our provided beginning organization. So systems and Moreover, during Indiana entire forgiven. with quarter and ability investments the new across We thank Internet our I'd these million approximately completed financings fiscal successful quarter augment and $XX through invest net receive our our we facilitating significant team support. Inotiv’s that fiscal totaling of made the debt for to [ph], been investments to respectively, our acquisitions, to embedded at PPP we bench all expansion, did future. $XX of note after in talent, loan growth. our designed infrastructure, First has future million in critical proceeds strength continue April operational shareholders third we of business we in their The to XXXX equity

$X.X higher increased a year-over-year million, financial grew XX% to Inotiv’s due million with approximately few by growth BioPATH during months combined the Moving internal approximately driven $X.X highlights. year-over-year million fiscal quarter HistoTox to of bolder of $X.X revenue. million and XX% revenue $XX.X incremental by of June. third profit Gross of to our from and May to revenue XXXX

expenses, investments retention expenses. Our recruiting startup quarter and new incremental related including strategic to investments and Incremental made higher BioPATH. internal service we for Bolder this and costs drove offerings, integration acquisition operating costs HistoTox higher growth and related and

$XXX,XXX EBITDA leverage to the increased our $X.X million in we from However, scale. quarter, the in prior adjusted business underlying demonstrating approximately our year XXX% as

the we a XX% period Finally, business. ratio and XX of XX, we million in book-to-bill were achieve growth a up in business June able with of backlog services ended which our March pleased XXXX is our from third XX% the of of we X.XX for million, compared million strength indicating up to with times to XXXX XX% are current $XX.X revenue, quarter and $XX after at $XX.X in

revenue year. for grow. we pulling as figure In investments, closing, will purchasing of last a advantage extremely to was one roof, decline the overhead of an as the percent assets faster dedicated bringing opportunities, grow been as can term And profitability, broader million we solutions. glove scalable of in-house, revenue, unallocated revenue to adjusted a our through several we We service corporate this market revenue. continue levers costs quarter, fixed are or We capabilities talented corporate our cost complimentary reducing we white under and initiatives, In clients. to providing improve highly acquired to lowering making have ability percentage approximately G&A XX.X% newly created existing same outsourcing key CRO leveraging compared acquisition see direct taking we cross-selling by to than to all driving and believe including to assembling longer $X.X period of continue in reducing cross-sell and the our third of XX.X% client that team believe

ability Our businesses. to acquisitions, our complete, support capital efforts attractive clients, successful identify our to all and and the assemble to access our integrate of our and to talent complete retaining markets

Inotiv. continued to best believe transform to yet I that have come. We significantly is our

flexibility, Beth, that, in attention With strive results our go call unique third to please recap We will turn detail. I ahead. Beth accelerate service, details, with CRO quarter innovation creating opportunity Chief Officer, us peers the for will Financial outperform our financial the over to to to more our a to and our Taylor, XXXX growth. fiscal

Beth Taylor

period, segment HistoTox XX.X% segment increased the period, to XXXX Good year to $XX.X start-up fiscal acquisition driven afternoon. in compensation higher the in of offset Operating loss in the third of greater year growth loss $XXX,XXX million quarter the to expense in sampling $XXX,XXX million. in in increased from increased prior XX.X% revenue XXXX Bolder XXXX $XX.X higher from fiscal in year XX% fiscal Service prior the the in prior XXXX the Product -- improved period $XX.X reflecting and XXXX prior comparable of revenue $XXX,XXX year utilization BioPATH months on in-vivo support of prior third in quarter $XX,XXX Product quarter XXXX, quarter of instruments totaled margin driven Bob. from fiscal third analytical of of XX.X% totaling fiscal gross increased and $XXX,XXX year quarter third X%, period, comparable implemented incremental last period. and recently and by $X.X growth increase comparable revenue systems. to incremental the fiscal stock future capacity. to the in revenue from decrease increased the reflecting reflecting compared Thanks revenue operating million for $XX.X integration year of increased prior two and of strategic margin million comparable costs. sales. fiscal period, of in million non-cash margins million XXXX $XXX,XXX the quarter the expense half reductions of year third revenue in the in gross partially expanded to which Culex existing internal in operating comparable $X.X $X.X XX.X% from of the was million cost, contribution of XX.X% third of Service investments an by [ph] Service Labs In expenses including by our in

also This XX.X% expense, prior $X.X prior have fiscal negative to to commissions compensation a non-cash diluted our of book-to-bill and that including XXXX orders $XXX,XXX or net share of quarter’s BioPATH. approximately to due of G&A, relocation oriented, of recognition and per $X.XX growth adjusted to a we negative revenue. G&A investment expenses higher XX.X% much corresponding the million when quarter combined, Net fiscal as in corporate of XXXX I’d were expense this was quarter's we totalled third win loss new the the ratio recruiting to compared compared to or loss share related Adjusted of quarter All the ratio approximately totalled unallocated the third to million in diluted quarter in in equalled compensation to the costs fiscal stock the of the fiscal compared acquisitions transaction in revenue which XXXX was Labs of per quarter in third XXXX. XXXX revenue third and like quarter point HistoTox comparable $X.XX year of fiscal increased $XXX,XXX X.X prior of prior higher in periods Bolder out growth-oriented includes selling that period. of approximately third period. compared book-to-bill year for EBITDA $X.X times. comparable The

integration our We and growth headcount, and technology which systems. infrastructure continued to for two build included additional acquisitions for the in offerings, costs investments and service transaction new

an of flow compensation depreciation first of primarily [ph] Cash $XX.X first at on operations million Briefly $X $X.X an months totaled payable million was Labs growth of million of up our amortization in our fiscal HistoTox the months million. XXXXand partially of June stock $X.X XXXX Total $XX.X from increase of to XXXX. million million, which the to to widened CapEx and backlog purchase million. Bolder [ph] of fiscal million $X nine million, end XXXX XX, advances expense share reflects million. period, up accounts of of of year XX, million negative totalled $X.X million. fiscal points and revenue to EBITDA increase Compared results. the Net was $X.X from third driven and and the fiscal per XXXX million months revenue the increased the $X back XX.X%. million reviewing which $XX.X XX.X% prior includes and or accounts Our XXX from adjusted $X.X a to in the margin of of XXXX $X first $X.XX million, million internal first nine of fiscal during quarter incremental operations non-cash add for XX.X% customer by XXXX the from months BioPATH in and accrued increase the increased basis expanded for loss million, by approximately $XX of receivable of on contribution nine from Louis nine St. $X.X two and expenses $X.X $X.X diluted offset gross an months which building $X.X March totalling

XXXX been to confident pleased has heading, forgiven future. and Our and in a in included year term prepared we debt the $X.X of cash long at concludes which included $XX.X cash remarks. million, which our This subsequent Overall, Total million. XX, is feel end. equivalents to direction million, our our sheet June and $XX.X continuing balance debt of of very million invest business balance are we our $XX.X loan, PPP was with

will operator open call I for that, our to to it the with questions. turn So up over Donna

Operator

is Thank first Securities. from you. ahead. question [Operator Please of Colliers coming Instructions] go Our Kyle Bauser

Kyle Bauser

Great. you margin months, Bolder start with for Hi EBITDA about acquisitions. contribution our sales updates the everyone, and great well? results we spell which firms on as were phenomenal the estimates, contributions over Maybe the I'll but contribution you can might again. target from margin congrats how HistoTox the margins well both the from and know two I and coming quarters above out talk

Robert Leasure

what Hi generally we of the bottom from contributions Kyle, is lines by Bob, well think these just this is site, give expected. acquired it is and EBITDA The aware I sales, the contribution, but I sites, XX%. both obviously XX.X, I'm we believe. margin yes, we since what it. then contribution We don't Well gave we we're yes, margin about

and we're exceeded the very pleased sales our contributions the and with expectations think that. I original So

Kyle Bauser

in unallocated how you leverage it, we like press there from level and macro a go, and release. you're on cetera. get looks relocation, where just scale? G&A, acquisitions, up could it can about Can much speak with think bit thinking of how kind little that, you I about appreciate Great, a It appreciate the of breakout it the bumped the et G&A recruiting,

Robert Leasure

I as X% have been fees. I some a going leaders started Well, which now, those in generated we've raising in down the come additional lot said on very our believe standpoint. active also very market, businesses. as recruited G&A very We've do capital. reoccurring and then -- businesses, We unallocated to G&A and think X% I've new corporate have have consulting past, a right our active to active from activity the And we we will are M&A been for fees, fees, in M&A

the capacity, grow. reoccurring and separate separate have tried release and on what have focused what's this not do we time, out than We buy business and So startup integration to to grow are we the, to little bit corporate At build in service can some a we of out and this what's out so for reoccurring we a going our and and are are in and I capacity the can believe segment opportunity that is build we we those doing. that unallocated faster of need do of us this G&A. time great M&A some the probably what to picking job costs, better think believe that's what to we're services costs,

Kyle Bauser

of spend underlining top you're is biotech know could of it, that's M&A, typically a get little in that? and looking targeting? we and of from we what could about the how inorganic of layer an just maybe talk if rate, curious incremental on kind R&D definitely, bit in amount Got what organic you around and XX%, sort targeting growth what you're market for I growth terms

Robert Leasure

inorganic growth organic and In terms of growth? our

Kyle Bauser

Yes.

Robert Leasure

continuing that three year last to but a I think think given I about rate we're not And have that been don’t, to on information, will be do. I we're is the we this I what think again. obviously something I run excess that that that go of expecting really forward do in years Well, any we've think XX%.

than give any our inorganic going guidance growth think and don't go M&A I'd I that, other other be that we So I I active. really can we're strategy we really, projecting on forward acquisitions remain guidance, to can't than give and don't the think any because project the

Kyle Bauser

find examine just prioritizing maybe the talk do about prioritizing the sense, general similar time? geographic makes how in prioritizing any in on many you you're over, company targets? if with how just given at culture, you and you're a that are And, How maybe strategy, M&A M&A wondering of could you maybe general? terms, No, expanding kind that footprint, corporate typically just you again

Robert Leasure

service believe We note very in that Well, back the want we took let's providing goals sure and achieve and mindset you in acquisition our make stock that culture acquisition. our corporate with sellers culture a how is to by say that same could company. couple client to we the providing corporate critical that that we And strategy. very did, much they our the last the will have,

big them are they're So a to like our like and doing, believer we we'd future in on what obviously, also. bet

little really this no to got, things, we've to talking multiple we've look take see multiple all one care And give can at am more we're will have to put committed ourselves team as grow but number of able do at time I well hate longer to of able do a you fairly that, once. This we who stretch and further to great you a developed startup to any things to more is can a on what I But to acquired, me. wonder things, So, are multiple at sure it's team we've I what people be is things, at as things, board how a looking simultaneously. -- to be continue I do to deep that have together. members looking tell certain quite to a to team these we people. talented more as

pleased accomplish. really we're able been that So commitment we know the I that's what the quick that right have to sustainable, if know at don't and but made they've working always that a with and group pace. now, pretty I'm I they've

Kyle Bauser

acquisitions just that I up ratio think to should a lot there, we kind when the the artificially you or how I'm curious going XXX%. because I Again, of forward? and wondering about sustainable to maybe how HistoTox not time over of that am going getting is book-to-bill high certainly was Yes, find on, Bolder sleep X.X. guess, that

Robert Leasure

the -- pretty let Bolder different, work quickly. operations a comes little will is I the and goes

that we a remaining have as usually, backlog have doesn't as operations. as So don't big the

So the arena without Bolder. came in book-to-bill most of the

I wasn't, never up I had you could at have the So, that XX if growth sales. back and to think kind Bolder was you that projected would it looked to closer have in we It were on XX. that of we book-to-bill, done

So, the we sustainable. would tomorrow. up it know, know year what never month projected and I is to it we're very wake I I had don't we have until never have. that the that but is that to we will currently strong, tell going you

work So, right being an with now, are and out think increasing the along obviously industry means pleased I much rest further. scheduled backlog very which seeing we is

Kyle Bauser

it the question. last the build you and gave appreciate is Louis and facility you. a just How going, of I now, I that, forgot on maybe if this? out St. Got Thank timeline

Robert Leasure

the or first I XXXX quarter second completion in the for it's fiscal calendar is what XXXX. of in part that mentioned scheduled the call of Well,

up that starting year. is open up phases, February it maybe down January, What phase January I some looking now do what achieve to trying to it capacity of we growth in break can so targeting October, and is operation. next we're a So right in we're we mention in being we're can not before did

and so there demand the think is can doing we what to this. we're accelerate I

it now. very stay but really construction I'm we next January be market. able to and pleased of on until with it's we not won't easy I and on been They've can if completed in in can the year, if start some get know So the track October, track. stay contractors of always today's facility right in using

Kyle Bauser

results the you and it updates thank is perfect. Well, on I the no agree, great, for congrats again.

Robert Leasure

you. Thank

Operator

question Our from ahead. coming Windley go is of Dave Thank Instructions] you. Please [Operator Jefferies. next

David Windley

Thanks a taking Louis but your your out, part but of your about your last In in don’t have acquisition? how was network good add Hi, answered I wondering for wondering do preference, in St. couple opening related your Bob, afternoon. you capacity but answers my with is Louis of how have much you, the without this early, footprint? a what revenue or existing I'm you already, you questions. in in you talked much answer I to could St.

Robert Leasure

[Indiscernible] close if been so in I the in away think Okay. believe this, that that to a to we've I $XX another if we've at some last were last $XXX look were quarter, a the capacity the to we run about Boulder million Bolder, we'd from operations, we I made up do million some you so fourth getting on quarter, basis, annualized try articulate we XX quarter question, with revenue in areas. of stay had probably of opened rate. moves and

So I see at and think St. now Lafayette. Gaithersburg and hopefully Fort right West in we could some capacity maybe additional Louis, Collins,

this quarter have areas some look hopeful at to some think some and I see in we're to but we continuing So, are that currently on bringing those of board. expand, growth to ways that that we're I'm with that doing we going things opportunities see to

sitting So up we're with goal XX% I what is that our our leasing XX% to today, XX% from that wouldn't XX% possible we're recently open to that say with at things bit but of and doing of I the it's say would to we open not to capacity that purchased. see continue and last that capacity increased it's little a we've facilities, quarter. equipment that this could quarter

David Windley

very very last clients the sounds booking you further it you sounds into the high, are mentioned in that future. the like, so that like attractive. It answer book-to-bill out Understood, is mentioned and the

like Is it? and bookings into to to future. are the to of working does of comments together, sound capacity it comments the capacity your a fair out satisfy possible, some open take I but if those be some characterize to that able simply way soon you're So, scheduling as demand further as that

Robert Leasure

that think point, at yes, yes. I this

David Windley

And sorry sorry. go ahead, then what about,

Robert Leasure

No, go ahead.

David Windley

for the going you it what capacity I to you? to ask, bringing the scientific talent about the that satisfy are able people like staff labor on the demand, of labor and so staff find as the forth need was you market that the just you're does to what to and looks side in equation labs

Robert Leasure

board than we've up, is think a had the recruiter quarter, that and a which a several another we that that and continue to else grew positions and We've up have we're and have two not any but able constantly do low are been we're striving things, market, we constantly, or on capacity of XXX lot on recruit. brought now, to people, it's in to turnover rate, capacity, right last again that significantly to in people to we today's different brought very fill maintain to challenge those pleased we I anybody

think we place company can continue and better and that make that people a I have come we culture our I got to place to Fortunately, improve to to good it work and work. hope a want a

could always better. we think I do

we've So, we're I but so a it have go the up, fine job it is add done going away for to challenge, keep us. far, to a pressure but to not people is think going

David Windley

it, question and me? a Got last from

Robert Leasure.

I'd low next like four say XX% to three portion around is of still, months. it over the or

David Windley

it across be service have. pretty demand Are by of strong, demand for good across, would one or service your lines, or strong like seems It problem is you to seeing in around Last balanced everything? couple and demand strong question area. a me pretty disproportionately a

Robert Leasure

we now we strong across everything think better have job have moment. fairly get than I to a I think the one at the we that in things able more have And or of the stayed been past. we with programs do

I we much a and have do all now I we think of programs. it, much book-to-bill, starting get services. larger added can and for all through to our in-house. with full and these breadth clients different IT that's we're I also doing, those driving of programs services our additional job as internally enabling services we've and I'll mean And think communicate communicate services these discovery As involve better programs,

David Windley

Got Thanks your Thank that's very answers. it, interesting. you. for

Robert Leasure

Thank you, Dave.

Operator

Thank Leasure you. This the floor question-and-answer brings to the would I us of turn end over back like for to comments. our closing to session. Mr.

Robert Leasure

our in firm, you fourth out Group, has look reporting Thank follow-up and in results. a to when We reach Thank quarter call. Equity our release very in guys. a much. forward we for fiscal hope Relations scheduling this call you back good to participating you're I day. to afternoon, interested please our Hi financial XXXX December everybody you The if Investor

Operator

for you concludes thank event. participation. This gentlemen, and today's Ladies your

your have day. a time, and disconnect lines may wonderful You at this

Inotiv (NOTV) 12 Aug 212021 Q3 Earnings call transcript