8-K
Inotiv, Inc. (NOTV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 11, 2023
| INOTIV, INC. | ||
|---|---|---|
| (Exact name of registrant as specified in its charter) | ||
| Indiana | 0-23357 | 35-1345024 |
| --- | --- | --- |
| (State or other jurisdiction of<br><br> incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 2701 KENT AVENUE<br><br> <br>WEST LAFAYETTE, indiana | 47906-1382 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (765) 463-4527
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written<br>communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting<br>material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement<br>communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement<br>communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Shares | NOTV | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
The information provided in Item 2.02 and Item 9.01, including Exhibit 99.1, of this Form 8-K is being furnished and shall not be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such a filing.
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On May 11, 2023, Inotiv, Inc. issued a press release announcing financial results for the three and six months ended March 31, 2023. The full text of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| Exhibit<br><br>No. | Description |
| --- | --- |
| 99.1 | Inotiv, Inc. press release, issued May 11, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INOTIV, INC. | ||
|---|---|---|
| Date: May 11, 2023 | By: | /s/ Beth A. Taylor |
| Chief Financial Officer, | ||
| Senior Vice President—Finance |
Exhibit 99.1
Inotiv, Inc.Announces Second Quarter Fiscal 2023 Financial Results
Updates SelectFull Year Fiscal 2023 Financial Guidance
WESTLAFAYETTE, IN, May 11, 2023– 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.
FinancialHighlights
Q2 FY 2023 Highlights
| • | Revenue<br> grew to $151.5 million in Q2 FY 2023 from $140.3 million during the three months ended March 31,<br> 2022 (“Q2 FY 2022”), driven by a $7.9 million, or 20.2%, increase in Discovery<br> and Safety Assessment (“DSA”) revenue and a $3.3 million, or 3.3%, increase in<br> Research Models and Services (“RMS”) revenue. |
|---|---|
| • | Consolidated<br> net loss for Q2 FY 2023 was $(9.6) million, or (6.4)% of total revenue, compared to consolidated<br> net loss of $(6.7) million, or (4.7)% of total revenue, in Q2 FY 2022. |
| --- | --- |
| • | Adjusted<br> EBITDA^1^ was $17.1 million, or 11.3% of total revenue, compared to $25.3 million,<br> or 18.0% of total revenue, in Q2 FY 2022. |
| --- | --- |
| • | Book-to-bill<br> ratio was 0.95x for the DSA services business. |
| --- | --- |
| • | DSA<br> backlog was $145.7 million, up from $133.6 million at March 31, 2022. |
| --- | --- |
YTD FY 2023Highlights
| • | Revenue<br> grew to $274.2 million in YTD FY 2023 from $224.5 million during the six months ended March 31,<br> 2022 (“YTD FY 2022”), driven by a $16.2 million, or 22.5%, increase in DSA revenue<br> and a $33.5 million, or 22.0%, increase in RMS revenue. |
|---|---|
| • | Consolidated<br> net loss for YTD FY 2023 was $(96.6) million, or (35.2)% of total revenue, compared to consolidated<br> net loss of $(90.1) million, or (40.1)% of total revenue, in YTD FY 2022. The YTD FY 2023<br> consolidated net loss included a $66.4 million non-cash goodwill impairment charge related<br> to our RMS segment. |
| --- | --- |
| • | Adjusted<br> EBITDA^1^ was $11.6 million, or 4.2% of total revenue, compared to $35.3 million,<br> or 15.7% of total revenue, in YTD FY 2022. |
| --- | --- |
| • | Book-to-bill<br> 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.
UpdatingSelect 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.
ManagementCommentary
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 2023Review
Revenue*(in millions)*
| (unaudited) | (unaudited) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Segment | Q2 FY 2023 | Q2 FY 2022 | 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 begining 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.
GrossProfit^2^ (in millions)
| (unaudited) | (unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Segment | Q2 FY 2023 | % of Segment Revenue | Q2 FY 2022 | % of<br><br> <br>Segment<br><br> <br>Revenue | ||||||
| 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 2023Review
Revenue*(in millions)*
| (unaudited) | (unaudited) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Segment | YTD FY 2023 | YTD FY 2022 | 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.
GrossProfit^2^ (in millions)
| (unaudited) | (unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Segment | YTD FY 2023 | % of Segment Revenue | YTD FY 2022 | % of<br><br> <br>Segment<br><br> <br>Revenue | ||||||
| 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 andFinancing 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 onDSA and RMS Activities
| • | The<br> Company will be co-locating and further integrating its genetically<br> engineered models and services (“GEMS”) business with its existing Pharmacology,<br> Toxicology, Pharmacokinetic and Laboratory Sciences operations in St. Louis, MO, allowing<br> colleagues with similar skills and expertise to collaborate more closely. We expect the completion<br> of this project to occur in the third fiscal quarter of 2023, and upon completion we will<br> eliminate the need for one of our leased facilities in St Louis. The lease expires in July<br> 2023 and will not be renewed. |
|---|---|
| • | Within<br> its DSA business segment, the Company’s Rockville, MD site is now operational with<br> GLP biotherapeutics analytical and genetic toxicology capabilities; the facility expansion<br> in Boulder, CO has been completed; and the expansion activities at Fort Collins, CO remain<br> on track and are expected to become operational by the end of FY 2023. |
| --- | --- |
| • | Within<br> its RMS business segment, as previously announced during the first fiscal quarter of 2023,<br> the Company completed the shutdown of its Cumberland and Dublin, VA facilities and initiated<br> a relocation of its operations in Haslett, MI, and Boyertown, PA, to its newly refurbished<br> facility in Denver, PA. The facility closures in Haslett and Boyertown were completed as<br> planned in March 2023, and these facilities have been listed for sale. |
| --- | --- |
| • | In<br> the first fiscal quarter of 2023, the Company initiated the relocation of two RMS facilities<br> in Indianapolis, IN, which are expected to be completed by June 30, 2023. |
| --- | --- |
| • | The<br> relocation of the Company’s RMS facility in France to recently updated operations in<br> The Netherlands is now underway, and we expect to have this process completed by the end<br> of June 2023. |
| --- | --- |
| • | The<br> Company has completed its consultations with employee representatives to relocate its Blackthorne,<br> U.K. facility to operations in Hillcrest, U.K., and currently expects this relocation to<br> be completed during the third quarter of fiscal 2024. |
| --- | --- |
| • | In<br> conjunction with these RMS changes, the Company is reviewing alternatives and route enhancements<br> to our transportation system and has begun to initiate changes, which we expect will result<br> in a reduction in the number of vehicles required, a reduction in energy consumption and<br> its associated greenhouse gas emissions, and ultimately a reduction in transportation expenses<br> while maintaining and improving our service levels. |
| --- | --- |
| • | The<br> previously announced sale of the Company’s Israel operations is still in process and<br> is expected to be completed within this fiscal year. |
| --- | --- |
SubsequentEvents:
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 toGAAP 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/.
Thisrelease contains forward-looking statements that are subject to risks and uncertainties including, but not limited to, risks and uncertaintiesrelated 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 reduceits legal and third party fees, changes in the market and demand for the Company’s products and services, the development, marketingand sales of products and services, changes in technology, industry and regulatory standards, the timing of acquisitions and the successfulclosing, integration and business and financial impact thereof, governmental regulations, inspections and investigations, claims, investigationsand litigation against or involving the Company, its business and/or its industry, the impact of site closures and consolidations, expansionand related efforts, and various other market and operating risks, including those detailed in the Company's filings with the U.S. Securitiesand Exchange Commission.
| Company Contact | Investor Relations |
|---|---|
| Inotiv, Inc. | The Equity Group Inc. |
| Beth A. Taylor, Chief Financial<br> Officer | Devin Sullivan |
| (765) 497-8381 | (212) 836-9608 |
| btaylor@inotivco.com | dsullivan@equityny.com |
INOTIV, INC.
CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months<br> Ended | Six Months<br> Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | March 31, | |||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Service revenue | $ | 58,752 | $ | 49,584 | $ | 108,800 | $ | 87,760 | ||||
| Product<br> 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<br> provided (excluding amortization of intangible assets) | 38,143 | 33,305 | 73,573 | 57,514 | ||||||||
| Cost of products<br> 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<br> administrative | 29,035 | 21,347 | 58,004 | 34,599 | ||||||||
| Amortization<br> of intangible assets | 8,453 | 6,414 | 17,234 | 9,810 | ||||||||
| Other operating<br> expense | 4,812 | 4,450 | 8,451 | 38,030 | ||||||||
| Goodwill<br> impairment loss | — | — | 66,367 | — | ||||||||
| Operating income (loss) | $ | (2,125 | ) | $ | 7,868 | $ | (92,703 | ) | $ | (25,773 | ) | |
| Other (expense) income: | ||||||||||||
| Interest<br> expense | (10,515 | ) | (7,547 | ) | (20,965 | ) | (12,375 | ) | ||||
| Other<br> expense (income) | 545 | (139 | ) | (1,333 | ) | (57,866 | ) | |||||
| (Loss) income before income<br> taxes | $ | (12,095 | ) | $ | 182 | $ | (115,001 | ) | $ | (96,014 | ) | |
| Income<br> tax benefit (expense) | 2,466 | (6,846 | ) | 18,440 | 5,939 | |||||||
| Consolidated net loss | $ | (9,629 | ) | $ | (6,664 | ) | $ | (96,561 | ) | $ | (90,075 | ) |
| Less:<br> Net income (loss) attributable to noncontrolling interests | 365 | (577 | ) | 756 | (941 | ) | ||||||
| Net loss<br> attributable to common shareholders | $ | (9,994 | ) | $ | (6,087 | ) | $ | (97,317 | ) | $ | (89,134 | ) |
| Loss per common share | ||||||||||||
| Net loss attributable to common<br> shareholders: | ||||||||||||
| Basic and<br> diluted | $ | (0.39 | ) | $ | (0.24 | ) | $ | (3.79 | ) | $ | (3.84 | ) |
| Weighted-average number of common<br> shares outstanding: | ||||||||||||
| Basic and<br> diluted | 25,687 | 25,315 | 25,645 | 23,197 |
INOTIV**, INC.**
CONDENSED CONSOLIDATEDBALANCE SHEETS
(In thousands, except share amounts)
| September 30, | |||||
|---|---|---|---|---|---|
| 2022 | |||||
| Assets | |||||
| Current assets: | |||||
| Cash<br> and cash equivalents | 24,596 | $ | 18,515 | ||
| Restricted<br> cash | — | 465 | |||
| Trade receivables<br> and contract assets, net of allowances for credit losses of 7,523 and 6,268, respectively | 74,014 | 100,073 | |||
| Inventories,<br> net | 64,286 | 71,441 | |||
| Prepaid expenses<br> and other current assets | 40,479 | 42,483 | |||
| Assets<br> held for sale | 7,270 | — | |||
| Total<br> current assets | 210,645 | 232,977 | |||
| Property and equipment, net | 188,496 | 186,199 | |||
| Operating lease right-of-use<br> 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<br> assets | 868,666 | $ | 962,900 | ||
| Liabilities, shareholders'<br> equity and noncontrolling interest | |||||
| Current liabilities: | |||||
| Accounts<br> payable | 30,114 | $ | 28,695 | ||
| Accrued expenses<br> and other liabilities | 30,958 | 35,801 | |||
| Revolving<br> credit facility | — | 15,000 | |||
| Fees invoiced<br> in advance | 55,196 | 68,642 | |||
| Current portion<br> of long-term operating lease | 10,061 | 7,982 | |||
| Current portion<br> of long-term debt | 4,023 | 7,979 | |||
| Liabilities<br> held for sale | 2,101 | — | |||
| Total<br> current liabilities | 132,453 | 164,099 | |||
| Long-term operating leases,<br> net | 32,730 | 24,854 | |||
| Long-term debt, less current<br> portion, net of debt issuance costs | 370,040 | 330,677 | |||
| Other long-term liabilities | 6,023 | 6,477 | |||
| Deferred<br> tax liabilities, net | 54,785 | 77,027 | |||
| Total<br> liabilities | 596,031 | 603,134 | |||
| Shareholders’ equity and<br> noncontrolling interest: | |||||
| Common shares, no par value: | |||||
| Authorized 74,000,000 shares<br> at March 31, 2023 and at September 30, 2022; 25,759,107 issued and outstanding at March 31, 2023 and 25,598,289<br> at September 30, 2022 | 6,491 | 6,362 | |||
| Additional<br> paid-in capital | 711,591 | 707,787 | |||
| Accumulated<br> deficit | (444,838 | ) | (348,277 | ) | |
| Accumulated<br> other comprehensive income (loss) | 702 | (5,500 | ) | ||
| Total equity attributable to<br> common shareholders | 273,946 | 360,372 | |||
| Noncontrolling<br> interest | (1,311 | ) | (606 | ) | |
| Total<br> shareholders’ equity and noncontrolling interest | 272,635 | 359,766 | |||
| Total<br> liabilities and shareholders’ equity and noncontrolling interest | 868,666 | $ | 962,900 |
All values are in US Dollars.
INOTIV, INC.
CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months<br> Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, | ||||||
| 2023 | 2022 | |||||
| Operating activities: | ||||||
| Consolidated<br> net loss | $ | (96,561 | ) | $ | (90,075 | ) |
| Adjustments<br> to reconcile net loss to net cash used in operating activities, net of acquisitions: | ||||||
| Depreciation<br> and amortization | 26,253 | 15,866 | ||||
| Employee<br> stock compensation expense | 3,827 | 20,300 | ||||
| Changes<br> in deferred taxes | (21,303 | ) | (1,907 | ) | ||
| Provision<br> for doubtful accounts | 1,333 | 381 | ||||
| Amortization<br> of debt issuance costs and original issue discount | 1,512 | 1,203 | ||||
| Noncash<br> interest and accretion expense | 2,870 | 2,512 | ||||
| Loss on<br> fair value remeasurement of embedded derivative | — | 56,714 | ||||
| Other non-cash<br> operating activities | 8 | 603 | ||||
| Goodwill<br> impairment loss | 66,367 | — | ||||
| Loss on<br> debt extinguishment | — | 878 | ||||
| Non-cash<br> amortization of inventory fair value step-up | 427 | 6,277 | ||||
| Non-cash<br> restructuring costs | 678 | — | ||||
| Changes in<br> operating assets and liabilities: | ||||||
| Trade receivables<br> and contract assets | 22,836 | (8,926 | ) | |||
| Inventories | 7,125 | (14,688 | ) | |||
| Prepaid<br> expenses and other current assets | 1,862 | (10,149 | ) | |||
| Operating<br> lease right-of-use assets and liabilities, net | 429 | 1,457 | ||||
| Accounts<br> payable | 5,018 | 5,222 | ||||
| Accrued<br> expenses and other liabilities | (3,474 | ) | (11,510 | ) | ||
| Fees invoiced<br> in advance | (13,720 | ) | 28,402 | |||
| Other<br> asset and liabilities, net | (61 | ) | 1,467 | |||
| Net<br> cash provided by operating activities | 5,426 | 4,027 | ||||
| Investing activities: | ||||||
| Capital expenditures | (16,840 | ) | (15,202 | ) | ||
| Proceeds<br> from sale of equipment | 276 | 283 | ||||
| Cash<br> paid in acquisitions | — | (288,702 | ) | |||
| Net<br> cash used in investing activities | (16,564 | ) | (303,621 | ) | ||
| Financing activities: | ||||||
| Payments<br> of long-term debt | — | (37,746 | ) | |||
| Payments<br> of debt issuance costs | (54 | ) | (9,887 | ) | ||
| Payments<br> on promissory notes | (1,454 | ) | (763 | ) | ||
| Payments<br> on revolving credit facility | (21,000 | ) | (10,000 | ) | ||
| Payments<br> on senior term notes and delayed draw term loans | (1,375 | ) | (601 | ) | ||
| Borrowings<br> on construction loan | — | 1,184 | ||||
| Borrowings<br> on revolving loan facility | 6,000 | 10,000 | ||||
| Borrowings<br> on delayed draw term loan | 35,000 | 35,000 | ||||
| Proceeds<br> from exercise of stock options | 107 | 93 | ||||
| Proceeds<br> from issuance of senior term notes | — | 205,000 | ||||
| Payments<br> on capex line of credit | — | (1,749 | ) | |||
| Net cash<br> provided by financing activities | 17,224 | 190,531 | ||||
| Effect of exchange rate changes<br> on cash and cash equivalents | 1,052 | (392 | ) | |||
| Net increase (decrease) in cash<br> and cash equivalents | 7,138 | (109,455 | ) | |||
| Less: cash, cash equivalents,<br> and restricted cash held for sale | (1,522 | ) | — | |||
| Cash, cash<br> equivalents, and restricted cash at beginning of period | 18,980 | 156,924 | ||||
| Cash,<br> 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<br> flow information: | ||||||
| Cash paid<br> for interest | $ | 16,374 | $ | 5,989 | ||
| Income taxes<br> paid, net | $ | 3,952 | $ | 614 |
INOTIV, INC.
RECONCILIATIONOF GAAP TO NON-GAAP
SELECT BUSINESSSEGMENT 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<br> income | 1,924 | 3,752 | 4,296 | 9,794 | ||||||||
| Operating<br> income as a % of total revenue | 1.2 | % | 2.7 | % | 1.5 | % | 4.4 | % | ||||
| Add back: | ||||||||||||
| Depreciation<br> and amortization | 3,611 | 3,417 | 7,591 | 5,958 | ||||||||
| Restructuring<br> costs | 97 | - | 97 | - | ||||||||
| Startup<br> costs | 2,281 | 1,474 | 3,786 | 2,431 | ||||||||
| Total<br> non-GAAP adjustments to operating income | 5,989 | 4,891 | 11,474 | 8,389 | ||||||||
| Non-GAAP<br> operating income | 7,913 | 8,643 | 15,770 | 18,183 | ||||||||
| Non-GAAP<br> operating income as a % of DSA revenue | 16.8 | % | 22.1 | % | 17.9 | % | 25.3 | % | ||||
| Non-GAAP<br> 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<br> income/(loss) | 12,725 | 22,562 | (58,547 | ) | 22,642 | |||||||
| Operating<br> income/(loss) as a % of total revenue | 8.4 | % | 26.8 | % | (21.4 | )% | 10.1 | % | ||||
| Add back: | ||||||||||||
| Depreciation<br> and amortization | 9,379 | 6,425 | 18,662 | 9,908 | ||||||||
| Restructuring<br> costs | 1,643 | - | 1,909 | - | ||||||||
| Amortization<br> of inventory step up | 183 | 2,609 | 427 | 6,277 | ||||||||
| Other<br> non-recurring, third party costs | 469 | 507 | 1,140 | 946 | ||||||||
| Goodwill<br> impairment loss | - | - | 66,367 | - | ||||||||
| Total<br> non-GAAP adjustments to operating income/(loss) | 11,674 | 9,541 | 88,505 | 17,131 | ||||||||
| Non-GAAP<br> operating income | 24,399 | 32,103 | 29,958 | 39,773 | ||||||||
| Non-GAAP<br> operating income as a % of RMS revenue | 23.4 | % | 31.7 | % | 16.1 | % | 26.1 | % | ||||
| Non-GAAP<br> 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<br> Corporate G&A | (16,774 | ) | (18,445 | ) | (38,452 | ) | (58,209 | ) | ||||
| Unallocated<br> corporate G&A as a % of total revenue | (11.1 | )% | (13.1 | )% | (14.0 | )% | (25.9 | )% | ||||
| Add back: | ||||||||||||
| Stock<br> option expense | 1,781 | 1,141 | 3,827 | 25,073 | ||||||||
| Acquisition<br> and integration costs | 105 | 2,085 | 1,088 | 10,893 | ||||||||
| Total<br> non-GAAP adjustments to operating income/(loss) | 1,886 | 3,226 | 4,915 | 35,966 | ||||||||
| Non-GAAP<br> operating loss | (14,888 | ) | (15,219 | ) | (33,537 | ) | (22,243 | ) | ||||
| Non-GAAP<br> 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<br> income/(loss) | (2,125 | ) | 7,869 | (92,703 | ) | (25,773 | ) | |||||
| Operating<br> loss as a % of total revenue | (1.4 | )% | 5.6 | % | (33.8 | )% | (11.5 | )% | ||||
| Add back: | ||||||||||||
| Depreciation<br> and amortization | 12,990 | 9,842 | 26,253 | 15,866 | ||||||||
| Stock<br> compensation expense | 1,781 | 1,141 | 3,827 | 25,073 | ||||||||
| Restructuring<br> costs | 1,740 | - | 2,006 | - | ||||||||
| Acquisition<br> and integration costs | 105 | 2,085 | 1,088 | 10,893 | ||||||||
| Amortization<br> of inventory step up | 183 | 2,609 | 427 | 6,277 | ||||||||
| Startup<br> costs | 2,281 | 1,474 | 3,786 | 2,431 | ||||||||
| Other<br> non-recurring, third party costs | 469 | 507 | 1,140 | 946 | ||||||||
| Goodwill<br> impairment loss | - | - | 66,367 | - | ||||||||
| Total<br> non-GAAP adjustments to operating loss | 19,549 | 17,658 | 104,894 | 61,486 | ||||||||
| Non-GAAP<br> operating income/(loss) | 17,424 | 25,527 | 12,191 | 35,713 | ||||||||
| Non-GAAP<br> operating income/(loss) as a % of total revenue | 11.5 | % | 18.2 | % | 4.4 | % | 15.9 | % |
INOTIV, INC.
RECONCILIATIONOF 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<br> net loss | $ | (9,629 | ) | $ | (6,664 | ) | $ | (96,561 | ) | $ | (90,075 | ) |
| Adjustments (a): | ||||||||||||
| Interest<br> expense | 10,515 | 7,547 | 20,965 | 12,375 | ||||||||
| Income tax<br> (benefit) expense | (2,466 | ) | 6,846 | (18,440 | ) | (5,939 | ) | |||||
| Depreciation<br> and amortization | 12,990 | 9,842 | 26,253 | 15,866 | ||||||||
| Stock compensation<br> expense (1) | 1,781 | 1,141 | 3,827 | 25,073 | ||||||||
| Acquisition<br> and integration costs (2) | 105 | 2,<br> 085 | 1,088 | 10,893 | ||||||||
| Startup costs | 2,281 | 1,474 | 3,786 | 2,431 | ||||||||
| Restructuring<br> costs (3) | 1,740 | - | 2,006 | - | ||||||||
| Unrealized<br> foreign exchange (gain)/loss | (739 | ) | (134 | ) | 511 | 60 | ||||||
| Loss on debt<br> extinguishment | - | - | - | 877 | ||||||||
| Amortization<br> of inventory step up | 183 | 2,609 | 427 | 6,277 | ||||||||
| Loss (gain)<br> on disposition of assets | (129 | ) | 12 | 251 | (235 | ) | ||||||
| Loss on fair<br> value remeasurement of convertible notes (4) | - | - | - | 56,714 | ||||||||
| Other non-recurring,<br> third party costs | 469 | 507 | 1,140 | 946 | ||||||||
| Goodwill<br> impairment loss (5) | - | - | 66,367 | - | ||||||||
| Adjusted<br> EBITDA (b) | $ | 17,101 | $ | 25,265 | $ | 11,620 | $ | 35,263 | ||||
| GAAP Consolidated<br> net loss as a percent of total revenue | (6.4 | )% | (4.7 | )% | (35.2 | )% | (40.1 | )% | ||||
| Adjustments<br> as a percent of total revenue | 17.6 | % | 22.8 | % | 39.5 | % | 55.8 | % | ||||
| Adjusted<br> EBITDA as a percent of total revenue | 11.3 | % | 18.0 | % | 4.2 | % | 15.7 | % | ||||
| (a) | Adjustments<br> to certain GAAP reported measures for the three and six months ended March 31, 2023 and 2022 include, but are not limited to,<br> the following: | |||||||||||
| --- | --- | --- | --- | |||||||||
| (1) | For the six months ended<br> March 31, 2022, $23.0 million relates to post combination non-cash stock compensation expense relating to the adoption of the<br> Envigo Equity Plan recognized in connection with the Envigo acquisition. | |||||||||||
| (2) | For the three and six months<br> ended March 31, 2023 and 2022, represents charges for legal services, accounting services, travel and other related activities<br> in connection with various acquisitions and the related integration of those acquisitions. | |||||||||||
| (3) | For the three and six months<br> ended March 31, 2023, represents costs incurred in connection with the exit of multiple sites as previously disclosed. | |||||||||||
| (4) | For the six months ended<br> March 31, 2022, represents loss of $56.7 million resulting from the fair value remeasurement of the embedded derivative component<br> of the convertible notes. | |||||||||||
| (5) | For the six months ended<br> March 31, 2023, represents a non-cash goodwill impairment charge of $66.4 million related to the RMS segment. | |||||||||||
| (b) | Adjusted EBITDA -<br> Consolidated net (loss) income before interest expense, income tax expense (benefit), depreciation and amortization, stock<br> compensation expense, acquisition and integration costs, startup costs, restructuring costs, unrealized foreign exchange gain/loss,<br> loss on debt extinguishment, amortization of inventory step up, gain/loss on disposition of assets, loss on fair value remeasurement<br> of the embedded derivative component of the convertible notes, other non-recurring third party costs and goodwill impairment loss. | |||||||||||
| --- | --- |