Fubotv earnings beat by $0.10, revenue topped estimates
Inotiv Inc. reported its Q3 2025 earnings, revealing a mixed performance with an EPS of -$0.51, missing the forecast of -$0.39, while revenue reached $130.68 million, surpassing the expected $127.05 million. Following the earnings release, Inotiv’s stock rose by 5.54% in aftermarket trading, reflecting investor optimism despite the earnings miss. According to InvestingPro analysis, the company is currently trading below its Fair Value, though it operates with a significant debt burden of $451.59 million.
Key Takeaways
- Revenue exceeded forecasts by 2.86%, reaching $130.68 million.
- EPS fell short of expectations with a negative surprise of 30.77%.
- Stock price increased by 5.54% in aftermarket trading.
- Operational improvements and cost-saving measures were highlighted.
- The company remains cautiously optimistic about future performance.
Company Performance
Inotiv demonstrated a solid revenue performance in Q3 2025, with a year-over-year increase of 23.5%. The company’s consolidated net loss improved to $17.6 million from $26.1 million in the previous year. Notably, the RMS segment saw a revenue growth of 34.1%, while the DSA segment increased by 8.9%. These results indicate significant progress in key operational areas.
Financial Highlights
- Revenue: $130.68 million, up 23.5% year-over-year
- Earnings per share: -$0.51, missing the forecast of -$0.39
- Adjusted EBITDA: $11.6 million, representing 8.9% of total revenue
Earnings vs. Forecast
Inotiv’s Q3 2025 EPS of -$0.51 fell short of the expected -$0.39, resulting in a negative surprise of 30.77%. However, the company’s revenue of $130.68 million surpassed the forecast of $127.05 million, delivering a positive surprise of 2.86%.
Market Reaction
Following the earnings announcement, Inotiv’s stock price rose by 5.54% in aftermarket trading, closing at $2.19. This increase reflects positive investor sentiment, likely driven by the revenue beat and operational improvements, despite the EPS miss. The stock is recovering from its 52-week low of $1.15. InvestingPro data shows the stock’s high volatility with a beta of 4.01, while maintaining a significant 90% premium to its 52-week low. For deeper insights into Inotiv’s valuation and financial health metrics, access the comprehensive Pro Research Report available on InvestingPro.
Outlook & Guidance
While Inotiv did not provide formal financial guidance, the company expressed cautious optimism about future performance. It plans to focus on improving margins and operational efficiency, with potential balance sheet restructuring in the pipeline. InvestingPro analysts have identified several key challenges, including cash burn concerns and profitability issues. Subscribers can access additional ProTips and detailed financial analysis to better understand the company’s future prospects.
Executive Commentary
CEO Bob Leisure stated, "We are cautiously optimistic with the keyword being cautious," emphasizing the company’s careful approach to future growth. He also highlighted, "We are a much better company today than we have ever been before," reflecting confidence in the company’s progress and strategic initiatives.
Risks and Challenges
- Continued net losses despite improvements.
- Increased cancellations, up 31% from the previous year.
- Potential challenges in maintaining stable pricing in the NHP market.
Q&A
During the earnings call, analysts inquired about Inotiv’s NHP import strategies, potential margin improvements in discovery services, and expectations for inventory and cash flow. The company addressed these concerns, highlighting improvements in customer service tracking and operational efficiencies.
Full transcript - Inotiv Inc (NOTV) Q3 2025:
Steve, Earnings Call Moderator, Innative: Thank you, Aaron, and good afternoon, everyone. Thank you for joining today’s quarterly call with Innative’s management team. Before we begin, I’d like to remind everyone that some of the statements that management will make on this call are considered forward looking statements, including statements about the company’s future operating and financial results and plans. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management’s expectations as of today’s date.
You should not place undue reliance on these forward looking statements, and the company does not undertake any obligation to update or revise forward looking statements, whether as a result of new information, future events or otherwise. Please refer to the company’s SEC filings for further guidance on this matter, including risks and uncertainties that could cause results to differ from forward looking statements. Management will also discuss certain non GAAP financial measures in an effort to provide additional information for investors. Definitions of these non GAAP measures and reconciliations to the most comparable GAAP measures are included in the company’s current and previous earnings releases, which has been posted to the Investors section of the company’s website, www.inative.com, and is also available in the Form eight ks filed with the Securities and Exchange Commission. If you haven’t obtained a copy of today’s press release yet, you can do so by going to the Investors section of Innative’s website.
Joining us from the company this afternoon are Bob Leisure, President and Chief Executive Officer and Beth Taylor, Chief Financial Officer. John Sagartz, Chief Strategy Officer will join us for the question and answer portion of the call. Bob will begin with some opening remarks, after which Beth will present a summary of the company’s financial results for our 2025, and then we’ll open the call for questions. It is now my pleasure to turn the call over to Bob Leisure, CEO. Bob, please go ahead.
Bob Leisure, President and Chief Executive Officer, Innative: Thank you, Steve, and good afternoon, everyone. During the third quarter, we made some announcements and saw some continuation of the positive trends, which we could could be very meaningful for our business going forward. On 05/29/2025, during our in person Investor Day, we addressed in more detail our view of the critical issues facing our industry such as tariffs, NIH funding, and the recent comments from the FDA related to new approach methodologies, or NAMS. We also outlined our progress over the last eight years as we have built our business, and in more recent focus over the last two years on integration and optimization. And then we outlined our goals to improve our cash flow and margins.
On 06/02/2025, we were informed by the SEC’s Division of Enforcement that it concluded its investigation, which began in May 2023 related to importation of nonhuman primates from Asia. Based on the information available to the division as of the date of its letter, the division does not intend to recommend an enforcement action by the SEC against Intuitive. As noted in our earnings release, which just went up based on current negotiations with the plaintiffs and the outstanding securities class action and shareholders derivative lawsuits, we recorded a $10,000,000 accrual for these lawsuits as of 06/30/2025, as well as a $10,000,000 receivable due to the fact that we currently expect to recover the full amount of the accrual under our existing insurance policies. However, we must still reach a final agreement on the terms of any settlement, and actual amounts may change. We will provide additional information once we have material updates to share.
In June, we received updated AAALAC accreditation for our NHP facilities in Texas. All of our RMS animal production facilities are currently AAALAC accredited, so this by itself is not particularly noteworthy. However, what we are extremely proud of is that both NHP facilities in Texas received accreditation and were noted for having an exemplary program of laboratory animal care and use. This is a testament not only to the commitment of our people, but also the benefit of the investments we have made that have substantially improved these facilities and welfare of our animal model business. We look forward to continuing to strive for the high standards as we invest in our facilities.
Now moving on to the quarterly results. We are pleased with the quarterly results. We are seeing signs that demonstrate the potential to increase DSA awards and improve the overall revenue, margins and adjusted EBITDA. For the 2025, we saw a year over year revenue increase of 23.5%. The total revenue was $130,700,000 compared to $105,800,000 in the 2024 and $124,300,000 in 2025.
Consolidated revenue for the quarter was the strongest since 2024. The year over year revenue increase was mainly due to an increase in RMS segment revenue of $21,000,000 or 34.1% improvement over the prior year quarter and an increase in DSA segment revenue of $3,900,000 or an 8.9% increase over the same period in fiscal twenty twenty four. Consolidated net loss for the quarter was $17,600,000 compared to $26,100,000 in the 2024. Our EBITDA for the quarter was $11,600,000 compared to $100,000 in 2024. Adjusted EBITDA for the quarter was the strongest since 2023.
Q3 fiscal year twenty twenty five DSA operating margins improved 4.6% over the Q2 fiscal year ’twenty five, but were still 0.8% lower compared to 2024. We previously noted we had a deterioration of DSA operating margins during the 2025, and we were pleased to see these margins improve during the fiscal third quarter. We believe the DSA operating margins have been impacted in fiscal year twenty twenty five from the pricing pressure we faced in fiscal year twenty twenty four that continued through the 2025. Margin improvements are critical to achieving our adjusted EBITDA goals. Some of the improvements in the ’25 were due to improved pricing and scale as we grew revenue while working to control costs, and we’ll continue to focus on improving these margins in the future.
RMS operating margins for Q3 fiscal year twenty twenty five were 19.8% higher than the prior year quarter. However, margins were 6.7% lower compared to Q2 fiscal year ’twenty five, which included a $7,600,000 of operating income from a litigation settlement agreement. If we excluded that $7,600,000 litigation settlement from 2025, our RMS operating margins in Q3 fiscal year twenty twenty five were the strongest operating margins we have seen since Q1 fiscal year twenty twenty four. We believe we have further opportunity to drive margins higher as we complete the next phase of the RMS site optimization plan, which we announced in December 2024. As we stated last quarter, we now anticipate net annual savings of $6,000,000 to $7,000,000 on capital investments of approximately $6,500,000 To date, we have spent approximately $300,000 net of tenant allowances related to this capital investment.
In connection with our revised optimization plan, we had two properties under contract to be sold. We closed on the sale of one property in June and the net proceeds were used to repay principal on our term loans. The second property is expected to close during 2025. This optimization plan is still on track to be completed by March 2026. As with previous projects, we have executed in the RMS segment, these additional investments are intended to help modernize our existing footprint while allowing us to close older facilities.
The revised plan will reduce capacity and should create operating efficiencies while continuing our efforts to support our animal welfare objectives. Additionally, we believe this plan allows us to remain agile and increase capacity in the future if needed. We also continue to integrate and improve our North American Transportation And Distribution Systems, which we brought in house in the 2024. We followed up last quarter’s year over year increase in net DSA awards of 27%, with a year over year Q3 increase in net DSA awards of 25. We saw the most significant awards growth in our discovery business and the safety assessment services, which we expanded and started up over the last two years, such as the biotherapeutics, medical device services, and genetic toxicology.
For the quarter, the discovery awards increased 31.3% over the same period a year ago. For all of DSA, we saw a positive quarterly net book to bill of 1.07 times, and a year to date book to bill now is 1.03 times. We are pleased with our fiscal twenty twenty five third quarter results, which we believe demonstrate our ability to identify opportunities and implement action plans to improve revenue and margins. We remain confident about our ability to continue to show improvement in our financial performance as we prepare for fiscal years 2026 and 2027, while we simultaneously also focus on client satisfaction metrics, continue to integrate our services, and enhance our speed and delivery. We continue to evolve as a company.
The 14 companies we acquired from 2018 to 2022 have now been working together for three or four years. We have gone from being a handful of different entities to a fully integrated nonclinical drug discovery and development company, which has recruited and developed significant scientific strength. Examples of some of these changes include a more optimized facility footprint, where we have 30% fewer sites compared to three years ago, providing a much better client experience and operating more efficiently and cost effectively. While we’ve reduced our sites by the 30%, we have more than doubled the number of licensed veterinarians we have on staff, significantly increasing the critical animal welfare staffing per facility. We have integrated and improved our systems to now have 34% less software platforms.
This is inherently more efficient and cost effective domain, plus we’ve invested in improved platforms, which provide much better data, improved ability to communicate both internally and with our clients. Over the last four years, while we focus on integrating our services, we’ve also been strengthening our scientific group. As an example, we have more than doubled our board certified veterinary pathologist, as well as our pathology support team. We have improved our capacity, expanded our services, and increased our scientific strength. We’ve also grown our sales team to help expand our sales and customer base.
I believe we are just now beginning to see the benefits of these changes. We continue to seek improvement and believe we can be agile and evolve as the market and science such as NAMS continue to evolve. While we have implemented and continue to implement strategies that we believe will address our cash flow and business model, we also recognize the importance of improving our balance sheet. We recognize that our first lien term loan matures in November 2026, with our convertible debt maturing in October 2027. Our lenders and convert holders have been very important partners to us and have been very supportive through some very challenging times over the last three years, and we look forward to continuing to work with them in the future.
While we are not providing any specific guidance at this time, we are prioritizing a strategic review of our balance sheet and capital structure, and our plan is to hire a third party to assist us with this process. We’ll provide more information at the appropriate time. Before I close and turn it over to Beth, we want to recognize and acknowledge that this has been nice to see this increased sales and net awards over the past two quarters, and we’ve seen these trends continue through the first month of this current quarter. However, we are coming off some very weak numbers from a year ago, and the geopolitical and macroeconomic conditions, risk and uncertainties are likely to remain with us and with the industry for the foreseeable future. We are cautiously optimistic with the keyword being cautious.
Despite whatever challenges we face, we remain committed to building a business that will create value for our clients, employees, and our shareholders and look forward to a bright future. Our leadership team has not only been resilient, but it has gotten stronger as we have worked through these changes in challenging times. We want everyone on our team and everyone who’s been part of this company to know how much they are appreciated as the journey has required some sacrifices and everyone has been asked to put forth extraordinary efforts with their trust, time, and talents to help us build this company. I’ll now hand things over to Beth to provide the financial overview.
Beth Taylor, Chief Financial Officer, Innative: Thank you, Bob, and good afternoon, everyone. For the 2025, total revenue was $130,700,000 compared to $105,800,000 in the 2024. This was a $24,900,000 or 23.5% increase in revenue from the prior year quarter, primarily driven by increased NHP revenue within our RMS segment. DSA revenue in the fiscal twenty twenty five third quarter was $48,200,000 compared to $44,200,000 in Q3 fiscal year twenty twenty four. The year over year increase in DSA revenue was primarily driven by an increase in general toxicology services as well as an increase in biotherapeutic services and medical device services.
Overall net new DSA awards this quarter were $50,400,000 a 13% increase over 2025 and a 25% increase over 2024. We have also seen strong quoting and awards for the month of July, which has been a good start to our last 2025. The backlog conversion rate in the 2025 was 35.5%, up from 31% in the prior year period. The DSA cancellations and change orders in the 2025 were approximately 31% higher compared to the prior year third quarter. Cancellations in the trailing twelve month period were approximately 2% more than the prior trailing twelve month period.
RMS revenue for the 2025 of $82,500,000 increased $21,000,000 or 34.1% compared to Q3 fiscal year twenty twenty four. The increase in RMS revenue was primarily due to higher NHP volumes sold and higher average selling prices for NHPs compared to the prior year quarter. The overall operating loss for the 2025 decreased $15,100,000 from $20,800,000 in the 2024 to $5,700,000 in 2025, primarily due to the $24,900,000 increase in revenue previously mentioned and decreased operating expenses, primarily offset by increased cost of revenue. The increase in cost of revenue primarily relates to increased costs associated with the increased NHP related product and service revenue previously discussed. Consolidated net loss attributable to common shareholders in the 2025 totaled $17,600,000 or a $0.51 loss per diluted share.
This is compared to consolidated net loss attributable to common shareholders of $26,100,000 or a $1 loss per diluted share in the 2024. For the 2025, adjusted EBITDA was $11,600,000 or 8.9% of total revenue compared to $100,000 or 0.1% of total revenue for the 2024. Non GAAP operating income for our DSA segment in the third quarter was $7,200,000 or 5.5% of total revenue compared to $5,000,000 or 4% of total revenue in the 2025 and $7,800,000 or point 4% of total revenue in the last fiscal year’s third quarter. As Bob mentioned, we continue to be focused on our DSA margins and we expect to see improvement in future quarters. As we experience an increase in discovery service revenue and continue to fill the added capacity and services we have developed over the last eighteen months, we believe we will see margin improvement through operating leverage.
In addition, we are seeing a much more stable pricing environment across our DSA services. The book to bill ratio for DSA in the 2025 was 1.07x to one, our trailing twelve month book to bill was 0.97x to one. DSA backlog was $134,300,000 at 06/30/2025, compared to $130,800,000 at 03/31/2025, and $139,400,000 at 06/30/2024. In our RMS segment, non GAAP operating income in the 2025 was $16,900,000 or 12.9% of total revenue compared to $15,600,000 or 12.5% of total revenue in the 2025 and $6,500,000 or 6.2% of total revenue in the 2024. Interest expense in 2025 increased to $13,600,000 from $12,100,000 in the 2024, primarily due to PIK interest incurred in relation to the second lien notes issued in September 2024.
Our balance sheet as of 06/30/2025, included $6,200,000 in cash and cash equivalents as compared to $21,400,000 on 09/30/2024. The primary uses of cash during the first nine months of fiscal twenty twenty five were negative working capital of $19,200,000 as we increased NHP inventory based on timing of imports and $5,600,000 of cash used in consolidated operations. In the 2025, we saw significant fluctuations in our working capital based on the timing of NHP purchases and when we get paid for sales of NHPs by our clients. The company has utilized and will continue to utilize its revolving credit facility during the normal course of business as needed. As of 06/30/2025, the company had access to the $15,000,000 revolver which had no balance outstanding.
Recently, the company has requested a draw of $3,000,000 on its revolving credit facility. Total debt net of debt issuance costs as of 06/30/2025 was $396,500,000 compared to $393,300,000 on 09/30/2024. This includes $114,800,000 of convertible notes as of 06/30/2025, and our second lien notes of $21,800,000 Cash used in operating activities was $24,800,000 for the nine months ended 06/30/2025, compared to $14,400,000 of cash used in operating activities for the nine months ended 06/30/2024. Capital expenditures in the 2025 were $4,000,000 or approximately 3.1% of total revenue. The 2024 capital expenditures were $4,400,000 or 4.2% of revenue.
We continue to expect our annual capital spend for fiscal twenty twenty five to be less than 4% of revenue. We have not provided formal financial guidance for fiscal twenty twenty five. While we continue to feel positive about the progress we have made in recent quarters, we are not providing formal fiscal twenty twenty five guidance at this time. As we have stated previously, we hope to resume providing guidance once we have greater clarity on the market and client demand and clarity on any impact to our business once there is more information on tariffs. Our current operating plan forecasts compliance with the updated covenants under our latest amendment to the credit agreement entered into in September 2024.
And with that financial overview, we will turn the call over to our operator for questions.
Operator: Certainly. And we will take our first question from Matt Hewitt with Craig Hallum Capital Group. Your line is open.
Matt Hewitt, Analyst, Craig Hallum Capital Group: Good afternoon and congratulations on the progress. Maybe first up, it sounds like your cancellations or negative change orders are still a little bit elevated. Is it your expectation that you could start to see that decline as we get into the back half of the year, maybe into fiscal year twenty twenty six? How are you thinking about that metric?
Bob Leisure, President and Chief Executive Officer, Innative: Well, I can’t predict what’s going to happen. But yes, they were elevated this past quarter. For the year, they’re only up 2%, but the last quarter was a fairly big quarter of cancellations for us. So as you can probably figure out, our book to bill on a gross basis was extremely large. You take that book to bill on top of the increased sales we had, the 8% increase in sales we had, and you take the cancellations, it was a very, very strong quarter for new bookings.
I think we just have to we have to plan for cancellations to continue to be high. If they’re not, that’s great. But as a result, that means, we need to have a higher gross book to bill and prepare for that. I think we have done a much better job over the last year expecting that. And I think last quarter demonstrates now that if we’re if that’s going be a new normal for a while to have cancellations, that means our gross bookings and expectations for gross bookings have to go up.
That’s why we increased our sales force, increased our sales team. And right now I think our organization is doing a good job of managing through that. However, as we’ve talked in the past, we sometimes get cancellations that can be one or two that can be fairly big because of the size of our company. Last quarter was pretty significant. This quarter looks to me like it right now it started off much better, but we’ll wait and see how that goes.
But yeah, I think we just got to pro plan, but that’s a new normal and sell through it. We can’t change it. We need to prepare for it.
Matt Hewitt, Analyst, Craig Hallum Capital Group: Well, obviously, your sales team is doing a phenomenal job if they’re more than covering that. Maybe second would be, what’s up next for your site optimization? You’ve obviously made some significant progress on the checklist there. I’m just curious as you look at Q4, but more importantly at fiscal twenty six, what’s next on the site optimization side?
Bob Leisure, President and Chief Executive Officer, Innative: Well, I’d like to see less and we have been trying to focus less on brick and mortar changes and more in some fine tuning of what have. So we have these three or four facilities we’re moving now and one that we’re significantly improving. That will be significant. We will continue to improve our facilities in Alice, Texas, as we increase some of the service work we do down there that is increasing demand, that we probably increase those facilities. And then right now what we’re looking at is how do we fine tune the facilities that we have.
Relocating some work without moving brick and mortar, but relocating work and how do we do a better job for our client, serving our client, how do we open up additional capacity. So it’s one thing that we when you’re making these macro changes, and that I’d like us to really focus on some of the smaller changes that are very significant. And how do we get more capacity out of existing facilities? And so before we get back into the brick and mortar game right now, I don’t think we have any more significantly old facilities to close. This is the last big one.
But I do think we have a lot of tweaks we can make in order to improve upon the existing facilities that we do have. And that will be the focus.
Matt Hewitt, Analyst, Craig Hallum Capital Group: That’s great. Thank you.
Operator: And we can take our next question from Dave Windley with Jefferies. Your line is open.
Dave Windley, Analyst, Jefferies: Hi, thanks for taking my questions. I wondered first Bob, if you could talk about the mix of bookings that you’re seeing relative to your book of business. You’ve called out new services added a couple of quarters, maybe more quarters about momentum in biotherapeutics and medical device was another call out today. Are the bookings even more over weighted in those new service directions than the current revenue?
Bob Leisure, President and Chief Executive Officer, Innative: Yes. So we’ve seen bookings yet and the revenue is yet to catch up with some of the bookings that we recorded last quarter. But we had seen over the last two quarters prior to that, we had seen a beginning significant increase kind of started last in our first fiscal Q1 in discovery. Kind of continued into Q2 and it really ballooned quite a bit into Q3. So discovery being up 31%, 32% year over year is very big for us.
Because discovery is probably our most fixed cost business. And that has really significant impact on our ability to create margins and create money to the bottom line. It’s also an area where we had expanded some of the services. We brought in some scientific talent, we’re very pleased with. And we developed and put in place, really started developing a new sales team there.
I would say in December 2023. So it’s been about eighteen months. So to see them really come together and sell and really win new accounts and then see increasing sales from existing accounts has been very, very rewarding. And I think they’re feeling very good about the momentum that they have. But it’s not just safety assessment.
Our safety assessment capacity has stayed fairly full. We may see some benefit from safety assessment from pricing, but we don’t have a lot of room, We’ve stayed at 85% in terms of a lot of our safety assessment capacity. So a lot of this is in niche and scientific areas.
Dave Windley, Analyst, Jefferies: Got it. Shifting to NHPs. Your competitor and you have announced today a conclusion of this DOJ investigation. Obviously, that’s good news to put that behind you to put a tourniquet on the legal costs that you were incurring. I want to understand better what your freedom of movement is within HP.
Are you now free to import from Cambodia broadly speaking? And then secondary question to that, how do you believe that any changes, depending your answer to my question, but any changes to the market and market pricing that will cause as a result of these changes? Thanks.
Bob Leisure, President and Chief Executive Officer, Innative: First of all, the DOJ issues for us, I think were resolved several quarters ago, and US Fish and Wildlife is and the DOJ have never told us we cannot import from Cambodia. Matter of fact, just the opposite. They told us that we are free to import from Cambodia, and we haven’t for the last two or three quarters. We have not imported from Cambodia. But that also is somewhat not only up to our US government, it’s also up to the Cambodian government.
So, and we have other good Asian supplies right now. So we do work with people in Cambodia and along with many other countries. If we see the opportunity that we can safely import at a fair price, that’s obviously something we’re going to consider. That has not transpired yet. We’ve not done that.
I’m not aware of anybody that’s done that. But I’m not aware of anybody prohibiting the in The U. S. Of prohibiting the use of imports. There may be that something Cambodia also has a say in though.
So right now I don’t believe that we have any plans to change that in the next quarter. But those conversations and those site visits take place frequently throughout the months and throughout the quarters. And that could always change. So, but right now I don’t, I think we have plenty of ability to meet the demand and we’ll keep that option open hopefully.
Dave Windley, Analyst, Jefferies: So on the price point, mean, Cobb’s still a little elevated in NHP related activities, but I mean, yours may not have changed, but Charles River situation definitely changed. They have inventory that is freed up. I think that inventory might have aged out of its usefulness, but seemingly there’s more inventory available than less. And I’m wondering how that impacts price going forward. Thanks.
Bob Leisure, President and Chief Executive Officer, Innative: Well, can’t comment on Charles River, obviously. As far as pricing, we’ve not seen pricing really change much in the last year. Unfortunately, it’s calmed down. We’ve not seen price cost or pricing change much in The US. And I’m not, we keep track of what is in The US from the USDA and the other government statistics.
And I’ve not seen a large increase in the amount of NHPs available in The US. So I think for right now it looks like things are staying pretty stable. And I don’t see, unless Cambodia does open and they change pricing and Cambodia chooses how they export, I’m not sure that we see it changing next year. So there are a lot of factors that go in there. I’m not gonna get into all of them on this call.
But right now, we don’t see a change in pricing.
Dave Windley, Analyst, Jefferies: Okay. Thank you.
Beth Taylor, Chief Financial Officer, Innative: Before our next question, we do have a correction to our cash used in operating activities for the nine months ended 06/30/2024. I read this as 14,400,000 but it was $4,400,000 So operator, please continue.
Operator: Certainly. And we can move next to Frank Tekkenin with Lake Street Capital Markets. Your line is open.
Frank Tekkenin, Analyst, Lake Street Capital Markets: Great. Thanks for taking the questions. I was hoping to follow-up on some of the Discovery commentary. Obviously, you just mentioned that’s your largest fixed cost business. I was hoping you could help maybe put some metrics around what incremental growth in that business would translate to from an EBITDA perspective.
I realize you’re not providing forward EBITDA commentary at this point, but just kind of understanding just how much leverage is in that business as some of the strong orders you’ve seen start to translate to revenue?
Bob Leisure, President and Chief Executive Officer, Innative: Yes. So let me go back. Saw a strong increase, but it’s not back to the levels it was two or three years ago. So and this had a pretty dramatic impact on our margins and our bottom line when we saw those issues deteriorate. So we’re now getting back very quickly, I should say, if we can continue this growth to levels we were two or three years ago.
But in terms of, if you were to say safety assessment, you have incremental bottom line, it goes to the bottom line of 50 to variable contribution of 50 to 60%. And in the discovery because the fixed cost nature we could see incremental bottom line be as high as 70 to 80%.
Frank Tekkenin, Analyst, Lake Street Capital Markets: Got it. That’s helpful. And then I think we’ve talked about kind of some of the metrics you have recently started tracking around kind of customer satisfaction, on time delivery of services. Can you maybe recap some of those metrics for the most recent quarter and the importance of just that and how it translates to new business awards from those customers?
Bob Leisure, President and Chief Executive Officer, Innative: Well, during the Investor Day, I think we alluded to some of these. And one of the great advantages of having a new lot and improved systems is we have much better metrics. And so I think we talked about this a little bit. When we had in Investor Day is that when we first started together, had 14 sites that were operating as 14 individual sites. And many times we have now customers who are using multiple sites, three, four sites.
I think 70% of our customer base may use multiple sites. So Beth, can you check that, you and Brandon there, if you could check that number for me. What because I know we talked about that during the Investor Day. One of the things that’s important to us is though, if we’re how do we act like one company? And if they’re gonna use multiple sites, how do we make that seamless for them so they’re getting the one company experience, not feel like they’re working with three companies?
And then when we do that, how do we communicate internally? And then how do we make sure we deliver that on time? So first, the systems, we had to develop the systems to be able to track this, to communicate it, and then be able to track it. So now, when we were growing three years ago, we could grow, but we didn’t have the sophistication in the pricing systems, the management systems and the on time delivery. Now we have that.
And so when we’re seeing growth now, I continue to focus on this, because I think one of the mistakes we made three years ago was we grew very quick, but it didn’t mean we were always meeting our customer expectations. And we didn’t have a way to track that as scientifically as we do today. And we didn’t have a way to price it as scientifically as we do today. And so those are some much more improved controls that we have today. And as a result, I can now see daily our on time delivery.
And if we’re late on something, how many days late and why, and we go back and address the root cause. So I would without giving I don’t think we’ve ever given those dramatic, but we are significantly better today. And I’m actually very, very proud of the on time delivery we have today. It’s improved significantly over the last two years, specifically over the last years that we have much better metrics to track this. And once we started tracking it, we could see it improve.
And I think that also has something to do with why we are seeing an increasing amount of revenue and orders with existing customers. So again, most of our customers are small, medium pharma or the biotech. And as they have a positive experience and they can see that we can communicate and deliver on time, then it really improves the fact that we have a reoccurring and stable customer base. But I will say that we are significantly better than we were a year ago. We are not 100%, but we are striving for 100 and we are a lot closer to it than we have ever been.
Frank Tekkenin, Analyst, Lake Street Capital Markets: Got it. That’s helpful. Maybe just one last one related to cash. I heard the comment about some NHP stocking that took some cash out this quarter. I was curious if you could maybe talk to cash flow expectations going forward as some of that those NHPs maybe convert to revenue and what that does to your cash balance?
Bob Leisure, President and Chief Executive Officer, Innative: Well, I think what we will do is if possible, we’ll probably maintain a higher level of NHPs than we have in the past. We were running very thin and I think that that was and I think our customers would like to see that we had a little bit more inventory, so we now are carrying a little bit more inventory. And I think we’ll continue to carry more inventory. I think as it comes to evaluating our balance sheet, we will look at this as if this is the new normal that we want to carry in inventory. Yes, could convert some of this to cash if we need to, frank.
But I think if we want this to be the new normal, and when we evaluate how we want to improve our balance sheet, we may need to plan for this to be the new normal and plan accordingly. So right now, if we needed to slow down the imports and slow down what we’re doing, we could do that and convert it to cash. I think what we’re looking to do is make sure we have made a much more stable environment to take care of our customers’ needs.
Steve, Earnings Call Moderator, Innative: And
Operator: this does conclude the question and answer session. I’d like to turn the program back over to Bob Leisure for any closing remarks.
Bob Leisure, President and Chief Executive Officer, Innative: All right. Thank you. As you can tell, we’re very encouraged by these results and the recent growth we’ve seen in our DSA business or quoting awards over the last two quarters. And as this growth develops, we will need to remain vigilant on delivering an exceptional experience, service and product for our clients, as I just outlined. We made progress towards achieving the financial goals we outlined during our Investor Day, and as I said, we’re going to prioritize a strategic review of our capital structure, improving our balance sheet.
As I said in the past, we are a much better company today than we have ever been before. But we still feel like we have a plan for much further improvement in the future. So thank you very much for your time today. We’ll look forward to talking to many of you later.
Operator: Thank you for your participation. This does conclude today’s program. You may disconnect at any time.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.