WEST LAFAYETTE, Ind., Jan. 10, 2023 (GLOBE NEWSWIRE) -- 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 ("Q4 FY 2022") and twelve months ("FY 2022") ended September 30, 2022.
Financial Highlights
FY 2022 Highlights
- Revenue grew to $547.7 million in FY 2022 from $89.6 million during the twelve months ended September 30, 2021 ("FY 2021"), driven by a $75.7 million rise in Discovery and Safety Assessment ("DSA") revenue and $382.4 million of incremental revenue from our Research Models and Services ("RMS") business. Growth resulted primarily from acquisitions and growing customer demands along with favorable pricing.
- Consolidated net loss for FY 2022 was $(337.3) million, or (61.6)% of total revenue, compared to consolidated net income of $10.9 million, or 12.2% of total revenue, in FY 2021. The FY 2022 consolidated net loss included a $236.0 million non-cash goodwill impairment charge; $23.0 million of post combination non-cash stock compensation expense relating to the adoption of the Envigo Equity Plan; and $56.7 million of fair value remeasurement of the embedded derivative component of the convertible notes issued in September 2021.
- Adjusted EBITDA increased to $90.5 million, or 16.5% of total revenue, from $9.3 million, or 10.4% of total revenue in FY 2021.
- Book-to-bill ratio was 1.33x for the DSA services business.
Q4 FY 2022 Highlights
- Revenue grew to $150.5 million in Q4 FY 2022 from $30.1 million during the three months ended September 30, 2021 ("Q4 FY 2021"), driven by a $14.1 million rise in DSA revenue and $106.3 million of incremental revenue from our RMS business. Favorable pricing for both segments and increased customer demand in DSA produced revenue exceeding acquisition contributions.
- Consolidated net loss for Q4 FY 2022 was $(243.6) million, or (161.9)% of total revenue, compared to consolidated net income of $9.4 million, or 31.2% of total revenue, in Q4 FY 2021. The Q4 FY 2022 consolidated net loss included a $236.0 million non-cash goodwill impairment charge.
- Adjusted EBITDA increased to $18.3 million, or 12.1% of total revenue, from $4.3 million, or 14.4% of total revenue in Q4 FY 2021.
- Book-to-bill ratio was 1.03x for the DSA services business.
- DSA backlog was $147.2 million at September 30, 2022, up from $143.2 million at June 30, 2022 and $81.4 million at September 30, 2021
Select Financial Guidance for First Quarter ("Q1 FY 2023") and Full Fiscal Year 2023 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 recent cost-cutting initiatives including the announced facility consolidation plans in the U.S. In addition, the guidance presented below represents the Company's best efforts to estimate the impact of the non-human primate ("NHP") supply disruption that was identified in Q1 FY 2023. For FY 2023, we are providing guidance of at least $580 million of revenue and at least $75 million of Adjusted EBITDA.
Due to the issues related to NHP matters, including the Company's decision to refrain from selling or delivering any of its Cambodian NHPs held in the U.S. until the Company's staff and external experts can evaluate what additionally could be done to satisfy itself that the NHPs in inventory from Cambodia can be reasonably determined to be purpose-bred, the guidance of at least $580 million of revenue in FY 2023 includes estimated Q1 FY 2023 revenue of $118 million to $122 million and estimated revenue during Q2-Q4 FY 2023 of approximately $460 million. The guidance of $75 million of Adjusted EBITDA includes an expected negative Adjusted EBITDA margin in Q1 FY 2023 and an estimated Adjusted EBITDA margin of approximately 17% during the nine-month period of Q2-Q4 FY 2023. With the significant organic and inorganic investments made in the business over the last twelve months, we expect capital expenditures to moderate from 2022 and are providing guidance of no more than $25 million of expected capital expenditures during FY 2023.
Management Commentary
Robert Leasure Jr., President, and Chief Executive Officer, commented, "2022 was a milestone year, as we made significant progress, put an excellent team in place, and continued to improve our services and capacity while integrating and optimizing our facilities. While we have built the business through acquisitions, we have also seen significant organic growth which has been critical to our success. Organic revenue growth in 2022 was $141.0 million representing incremental revenue growth of approximately 31%. We are very pleased with our achievements and the progress made in integrating the seven acquisitions completed during the year, highlighted by our entry into the RMS business. Although we are facing headwinds related to NHP disruption, we have entered fiscal year 2023 with a much stronger organization, and a clear vision of what we need to focus on to improve earnings, cash flow and overall operations. Over the last four years, we have developed an organization with a full range of services in place to meet our clients' pre-clinical research and development needs. Over the past nine months, we have announced and initiated several projects that we believe will streamline our RMS operations. Going into calendar 2023, we are focused on enhancing efficiencies and improving our gross margins and earnings, while further evolving the Company into a multi-service discovery and pre-clinical contract research organization."
FY 2022 Review
| Revenue (in millions) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Segment | FY 2022 | FY 2021 | Difference | % Change | ||||||||||
| DSA1 | $ | 165.3 | $ | 89.6 | $ | 75.7 | +84.5 | % | ||||||
| RMS | $ | 382.4 | - | $ | 382.4 | - | ||||||||
| Total | $ | 547.7 | $ | 89.6 | $ | 458.1 | +511.3 | % | ||||||
| 1 includes BASi Products | ||||||||||||||
Higher total revenue was driven by a $75.7 million increase in DSA revenue and $382.4 million of incremental RMS revenue.
Organic growth generated $49.6 million of DSA revenue while acquisitions added $26.1 million of DSA incremental service revenue in excess of fiscal year 2021 service revenue from acquisitions based on the baseline revenue prior to the acquisitions. The acquisitions of Envigo RMS Holding Corp. ("Envigo"), Robinson Services, Inc. ("RSI") and Orient BioResource Center, Inc. ("OBRC") added $291.1 million of incremental revenue based on the baseline revenue prior to the acquisitions, and internal growth generated $91.3 million of additional revenue in the RMS segment during FY 2022. RMS revenue in FY 2022 reflected one partial and three full quarters of contribution from Envigo, which was acquired on November 5, 2021, three full quarters of contribution from RSI, which was acquired on December 29, 2021, and one partial and two full quarters of contribution from OBRC, which was acquired on January 27, 2022.
| Gross Profit1 (in millions) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Segment | FY 2022 | % of Segment Revenue | FY 2021 | % of Revenue | ||||||||||
| DSA2 | $ | 59.4 | 35.9 | % | $ | 30.2 | 33.7 | % | ||||||
| RMS | $ | 97.8 | 25.6 | % | - | - | ||||||||
| Total | $ | 157.2 | 28.7 | % | $ | 30.2 | 33.7 | % | ||||||
| 1 excludes amortization of intangible assets 2includes BASi Products | ||||||||||||||
Higher total gross profit in FY 2022 was the result of a $29.2 million increase in DSA gross profit from FY 2021, and $97.8 million of RMS gross profit as compared to no such contribution in FY 2021. The increase in DSA gross profit as a percent of DSA revenue was due to operating expense leverage seen in the first three quarters of FY 2022 in connection with the revenue expansion. The decline in total gross profit as a percent of consolidated revenue for FY 2022 was primarily due to the inclusion of RMS products that have a lower gross profit as a percent of revenue compared to DSA. RMS gross profit included $10.2 million of non-cash inventory step-up amortization in FY 2022, which negatively impacted the RMS gross profit percentage by approximately 2.6%.
Consolidated net loss for FY 2022 was $(337.3) million compared to consolidated net income of $10.9 million in FY 2021. Consolidated net loss of $(337.3) million for FY 2022 included the $236.0 million non-cash goodwill impairment charge, as well as $8.6 million of restructuring charges and legal fees related to the previously announced closures of our facilities in Cumberland and Dublin, VA; $16.1 million of acquisition and integration costs, which included due diligence for opportunities we explored during the year; a non-cash charge for amortization of inventory step up of $10.2 million; a one-time charge of $0.5 million for the write off of deferred legal and accounting fees for our S-1 registration statement that was withdrawn; $23.0 million of post combination non-cash stock compensation expense relating to the adoption of the Envigo Equity Plan; and $56.7 million of fair value remeasurement of the embedded derivative component of the convertible notes issued in September 2021.
Q4 FY 2022 Review
| Revenue (in millions) | ||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||
| Segment | Q4 FY 2022 | Q4 FY 2021 | Difference | % Change | ||||||||||
| DSA1 | $ | 44.2 | $ | 30.1 | $ | 14.1 | +46.8 | % | ||||||
| RMS | $ | 106.3 | - | $ | 106.3 | - | ||||||||
| Total* | $ | 150.5 | $ | 30.1 | $ | 120.4 | +400.0 | |||||||
| *Table may not foot due to rounding | ||||||||||||||
| 1 includes BASi Products | ||||||||||||||
The increase in total revenue in Q4 FY 2022 was driven by a $14.1 million rise in DSA revenue and $106.3 million of incremental RMS revenue.
During Q4 FY 2022, organic growth of DSA revenue was $12.0 million and acquisitions added $2.1 million of incremental service revenue in excess of Q4 FY 2021 service revenue from acquisitions based upon the baseline revenue prior to the acquisitions. The acquisitions of Envigo, RSI and OBRC added $81.4 million of incremental revenue based on the baseline revenue prior to the acquisitions, and internal growth generated $24.9 million of additional revenue in our RMS segment during Q4 FY 2022.
| Gross Profit1 (in millions) | ||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||
| Segment | Q4 FY 2022 | % of Segment Revenue | Q4 FY 2021 | % of Revenue | ||||||||||
| DSA2 | $ | 13.0 | 29.4 | % | $ | 10.3 | 34.2 | % | ||||||
| RMS | $ | 29.2 | 27.5 | % | - | - | ||||||||
| Total | $ | 42.2 | 28.0 | % | $ | 10.3 | 34.2 | % | ||||||
| 1 excludes amortization of intangible assets 2includes BASi Products | ||||||||||||||
Higher total gross profit in Q4 FY 2022 was the result of a $2.7 million increase in DSA gross profit from the comparable prior year period and $29.2 million of RMS gross profit as compared to no such contribution in the prior year period. The decline 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, to begin adding services and capacity which we expect to have available in Q2 and Q3 of FY 2023. RMS gross profit included $0.2 million of non-cash inventory step-up amortization in Q4 FY 2022, which negatively impacted the RMS gross profit percentage by approximately 0.8%.
Consolidated net loss for Q4 FY 2022 was $(243.6) million compared to consolidated net income of $9.4 million in Q4 FY 2021. Consolidated net loss for Q4 FY 2022 included a non-cash goodwill impairment charge of $236.0 million related to our RMS segment. The sustained reduction in our stock price caused the Company to evaluate the carrying value of our goodwill as of fiscal year end. As a result of our impairment assessment, the Company determined that the carrying amount of goodwill attributed to our RMS segment was in excess of its fair value. Additionally, consolidated net loss for Q4 FY 2022 included $5.9 million of expenses and non-cash charges that consisted of: $3.7 million of restructuring charges and legal fees related to the previously announced closures of our facilities in Cumberland and Dublin, VA; $1.5 million of acquisition and integration costs, which included due diligence for opportunities we explored during the quarter; a one-time charge of $0.5 million for the write off of deferred legal and accounting fees for our S-1 registration statement that was withdrawn; and a non-cash charge for amortization of inventory step up of $0.2 million.
Cash Provided by Operating Activities and Financial Condition
As of September 30, 2022, the Company had $18.5 million in cash and cash equivalents, a $15.0 million balance on a $15.0 million revolving credit facility, and a $0 balance on a $35 million delayed draw term loan ("DDTL"). The $35 million DDTL was drawn on October 12, 2022, and a portion of the proceeds were used to repay the $15.0 million balance on the revolving credit facility while the remaining was drawn to fund some of the Company's capital expenditures in 2022 and those planned for 2023. Total debt, net of debt issuance costs, as of September 30, 2022, was $353.7 million, including the balance on the revolving credit facility. We were in compliance with our debt covenants as of September 30, 2022.
Cash used by operating activities was $5.2 million for FY 2022, compared to cash provided by operating activities of $10.7 million for FY 2021. Contributing factors to our cash used by operations for FY 2022 included an increase in working capital which was primarily driven by an increase in inventory and prepaid deposits. These increases in working capital were driven by the timing of prepaid deposits for future NHP shipments, the shipment of NHPs and the collection of cash as it relates to the shipments to customers. For FY 2022, we spent $36.3 million in capital expenditures.
Subsequent Events
- On November 16, 2022, the Company became aware that the U.S. Attorney's Office for the Southern District of Florida has criminally charged employees of the principal supplier of NHPs to the Company, along with two Cambodian government officials, with conspiring to illegally import NHPs into the United States from December 2017 through January 2022 and in connection with seven specific imports between July 2018 and December 2021. Due to the allegations contained in the indictment involving the supplier and the Cambodian government officials, the Company believed that it was prudent, at the time and continuing as of the date of this release, to refrain from selling or delivering any of its Cambodian NHPs held in the U.S. until the Company's staff and external experts can evaluate what additionally could be done to satisfy itself that the NHPs in inventory from Cambodia can be reasonably determined to be purpose-bred.
- On November 29, 2022, the Company announced additional site consolidation plans in the U.S., its intent to consult with employee representatives for a proposed consolidation of certain European and U.K. sites and provided an update on site optimization plans in process.
- On December 8, 2022, the Company announced the opening of the second phase of its lab facility in Rockville, MD, the scheduled opening date of January 2023 for its pathology campus and training center in Kalamazoo, MI, and the opening and occupancy of the site expansion at its facility in Boulder, CO.
- On December 12, 2022, the Company issued a press release discussing the impact of the Cambodian NHPs matters on its business, as well as the Company's perspective on the impact to the industry.
- On December 29, 2022, the Company entered into a Second Amendment to the Credit Agreement as outlined in the Form 8-K filed on January 5, 2023.
- On January 9, 2023, the Company entered into a Third Amendment to the Credit Agreement which provides that, among other things, during the period beginning on January 9, 2023 and ending on the date on which financial statements for the Company's fiscal quarter ending March 31, 2024 are delivered, as long as there is no event of default (the "Amendment Relief Period"): (i) the Cambodian NHP-related matters, to the extent existing and disclosed to the lenders prior to December 29, 2022, shall not constitute a material adverse effect under the Credit Agreement and will not restrict the Company's ability to request credit extensions under the revolving credit facility, for the duration of the Amendment Relief Period (ii) the use of borrowings under the revolving credit facility is limited to funding operational expenses of the Company in the ordinary course and cannot be used for the making or funding of investments, permitted acquisitions or restricted payments, payments or purchases with respect to any indebtedness, bonuses or executive compensation, or judgments, fines or settlements, and (iii) additional limitations are imposed on certain provisions, including restrictions on permitted asset sales, prohibitions on permitted acquisitions, and limitations on the ability to incur additional debt, investments and making restricted payments. In addition, the Third Amendment provides for other changes including additional mandatory prepayments following the receipt of certain cash receipts, including an equity proceeds sweep and an extraordinary cash receipts sweep, the removal of the ability to incur incremental debt facilities, and an anti-hoarding covenant such that after any draw on the revolving facility, the Company's cash held on hand domestically within the U.S. cannot exceed $10 million.
Conference Call
Management will host a conference call on Tuesday, January 10, 2023, at 5:00 pm ET to discuss fourth quarter reported results for fiscal year 2022.
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=aRQt1BZP
For those who cannot listen to the live broadcast, an online replay will be available in the Investors section of Inotiv's web site at: https://www.inotivco.com/investors/investor-information/.
Non-GAAP to GAAP Reconciliation
This press release contains financial measures that are not calculated in accordance with generally accepted accounting principles in the United States (GAAP), including Adjusted EBITDA and Adjusted EBITDA as a percentage of total revenue for the three and twelve months ended September 30, 2022 and 2021 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 of intangible assets, stock compensation expense, United Kingdom lease liability reversal benefit, acquisition and integration costs, startup costs, restructuring costs incurred in connection with the exit of our Cumberland and Dublin facilities, unrealized foreign exchange gain, loss on debt extinguishment, amortization of inventory step up, loss/gain on disposition of assets, loss/gain on fair value remeasurement of convertible notes, PPP loan forgiveness, goodwill impairment loss and other non-recurring third-party costs. 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 or expected net income margin without unreasonable effort because certain items that impact net income and net income margin are out of the Company's control and/or cannot be reasonably predicted at this time, which unavailable information could have a significant impact on the Company's GAAP financial results.
The Company believes that these non-GAAP measures provide useful information to investors. Among other things, they may help investors evaluate the Company's ongoing operations. They can assist in making meaningful period-over-period comparisons and in identifying operating trends that would otherwise be masked or distorted by the items subject to the adjustments. Management uses these non-GAAP measures internally to evaluate the performance of the business, including to allocate resources. Investors should consider these non-GAAP measures as supplemental and in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.
Management has chosen to provide this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of our results and to illustrate our results giving effect to the non-GAAP adjustments. Management strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and cautions investors that the non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
About the Company
Inotiv, Inc. is a leading contract research organization dedicated to providing nonclinical and analytical drug discovery and development services and research models and related products and services. The Company's products and services focus on bringing new drugs and medical devices through the discovery and preclinical phases of development, all while increasing efficiency, improving data, and reducing the cost of taking new drugs to market. Inotiv is committed to supporting discovery and development objectives as well as helping researchers realize the full potential of their critical R&D projects, all while working together to build a healthier and safer world. Further information about Inotiv can be found here: https://www.inotivco.com/.
This release contains forward-looking statements that are subject to risks and uncertainties including, but not limited to, risks and uncertainties related to the ability of the Company to complete its fiscal 2022 financial statement closing process, the impact of recent events related to non-human primate matters on the Company's business, operations, results, financial condition, cash flows, and assets, the Company's ability to obtain waivers or amendments related to covenants under its credit agreement, changes in the market and demand for the Company's products and services, the development, marketing and sales of products and services, changes in technology, industry and regulatory standards, the timing of acquisitions and the successful closing, integration and business and financial impact thereof, governmental regulations, inspections and investigations, claims and litigation against or involving the Company, its business and/or its industry, the impact of site closures and consolidations, expansion and related efforts, and various other market and operating risks, including those detailed in the Company's filings with the U.S. Securities and Exchange Commission.
| Company Contact | Investor Relations |
| Inotiv, Inc. | The Equity Group Inc. |
| Beth A. Taylor, Chief Financial Officer | Devin Sullivan |
| (765) 497-8381 | (212) 836-9608 |
| btaylor@inotivco.com | dsullivan@equityny.com |
INOTIV, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Service revenue | $ | 55,099 | $ | 28,974 | $ | 202,978 | $ | 85,832 | ||||||||
| Product revenue | 95,367 | 1,102 | 344,678 | 3,773 | ||||||||||||
| Total revenue | 150,466 | 30,076 | 547,656 | 89,605 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of services provided (excluding amortization of intangible assets) | 38,705 | 19,058 | 130,696 | 57,262 | ||||||||||||
| Cost of products sold (excluding amortization of intangible assets) | 69,536 | 710 | 259,748 | 2,187 | ||||||||||||
| Selling | 4,463 | 1,139 | 16,650 | 3,517 | ||||||||||||
| General and administrative | 26,185 | 6,784 | 82,436 | 23,230 | ||||||||||||
| Amortization of intangible assets | 12,224 | 843 | 30,888 | 1,768 | ||||||||||||
| Other operating expense | 5,814 | 4,950 | 54,685 | 7,259 | ||||||||||||
| Goodwill impairment loss | 236,005 | - | 236,005 | - | ||||||||||||
| Operating income (loss) | (242,466 | ) | (3,408 | ) | (263,452 | ) | (5,618 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (8,888 | ) | (520 | ) | (29,704 | ) | (1,683 | ) | ||||||||
| Other income (expense) | (1,867 | ) | 13,240 | (59,293 | ) | 13,420 | ||||||||||
| Loss before income taxes | (253,221 | ) | 9,312 | (352,449 | ) | 6,119 | ||||||||||
| Income tax (expense) benefit | 9,590 | 70 | 15,187 | 4,776 | ||||||||||||
| Consolidated net (loss) income | $ | (243,631 | ) | $ | 9,382 | $ | (337,262 | ) | $ | 10,895 | ||||||
| Less: Net income (loss) attributable to noncontrolling interests | 525 | - | (244 | ) | - | |||||||||||
| Net (loss) income attributable to common shareholders | $ | (244,156 | ) | $ | 9,382 | $ | (337,018 | ) | $ | 10,895 | ||||||
| Earnings (loss) per common share | ||||||||||||||||
| Net (loss) income attributable to common shareholders: | ||||||||||||||||
| Basic | $ | (9.54 | ) | $ | 0.59 | $ | (13.84 | ) | $ | 0.83 | ||||||
| Diluted | $ | (9.54 | ) | $ | 0.06 | $ | (13.84 | ) | $ | 0.19 | ||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic | 25,590 | 15,912 | 24,354 | 13,191 | ||||||||||||
| Diluted | 25,590 | 16,473 | 24,354 | 13,865 | ||||||||||||
Note - Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
INOTIV, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| September 30, | September 30, | |||||||
| 2022 | 2021 | |||||||
| Assets | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 18,515 | $ | 138,924 | ||||
| Restricted cash | 465 | 18,000 | ||||||
| Trade receivables and contract assets, net of allowances for credit losses of $6,268 and $668, respectively | 100,073 | 28,364 | ||||||
| Inventories, net | 71,441 | 602 | ||||||
| Prepaid expenses and other current assets | 42,483 | 3,129 | ||||||
| Total current assets | 232,977 | 189,019 | ||||||
| Property and equipment, net | 186,199 | 47,978 | ||||||
| Operating lease right-of-use assets, net | 32,489 | 8,358 | ||||||
| Goodwill | 157,825 | 51,927 | ||||||
| Other intangible assets, net | 345,886 | 24,233 | ||||||
| Other assets | 7,524 | 341 | ||||||
| Total assets | 962,900 | 321,856 | ||||||
| Liabilities, shareholders' equity and noncontrolling interest | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 28,695 | $ | 6,163 | ||||
| Accrued expenses and other liabilities | 35,801 | 8,968 | ||||||
| Capex line of credit | - | 1,749 | ||||||
| Revolving loan facility | 15,000 | - | ||||||
| Fees invoiced in advance | 68,642 | 26,614 | ||||||
| Current portion on long-term operating lease | 7,982 | 1,959 | ||||||
| Current portion of long-term debt | 7,979 | 9,656 | ||||||
| Total current liabilities | 164,099 | 55,109 | ||||||
| Long-term operating leases, net | 24,854 | 6,554 | ||||||
| Long-term debt, net of current portion, net of debt issuance costs | 330,677 | 154,209 | ||||||
| Other liabilities | 6,477 | 512 | ||||||
| Deferred tax liabilities, net | 77,027 | 344 | ||||||
| Total liabilities | 603,134 | 216,728 | ||||||
| Shareholders' equity and noncontrolling interest: | ||||||||
| Authorized 74,000,000 shares at September 30, 2022 and 19,000,000 shares at September 30, 2021; 25,598,289 issued and outstanding at September 30, 2022 and 15,931,485 at September 30, 2021 | 6,362 | 3,945 | ||||||
| Additional paid-in-capital | 707,787 | 112,198 | ||||||
| Accumulated deficit | (348,277 | ) | (11,015 | ) | ||||
| Accumulated other comprehensive loss | (5,500 | ) | - | |||||
| Total equity attributable to common shareholders | 360,372 | 105,128 | ||||||
| Noncontrolling interest | (606 | ) | - | |||||
| Total shareholders' equity and noncontrolling interest | 359,766 | 105,128 | ||||||
| Total liabilities and shareholders' equity and noncontrolling interest | $ | 962,900 | $ | 321,856 | ||||
INOTIV, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Twelve Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | (unaudited) | |||||||
| Consolidated net (loss) income | $ | (337,262 | ) | $ | 10,895 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisitions: | ||||||||
| Depreciation and amortization | 49,324 | 6,268 | ||||||
| Employee stock compensation expense | 24,202 | 1,786 | ||||||
| Gain on tax benefit due to acquisitions | - | (4,985 | ) | |||||
| Changes in deferred taxes | (17,835 | ) | - | |||||
| Provision for doubtful accounts | 1,306 | 208 | ||||||
| Amortization of debt issuance costs and original issue discount | 2,257 | - | ||||||
| Noncash interest and accretion expense | 5,316 | - | ||||||
| Loss (gain) on fair value remeasurement of embedded derivative | 56,714 | (8,362 | ) | |||||
| Other non-cash operating activities | 781 | 14 | ||||||
| Goodwill impairment loss | 236,005 | - | ||||||
| Loss on debt extinguishment | 877 | - | ||||||
| Non-cash amortization of inventory fair value step-up | 10,246 | - | ||||||
| Non-cash restructuring costs | 3,129 | - | ||||||
| Financing lease interest expense | - | 184 | ||||||
| Gain on extinguishment of PPP loan | - | (4,851 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Trade receivables and contract assets | (23,838 | ) | (11,951 | ) | ||||
| Inventories | (35,198 | ) | 98 | |||||
| Prepaid expenses and other current assets | (20,054 | ) | (780 | ) | ||||
| Operating lease right-of-use assets and liabilities, net | 824 | (54 | ) | |||||
| Accounts payable | (8,042 | ) | 2,619 | |||||
| Accrued expenses and other liabilities | 14,662 | 5,103 | ||||||
| Fees invoiced in advance | 25,962 | 14,554 | ||||||
| Other asset and liabilities, net | 5,407 | - | ||||||
| Net cash (used in) provided by operating activities | (5,217 | ) | 10,746 | |||||
| Investing activities: | ||||||||
| Capital expenditures | (36,300 | ) | (12,472 | ) | ||||
| Proceeds from sale of equipment | 290 | 2 | ||||||
| Cash paid in acquisitions | (297,712 | ) | (41,590 | ) | ||||
| Net cash (used in) investing activities | (333,722 | ) | (54,060 | ) | ||||
| Financing activities: | ||||||||
| Payments on finance lease liability | - | (286 | ) | |||||
| Payments of long-term debt | (36,777 | ) | (4,153 | ) | ||||
| Payments of debt issuance costs | (10,067 | ) | (6,223 | ) | ||||
| Payments on promissory notes | (2,166 | ) | - | |||||
| Payments on revolving credit facility | (19,000 | ) | - | |||||
| Payments on senior term notes | (1,800 | ) | - | |||||
| Borrowings on long-term loan | - | 18,305 | ||||||
| Borrowings on convertible senior notes | - | 122,036 | ||||||
| Borrowings on convertible senior notes, restricted cash | - | 18,000 | ||||||
| Borrowings on revolving loan facility | 34,000 | - | ||||||
| Borrowings on senior term notes and delayed draw term loans | 240,000 | - | ||||||
| Proceeds from exercise of stock options | 118 | 246 | ||||||
| Proceeds from issuance of common stock net | - | 48,971 | ||||||
| Repayment of PPP loan | - | (200 | ) | |||||
| Borrowing on capex line of credit | - | 2,136 | ||||||
| Other, net | (1,157 | ) | - | |||||
| Net cash provided by (used in) financing activities | 203,151 | 198,832 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (2,156 | ) | - | |||||
| Net (decrease) increase in cash and cash equivalents | (137,944 | ) | 155,518 | |||||
| Cash, cash equivalents, and restricted cash at beginning of period | 156,924 | 1,406 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 18,980 | $ | 156,924 | ||||
| Noncash financing activity: | ||||||||
| Seller financed acquisition | $ | 6,888 | $ | 1,500 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 17,063 | $ | 1,267 | ||||
| Income taxes paid, net | $ | 479 | $ | 8 | ||||
INOTIV, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECT BUSINESS SEGMENT INFORMATION
(In thousands)
(unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||
| DSA | |||||||||||
| Revenue | 44,186 | 30,076 | 165,289 | 89,605 | |||||||
| Operating income | (635 | ) | 4,962 | 22,330 | 14,188 | ||||||
| Operating income as a % of total revenue | (0.4 | )% | 16.5 | % | 4.1 | % | 15.8 | % | |||
| Add back: | |||||||||||
| Depreciation and amortization | 4,157 | 1,863 | 13,553 | 5,354 | |||||||
| Startup costs | 1,525 | 636 | 5,687 | 1,477 | |||||||
| Total non-GAAP adjustments to operating income | 5,682 | 2,499 | 19,240 | 6,831 | |||||||
| Non-GAAP operating income | 5,047 | 7,461 | 41,570 | 21,019 | |||||||
| Non-GAAP operating income as a % of DSA revenue | 11.4 | % | 24.8 | % | 25.1 | % | 23.5 | % | |||
| Non-GAAP operating income as a % of total revenue | 3.4 | % | 24.8 | % | 7.6 | % | 23.5 | % | |||
| RMS | |||||||||||
| Revenue | 106,280 | N/A | 382,367 | N/A | |||||||
| Operating income/(loss) | (223,890 | ) | N/A | (189,346 | ) | N/A | |||||
| Operating income/(loss) as a % of total revenue | (148.8) % | N/A | (34.6) % | N/A | |||||||
| Add back: | |||||||||||
| Depreciation and amortization | 13,300 | N/A | 35,771 | N/A | |||||||
| Restructuring costs | 3,703 | N/A | 8,564 | N/A | |||||||
| Amortization of inventory step up | 207 | N/A | 10,246 | N/A | |||||||
| Other non-recurring, third party costs | (1,099 | ) | N/A | 211 | N/A | ||||||
| Goodwill impairment loss | 236,005 | N/A | 236,005 | N/A | |||||||
| Total non-GAAP adjustments to operating income/(loss) | 252,116 | N/A | 290,797 | N/A | |||||||
| Non-GAAP operating income/(loss) | 28,226 | N/A | 101,451 | N/A | |||||||
| Non-GAAP operating income/(loss) as a % of RMS revenue | 26.6 | % | N/A | 26.5 | % | N/A | |||||
| Non-GAAP operating income/(loss) as a % of total revenue | 18.8 | % | N/A | 18.5 | % | N/A | |||||
| Three Months Ended | Twelve Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||
| Unallocated Corporate G&A | (17,941 | ) | (8,370 | ) | (96,436 | ) | (19,806 | ) | |||
| Unallocated corporate G&A as a % of total revenue | (11.9 | )% | (27.8 | )% | (17.6 | )% | (22.1 | )% | |||
| Add back: | |||||||||||
| Depreciation and amortization | - | 221 | - | 914 | |||||||
| Stock option expense | 1,917 | 747 | 28,974 | 1,786 | |||||||
| United Kingdom lease liability reversal benefit | - | - | - | (179 | ) | ||||||
| Acquisition and integration costs | 1,544 | 4,249 | 16,119 | 5,377 | |||||||
| Total non-GAAP adjustments to operating income | 3,461 | 5,217 | 45,093 | 7,898 | |||||||
| Non-GAAP operating income/(loss) | (14,480 | ) | (3,153 | ) | (51,343 | ) | (11,908 | ) | |||
| Non-GAAP operating income as a % of total revenue | (9.6 | )% | (10.5 | )% | (9.4 | )% | (13.3 | )% | |||
| Total | |||||||||||
| Revenue | 150,466 | 30,076 | 547,656 | 89,605 | |||||||
| Operating income/(loss) | (242,466 | ) | (3,408 | ) | (263,452 | ) | (5,618 | ) | |||
| Operating income/(loss) as a % of total revenue | (161.1 | )% | (11.3 | )% | (48.1 | )% | (6.3 | )% | |||
| Add back: | |||||||||||
| Depreciation and amortization | 17,457 | 2,084 | 49,324 | 6,268 | |||||||
| Stock option expense | 1,917 | 747 | 28,974 | 1,786 | |||||||
| United Kingdom lease liability reversal benefit | - | - | - | (179 | ) | ||||||
| Restructuring costs | 3,703 | - | 8,564 | - | |||||||
| Acquisition and integration costs | 1,544 | 4,249 | 16,119 | 5,377 | |||||||
| Amortization of inventory step up | 207 | - | 10,246 | - | |||||||
| Startup costs | 1,525 | 636 | 5,687 | 1,477 | |||||||
| Other non-recurring, third party costs | (1,099 | ) | - | 211 | - | ||||||
| Goodwill impairment loss | 236,005 | - | 236,005 | - | |||||||
| Total non-GAAP adjustments to operating income/(loss) | 261,259 | 7,716 | 355,130 | 14,729 | |||||||
| Non-GAAP operating income/(loss) | 18,793 | 4,308 | 91,678 | 9,111 | |||||||
| Non-GAAP operating income/(loss) as a % of total revenue | 12.5 | % | 14.3 | % | 16.7 | % | 10.2 | % | |||
Note - The fiscal 2021 select business segment information reported above is consistent with the amounts reported in the earnings release furnished on December 16, 2021. The fiscal 2022 select business segment information reported above includes reclassifications in the current fiscal year to align with our current operations of the business.
INOTIV, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
(In thousands)
(unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||
| GAAP Consolidated net (loss) income | (243,631 | ) | 9,382 | (337,262 | ) | 10,895 | |||||
| Adjustments (a): | |||||||||||
| Interest expense | 8,888 | 520 | 29,704 | 1,683 | |||||||
| Income tax expense (benefit) | (9,590 | ) | (70 | ) | (15,187 | ) | (4,776 | ) | |||
| Depreciation and amortization | 17,457 | 2,084 | 49,324 | 6,268 | |||||||
| Stock compensation expense (1) | 1,917 | 747 | 28,974 | 1,786 | |||||||
| United Kingdom lease liability reversal benefit | - | - | - | (179 | ) | ||||||
| Acquisition and integration costs (2) | 1,544 | 4,249 | 16,119 | 5,377 | |||||||
| Startup costs | 1,525 | 636 | 5,687 | 1,477 | |||||||
| Restructuring costs (3) | 3,703 | - | 8,564 | - | |||||||
| Unrealized foreign exchange gain | 1,335 | - | 754 | - | |||||||
| Loss on debt extinguishment | - | - | 877 | - | |||||||
| Amortization of inventory step up | 207 | - | 10,246 | - | |||||||
| Loss (gain) on disposition of assets | (3 | ) | - | (234 | ) | - | |||||
| Loss (gain) on fair value remeasurement of convertible notes (4) | - | (8,362 | ) | 56,714 | (8,362 | ) | |||||
| PPP loan forgiveness | - | (4,851 | ) | - | (4,851 | ) | |||||
| Other non-recurring, third party costs | (1,099 | ) | - | 211 | - | ||||||
| Goodwill impairment loss (5) | 236,005 | - | 236,005 | - | |||||||
| Adjusted EBITDA (b) | 18,258 | 4,335 | 90,496 | 9,318 | |||||||
| GAAP Consolidated net (loss) income as a percent of total revenue | (161.9 | )% | 31.2 | % | (61.6 | )% | 12.2 | % | |||
| Adjustments as a percent of total revenue | 174.1 | % | (16.8 | )% | 78.1 | % | (1.8 | )% | |||
| Adjusted EBITDA as a percent of total revenue | 12.1 | % | 14.4 | % | 16.5 | % | 10.4 | % | |||
(a) Adjustments to certain GAAP reported measures for the three and twelve months ended September 30, 2022 and 2021 include, but are not limited to, the following:
(1) For the twelve months ended September 30, 2022, $23.0 million relates to post combination non-cash stock compensation expense relating to the adoption of the Envigo Equity Plan recognized in connection with the Envigo acquisition.
(2) For the three months ended September 30, 2022, represents charges for legal services, accounting services, travel, change in control charges and other related activities in connection with the acquisition and integration of Envigo, ILS, OBRC, Histion, and Protypia and due diligence for opportunities we explored during the quarter. For the twelve months ended September 30, 2022, represent charges for legal services, accounting services, travel, change in control charges and other related activities in connection with the acquisitions of Plato BioPharma, Envigo, RSI, ILS, OBRC, Histion and Protypia and due diligence for opportunities we explored during the year.
(3) For the three and twelve months ended September 30, 2022, restructuring costs represent costs incurred in connection with the exit of our Dublin and Cumberland sites
(4) For the twelve months ended September 30, 2022, represents loss of $56.7 resulting from the fair value remeasurement of the embedded derivative component of the convertible notes.
(5) For the three and twelve months ended September 30, 2022, represents a non-cash goodwill impairment charge of $236.0 million related to the RMS segment.
(b) Adjusted EBITDA - Consolidated net (loss) income before interest expense, income tax expense (benefit), depreciation and amortization of intangible assets, stock compensation expense, United Kingdom lease liability reversal benefit, acquisition and integration costs, startup costs, restructuring costs, unrealized foreign exchange gain, loss on debt extinguishment, amortization of inventory step up, gain/loss on disposition of assets, loss/gain on fair value remeasurement of the embedded derivative component of the convertible notes, PPP loan forgiveness, goodwill impairment loss and other non-recurring third party costs.
