Q1 FY 2022 Highlights
- Revenue grew 370.4% to
$84.2 million , from$17.9 million during the three months endedDecember 31, 2020 (“Q1 FY 2021”), driven by internal growth of$4.9 million and incremental revenue fromHistoTox Labs, Inc. (“HistoTox Labs”),Bolder BioPATH, Inc. (“Bolder BioPATH”),Gateway Pharmacology Laboratories LLC (“Gateway Pharmacology”),Plato BioPharma, Inc. (“Plato BioPharma”) andEnvigo RMS Holding Corp. (“Envigo”) totaling$61.4 million . RMS revenue in Q1 FY 2022 reflected a partial quarter contribution fromEnvigo , which was acquired onNovember 5, 2021 . - Gross profit increased 227.1% to
$19.3 million , from$5.9 million in Q1 FY 2021, reflecting additional gross profit from acquisitions and a 412 basis point expansion in gross margin on organic growth for discovery and safety assessment services (“DSA”) to 36.9%. - Operating loss totaled
$(33.6) million , compared to operating income of$14,000 in Q1 FY 2021, reflecting an increase in operating expenses, which more than offset higher gross profit on higher revenue. The increase in operating expenses reflects post combination non-cash stock compensation expense relating to the adoption of the Envigo Equity Plan recognized in connection with theEnvigo acquisition of$23.0 million and higher strategic investment in unallocated corporate general and administrative expense (“G&A”) to support additional future revenue growth, which included recruiting and relocation expense, higher compensation expense, transaction costs related to the acquisitions of Plato andEnvigo , an increase in sales commissions due to higher sales awards and an increase in startup costs for internal investments in new service offerings. - Net loss attributable to common shareholders was
$(83.0) million , or$(3.93) per basic and diluted share, compared to a net loss of$(366,000) , or$(0.03) per basic and diluted share, in Q1 FY 2021. Net loss for Q1 FY 2022 includes post combination non-cash stock compensation expense relating to the adoption of the Envigo Equity Plan recognized in connection with theEnvigo acquisition of$23.0 million and$56.7 million of fair value remeasurement on the embedded derivative component of the convertible notes issued inSeptember 2021 . - Adjusted EBITDA increased 621.4% to
$10.1 million or 12.0% of total revenue, from$1.4 million or 7.8% of total revenue in Q1 FY 2021. - Book-to-bill ratio of 1.78x for DSA services business.
- Ending DSA backlog of
$104.6 million , up 130.9% compared to$45.3 million atDecember 31, 2020 , and up 28.5% from$81.4 million atSeptember 30, 2021 .
Significant Events during Q1 FY 2022
- On
October 4, 2021 , announced the acquisition of Plato BioPharma, aColorado -based in vivo pharmacology research and drug discovery company specializing in cardiovascular, renal, pulmonary and hepatic therapeutic areas. - On
November 5, 2021 , announced the completion of the acquisition ofEnvigo , a leading global provider of research models and services, for base cash consideration of$271.0 million , including adjustments for net working capital and cash balances as provided in the merger agreement of approximately$13.0 million and$48.0 million , respectively, and 9,036,538Inotiv common shares. The common shares included in the merger consideration include 790,620 shares issuable upon the exercise of certainEnvigo stock options that were assumed by the Company in the transaction. - In connection with the acquisition of
Envigo , the Company announced onNovember 5, 2021 a new senior secured term loan facility of$165.0 million to fund the cash portion of the acquisition, in addition to using net proceeds from the senior convertible notes issuedSeptember 27, 2021 . The term loan facility will accrue interest at the prevailing LIBOR rate, plus a margin of between 6.00% and 6.50%. The initial interest rate is LIBOR plus 6.25%, and the term loan facility will mature onNovember 5, 2026 . - On
December 29, 2021 , we closed on the acquisition of the rabbit breeding and supply business ofRobinson Services Inc. (“RSI”), aNorth Carolina -based provider of high-quality animal models, which was announced onJanuary 6, 2022 .
Subsequent Events
- On
January 4, 2022 , announced a collaboration with Synexa Life Sciences, a world leader in clinical biomarker and bioanalysis research services, that will accelerate the Company’s development of biomarkers essential to the understanding of safety and efficacy of novel biotherapeutics, enhancing the Company’s core preclinical DSA services. - On
January 10, 2022 , announced the purchase ofIntegrated Laboratory Systems, LLC (“ILS”), a contract research organization (“CRO”), located inMorrisville, North Carolina , specializing in genetic toxicology, in vivo and in vitro toxicology, pathology, molecular biology, bioinformatics and computational toxicology services. Transaction consideration totaled$56.0 million , consisting of:$38.0 million in cash and 429,118Inotiv common shares having a value of$18.0 million based on the volume weighted average closing price of Company shares as reported by NASDAQ for the twenty trading-day period ending onJanuary 6, 2022 . ILS operates in two leased facilities with a total of 50,000 square feet, including a vivarium that is accredited by theAssociation for Assessment and Accreditation of Laboratory Animal Care , and recognized revenue of approximately$20.0 million in 2021. - On
January 10, 2022 , the Company borrowed the full amount of its existing$35.0 million delayed draw term loan facility (the "DDTL") under its credit agreement datedNovember 5, 2021 to fund the purchase of ILS. - On
January 27, 2022 , announced the purchase ofOrient BioResource Center, Inc. (“OBRC), fromOrient Bio, Inc. , a preclinical CRO and animal model supplier based inSeongnam, South Korea . OBRC is a primate quarantine and holding facility located nearAlice, Texas . Consideration for the OBRC stock consisted of$28.2 million in cash, subject to certain adjustments, and 677,339 of the Company's common shares. As part of the purchase consideration, the Company agreed to leave in place a payable owed by OBRC to the Seller in the amount of$3.7 million . The payable will not bear interest and is required to be paid to the Seller on the date that is 18 months after the Closing. - In connection with the purchase of OBRC, the Company entered into a first amendment to its existing credit agreement on
January 27, 2022 . The amendment provides for, among other things, an increase to the existing term loan facility in the original principal amount of$40.0 million (“Incremental Term Loans”) and a new delayed draw term loan in the amount of$35.0 million , which amount is available to be drawn up to 24 months from the date of the amendment. OnJanuary 27, 2022 , the Company borrowed the full amount of the Incremental Term Loans, but did not borrow any amounts under the new delayed draw term loan.
Q1 FY 2022 Review
Total revenue increased 370.4% to
Revenue (in millions) | ||||||||||||||
(unaudited) | (unaudited) | |||||||||||||
Segment | Q1 FY 2022 | Q1 FY 2021 | Difference | % Change | ||||||||||
DSA1 | +83.2 | % | ||||||||||||
RMS | - | NM | ||||||||||||
Total | +370.4 | % | ||||||||||||
1 includes BASi Products |
The acquisitions of
Total gross profit increased to
Gross Profit1 (in millions) | ||||||||||||||
(unaudited) | (unaudited) | |||||||||||||
Segment | Q1 FY 2022 | % of Segment Revenue | Q1 FY 2021 | % of Revenue | ||||||||||
DSA2 | 37.2 | % | 33.0 | % | ||||||||||
RMS | 13.8 | % | - | - | ||||||||||
Total | 22.9 | % | 33.0 | % | ||||||||||
1 excludes amortization of intangible assets 2includes BASi Products |
DSA gross profit for Q1 FY 2022 was
RMS gross profit for Q1 FY 2022 was
Operating expenses increased by 698.3%, or
Net loss attributable to common shareholders was
Adjusted EBITDA increased 621.4% to
Cash Provided by Operating Activities and Financial Condition
As of
On
On
Conference Call
Management will host a conference call on
Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic)
- (201) 493-6739 (International)
The live conference call webcast also will be accessible in the Investors section of the Company’s website, and directly via the following link:
https://themediaframe.com/mediaframe/webcast.html?webcastid=cXkN5tYP
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 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 shown in the reconciliation. 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
This release may contain forward-looking statements that are subject to risks and uncertainties including, but not limited to, risks and uncertainties related to changes in the market and demand for our services and products, 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, near-term and long-term growth in revenue and operating margins, the impact of the COVID-19 pandemic on the economy, demand for our services and products and our operations, including the measures taken by governmental authorities to address the pandemic, which may precipitate or exacerbate other risks and/or uncertainties and various other market and operating risks, including those detailed in the Company's filings with the
Company Contact | Investor Relations |
(765) 497-8381 | (212) 836-9614 |
btaylor@inotivco.com | kahl@equityny.com |
(212) 836-9608 | |
dsullivan@equityny.com |
Financial Tables Follow:
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three Months Ended | |||||||||
2021 | 2020 | ||||||||
Service revenue | $ | 38,176 | $ | 17,032 | |||||
Product revenue | 46,035 | 853 | |||||||
Total revenue | 84,211 | 17,885 | |||||||
Costs and expenses: | |||||||||
Cost of services provided (excluding amortization of intangible assets) | 24,209 | 11,597 | |||||||
Cost of products sold (excluding amortization of intangible assets) | 40,677 | 411 | |||||||
Selling | 2,738 | 625 | |||||||
General and administrative | 13,252 | 4,882 | |||||||
Amortization of intangible assets | 3,396 | 160 | |||||||
Other operating expense | 33,580 | 196 | |||||||
Operating income | (33,641 | ) | 14 | ||||||
Other income (expense): | |||||||||
Interest expense | (4,828 | ) | (347 | ) | |||||
Other (expense) income | (57,727 | ) | — | ||||||
Income (loss) before income taxes | (96,196 | ) | (333 | ) | |||||
Provision for income taxes | 12,785 | (33 | ) | ||||||
Consolidated net income (loss) | $ | (83,411 | ) | $ | (366 | ) | |||
Less: Net income (expense) attributable to noncontrolling interests | (364 | ) | — | ||||||
Net income (loss) attributable to common shareholders | (83,047 | ) | (366 | ) | |||||
Earnings per common share | |||||||||
Net income attributable to common shareholders: | |||||||||
Basic and diluted | $ | (3.93 | ) | $ | (0.03 | ) | |||
Weighted-average number of common shares outstanding: | |||||||||
Basic and diluted | 21,124 | 11,016 |
Note – Certain prior quarter amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
RECONCILIATION OF GAAP TO NON-GAAP EARNINGS
(In thousands)
(Unaudited)
Three Months Ended | |||||||
2021 | 2020 | ||||||
GAAP Consolidated net income (loss) | $ | (83, 411 | ) | $ | (366 | ) | |
Add back (a): | |||||||
Interest expense | 4,828 | 347 | |||||
Income taxes (benefit) expense | (12,785 | ) | 33 | ||||
Depreciation and amortization | 6,024 | 1,065 | |||||
Stock option expense (1) | 23,932 | 181 | |||||
Acquisition and integration costs (2) | 8,808 | — | |||||
Startup costs | 957 | 160 | |||||
Foreign exchange losses | 320 | — | |||||
Loss on debt extinguishment | 877 | — | |||||
Amortization of inventory step up | 3,668 | — | |||||
Other non-recurring, third party costs | 439 | — | |||||
Gain on disposition of assets | (249 | ) | — | ||||
Loss on fair value remeasurement of convertible notes (3) | 56,714 | — | |||||
Adjusted EBITDA (b) | $ | 10,122 | $ | 1,420 |
(a) Adjustments to certain GAAP reported measures for the three months ended |
(1) |
(2) For the three months ended |
(3) For the three ended |
(b) Adjusted EBITDA - Earnings before interest expense, income taxes (benefit) expense, depreciation and amortization, stock option expense, non-recurring acquisition and integration costs, startup costs, foreign exchange losses, loss on debt extinguishment, amortization of inventory step up, other non-recurring, third party costs, gain on disposition of assets and loss on fair value remeasurement of the embedded derivative component of the convertible notes. |
RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION | |||||
In thousands | |||||
Unaudited | |||||
Three Months Ended | |||||
December | |||||
2021 | 2020 | ||||
DSA | |||||
Revenue | 32,825 | 17,885 | |||
Operating income | 6,042 | 3,277 | |||
Operating income as a % of total revenue | 7.2 | % | 18.3 | % | |
Add back: | |||||
Depreciation and amortization | 2,541 | 872 | |||
Stock option expense | - | - | |||
Acquisition and integration costs | - | - | |||
Startup costs | 957 | 160 | |||
Other non-recurring, third party costs | - | - | |||
Total non-GAAP adjustments to operating income | 3,498 | 1,032 | |||
Non-GAAP operating income | 9,540 | 4,309 | |||
Non-GAAP operating income as a % of DSA revenue | 29.1 | % | 24.1 | % | |
Non-GAAP operating income as a % of total revenue | 11.3 | % | 24.1 | % | |
RMS | |||||
Revenue | 51,386 | N/A | |||
Operating income/(loss) | 80 | N/A | |||
Operating income/(loss) as a % of total revenue | 0.0 | % | N/A | ||
Add back: | |||||
Depreciation and amortization | 3,483 | N/A | |||
Stock option expense | - | N/A | |||
Acquisition and integration costs | - | N/A | |||
Amortization of inventory step up | 3,668 | N/A | |||
Startup costs | - | N/A | |||
Other non-recurring, third party costs | 439 | N/A | |||
Total non-GAAP adjustments to operating income/(loss) | 7,590 | N/A | |||
Non-GAAP operating income/(loss) | 7,670 | N/A | |||
Non-GAAP operating income/(loss) as a % of RMS revenue | 14.9 | % | N/A | ||
Non-GAAP operating income/(loss) as a % of total revenue | 9.1 | % | N/A |
Unallocated Corporate G&A | (39,764 | ) | (3,263 | ) | |
Unallocated corporate G&A as a % of total revenue | -47.2 | % | -18.2 | % | |
Add back: | |||||
Depreciation and amortization | - | 193 | |||
Stock option expense | 23,932 | 181 | |||
Acquisition and integration costs | 8,808 | - | |||
Other non-recurring, third party costs | - | - | |||
Total non-GAAP adjustments to unallocated corporate G&A | 32,740 | 374 | |||
Non-GAAP unallocated corporate G&A | (7,024 | ) | (2,889 | ) | |
Non-GAAP unallocated corporate G&A as a % of total revenue | -8.3 | % | -16.2 | % | |
Total | |||||
Revenue | 84,211 | 17,885 | |||
Operating (loss) income | (33,642 | ) | 14 | ||
Operating (loss) income as a % of total revenue | -39.9 | % | 0.1 | % | |
Add back: | |||||
Depreciation and amortization | 6,024 | 1,065 | |||
Stock option expense | 23,932 | 181 | |||
Acquisition and integration costs | 8,808 | - | |||
Amortization of inventory step up | 3,668 | - | |||
Startup costs | 957 | 160 | |||
Other non-recurring, third party costs | 439 | - | |||
Total non-GAAP adjustments to operating (loss) | 43,828 | 1,406 | |||
Non-GAAP operating income | 10,186 | 1,420 | |||
Non-GAAP operating income as a % of total revenue | 12.1 | % | 7.9 | % |
Source:
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