Inotiv, Inc. Earnings Call Highlights Revenue Growth

Inotiv, Inc. ((NOTV)) has held its Q2 earnings call. Read on for the main highlights of the call.

Inotiv, Inc. Reports Positive Earnings Call with Revenue Growth Despite Challenges

The recent earnings call for Inotiv, Inc. reflected a generally positive sentiment, highlighting significant revenue growth and improved operating margins, particularly in the RMS segment. However, the company faces challenges in the DSA segment, with revenue decline and margin deterioration. Strategic initiatives and settlements have bolstered the company’s financial position, contributing to the overall optimistic outlook.

Revenue Growth

For the second quarter of fiscal 2025, Inotiv, Inc. reported total revenue of $124.3 million, marking a year-over-year increase of $5.3 million or 4.4%. This growth was primarily driven by an increase in the RMS segment revenue, which rose by $6.6 million.

RMS Segment Performance

The RMS segment showed robust performance with a 9.1% increase in revenue compared to Q2 of fiscal 2024. This growth was mainly attributed to higher volumes of NHPs sold, indicating strong demand in this segment.

Improved Operating Margins

Inotiv, Inc. achieved improved operating margins in the RMS segment, which were the strongest since Q1 of fiscal year 2024. This improvement underscores the company’s effective cost management and operational efficiency.

Settlement and Financial Position

The company successfully settled a litigation case for approximately $7.6 million, which has positively impacted its financial resources, enhancing its ability to invest in future growth opportunities.

Positive Book-to-Bill Ratio

Despite challenges, the DSA segment maintained a positive book-to-bill ratio of 1.01:1 in Q2 of fiscal 2025. This indicates a stable demand for services, with quoting and awards remaining consistent over the last nine months.

Optimized RMS Site Plan

Inotiv, Inc. has refined its RMS site optimization plan, which is expected to result in net annual savings of $6 million to $7 million. This strategic move is part of the company’s efforts to enhance operational efficiency.

DSA Segment Revenue Decline

The DSA segment experienced a revenue decline in fiscal Q2, with revenue dropping to $45.3 million from $46.6 million in Q2 of fiscal year 2024. This decline was primarily driven by a decrease in general toxicology services revenue.

DSA Margin Deterioration

Margins in the DSA segment have deteriorated over the last two quarters due to higher costs associated with NHPs, increased overtime, labor costs, utility costs, and operating supplies. This poses a challenge for the company moving forward.

Higher Interest Expense

Interest expense in Q2 of fiscal 2025 increased to $13.4 million from $11.1 million in Q2 of 2024. This rise was primarily due to interest on second lien notes issued in September 2024.

Forward-Looking Guidance

Inotiv, Inc. provided forward-looking guidance indicating continued revenue and adjusted EBITDA growth over the next two quarters of fiscal 2025. The company anticipates net annual savings from its revised RMS site optimization plan and expects new orders to remain strong, with a book-to-bill ratio of 1.01:1.

In conclusion, Inotiv, Inc.’s earnings call conveyed a positive outlook with significant revenue growth and improved operating margins, particularly in the RMS segment. While challenges persist in the DSA segment, strategic initiatives and settlements have strengthened the company’s financial position, setting the stage for continued growth in the coming quarters.