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II

Inotiv, Inc. (NOTV)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue grew 4.4% year-over-year to $124.3M, driven by RMS (+9.1% YoY) while DSA declined (-2.8% YoY); operating loss narrowed sharply to $2.9M and adjusted EBITDA improved to $8.0M, reflecting cost controls and a $7.6M legal settlement inflow .
  • Versus consensus, revenue modestly beat ($124.3M vs $124.0M*) and EPS beat (Primary EPS -$0.568* vs -$0.635*), while S&P Global’s EBITDA actual ($4.35M*) tracked below consensus ($7.52M*) due to mix and non-GAAP adjustments; the company does not provide formal guidance .
  • RMS momentum and optimization are catalysts: revised RMS plan accelerates completion to March 2026 with higher annual savings ($6–$7M vs $4–$5M) and savings starting as soon as Q4 FY25; NHP services revenue rose ~10% QoQ, and DSA bookings improved (book-to-bill 1.01x) .
  • Headwinds include DSA margin pressure from higher-cost NHPs carrying over into studies, pricing dynamics, higher utilities/supplies, and elevated interest expense; operating cash outflows and rising net debt warrant monitoring .

What Went Well and What Went Wrong

What Went Well

  • RMS revenue increased $6.6M (+9.1% YoY) on higher NHP product and services; RMS non-GAAP operating income rose to $15.6M and 19.7% of RMS revenue, showing margin recovery .
  • Adjusted EBITDA improved to $8.0M (6.4% margin), supported by lower operating expenses versus prior year (no repeat of the DOJ charge) and the $7.6M settlement received during Q2 .
  • Management highlighted strategic progress: “We now anticipate net annual savings of $6–$7M…completion by March 2026…beginning to see savings benefits as soon as Q4 fiscal 2025,” reinforcing execution on RMS optimization and efficiency .

What Went Wrong

  • DSA margins deteriorated due to higher-cost NHPs used in toxicology studies, overtime/labor, utilities and supplies; DSA revenue fell to $45.3M (-2.8% YoY) with non-GAAP operating income down to $5.0M .
  • Cash used in operations was $17.3M YTD FY25 versus $10.4M provided in YTD FY24; cash and cash equivalents declined to $19.3M, reflecting working capital swings tied to NHP deposits and collections .
  • Interest expense increased to $13.4M in Q2 (from $11.1M YoY), and total debt net rose to $399.5M; leverage and covenant compliance remain key watch items despite management’s forecast to comply with updated covenants .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$119.035 $130.417 $119.876 $124.323
DSA Revenue ($USD Millions)$46.631 $44.568 $42.822 $45.332
RMS Revenue ($USD Millions)$72.404 $85.849 $77.054 $78.991
Operating Income (Loss) ($USD Millions)$(43.116) $(13.167) $(15.507) $(2.938)
Net Loss ($USD Millions)$(48.079) $(18.891) $(27.630) $(14.866)
Diluted EPS ($USD)$(1.86) $(0.73) $(1.02) $(0.44)
Adjusted EBITDA ($USD Millions)$3.076 $5.369 $2.610 $7.957
Adjusted EBITDA Margin (%)2.6% 4.1% 2.2% 6.4%

Segment breakdown:

SegmentQ2 2024Q1 2025Q2 2025
DSA Revenue ($USD Millions)$46.631 $42.822 $45.332
RMS Revenue ($USD Millions)$72.404 $77.054 $78.991

KPIs and balance sheet:

KPIQ4 2024Q1 2025Q2 2025
DSA Book-to-Bill (x)0.78x 1.01x 1.01x
DSA Backlog ($USD Millions)$129.9 $130.4 $130.8
Net New DSA Orders ($USD Millions)N/A$42.3 $44.5
DSA Cancellations Change (YoY)N/A+54% −28%
NHP Services Revenue (QoQ)N/AN/A+~10%
Cash & Cash Equivalents ($USD Millions)$21.432 $38.043 $19.299
Total Debt, net ($USD Millions)$393.3 $396.0 $399.5

Estimates vs actuals (S&P Global):

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD)$123,964,670*$124,323,000
Primary EPS ($USD)−0.635*−0.5679*
EBITDA ($USD)$7,515,330*$4,345,000*

Values retrieved from S&P Global*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial Guidance (Revenue/EPS)FY 2025None provided; prior guidance withdrawn in FY24 None provided Maintained none
Capex (% of Revenue)FY 2025<4% <4% Maintained
RMS Site Optimization Annual SavingsProject lifecycle$4–$5M annual savings; completion by end of FY26 $6–$7M annual savings; completion by March 2026; savings begin as soon as Q4 FY25; capex ~$6.5M Raised and accelerated
Covenant Compliance OutlookFY 2025N/AForecasts compliance with updated credit agreement covenants (Sept 2024 amendment) Clarified outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
NAMs/technology (computational tox, proteomics)Not highlighted in release Building capabilities; discovery awards green shoots Supports FDA aims; integrates NAMs, expects continued role for animal models; client education ongoing Building capability; gradual adoption
Tariffs/macroNot highlighted Not highlighted 10% tariffs on NHPs; working with suppliers/customers to mitigate; some inflation in lab equipment; demand unchanged so far Manageable near term; monitoring escalation
RMS optimizationInitiated next phase; targeted $4–$5M savings Plan reiterated; completion by end FY26 Savings raised to $6–$7M; completion March 2026; savings start Q4 FY25 Positive acceleration
NHP pricing/volumeVolatility cited; pricing down YoY in FY24 Lower ASPs; presold inventory; reduced volatility planned Higher volumes at lower prices; NHP services +~10% QoQ; boarding capacity expansion Volume up; ASP normalized; services growing
DSA demand/marginsBook-to-bill 0.78x; backlog ~$130M Book-to-bill 1.01x; cancellation impacted by one large project Book-to-bill 1.01x; new orders +27% YoY; margins pressured by cost/pricing; improvement actions underway Demand improving; margins to recover
Regulatory/legalDOJ resolution charges impacted FY24 Covenant amendment (Sept 2024), liquidity improved via equity raise No repeat DOJ charge; FNI settlement $7.6M received Legal tail risk reduced

Management Commentary

  • “We now anticipate net annual savings of $6–$7 million…this project is now anticipated to be completed by March of 2026…beginning to see savings benefits as soon as Q4 fiscal 2025.” — CEO Robert Leasure .
  • “The increase in RMS revenue was primarily due to the higher NHP volumes sold, partially offset by lower average selling price for NHPs compared to the prior year quarter.” — CFO Beth Taylor .
  • “We broadly support the FDA’s stated goals of reducing animal testing…we have been building these capabilities over many years…computational toxicology, proteomics, ex vivo and in vitro assays.” — CEO Robert Leasure .
  • “Based upon current tariff levels, we will be paying the 10% tariffs [on NHPs] and we will be working with suppliers and customers to mitigate the financial impact.” — CEO Robert Leasure .

Q&A Highlights

  • NAMs adoption and marketing: Clients are becoming educated; growth in computational tox/proteomics is emerging but gradual, with more traction in discovery than safety/efficacy .
  • RMS optimization focus: Revised plan aims to reduce capacity while boosting efficiency and animal welfare; improved transportation efficiencies reduce need for dispersed facilities .
  • Demand cadence: Strong quoting/closing early in Q3; company expects sequential and YoY revenue growth over next two quarters; Discovery awards up 6.2% YTD .
  • Government exposure: ~7% of FY24 revenue; Q2 saw increases in U.S. government sector on both DSA and RMS .
  • DSA margin recovery: Actions already underway; step-down in higher-cost NHPs should ease cost pressure; pricing discounting less prevalent than 6–12 months ago .

Estimates Context

  • Revenue modestly beat consensus ($124.3M actual vs $124.0M* consensus) and Primary EPS beat (−$0.568* actual vs −$0.635* consensus). EBITDA missed (S&P EBITDA $4.35M* vs $7.52M* consensus), while company-reported adjusted EBITDA was $8.0M (6.4% margin) reflecting non-GAAP adjustments .
  • Implications: RMS strength and cost actions underpin revenue and adjusted EBITDA; DSA margin headwinds likely drive cautious revisions to near-term margin assumptions despite bookings traction .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • RMS is the near-term engine: higher NHP volume, expanding boarding/colony services (+~10% QoQ), and optimization-driven savings support margin uplift and cash generation starting Q4 FY25 .
  • DSA trajectory improving on bookings (book-to-bill 1.01x; new orders +27% YoY), but margin recovery depends on cost normalization (NHP cost mix) and pricing discipline; monitor next two quarters for progress .
  • Balance sheet watch: interest expense elevated ($13.4M in Q2) and net debt increased ($399.5M); covenant compliance is forecast, but working capital swings (NHP deposits/collections) can pressure liquidity .
  • Regulatory/macro: 10% tariffs on NHPs being mitigated; NAMs adoption aligns with Inotiv capabilities but will likely be gradual; NIH funding headlines not materially impacting demand yet .
  • No formal guidance: model using bookings/backlog and segment dynamics; capex remains <4% of revenue, with optimization capex ~$6.5M funded via tenant improvements and settlement proceeds .
  • Trading setup: near-term catalysts include RMS savings realization by Q4 FY25 and DSA margin improvements; risks include tariff escalation, pricing pressure, and interest costs .

Additional Source Documents Read

  • Q2 FY25 8-K and press release (financials, segments, non-GAAP reconciliations, backlog/book-to-bill) .
  • Q2 FY25 earnings call transcript (prepared remarks and Q&A) .
  • Q1 FY25 press release and call (prior quarter trends, bookings, cancellations, equity raise) .
  • Q4 FY24 press release (baseline, optimization plans, segment trends) .