Executive Summary

Q3 FY25 revenue grew 23.5% YoY to $130.7M and rose 5.1% QoQ, with RMS strength (NHPs) and improving DSA; operating loss narrowed to $(5.7)M and adjusted EBITDA improved to $11.6M (8.9% margin) .
Against S&P Global consensus, revenue beat by ~2.9% ($130.7M vs $127.1M*) and GAAP EPS was essentially in line to slightly worse (−$0.51 vs −$0.515*); GAAP EBITDA undershot consensus (actual ~ $8.3M vs $11.0M*), while company-reported adjusted EBITDA outperformed internal prior trends . Values retrieved from S&P Global.
Order momentum improved: DSA book-to-bill 1.07x, net awards +25% YoY, backlog $134.3M; cancellations remain elevated (TTM +~2%), but management is staffing sales to outgrow churn .
No formal FY25 guidance; management reaffirmed capex <4% of revenue and announced a strategic review of the capital structure; liquidity included a requested $3.0M revolver draw (corrected from prior disclosure) .

What Went Well and What Went Wrong

What Went Well
- RMS revenue +34.1% YoY to $82.5M on higher NHP volume and pricing; RMS swung to $6.4M operating income vs $(7.4)M YoY; non‑GAAP RMS op income was $16.9M (20.4% of RMS revenue) .
- DSA commercial momentum: net awards +25% YoY; DSA book‑to‑bill 1.07x; discovery awards +31.3% YoY; management cites improved pricing/scale and stable pricing environment .
- Regulatory/legal overhang eased: SEC enforcement investigation concluded with no recommended action; AAALAC accreditation noted as “exemplary” for both Texas NHP facilities .
What Went Wrong
- Cancellations elevated: DSA cancellations/change orders ~31% higher YoY in Q3; management planning assuming higher cancellation “new normal” despite strong gross bookings .
- Cash burn and leverage: YTD operating cash flow $(24.8)M, cash $6.2M vs $21.4M at FY24-end; total debt ~$396.5M; interest expense rose to $13.6M (PIK on 2nd lien notes) .
- GAAP EBITDA missed S&P consensus (actual ~8.3M vs 11.0M*), reflecting the cost/mix effects and higher cost of revenue tied to NHP throughput; management highlighted adjusted EBITDA improvement to 8.9% margin . Values retrieved from S&P Global.

Financial Results

Overall performance and vs estimates

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025	Q3 2025 S&P Consensus
Revenue ($M)	$105.8	$119.9	$124.3	$130.7	$127.1*
GAAP Diluted EPS ($)	$(1.00)	$(1.02)	$(0.44)	$(0.51)	$(0.515)*
Operating Margin (%)	(19.6%)	(12.9%)	(2.4%)	(4.3%)	—
GAAP EBITDA ($M) ≈ Op Inc + D&A	~$ (6.6)	~$ (1.3)	~$ 10.9	~$ 8.3	$11.0*
Adjusted EBITDA ($M)	$0.1	$2.6	$8.0	$11.6	—
Adjusted EBITDA Margin (%)	0.1%	2.2%	6.4%	8.9%	—

Values retrieved from S&P Global for consensus cells marked with *.

Segment breakdown

Segment Metric	Q3 2024	Q2 2025	Q3 2025
DSA Revenue ($M)	$44.2	$45.3	$48.2
DSA Operating Income ($M)	$2.3	$(0.1)	$2.1
DSA Non‑GAAP Op Income ($M)	$7.8	$5.0	$7.2
RMS Revenue ($M)	$61.6	$79.0	$82.5
RMS Operating Income (Loss) ($M)	$(7.4)	$11.4	$6.4
RMS Non‑GAAP Op Income ($M)	$6.5	$15.6	$16.9

KPIs and commercial metrics

KPI	Q1 2025	Q2 2025	Q3 2025
DSA Book‑to‑Bill (x)	1.01x	1.01x	1.07x
DSA Backlog ($M)	$130.4	$130.8	$134.3
DSA Net Awards YoY	—	+27% (noted by mgmt)	+25%
Backlog Conversion Rate	—	—	35.5%
DSA Cancellations YoY	—	—	~+31%

Cash, leverage and liquidity (point-in-time)

Cash and cash equivalents: $6.2M at 6/30/25 (vs $21.4M at 9/30/24) .
Total debt (net): $396.5M at 6/30/25; no revolver borrowings as of 6/30/25; recently requested $3.0M draw (corrected disclosure) .
YTD operating cash flow: $(24.8)M; capex YTD: $13.9M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Formal FY25 Guidance	FY25	Not providing (Q1/Q2)	Not providing (Q3); will revisit with more clarity on tariffs/demand	Maintained
Capital Expenditures	FY25	<4% of revenue (Q2)	Continue to expect <4% of revenue (Q3)	Maintained
RMS Site Optimization Savings	Multi‑year	Prior plan discussed; timing accelerated (Q2)	Net annual savings $6–$7M on ~$6.5M capex; completion by Mar‑2026	More specific; reiterated timing
Liquidity (Revolver)	Near‑term	$15M facility, no borrowings (6/30)	Requested a $3.0M draw (corrected)	New draw request
Capital Structure Review	N/A	—	Initiating strategic review; will hire third party	New disclosure

Earnings Call Themes & Trends

Topic	Q1 FY25 (Dec qtr)	Q2 FY25 (Mar qtr)	Q3 FY25 (Jun qtr)	Trend
Demand/Bookings	DSA b‑to‑b 1.01x; backlog $130.4M	DSA b‑to‑b 1.01x; backlog $130.8M	DSA b‑to‑b 1.07x; net awards +25% YoY; discovery +31% awards	Improving
Pricing	—	DSA pricing pressure persisted into FY25 (mgmt commentary)	Pricing stabilizing in DSA; improved pricing and scale aided margins	Stabilizing
NHP Supply/Pricing	RMS down on pricing in Q1	RMS up on NHP volume/pricing in Q2	RMS +34% YoY; pricing stable; no broad US NHP supply surge; Cambodia imports possible but not planned near‑term	Stable pricing; supply managed
Regulatory/Legal	Equity raise; operations optimization	FNI $7.6M settlement; DOJ charge non‑repeat	SEC enforcement closed (no action); lawsuits accrual with expected insurance recovery	De‑risking
Operations/Optimization	Next RMS optimization phase; savings $4–5M initially	US optimization to complete by Q2 FY26	On track by Mar‑2026; property sale closed; second under contract	Executing
Capital Structure	—	—	Strategic review of balance sheet; maturities 2026/2027 highlighted	Proactive

Management Commentary

Strategic progress and demand: “We are pleased with the quarterly results… demonstrate the potential to increase DSA awards and improve… revenue, margins and adjusted EBITDA” .
DSA margins: “DSA operating margins improved… impacted… from pricing pressure… improvements due to improved pricing and scale… focus on improving these margins” .
RMS execution: “RMS operating margins… strongest… since Q1 FY24 excluding litigation settlement; optimization plan net annual savings of $6–$7M on ~$6.5M capex” .
Customer delivery: “We consistently monitor operational data and client metrics to help build a strong recurring client base” .
Capital structure: “We are prioritizing a strategic review of our balance sheet and capital structure… plan to hire a third party” .

Notable quotes

“Discovery awards increased 31.3% over the same period a year ago… discovery is probably our most fixed cost business… incremental bottom line… 70–80%” .
“We just have to plan for cancellations to continue to be high… means our gross bookings… have to go up” .
“We don’t see a change in [NHP] pricing… things are staying pretty stable” .

Q&A Highlights

Cancellations and bookings: Elevated cancellations (one or two large cancels can swing) require higher gross bookings; sales force expanded to offset churn .
Site optimization: Focus shifting from “brick and mortar” closures to fine‑tuning utilization and capacity within existing facilities; last big closure nearing completion .
NHP sourcing/pricing: US authorities have not prohibited Cambodia imports, but imports haven’t resumed; pricing stable; team managing supply through multiple Asian sources .
Incremental margins: Discovery’s high fixed cost base supports 70–80% variable contribution on incremental revenue; safety assessment ~50–60% .
Cash working capital: Higher NHP inventory to support client reliability; could convert to cash if needed, but aiming to maintain a higher level as the “new normal” .

Estimates Context

Q3 FY25 vs S&P Global consensus: Revenue $130.7M vs $127.1M* (beat ~2.9%); GAAP diluted EPS −$0.51 vs −$0.515* (essentially in line/slight miss ~$0.005); GAAP EBITDA ~ $8.3M vs $11.0M* (miss) . Values retrieved from S&P Global.
Estimate depth: Q3 had 3 revenue estimates and 2 EPS estimates*; revenue surprise may drive modest upward top‑line revisions, but GAAP EBITDA shortfall versus EBITDA consensus could temper EBITDA trajectory in models* (many analysts may focus on adjusted EBITDA progression to 8.9%) . Values retrieved from S&P Global.

Key Takeaways for Investors

Mix-led recovery: RMS (NHP-driven) and improving DSA awards drove a clean top‑line beat; operating leverage is emerging (adj. EBITDA to 8.9%) but cancellations and cost of revenue remain watchpoints .
Quality of earnings: On S&P metrics, GAAP EBITDA missed consensus even as adjusted EBITDA improved; scrutiny will remain on cost discipline and margin mix . Values retrieved from S&P Global.
Commercial momentum: Book‑to‑bill >1x and discovery awards +31% signal better forward conversion; stable DSA pricing and higher fixed‑cost absorption could further expand margins if churn moderates .
Balance sheet pivot: Strategic capital structure review acknowledges 2026/2027 maturities and rising interest expense; any refinancing/asset actions are meaningful catalysts .
Regulatory de‑risking: SEC enforcement investigation closure reduces tail risk; continued strong AAALAC accreditation supports RMS positioning .
Liquidity: Revolver draw request ($3.0M) and negative YTD operating cash flow highlight the need to improve working capital cadence as NHP inventory normalizes .
Trading setup: Near‑term, revenue beats plus award momentum are supportive; medium‑term, delivery on DSA margin recovery, optimization savings realization, and capital structure actions will drive multiple re‑rating .

Appendix: Q3 FY25 Operating Detail and Drivers

Revenue growth composition: +$21.0M RMS (NHP volume/ASP), +$3.9M DSA (general tox, biotherapeutics, medical device) .
Operating loss bridge: Improvement driven by RMS swing and absence of prior‑year DOJ charges; cost of revenue up with NHP throughput .
Non‑GAAP adjustments include D&A, stock comp, startup/restructuring, legal/third‑party costs; FY25 YTD also reflects $(7.55)M FNI settlement .

S&P Global estimates used herein are marked with * and Values retrieved from S&P Global.

Inotiv, Inc. (NOTV)·Q3 2025 Earnings Summary