Q4 2021 Inotiv Inc Earnings Call
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Greetings and welcome to <unk>, Inc. 's fourth quarter fiscal 2021 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
I will now turn the conference over to your host Devin Sullivan Senior Vice President of the equity group you may begin.
Thank you Kyle and good afternoon, everyone and it's a inc. Fourth quarter fiscal 2021 financial results were released today. After the market closed a copy of the earnings release can be found in the investors section of the company's website at <unk> Dot com.
As a matter of formality I need to remind you that some of the statements that management will make on this call are considered forward looking statements, including statements about the company's future operating and financial results and plants such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected.
Any such statements represent management's expectations as of today's date you.
You should not place undue reliance on these forward looking statements and the company does not undertake any obligation to update or revise forward looking statements, whether as a result of new information future events or otherwise.
Please refer to the company's SEC filings for further guidance on this matter manner.
Management will also discuss certain non-GAAP financial measures in an effort to provide additional information for investors.
Definition of these non-GAAP measures and reconciliation to the most comparable GAAP measures is included in the company's financial results press release and corresponding form 8-K.
Joining us from the company. This afternoon are Bob Leisure, President and Chief Executive Officer, Beth Taylor, Chief Financial Officer, and John <unk>, The Chief strategy Officer.
Bob will begin with some opening remarks, after which Beth will present, a summary of the company's financial results. Then we will open the call for questions.
Now it is my pleasure to turn the call over to Bob Leisure Bob. Please go ahead.
Alright, Thank you Devin and good afternoon, everyone and thank you for joining US today, sorry, we were a little delayed this smoke.
Fiscal 2021, it was really a transformational year for inner tube, reflecting our success and we expanded the existing operations and services.
Starting up new operations and services acquiring strategic assets raising capital built.
Building really a very strong foundation for our future and I'm very proud of the team and the results this quarter and this year.
By broadening our suite of solutions, and adding new talent to our team achieving greater scale. We've created an organization that is more comprehensively support our clients' discovery and development objectives and it has expanded platform also presents us with significant opportunities to cross sell solutions drive revenue.
And deliver improved operating margins.
It's a rapidly transformed this past year, but one constant that has played a key role of our success is our client service oriented culture.
I commend our growing team for their dedication to our customers looking to constantly improve and for making the appropriate short term decisions to ensure that thrive over the long run.
To recap some of this year's notable milestones I'll start with the expansion of our existing operations and services.
At West Lafayette, Indiana facility, we expanded buy barium capacity.
February received accreditation by the association for assessment.
<unk> of laboratory animal care International.
In St. Louis we exercised our option to purchase the previously leased facility and have completed the first phase expansion of approximately 15000 square feet, adding office archived in laboratory capacity.
St. Louis expansion gives us critical new technology and state of the art laboratory capabilities to support our clients' needs and D. M. P. K.
L. A cooler biology, pharmacology toxicology and histopathology, helping extend our reach into earlier stages of drug discovery.
We opened a newly constructed scientific laboratories in November of this year.
Our Fort Collins, Colorado facility, we invested more than $1 million over the last year to make improvements expand capacity and broaden our services. It's allowed us to more than double this business. Since it was acquired in November 2019.
And Evansville, Indiana, We recently initiated design planning for another expansion.
Expect a design build and validation process to take approximately 24 months.
In Boulder, Colorado, we acquired three companies have now increased.
At least space by an additional 19000 square feet adjacent to our existing sites to support the additional strong demand.
We are receiving for our discovery services and.
In Gaithersburg, Maryland, we invested in equipment infrastructure would reduce bottlenecks at least additional space.
As a result this business saw significant growth in the past 12 months has more than doubled almost tripled its sales capacity since its acquisition in 2019.
Among our internal startups this past fiscal year, we initiated the development.
New in House Enterprise wide technology solutions for data study management.
An additional investment to help enhance client experience.
We also recruited notable industry experts to innovative to help accelerate the startup of new services further reducing our outsourcing costs and enhancing our ability.
To deliver services as a fully integrated service provider.
Examples include Doctor out them all back.
Spearheading our new veterinary clinical.
Allergy offering.
Dr. Dennis Ward, who is leading the development of our analytical capabilities to support biologics Biomarkers cell based analysis and therapeutics.
Dr. Nicholas Jackson.
Building out our medical device histology and pathology solutions.
Doctor Coppola Krishna.
We're seeing our entry into the genetic toxicology space.
Kai speaks who's leading our cardiovascular safety pharmacology business.
And a team of experts to lead the development and growth.
Send data reporting or standard for the exchange of non clinical data.
These internal initiatives started to contribute to our underlying organic growth in the fourth quarter.
In fiscal 2021, we also significantly changed the complexion of intuitive.
Through strategic acquisitions, starting with the purchase of Boulder, Colorado based there's still talk slabs and Boulder bio path.
In April and May.
His to talk brought a strong expertise in tissue staining quantitative image analysis, well bowler bio path added depth to our existing pharmacology apology enterprise, allowing us to further extend our market reach and early stage drug discovery.
These acquisitions now comprise our Boulder, Colorado operations, and together delivered strong fourth quarter performance as for initiative contributing approximately $7 1 million of combined revenue corresponding to an annualized revenue run rate of approximately $28.4 million.
Both companies' corporate cultures have proven to be highly compatible with ours and each business has been integrating it into the fold performing ahead of our expectations.
We're starting to see these tangible cross selling benefits from these acquisitions as well.
For example, we had the opportunity to integrate bio analysis pharma Cook pharmacokinetics previously provided by legacy and into the site to the non clinical service offerings provided by legacy Boulder bio path.
Expect to reap similar benefits from our acquisition, Colorado based.
Play Doh Biopharma.
Which we completed after the quarter ended which brings as complementary in vivo pharmacology platform that we are weaving into our Boulder discovery operations.
In July we acquired genetic toxicology assets for Millipore Sigma is borrow relax portfolio.
Bolstering our efforts to develop in house genetic toxicology capabilities.
Purchased first class laboratory equipment and instrumentation stock consumables bench work from a tenancy based lab services provider ceased operations advancing our efforts to build in house therapeutic solutions.
We recently signed a lease on a facility in Rockville, Maryland and have initiated recruiting efforts to build the scientific laboratory staff necessary to support this effort.
In August we acquired Missouri, based gateway, pharmacology, which enhances our expertise cardiovascular and renal pharmacology gateway pharmacology dovetails, well with our expanded St. Louis facilities.
Strategically positioning us for additional synergies.
Finally in September we announced an agreement to purchase <unk>, a leading global provider of research models and services.
The N V go transaction closed after quarter end, so did not contribute to our fourth quarter financial results.
That said, we are very pleased about how well the two organizations are coming together.
From a financial perspective, we expect the indigo acquisition to be accretive to EBITDA margins and earnings in the quarters to come.
And in Vigo, we have secured access to high quality research models for the preclinical services offered by intuitive and needed by our clients. This.
This acquisition was once again, a result of listening to and addressing our customers' concerns.
Reflecting in vigorous deep animal husbandry expertise and services.
17 of its top 20 clients had been repeat customers for more than a decade.
These incredibly durable customer relations relationships.
Supported 99% plus revenue retention rates at N V go and it'll benefit our combined organization in the years to come.
Moreover, we have identified excellent cross selling opportunities with M. P goes global base of more than 2000 and 550 clients.
Clearly in Vigo brings us additional scale and expands our footprint there.
<unk>, new geographies, such as the European market.
Finally, and importantly, we benefit from an injection of additional talent.
Our strong fourth quarter fiscal 2021 financial results reflect the successful execution of our strategic growth plan.
With revenue nearly doubling year over year to $30 1 million driven by approximately 47% internal growth.
3% external growth.
Adjusted EBITDA increased to $4 3 million from 156000 during the same time period, demonstrating the under demonstrating the underlying leverage in our business as we scale.
As I noted earlier in the fourth quarter and throughout fiscal 2021, we continued to make significant investments in our business through acquisitions and internal expansions and embedded operational startups.
Simultaneously across our organization, we have continued to make broad expansion investments in G&A.
Our people infrastructure systems and services.
While our operating margins were temporarily depressed in the fourth quarter due to these growth oriented investments.
<unk> threep enhance future growth and margins over the long run.
We are pulling several levers to improve longer term profitability, including making scalable investments continuing to reduce outsourcing by bringing capabilities in house.
Driving cross selling initiatives.
Taking advantage of purchasing opportunities.
<unk> client acquisition cost because the percent of revenue.
Leveraging existing direct fixed cost and reducing corporate overhead as a percentage of revenue.
In the fourth quarter adjusted unallocated corporate G&A was approximately $3 2 million.
Or 10, 5% of revenue compared to 21, 7% of revenue for the same period last year.
And we expect to see this figure.
Further as we continue to grow.
Including in Vigo, we are targeting long term organic revenue growth.
In the high single double digits, and EBITDA margins in the range of 18% to 22%.
In the near term we are optimistic for continued strong revenue growth based on a robust robust backlog as well as anticipated contributions from recent acquisitions.
Terminal expansions and new services.
We were pleased that after achieving strong revenue growth.
We're able to report a book to Bill ratio in the fourth quarter of 1.77 times for our services business.
We ended the quarter with a backlog of $81 4 million up 31% compared to $62 million on June 32021 eight.
86%.
From $43 8 million on September 32020.
Indicating the current strength of our business.
Fiscal 2021 has been a busy year and we've accomplished quite a bit a compact timeframe, but.
But I believe the best is yet to come for our clients employees and shareholders.
With that I will turn the call over to Doug Taylor, Chief Financial Officer to discuss our fiscal 2021 fourth quarter and full year financial results.
More detail.
Please go ahead.
Thanks, Bob Good afternoon.
In the fourth quarter of fiscal 2021, our revenue increased 97% to $30.1 million from $15 $8 million in the comparable prior year period, driven by internal growth of $6.7 million in incremental revenue contribution from Houston.
Slab well their bio path and gateway pharmacology, which totaled $76 million.
Service segment revenue in the fourth quarter of fiscal 'twenty, 'twenty, one increased 93.3% to $29 million.
15 million in the comparable prior year period.
Service gross margin increased to 34, 2% in the fourth quarter of fiscal 2021 from 28, 9% in the comparable prior year period.
Selecting the greater utilization of recently expanded capacity.
Products segment revenue increased 49% to $1 1 million in the fourth quarter of fiscal 2021 from $782000 in the comparable prior year period as instruments are used for a variety of research markets, including COVID-19 related research applications.
And universities are working at a higher capacity in 2021 compared to the fourth quarter of 'twenty 'twenty with a greater impact from the COVID-19 pandemic.
Product gross margin was 35, 6% in the fourth quarter of fiscal 2021 compared to 36, 6% in the comparable prior year period.
Operating loss for the fourth quarter of fiscal 2021 totaled $3 4 million compared to an operating loss of $1 4 million in the prior year period, reflecting increased strategic investments and operating expenses to support future revenue growth, including $4 2 million of incremental.
Acquisition and integration cost $747000 or higher.
Cash stock compensation expense and $636000 of higher startup costs.
This quarter's growth oriented investment and G&A includes recruiting and relocation expenses.
Compensation expenses, including noncash stock compensation and transaction costs related to the acquisitions of hits the top lad.
El Paso Gateway Pharmacology in V go and play Doh by Biopharma the.
The last two of which closed after quarter end.
Combined adjusted corporate unallocated G&A much of which was growth oriented totalled approximately 10.
Percent of revenue in the fourth quarter of fiscal 2021 compared to approximately 21, 7% of revenue in the fourth quarter of fiscal 'twenty 'twenty. Our long term objective is for unallocated corporate G&A to reach between 6% to 8% of revenue.
I'd also like to point out that this quarter selling expenses were higher compared to prior periods.
Our increased book to Bill ratio as we accrued commissions when we win awards prior to the recognition of corresponding revenue.
[laughter].
Net income in the fourth quarter of fiscal 2021 totaled $9 $4 million or six cents per diluted share compared to a net loss of $1 8 million or six minus 16 cents per diluted share in the comparable prior year period.
This quarter's reported figure benefited from $4 9 million related to the forgiveness of our P. P. P alone.
And a $8 $4 million noncash gain on fair value Remeasurement of convertible notes.
Adjusted EBITDA equaled approximately $4 3 million in the fourth quarter of fiscal 2021 compared to $156000 in the comparable prior year period.
The book to Bill ratio for the fourth quarter of fiscal 2020, 111.77 times, we continued to build our infrastructure for growth, which included additional head count transaction and integration costs and internal investments in new service offerings technology and system.
Our backlog at the end of the fourth quarter of fiscal 2021 was $81 $4 million.
From $62 million on June 32021, and up from $43 $8 million on September 32020.
Briefly reviewing our full year fiscal.
Fiscal 'twenty 'twenty. One result, total revenue increased 48, 2% to 89.6 million driven by $17 3 million of internal growth and incremental revenue contribution from his to talk slabs well there.
Oh path and gateway pharmacology totaling $11 $8 million.
Compared to the prior year period.
2021, gross margin expanded 350 basis points to 33, 7%.
Net income totaled $10 9 million versus a net loss of $4 $7 million and adjusted EBITDA increased 223, 5% to $9 $3 million.
Cash flow from operations during fiscal 2021 totaled $10 $7 million compared to $1 $3 million in the prior fiscal year.
Capex for fiscal 2021 totaled $12 $5 million, which included investments in laboratory equipment to increase capacity at all locations facility improvements at the Fort Collins location and the purchase and expansion of our St. Louis facility.
Our balance sheet on September 32021 included cash and cash equivalents of $156 $9 million.
And total long term debt of $163 $9 million.
Our P. P P loans totaling $4 9 million was forgiven during the quarter.
And finally, we had a zero balance and $5 million of availability under our general line of credit and a $1 7 million dollar balance on a $3 million equipment loan.
Lastly, today, we filed an 8-K disclosing that management together with the audit Committee of the board of Directors concluded that we did not properly account for certain tax attributes.
Related to our acquisition of bolder bio path in the third quarter of fiscal 2021.
We intend to restate, our historical financial results for the third quarter, making certain certain noncash adjustments.
To increase the amount of goodwill and deferred tax liability recorded on the June 32021 balance sheet by approximately $4 $9 million and to reduce our valuation allowance recorded on the June 32021 balance sheet well.
While increasing income tax benefit in the statement of income for the three and nine month periods ending June 32021 by approximately $4 9 million.
Therefore, our previously filed quarterly report for the period ended June 32021 should not be relied upon this adjustment improved profitability for the quarter ended June 32021 from net loss of $2 $3 million to net income of $2 6 million.
In connection with this restatement management has concluded that a material weakness exist in the company's internal control over financial reporting related to accounting for taxes for acquisitions that qualify as a as a stock acquisition for tax purposes, we have established a thorough.
With mediation plan to address this weakness, which includes engaging with highly qualified tax advisors.
Overall, we are very pleased with the direction our business is heading until confident in continuing to invest in our future.
This concludes our prepared remarks and with that operator, please open the call for questions.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question is from Kyle Boser with Colliers Securities. Please proceed with your question.
Great. Thanks, So much can you hear me okay.
Yes, Scott.
Great. Thanks for all the updates just a phenomenal book to Bill here can you talk just in general terms.
About how maybe.
Maybe price inflation, and our cross selling with histone toxin Boulder paths are influenced the strong book to bill in the corner.
Yeah.
What was it the Boulder bio path and talks acquisitions closed in May.
So our.
Our sales cycle is probably what we did in may.
I think what happened this quarter was.
Was in process well before we we did to me I think some of the results this quarter and some of it in the book to Bill This quarter what are the things that had been in process 12 to 18 months and things we've been putting in place over the last 12 months, that's not in the last four to five months.
That being said we may have had some short term gains from some of the Boulder in his talks clients.
I think it's a it's more of an indication of a very strong demand our ability to open up some capacity.
Our plans to open up further capacity.
And existing customers continue to do.
To expand the amount of work that they place with us.
I think that.
Some of our Boulder bio path and the integration of Boulder bio path and his to talks R. R. R.
Are things that are going to.
For the drivers in the future, but I doubt if we saw as much in the last quarter because I know.
Those those amazing I think some of those things would close last quarter would have been a larger projects would've been quoted quoted in June in an issue that quickly.
So we are seeing some benefit obviously and we're seeing some benefit that will impact future quarters, but I don't know that it was two had been that big that quickly.
What was the second half of your question.
Oh, just how have pricing crisis might have influenced yeah.
There there has been I think some inflation.
Inflation over.
Over the summer we saw obviously wage inflation.
Take place that we addressed proactively try to address quickly.
We saw taking place.
But we have tried to pass through some of that that being said so.
So much of the results we had in Q4.
Were jobs that were quoted in one well before that that inflationary period.
I think it will take probably some inflation is obviously.
And some price increase there is definitely in the backlog as we look out but you know we're looking at six to nine month backlog.
So it's not all of it would be in there, but there is there is going to be some.
Some inflationary pressure as a result of some of the.
Price increases we saw that I think we've been able to pass through over the last three or four months.
Sure got it I appreciate that and then on a pro forma basis for the combined company, how should we think about capex requirements.
Going forward in broad terms.
Well, we I think we are we have been aggressive in trying to address our ability to move.
Our company forward to prepare the company that's going to be the best company in 2024 and 2025.
Drug discovery and development.
And.
And we've also been very disciplined in how we how we view use of our capital.
As long as we can continue to find.
Really good returns and which we've been able to on some of the capital that we've invested we don't need to see right away, but as long as we can see long term. Good returns, we're going to continue to be aggressive in investing.
We succeeded with that strategy I believe.
Our discovery and safety assessment business.
And with in vivo.
I believe that they probably have not invested as aggressively because we have in the past.
And so I think that there are some low lying opportunities for some investments that could drive some pretty strong returns and it would be go in the future. So.
I think we'll be very disciplined, but we're looking forward to making some of those some of those investments and they're making some of them are.
Now as we speak some are some are deferred maintenance issues, but a lot of them are very strong returns.
Yeah.
Got it I appreciate it and then just lastly.
How are you looking at new M&A targets, obviously, you had a very productive year for M&A.
Are you looking to drive scale be a geography are there other service areas that you think you can bring in house.
And then you know at what point does it make sense to evaluate clinical services not not preclinical it's still a little early but just kind of curious about your thoughts there. Thank you.
First of all we know right now we're focused on the.
Preclinical.
Market.
Notebooks on clinical services, although we do have some clients that ask us to do some clinical by analytical work its a small percent of our overall revenue and we've not really focused on the on the clinical market, nor nor are we doing that today I won't say never but we're not doing it correctly.
As far as.
Preclinical.
I think what's been key to our strategy has been scale.
And you can see our existing sites that want to be bought.
The important sort of we've talked about all of the doubling or tripling in size and those skills, but significant enhanced margins as we as we leverage direct cost. So we'll continue to look for opportunities that provide scale.
And.
We've obviously been aggressive in acquiring services and now.
Now I think we could even consider looking at opportunities to draw.
<unk> market share.
So.
It is.
It's something that we've done quite a bit in early years, we took a two.
2019, and 20, we took about 12 months as we really focus on their infrastructure.
We've become much stronger I think and I believe that.
I think the synergies that we can see from future acquisitions are probably much greater than they've ever been before.
And so we're looking forward to continuing to to look at opportunities and ways that we can grow our business.
Okay got it thanks for all the updates and congrats on a strong quarter.
Thank you Joe.
Our next question is from Matt Hewitt with Craig Hallum Capital Group. Please proceed with your question.
Thank you for taking the questions and what are what are amazing year, you guys accomplished that Tun just.
Just a few questions first off regarding the integrations and then you spoke to this a little bit but I'm curious as you look at those integrations is the primary benefit going to come via margin expansion or do you see that it's a better or more important aspect of those integrations in the level.
Service and the quality and the timing of responses back to the customers is that the bigger opportunity within those integrations.
But it's.
It's been all all of the above the acquisitions, we've looked at we've looked at them.
Improving margins from growing the acquisitions and how can we invest in the companies that we've acquired.
Bring a scale and growth opportunities and being able to grow.
Didn't we also acquire clients when we when we acquired the services and we buy a lot of companies that are single service oriented.
Now we have all of IMD, enabling services under one roof. So we're able to take those clients.
And sell them all of our services and that.
That has helped grow our overall sales and no you know there's a lot of our internal growth as we sold.
Clients were acquired all of our services and then very importantly, when we have scaled up.
[laughter] started new services or require services. We inevitably then we don't have to outsource as much of our client doesn't have to go to a third party and when we can do that we can control the timing much better and we can help accelerate the speed.
I wish they could do the discovery and development work. So all three of those things are critical when we evaluate.
We valuate acquisitions. In addition, we're always.
Very interested in entertaining talent.
But.
When we look at acquisitions, but it's important that we can see the opportunity that we can scale, we want to be able to add value to what we were buying and then in addition, we look at how they can add value to our current customers and our other services and that Formula has worked extremely well force and I hope it continues.
Sure.
That's very helpful. Thank you separately I'm, just curious and I realize it's very early days, but regarding in V go and some of the cross selling opportunity. There what has been their initial response or feedback that you've been getting from some of their customers do you have anything anecdotally that you could point to as far as some initial wins on the cross.
Selling side.
We have had.
<unk> come to US now with the services that we have in and ask us to quote participate and their services.
And quoting their services.
I don't have a numeric number for you there are a number before you that can tell you how much that has been so far.
But where we're only four or five weeks into this.
And.
We have.
You can see a very robust backlog.
At this point.
Times, we were actually no quoting jobs, we have we've had so much activity our quoting level has ramped up significantly.
I would tell you in the last four to five weeks, we've more than doubled our client service group that is handling the quotes.
So we have a significant amount of activity.
And.
That's a great opportunity great problem for us to have and I'm really pleased that we've been able to retain some very talented people that they've been able to grow that.
You know for us who want to be really client service oriented.
That means even returning timely somebody ask you to quote and we're ramping that up quickly to take advantage of all of the opportunities that are coming to us at the moment, but I don't have a numeric.
Anything for you right now, but I can tell you what depending on what that is.
And that's okay anecdotally is fine and I realize it's early days one last one for me.
Regarding you just touched on it a little bit there, but I think on the N V. Go acquisition call that you hosted you talked about one of the primary.
Areas that you plan to invest in one of the things that you think can continue to help you differentiate from peers is your quality of service and to do that you have to maintain the right level of employees I'm curious.
How is the hiring preceded are you having success and are there some areas that need a little bit more from a head count perspective to meet your internal targets. Thank you.
Well I think over the last three or four years at any one time we've had it.
500 people I noticed we had 50 openings, we had 1000 people over 100 openings today, we have 1800 and 1900 people, we probably have 200 openings.
Hiring in this market for our company for any company and in retention.
Hugely important.
We've been very aggressive in our hiring.
And we will continue to be I am pleased with our ability to recruit I think the N V go and some of the things we've done with last year and adding services.
Got some great talent and that talent has been able to recruit additional talent.
And you know it.
Very rewarding when when we even though get calls people, calling us wanting to wanting to be part of it too from what we're doing.
So that being said.
We got where we're always onboarding people were always looking for people.
And matter of fact, you know the phone call I was on.
For 30 40 minutes before we have what's called with it. It was all about what we're doing to enhance our ability to recruit retain.
And train our people and I think there's a high either agree or awareness or a company in a great amount of time spent on that.
Critical research for so.
But we are you know if we're going to continue to grow and you can see our backlog and you can see our book to bill, but if we're going to continue to grow and we have a very aggressive infrastructure build out and capital planning for next year, it's going to require people and we're going to need to be very aggressive to.
Try to keep those people to market from the market to our company.
Got it thank you very much and congratulations on your progress.
Thank you Matt.
Our next question is from Dave Windley with Jefferies. Please proceed with your question.
Hi, Good evening. Thanks for taking my question Hi, Bob in in prior conversations you have is a little bit of a follow up to Matt's question, but you had talked about.
Kind of needing to have capacity in place before you thought you could really turn the sales force loose on the cross selling opportunities that <unk> presents and I I thought that that capacity it might've been a little bit physical capacity, but certainly was also that client service element that Matt touched on can you talk about <unk>.
Ensure that you doubled that group can can you give zoom out a little bit and give a little bit of a perspective on.
You know kind of where you stand on capacity.
And your ability to kind of go full steam ahead against the opportunities that <unk> presents.
Hi, Dave.
I'll try to when we reported last quarter I believe we have 23 or $24 million this quarter's $30 million.
20% growth that's fairly large in one quarter.
If you'd asked me last quarter at this time do we have the ability to $30 million in.
In sales I, probably would not have.
Given that $30 million.
Even the capacity.
So.
I'm very pleased by how fast we were able to bring on capacity.
That being said.
I think you know what we what we saw last quarter was was what we could do I wouldn't I couldn't have asked them.
To do much more that's pretty good growth in one quarter for a service oriented regulated business that we're that we're in.
That being said we are today.
Today I outlined we've got a lot of brick and mortar coming on board with leases.
We've just recently incurred I think entered into I think at Rockville ended.
It's a 19000 in Boulder.
I would tell you that where we're looking at.
Yeah.
Leasing additional space in a further expansion of major expansion in Fort Collins we're.
We're looking at buying a property.
Possibly in Maryland.
And we're looking at acquisitions and some acquisition to cope with it may even have capacity.
So where.
We're going to probably continue to be very aggressively ramping up that capacity, but.
What we saw last quarter, which was probably about what I think we could've done with.
The people we have I think if you look back and look at our sales per person. So another good indication where now we're now achieving over 200000 and sales per person. If you go back a couple years ago. We were $1 40, which gave you an idea we had a lot of capacity left.
We started going up to 200 and well over 200.
220 to 30, then we're starting to use up a lot of that.
Passenger.
We're sitting on.
So we will open up more capacity this quarter.
Open up again next quarter.
Some more and some of the new services are growing quickly.
But I you know what.
I can't really tell you that we can.
It's not like we're going to all of a sudden double our capacity.
20% moving 20% a quarter, it's pretty you know.
I didn't even with that we can do 10.
I'm not sure I would sit here and tell you, 20% a quarter to open up as possible, but yes acquisitions and some of the things. We're doing we've got some great opportunities I will put it that way.
Excellent I appreciate that answer Ah another topic here around.
Again, that's been touched on a little bit around cross selling and you mentioned.
What I was going to touch on in Indiana, enabling capabilities and having all of those in house and it does seem like.
Our level of your cross sell is two <unk>.
Not have to outsource or not have to send the client to other vendors for services that would be part of a of the study package.
And then the next level of out of cross selling might be capturing the client and some of your discovery businesses and pulling those through into some of your safety businesses are you able to do both of those now or is one the predominant kind of level of discussion with the client at this point.
We were able to do both of those and I also see we're seeing some of our safety assessment customers now moving some of their discovery work to us so.
So it's it's it's happening.
Across across the board.
And.
So.
I'll give you. An example, we opened up to send data reporting.
Send data reporting we were outsourcing it we may be quoted 12 weeks.
We don't make a lot of a lot of margin on that outsourcing that if we move it in house.
Any client.
Need to move quickly we can we can get that down to four weeks or less.
That's taking a lot of time just out of that one that one segment that were just out with that reporting that was critical.
When we did the safety pharmacology. So all of these things are significant benefits to our clients.
And I would tell you that the acquisitions, we've done in the services brought in.
Oh really specifically listening to our clients when I got here four years ago.
It's gonna be about returning the phone call it was pretty listening to our clients all of our all of our things that we're building in house are listening to clients and their concerns about our timing and I think that our team has done a good job of building those in some cases, even much faster than I thought I think we saw revenue from a lot of the startups, we did you know and and and.
We've not seen any revenue yet from our.
Generic toxicology startup that were doing but we could see some of that here in this quarter and we'll see I think more next quarter.
So.
These services are really ramping up in <unk>.
Not only are they ramping up we're already expanding or growing them.
Last question for me around the labor inflation that you touched on is that is your ability to price that through pretty real time or is there a lag to like an annual repricing of of rate cards and things like that.
Well, we've been able to I think a pass on pretty real time first was making sure that we.
Real time increase the wages because there was a lot of pressure there over the summer for entry level wages. In particular, we can we can pass them on real time, and our clients very understanding.
But when we're sitting on a six to eight months backlog.
That backlog is already priced.
And you know it.
Okay.
Maybe a previous rate.
But what we're closing today is as close to it the increased pricing it at one.
One point last year and even today, we think we are.
Even for some research models, we were very careful to do actually not even lock enterprise. It was almost like it was going to be real like it's going to be market pricing at the time of the study is placed because some of the.
Cost of the research models were going up so quickly specifically.
Human primates.
So.
We tried to do what we could to make sure we could protect our ability to pass through those costs.
Got it I appreciate those answers happy holidays have a good evening.
Thank you.
We have reached the end of the question and answer session and I will now turn the call over to Bob leisure for closing remarks.
Alright, well, thank you everybody for participating in our call. This afternoon and obviously, we're very pleased with the foundation, we've set and really looking forward to 2022.
Please reach out to Investor relations firm the equity group, if you're interested in scheduling a follow up call. We look forward to reporting back to you in February when we release, our first quarter fiscal 2022 financial results have a good day and thank you.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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