Q3 2022 Inotiv Inc Earnings Call
[music].
Greetings.
To <unk>, Inc. 's third quarter fiscal 2022 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.
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I will now turn the conference over to your host Devin Sullivan of the equity group. Thank you you may begin.
Thank you Alex Thank you everyone for joining <unk> third quarter fiscal 2022 financial results call.
Before we begin I'd like to remind everyone 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.
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 managements expectations as of today's date.
You should not place any 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.
Refer to the company's SEC filings for further guidance on this matter.
Management will also discuss certain non-GAAP financial measures in an effort to provide additional information for investors.
A definition of these non-GAAP measures and reconciliation to the most comparable GAAP measured measures excuse me are included in the company's earnings release, which will be which will be posted in the investors section of the company's website at innovative co dot com and is also available in the form 8-K filed with Securities and Exchange Commission today.
Joining us from the company. This afternoon are Bob Leisure, President and Chief Executive Officer, Beth Taylor, Chief Financial Officer, and John Cig Arts 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'll open the call for questions.
It is now my pleasure to turn the call over to Bob Leisure President and CEO of inactive Bob. Please go ahead.
Okay.
Thank you Devin good afternoon, everyone. We appreciate you taking the time to join us today.
By almost any measure our third quarter results were above our expectations at this point for growth and integration development strategy.
Driven by a combination of the positive impact, our well positioned acquisitions organic growth and a favorable pricing environment, we reported record revenues adjusted EBITDA and backlog.
We continue to make investments in expanding capacity and developing new service lines in response to demand from existing clients.
It's a business as reacquired in recent acquisitions and new clients. We've attracted as we've continued to build the product and service portfolio and positive reputation of intuitive as it fully integrated service provider.
We've implemented a implemented a site optimization plan to enhance services and improve our business model at a research model services, our Rms business.
This will allow us to achieve scale at RMS sites augment existing facilities and improve future margins.
We also continue to add scale in our discovery and safety assessment or DSA business to meet increasing customer demands drive revenue growth and improve efficiencies in margins. This requires that we continue to invest in our recruiting internal processes facilities equipment technology and existing personnel.
In our view and its performance so far in fiscal 2022 reflects our continuing evolution towards being a world class provider of preclinical CRO services, the global pharmaceutical and biotech industries as they pursue their development of life changing new medicines.
I think as a company we're much better today than we were nine months ago, but we're not nearly as good as we need to be nine months from now.
The total revenue for fiscal 2022 third quarter grew seven fold to 101 hundred $72 7 million.
Justice EBITDA increased to $37 million or 21, 4% of total revenues.
Our DSA and RMS business segments, each performed well.
Turning first to our DSA business, we had an exceptional quarter generating revenues of $49 2 million, an increase of $26 3 million or 115%.
From the $22 9 million of revenue, we achieved in Q3 of 2021.
And at 25, 8% increase over revenue, we achieved just the prior quarter.
Yeah.
And the year over year growth historical internal investments to increase capacity and expand our capabilities allowed us.
Two experienced organic growth.
Growth of $20 9 million up 91, 3% from.
The growth achieved in the same period last year and $5 4 million of incremental revenue came from the acquisitions of his to talks labs vulgar bio path Gateway pharmacology, Plato Biopharma bio reliance ILS.
And two months contribution from the recently acquired history on.
Subsequent to the end of the third quarter we.
We acquired <unk>, an emerging protein and peptide bioanalytical company that adds large molecule bioanalytical capabilities to our already established small molecule bio analytical offerings.
It's highly specialized use of mass spectrometry technology significantly enhances our ability to support clients in the development of safe and effective medicines, particularly particularly in the areas.
Of immuno oncology cell and gene therapy.
We added new capabilities and capacity in Rockville, Maryland to conduct G O P studies or in these in vitro cytogenetics.
And bacterial mutation assays as components of the standard battery of genetic toxicology studies required to support first in human devaluations of novel Therapeutics.
We continue to develop our suite of genetic toxicology services. This began with our acquisition of key genetic toxicology assets from Millipore Sigma is by our reliance portfolio in July of 2021, followed by the acquisition of North Carolina based integrated Laboratory systems LLC in January of 2022.
We're now offering a wide range of in vivo and in vitro general general and genetic toxicology services, including pathology and toxicology expertise genomics bio informatics and computational toxicology services.
Three current demand for existing services work.
We're continuing to increase capacity and capabilities across our existing enterprise.
From Fort Collins, and Boulder, Colorado to Rockville, Maryland to North Carolina.
These expansions were initiated in early fiscal 2022 and are expected to come online during fiscal 2023 and into fiscal 2024.
In aggregate once completed these expansions will increase our DSA capacity by approximately an additional 35%.
And Fort Collins, we are expanding operations to more than double the revenue run rate capacity of dislocation. We expect this additional capacity will become available during the third quarter of fiscal 'twenty three.
We're currently increasing the capacity of our recently acquired ILS facility in North Carolina by 30%.
And hope to have this additional capacity available by the first quarter of fiscal 'twenty three.
We also plan to increase square feet at this facility by approximately 45%, which is expected to be available by the first quarter of fiscal 'twenty four.
We are in the process of building out a new 48000 square foot.
Leased facility in Rockville, Maryland for.
For biotherapeutics and genetic toxicology growth.
Which is still on track to be completed by the end of Q2 fiscal 'twenty three.
We are starting to see some backlog and revenue from the initial phases, which have been completed.
And in Boulder, we are building out operations to provide approximately 30% additional capacity.
We.
Anticipate this capacity will become available by the end of Q1 fiscal 2023.
While we are very focused on building out new capacity as clients are continually continually telling us they want to place more work with us and buy a broader range of services from us.
We are very thoughtful about the pace at which we bring up that capacity.
It is entirely driven by the customer demand, we can see and the customers are talking to us about on a frequent basis.
Using this approach in the past we've generally found that we're able to fill the newly expanded facilities within 12 months of bringing them, bringing them online and we feel very good about our ability to do so again with these expansions we are investing in right now.
Turning now to our RMS segment.
This contributed $123 4 million of revenue in the third quarter, reflecting strong incremental revenue well above the run rate of the business.
Business had when we announced that the N V go acquisition in November of 2021.
This quarter also included a full quarter of contribution from Orient by our resource acquisition, we completed in January .
27th of 2022.
In addition to the revenue growth we are achieving.
We've taken significant actions RMS designed to enhance future margins by increasing our operating leverage through optimizing our network footprint.
In May we announced the closure of two and Vigo RMS facilities in Virginia.
The closure of our Cumberland facility is expected to be completed by mid September .
Cumberland comprised of less than 1% of our total and it's a revenue and did not contribute to profits for RMS segment since the acquisition of that business in November 2021.
Operations at our Dublin facility, along with our previously announced facility closures and Haizlip, Michigan, and Boyertown, Pennsylvania, Pennsylvania are being relocated to other facilities, which have recently been expanded or refurbished.
We believe these closures and consolidations will help generate operational efficiencies enhance future margins reduce the need for capital expenditures from closed sites and improve our ability to service our clients.
The transition for these three sites is underway and is expected to be completed by the end of March 2023.
Concurrently we continue to invest in facility improvements with a focus on animal welfare, along with environmental and safety improvements.
These include enhanced water systems, and air quality controls electrical upgrades and enhancements improved sewer systems housing and veterinary care facilities.
Across our business operations and support functions, we continue to fill critical positions and enhance our bench strength.
We have promoted and attracted to additive industry veterans with strong track records to take up key operational leadership roles in both the DSA and RMS segments.
We recently filled a critical roles in facilities management, and planning marketing and information technology.
Procurement financial financial planning corporate governance pathology pathology leadership and veterinarian support.
We've made substantial progress in filling many of the organizational changes to allow us to continue to grow and improve our business.
Based on recent sales trends and growth in our backlog, we are amending our guidance for fiscal year 2022.
Our revenue of at least $550 million.
Up from our prior annual revenue guidance of at least $510 million.
And adjusted EBITDA margin of not less than 17%.
Forecasted revenues up from prior guidance of adjusted EBITDA margin of not less than 15% of forecasted annual revenues.
As implied in the updated guidance there will likely be a decrease in revenue and EBITDA during fourth Q4 relative to Q3.
Due to revenue mix and the timing of RMS shipments.
As such we believe that the annualized six month figure ending Q4 will be more indicative of the underlying run rate of our business.
We are aware of the recent broader market concerns and commentary and as we did in the last quarter I'd like to further address a few of those.
During the last quarter, we saw record requests for quotes and an increasing backlog.
As a reminder, when we report new quote New awards. They are net of cancellations we.
We did see an increase in cancellations this past quarter. However.
However, the total net awards were the same as the previous quarter.
The main reason for cancellations in this quarters would do two molecules not being ready as expected for projects that were awarded 12 to 18 months ago.
We have seen instances, where we have not received awards due to our lead times.
Which other heroes could meet.
We need we saw a need to outsource some of our services due to high demand and we still have demand we cannot meet for services, which we are currently in the process of building out.
Yeah.
Overall, we continue to see high demand for services and believe our current expansion efforts will allow us to accommodate demand from existing clients and increasingly position us as an attractive provider for new clients.
We believe we've benefited from continued to grow business from our existing clients plus the new clients, we have secured from several acquisitions.
We also believe we further benefited from additional sales and marketing support we have added in the marketplace over the last quarter.
We continue to Mark our clients' liquidity closely.
We have continued to build out projects that we started last year and we have over the last four years.
As we have over the last four years, we will continue planning for additional expansions and evaluate acquisition opportunities.
We have reviewed our capital expansion plans with an eye on the overall economy and our commitment to a disciplined capital allocation.
We expect our capital expenditures to be approximately 8% to 9% of revenue versus our planned 10% to 11% we outlined in the fall of 2021.
Our maintenance capital expenditures have been 3% of revenue, we expect them to remain at this level and we will also focus on growth projects.
The environment is fluid and we will continue to monitor developments and react as necessary.
As for hiring over the last six months, we added an incremental positions, which increased our head count by 13, 5% to fill open positions and support our growth.
Over the next six months, we expect to increase head count by approximately 885%.
Continue to fill these open positions and support growth.
We've seen our revenue per employee improved when we continue to work on efficiencies as we grow.
Our leadership changes site optimization plans building out new services and scaling our existing operations are significant to our next year's plans.
With that I'll turn it over to our Chief Financial Officer Beth Taylor. Please go ahead with financial overview.
Thanks, Bob and good afternoon.
Total revenue for the third quarter of fiscal 2022, well too.
$272 $7 million.
$22 9 million in last year's third quarter, driven by higher revenue.
The assay segment and incremental revenue.
Great.
DSA segment revenues.
And 14, 8% in the fiscal 2022 third quarter to $49 $2 million.
$22 9 million in the fiscal 2021 third quarter and this was driven by a 29 million increase in service revenue from internal growth, which was complemented by $5 $4 million incremental service revenue from the acquisitions that Bob referenced earlier.
Our RMS segment revenue was $123 $4 million, we did not have any Rms revenue.
Comparable prior year period.
And as Bob noted, we did realize a full quarter of revenue from the Orient bio resource acquisition.
Our total gross profit increased to $59 million or 29, 5% of revenue up from total gross profit of $7 6 million or 28, 9% of revenue in last year's third quarter.
Gross profit for our DSA segment was $21 $8 million or 44, 3% of segment revenue compared to segment gross profit of $7 $6 million or 33, 2% of segment revenue in last year's third quarter.
The improvement in gross profit was primarily due to increased revenues as a result, and favorable pricing and investments in the DSA segment designed it increased margin capacity in order to meet growing customer demand.
Our next segment gross profit in the third quarter of fiscal 2022, with $29 $1 million or 23, 6% of RMS revenue well, we did not have any RMS gross profit in the prior year comparable period.
Gross profit in the fiscal 2022 third quarter benefited from improved product mix of higher margin research model, along with a full quarter of margin from the Orient Bio resource acquisition and this was partially offset by $2 8 million of noncash inventory step up amortization.
<unk>, which negatively impacted the IMS gross profit percentage by three 1%.
Operating income in the third quarter of fiscal 2022, with $4 $8 million compared to an operating loss of $1 $7 million in last year's third quarter, reflecting a significant increase in revenue, partially offset by increased operating expenses to support additional.
Future revenue growth, which included additional headcount recruiting and relocation expense higher compensation expense acquisition and integration costs, primarily related to the acquisitions and Vigo ILS. The Orient bio resource his theone ampco tip, yeah, and an increase in startup.
Cost for internal investments and new service offerings.
Adjusted corporate unallocated G&A totaled $14 $6 million or eight 5% of revenue in the third quarter of fiscal 2022, compared to $4 2 million or 18.1% of revenue in the third quarter of fiscal 2021.
The improvement was due to the advantage of scale as revenue has increased.
We continue to maintain a long term objective for unallocated corporate G&A to be between six and 8% of revenue.
Interest expense increased to $8 4 million from <unk> 4 million in last year's Q3, reflecting our higher debt balance for borrowings and paying for the acquisition starting in November 2021, and an increase in interest rates.
Consolidated net loss in the third quarter of fiscal 2022 totaled $3 8 million or a negative 16 cents per share compared to net income of $2 six nine or 80 cents per share in the third quarter of 2021.
Adjusted EBITDA increased to $37 million or 21, 4% of total revenue compared to adjusted EBITDA of $2 2 million or nine 6% of total revenue in the third quarter at fiscal 2021.
Our book to Bill ratio for DSA segment in the third quarter of fiscal 2022 was 1.19 times.
For the year, our book to Bill ratio is at 145 times.
The net awards in Q3 were the same as the previous quarter and the decline in the book to Bill was due to revenue in the third quarter being approximately $10 million higher than revenue in the second quarter fiscal 2022.
Our DSA backlog at the end of the third quarter was $143 $2 million up 7% from $133 $6 million on March 31, 2022, and this is up 131% from $62 million on June 32020.
In wine.
Net cash used in operations during the third quarter of fiscal 2022 totaled $9 4 million compared to cash provided by operations of $3 5 million in the comparable prior year period.
The use of cash in the third quarter of fiscal 2022 was primarily due to changes in net working capital with increases in both accounts receivable due to higher revenue and inventory due to the timing of receipt of research models for resale, which we expect to decrease in the fourth.
Quarter of fiscal 2022.
These increases were partially offset by increases in accounts payable and accrued expenses.
Capex in the quarter totaled $16 1 million or nine 3% of revenue with year to date, capex totaling $31 3 million or seven 9% of revenue, which included investments in facility improvements site expansions enhancements to laboratory technology and system.
Enhancements to improve the client experience.
Our balance sheet as of June 32022 included cash and cash equivalents of $21.2 million and total debt of $338 8 million.
At quarter end, we had a zero balance on a $15 million revolving credit facility and a zero balance on our 35 million delayed draw term loan per hour.
<unk> credit agreement in January 2022.
We were below our covenant ratios associated with our first lien and secured credit facility.
We remain very pleased with our financial performance balance sheet and general business outlook, we're continuing to invest in the evolution of our business and are confident in our ability to grow and capture a significant portion of the opportunities in our market.
And with this overview of the financials and our prepared remarks, we're going to turn the call back to the operator Alex for questions.
Thank you.
At this time, we will be conducting a question and answer session.
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Our first question comes from the line of French Hakkinen with Lake Street Capital markets. Please proceed with your question.
Hey, Thanks, Bob Beth John Congrats on the results and really all of the positive progress here wanted to start my questioning on the DSA business and first a clarifying question that the organic growth rate. Thank you correct at 91, 3% and then two just any specific bright spots in the DSA business.
What's driving that organic growth worth calling out would be a great color.
Well, we have obviously the increasing our capacity if you were all of our sites for one two we benefited from a favorable.
Favorable pricing.
And the market.
And three we benefited from.
Several acquisitions, where we continue to acquire customers. So we've been able to grow our customer base.
And then finally, we've actually increased our sales and marketing so.
We've talked about this a little bit also going back into.
I think in our January call is that one of the.
When that when the economy goes down what we wanted to do is make sure we're picking up.
Very small part of a very big market, we'll make sure we're picking up our percent would be the first call that our clients make.
And we need to work very hard to earn that every day.
We also during this time felt that we may need to pick up some more clients. If they if the market was to go down. So we've put in some extra effort into our sales and marketing, adding people to the sales and.
I think we benefit a little bit from all of those things. So I don't think it's any one thing I think it's several things and the fact that we had the capacity.
Two to expand expand ourselves we've been working on that for a while people always ask what is your capacity and I'm not sure we even.
No ourselves sometimes what it is.
The growth of 48 $49 million of DSA business.
Not something I would've.
As expected this quarter.
We're very pleased very pleased to see.
Okay. That's helpful. And then maybe just a follow up related to your commentary on the cancellations I appreciate the color there.
Just so I'm, making sure I'm understanding correctly it sounds like it was more customer customer by customer basis based on the programs that they were advancing those programs not making it to the next stage.
If I'm understanding correctly, and then just maybe to ask for a little more color on that any of those cancellations related to a more challenged biotech funding market, where they just don't have the capital to pursue some of the earlier stage projects or are you not seeing that phenomenon play out.
Well I think in the ordinary course of business, sometimes with the biotechs you do see some people that.
Don't feel like you're making progress and dark and it'll go raise the money I don't think we've seen anything out of the ordinary course of business.
And those cancellations what was unusual is the number of cancellations. We saw this this quarter because of the molecules not being ready or delays that our clients have had in being able to go forward with their studies.
And so that that did impact.
Or they're just not really ready to go forward or will never go forward because it didnt proceed as they expected.
I guess, that's something we should have expected seeing that we're booking things 16 to 18 months out and it's not as well known.
But let me ask John John do you have something that you could add anything you want to add to what <unk> seen there.
How do you feel about that.
No I would just echo what you said then that I think our clients are our prophetically booking studies well into the future in some cases in which.
Molecules haven't even been properly identified so there are.
Lots of reasons for compounds to fail and if they're not ready to go they don't they don't take the slots to hit that.
He had previously booked.
So great that's great color.
Does that also Frank right now.
We've been fortunate we've been able to many times to go out with those openings, we've been able to go out to the market and say, we have an opening and it's because the market demand is pretty high we have been able to fill up some of those openings.
So we've been fortunate to date with that.
Okay. That's really helpful. And then just maybe an update around optimizing the network footprint as my last question.
Following along it makes all sense in the world and I understand the strategy around it just curious if when you're looking at the broader business right now it's theirs.
Still more significant.
Network optimization coming from as far as the <unk>.
Consolidation or closure of facilities in the research model business goes.
No not at this point, we have announced what.
What we intend to do.
And where we're always evaluating opportunities, but this is all I think we have to announce at this time.
Okay perfect. That's helpful. Congrats again on the quarter and thanks for taking my questions.
Thank you Brian .
Our next question comes from the line of Matt Hewitt with Craig Hallum Capital Group. Please proceed with your question.
Thank you for taking the questions and congratulations on the progress.
Maybe first up a big step up in service gross margin in the quarter I know, you've obviously been working on some of these optimization progresses or projects, but as we think about that you know Q4 and going forward.
I would assume that that may be pulled back a little bit based on mix in Q4, it sounds like but how should we be thinking about that that line item going forward.
I would say that we had pretty favorable mix and we had some favorable pricing in this quarter in Q3.
And <unk>.
As I said before I think you've got to look at the combination of the rolling six months.
Just one quarter at a time because you can't have unusual.
Mix or charges go through through a quarter.
<unk>.
Is that do you have anything you want to add to that.
No I will just echo.
Especially on the ILS side, it was a mix of products sold.
And then on the DSA side, I mean, we're definitely getting the benefit of scale as our revenues increasing.
Yeah, we have.
We have a very very.
Very fixed cost structure. So some of this incremental revenue.
As some of as much as 50% to 80% drops to the bottom line.
That's great made.
Maybe shifting gears the Protip yeah acquisition.
Adding some news capabilities on the in the immuno oncology and cell and gene therapy markets is that an area, where you see some incremental growth and opportunity as we look out over the next couple of years is that something customers are seeking out and youre looking at that and trying to balance okay near term capacity expansion, adding.
Head count all those types of things one by the way, we've got some new markets, where there's clearly some opportunities.
Well I think this technology fits well into pulling several things together for us, but I'm going to let John answer that.
Great. That's it that's a good question so yeah.
It brings new technology that complements where we're going in our in our large molecule bioanalytical business allows us to take take a look at biomarkers and in solid tissues, where prior to that we were looking at biomarker development and and body fluids. So.
Complement is very much what we're doing in both non clinical and clinical space.
The applications immediately offered are in the immuno oncology space, where we have an opportunity to.
And to leverage the technology into many other therapeutic indications.
That's great. Thank you very much.
This is also one of the as I said I think I know the times before this is one of those technologies that.
We want to build a company we want to be in the future.
And when I got here in 2018.
There was a there was a risk of building the company spending two or three years to build the company you should have been in 2018. This is 2022 and we're trying to build right now and put together. The technology. We think is going to be relevant in 2024, and 2025 and this was critical to that strategy.
Okay.
That makes complete sense. Thank you.
Thank you Matt.
Thank you. Our next question comes from the line of Dave Windley with Jefferies. Please proceed with your question.
Hi, Good evening. Thanks for taking my question, Bob I wanted to start in.
And ask if you could elaborate on what you're seeing.
In kind of both the demand side and the supply side of your nonhuman primate business.
Oh, well, let's let's see switching over the nonhuman primate was it.
It's been a market where the.
Historically the.
Demand as is.
And then out stripping our supply.
And we still see that today.
I think that right now we're trying to evaluate what 2023 is going to look like.
It looks like that that could continue we don't see the supply.
Increasing any at this time.
But a lot of that has to do with what's taking place in Asia.
China Cambodia.
And.
Sometimes it's hard to get that information.
Directly over the phone.
So you.
You know we're on the ground and we're trying to we're trying to understand that.
What that future is going to look like what does it look like today.
But so far we've seen that demand.
Fairly strong we're still getting our hands around that.
That business I think in what it can be we also I believe.
Enhance the services of their business. So it's one thing to.
To sell the NXP, but it's it's another broad all the services that go with that being the boarding and the.
And the breeding to veterinary care and whatnot.
So we're looking at all those things as ways to grow the business, but right now we don't see anything changing over the last six or eight months.
And I'd say in advancing.
The same.
I understand why you're asking the question it.
It could be a good bellwether.
Projects are slowing down or canceling.
If we look at our future.
Toxicology request, we're still out 14, 16 months and we believe that our most of our customers are still out.
Quite a bit too.
So.
We'll have to evaluate that as the as the next 90 days.
As we start getting more guests.
I guess more concrete ideas what people what our customer base is going to be looking for next year.
Right.
If I could follow up there or are you still seeing.
Pricing escalate for I guess, the you know the pricing for four monkeys has gone up a tremendous amount and I guess I'm wondering is that still.
Escalating or is it more of an equilibrium now and then you know I. Appreciate you said you don't see supply increasing I'm hearing that you know maybe some some breeders are coming back online.
The Philippines and some other areas I'm wondering if you're seeing any of that.
We've not seen it yet but.
Come to market, but somebody coming back online and reading and then.
Having something yourself is gonna be a three to four year process.
So we.
You know I appreciate you mentioning that we will look into that [laughter].
We've not seen that we've not seen that to date.
And as far as pricing goes.
I believe the pricing is.
Staying fairly healthy I believe it's going up and early indications.
We've got some indications of pricing they continue to go up but I think again, that's something that we'll know more about in the next 60 to 90 days.
Let me flip over to DSA and ask are you having clients approach you.
For either.
Take or pay.
What would be I guess more space oriented agreements take or pay agreements around reserving study rooms, or reserving animal colonies to ensure the availability of the colony when they're ready to run the study or are you seeing clients kind of willing to take risk around that type of engagement.
Yeah, let's take those two separate questions.
One where we do not have a take or pay arrangement and our and our business model and we don't have a lot of large pharma toxicology studies, we're still small to medium sized pharma biotechs and we've not so we've not had them.
And our client base, the take or pay request or proposals.
And.
And so we've not addressed that.
Right now I don't see that we were set up to do that.
As far as the colonies, yes, we do have we do in our RMS business.
The large pharma side, we do those heroes and small and in the government and we do see people wanting to reserve colonies and have boarding arrangements. So they do have them available oh, because theyre concerned over the.
Supply despite issue going forward.
Okay.
I appreciate that and then if you could talk maybe this is a a best question, but thoughts around capital structure.
And.
Your ability to I I missed it if you said what your your kind of exposure to variable rate is and your ability to perhaps lock that in or swap that.
To minimize your your interest rate exposure.
That's all I'll, let you answer that.
Yeah, so yeah regarding our interest rate is.
Right.
625 on our senior secured debt plus LIBOR and we have the option of locking that in either every three months or six months.
And is that a permanent Oh, I'm, sorry, I didn't understand that is that a permanent lock in or you can lock it in for a period of time no. We can lock in for a period of time, when we get the option of locking it in for three months at a time or six months at a time.
Okay, and what are the thoughts about.
You know say hedging interest rate risk or or swapping to fixed.
Over the duration of the of the debt.
Well, we yeah, we have.
And looking at the debt market right now in our refinancing option it would be actually very expensive for us to refinance to a fixed rate. Okay. Okay. Great I appreciate the answers thanks a lot.
Thank you ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call back over to Bob leisure for closing remarks.
Thank you and everyone today as I mentioned at the top of the call. We're very pleased with our performance through the first nine months of fiscal 'twenty two.
Demand from existing and new clients.
For our services continues to grow we believe we are a strong position to provide fully integrated consultants zero service supporting critical drug medical discovery device discovery.
Development that saves and improves the quality of human lives.
We continue to make careful customer led investments in our business to drive future growth. So we continue to attract and promote world class talent to develop and implement our strategic plans in closing I'd like to take a moment to thank our 2000 plus employees, who work tirelessly every day.
A unique interactive experience for all of our customers. They are the reason our customers want to grow with us and are truly truly appreciate what they do for US. This concludes.
Our prepared remarks.
And with that operator.
I think we can close the session. Thank you very much.
Thank you. This concludes today's conference and you may disconnect your lines at this time.
Thank you for your participation and have a wonderful day.
Yeah.
Yeah.
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