Q3 2025 Inotiv Inc Earnings Call
And at any time by pressing the Star then one on your telephone keypad. Please be advised today's program is being recorded it is now my pleasure to turn the program over to Steve Halper of life Science you may begin.
Thank you Erin and good afternoon, everyone. Thank you for joining today's quarterly call with <unk> management team.
Before we begin I would 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 plans such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different.
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From those projected any such statements represent management's expectations as of today's date, 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, including risks and uncertainties that could cause results to differ from forward looking statements.
Management will also discuss certain non-GAAP financial measures in an effort to provide additional information for investors.
<unk> of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in the company's current and previous earnings releases, which has been posted to the investors section of the company's website Www Dot <unk> Dot com and is also available in the form 8-K filed with the.
The Securities and Exchange Commission, if you Havent obtained a copy of today's press release, yet you can do so by going to the investors section of <unk> website.
Joining us from the company. This afternoon are Bob Leisure, President and Chief Executive Officer, and Beth Taylor, Chief Financial Officer, John <unk>, Chief Strategy Officer will join US for the question and answer portion of the call Bob will begin with some opening remarks, after which Beth will present, a summary of the company's financial results.
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For our third fiscal quarter of 2025, and then we will open the call for questions. It is now my pleasure to turn the call over to Bob Leisure CEO. Bob. Please go ahead.
Thank you, Steve and good afternoon, everyone.
During the third quarter, we made some announcements and saw some continuation of the positive trends, which we could it could be very meaningful for our business going forward.
On May 29, 2025 during our in person Investor day, we addressed in more detail our view of the critical issues facing our industry such as tariffs NIH funding and the recent comments from the FDA related to new approach methodologies are names.
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We also outlined our progress over the last eight years as we've built our business.
And in more recent focus over the last two years on integration and optimization.
Speaker #4: Good day and welcome to the Inotiv third-quarter fiscal 2025 earnings call. Currently, all phone lines are on a listen-only mode. Later, there'll be an opportunity to ask questions during a question answer session.
And then we outlined our goals to improve our cash flow and margins.
On June <unk> 2025, we were informed by the Sec's Division of enforcement that have concluded its investigation, which began in may of 2023 related to importation of nonhuman primates information.
Speaker #4: You may register to ask a question at any time by pressing the star then one on your telephone keypad. Please be advised, today's program is being recorded.
Speaker #4: It is now my pleasure to turn the program over to Steve Halper of Life Science. You may begin.
Based on the information available to the division as of the data its letter the division does not intend to recommend an enforcement action by the SEC against intuitive.
Speaker #5: Thank you, Aaron, and good afternoon, everyone. Thank you for joining today's quarterly call with Inotiv's management team. 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 plans.
As noted in our earnings release, just that we're just went up based on current negotiations with the plaintiffs and the outstanding Securities class action and shareholders derivative lawsuits, we recorded a $10 million accrual for these lawsuits as of June 32025, as well as a $10 million receivable.
Speaker #5: Such statements are subject to risk 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.
Due to the fact that we currently expect to recover the full amount of the accrual under our existing insurance policies.
Speaker #5: 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.
However, who must still reach a final agreement on the terms of any settlement and actual amounts may change.
We will provide additional information once we have material updates to share.
In June we received updated a lack of accreditation for our <unk> facilities in Texas.
Speaker #5: Please refer to the company's SEC filings for further guidance on this matter, including risks and uncertainties that could cause results to differ from forward-looking statements.
All of our RMS animal production facilities are currently a lack of credited so this by itself is not particularly noteworthy. However, what we are extremely proud of is that both in HP facilities in Texas received accreditation and we're noted for having an exemplary program of laboratory animal care and use.
Speaker #5: Management will also discuss certain non-GAAP financial measures in an effort to provide additional information for investors. Definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in the company's current and previous earnings releases, which have been posted to the investor section of the company's website, www.inotiv.com, and are also available in the Form 8-K filed with the Securities and Exchange Commission.
This is a testament not only to the commitment of our people, but also the benefit of the investments. We've made that have substantially improve these facilities and welfare of our animals animal model business.
Speaker #5: If you haven't obtained a copy of today's press release yet, you can do so by going to the investor section of Inotiv's website. Joining us from the company this afternoon are Bob Leasure, president and chief executive officer, and Beth Taylor, chief financial officer.
Look forward to continuing to strive for the high standards as we invest in our facilities.
Now moving on to the quarterly results. We are pleased with the quarterly results.
We are seeing signs that demonstrate the potential to increase DSA awards and improved overall revenue margins and adjusted EBITDA.
Speaker #5: Joan Sagartz, chief strategy officer, will join us for the question and answer portion of the call. Bob will begin with some opening remarks. After which, Beth will present a summary of the company's financial results for our third fiscal quarter of 2025.
For the third quarter of fiscal 2025, we saw a year over year revenue increase of 23, 5%.
Total revenue was $130 7 million compared to $105 8 million in the third quarter of fiscal 2024, and $124 3 million in Q2 of fiscal 2025.
Speaker #5: And then we'll open the call for questions. It is now my pleasure to turn the call over to Bob Leasure, CEO. Bob, please go head.
Speaker #6: Thank you, Steve, and good noon, everyone. during the third quarter, we made some announcements and saw some continuation of the positive trends, which we could could be very meaningful for our business going forward.
Consolidated revenue for the quarter was the strongest since Q1 of fiscal 2024.
The year over year revenue increase was mainly due to an increase in RMS segment revenue of $21 million or 34, 1% improvement over the prior year quarter and an increase in DSA segment revenue of $3 9 million or an eight 9% increase over the same period in fiscal 2000.
Speaker #6: On May 29th, 2025, during our in-person investor day, we addressed in more detail our view of critical issues facing our industry, such as tariffs and age funding, and the recent comments from the FDA related to new approach methodologies or NAMS.
24.
Speaker #6: We also outlined our progress over the last eight years as we have built our business and in more recent focus over the last two years on integration and optimization.
Consolidated net loss for the quarter was $17 6 million compared to $26 1 million in the third quarter of fiscal 2024.
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Speaker #6: And then we outlined our goals to improve our cash flow and margins. On June 2, 2025, we were informed by the SEC's Division of Enforcement that it concluded its investigation, which began in May 2023, related to the importation of non-human primates from Asia.
EBITDA for the quarter was $11 6 million compared to <unk> 1 million in Q3 of fiscal 2024 and.
Adjusted EBITDA for the quarter was the strongest since Q4 of fiscal 2023.
Q3 fiscal <unk>.
Speaker #6: Based on the information available to the division as of the date of its letter, the division does not intend to recommend an enforcement action by the SEC against Inotiv.
Year 2025, DSA operating margins improved four 6% over the Q2 fiscal year 'twenty five, but we're still 8% lower compared to Q3 of 2024.
Speaker #6: As noted in our earnings release, just went out, based on current negotiations with the plaintiffs and the outstanding securities class action and shareholders' derivative lawsuits, we recorded a $10 million accrual these lawsuits as of June 30th, 2025, as well as a $10 million receivable due to fact that we currently expect to recover the full amount of the accrual under our existing insurance policies.
We previously noted we had a deterioration of DSA operating margins during the second quarter of fiscal 2025, and we were pleased to see these margins improve during the fiscal third quarter. We believe the DSA operating margins have been impacted in fiscal year 2025.
From the pricing pressure, we faced in fiscal year 2024. They continued through the first part of fiscal 2025 margin improvements are critical to achieving our adjusted EBITDA goals.
Speaker #6: However, we must still reach a final agreement on the terms of any settlement and actual amounts may change. We will provide additional information once we have material updates to share.
Some of the improvements in the third quarter of fiscal 'twenty five were due to improved pricing and scale as we grew revenue while working to control costs and we'll continue to focus on improving these margins in the future.
Speaker #6: In June, we received updated ALAC accreditation for our NHP facilities in Texas. All of our RMS animal production facilities are currently ALAC accredited, so this by itself is not particularly noteworthy.
RMS operating margins for Q3 fiscal year 2025 were 19, 8% higher than the prior year quarter. However margins were six 7% lowered acute compared to Q2 fiscal year 'twenty, five which included a $7 $6 million.
Speaker #6: However, what we are extremely proud of is that both NHP facilities in Texas received accreditation and were noted for having an exemplary program of laboratory animal care and use.
Operating income from our litigation settlement agreement if.
Speaker #6: This is a testament not only to the commitment of our people but also the benefit of the investments we have made that have substantially improved these facilities and the welfare of our animal model business.
If we excluded that $7 6 million litigation settlement from Q2 of fiscal year 2025, our RMS operating margins in Q3 fiscal year 2025 were the strongest operating margins we have seen since Q1 fiscal year 2024, we.
Speaker #6: We look forward to continuing to strive for the high standards as we invest in our facilities. Now, moving on to the quarterly results, we are pleased with the quarterly results.
We believe we have further opportunity to drive margins higher as we complete the next phase of the RMS site optimization plan, which we announced in December of 2024.
Speaker #6: We are seeing signs that demonstrate the potential to increase DSA awards and improved overall revenue, margins, and adjusted EBITDA. For the third quarter of fiscal 2025, we saw a year-over-year revenue increase of $23.5.
As we stated last quarter, we now anticipate net annual savings of $6 million to $7 million on capital investments of approximately $6 5 million.
To date, we have spent approximately $3 million net of tenant allowances related to this capital investment.
Speaker #6: The total revenue was $130.7 million, compared to $105.8 million in the third quarter of fiscal 2024 and $124.3 million in Q2 of fiscal 2025.
In connection with our revised optimization plan, we had two properties under contract to be sold.
Speaker #6: Consolidated revenue for the quarter was the strongest since Q1 of fiscal 2024. The year-over-year revenue increase was mainly due to an increase in RMS segment revenue of $21 million, or $34.1 percent improvement over the prior year quarter.
We closed on the sale of one property in June and the net proceeds were used to repay principal on our term loans. The second property is expected to close during Q4 of fiscal year 2025.
This optimization plan is still on track to be completed by March of 2026 as with previous projects. We have executed in the RMS segment. These additional investments are intended to help modernize our existing footprint, while allowing us to close the old facilities revised plan will reduce capacity and should create operating efficiencies.
Speaker #6: And an increase in DSA segment revenue of $3.9 million, or an $8.9% increase over the same period in fiscal 2024. Consolidated net loss for the quarter was $17.6 million, compared to $26.1 million in the third quarter of fiscal 2024.
While continuing our efforts to support our animal welfare objectives. Additionally.
Additionally, we believe this plan allows us to remain agile and increased capacity in the future if needed.
Speaker #6: Our EBITDA for the quarter was $11.6 million, compared to $0.1 million in Q3 of iscal 2024. Adjusted EBITDA for the quarter was the strongest since Q4 of fiscal 2023.
We also continued to integrate and improve our north American transportation and distribution systems, which we brought in house in the first half of fiscal 2024.
We followed up last quarter's year over year increase in net DSA awards of 27%.
Speaker #6: Q3 fiscal year 2025 DSA operating margins improved 4.6% over the Q2 fiscal year '25, but were still 0.8% lower compared to Q3 of 2024.
With a year over year Q3 increase in net DSA awards of 25%.
We saw the most significant awards growth in our discovery business and the safety assessment services, which we expanded and started up over the last two years, such as the biotherapeutics medical device services and genetic toxicology.
Speaker #6: We previously noted we had a deterioration of DSA operating margins during the second quarter of fiscal 2025, and we were pleased to see these margins improve during the fiscal third quarter.
For the quarter. The Discovery awards increased 31, 3% over the same period a year ago.
Speaker #6: We believe the DSA operating margins have been impacted in fiscal year 2025 from the pricing pressure we faced in fiscal year 2024 that continued through the first part of fiscal 2025.
For all of DSA, we saw it.
Positive quarterly net book to Bill of one seven times.
And a year to date book to Bill now is one three times.
Speaker #6: Margin improvements are critical to achieving our adjusted EBITDA goals. Some of the improvements in the third quarter of fiscal '25 were due to improved pricing and scale as we grew revenue while working to control cost.
We are pleased with their fiscal 2025 third quarter results, which we believe demonstrate our ability to identify opportunities and implement action plans to improve revenue and margins.
Speaker #6: And we'll continue to focus improving these margins in the ure. RMS operating margins for Q3 fiscal year 2025 were 19.8% higher than the prior year quarter.
We remain confident about our ability to continue to show improvement in our financial performance as we prepare for fiscal years 2026, and 2027, while we simultaneously also focus on client satisfaction metrics continued to integrate our services and enhance our speed in delivery.
Speaker #6: However, margins were 6.7% lower to compared to Q2 fiscal year '25, which included a 7.6 million dollars of operating income from a litigation settlement agreement.
We continue to evolve as a company. The 14 companies. We acquired from 2018 to 2022 have now been working together for three or four years.
Speaker #6: If we excluded that 7.6 million litigation settlement from Q2 of fiscal year 2025, our RMS operating margins in Q3 fiscal year 2025 were the strongest operating margins we have seen since Q1 fiscal year 2024.
We have gone from being a handful of different entities to a fully integrated non clinical drug discovery and development company.
Which has recruited and developed significant scientific strength.
Speaker #6: We believe we have further
Speaker #6: opportunity to drive margins
Speaker #6: higher as we
Examples of some of these changes include.
Speaker #6: complete the next phase of the
Speaker #6: RMS site
A more optimized facility footprint, where we have 30% fewer sites compared to three years ago, providing a much better client experience and operating more efficiently and cost effectively.
Speaker #6: optimization plan, which we
Speaker #6: announced in December
Speaker #6: of
Speaker #6: 2024. As we
Speaker #6: stated last quarter,
Speaker #6: we now
Speaker #6: anticipate net annual
Speaker #6: savings of 6 to 7
Speaker #6: million on capital investments of
While we have reduced our sites by that 30% we have more than doubled the number of licenses veterinarians, we have on staff significantly increasing the critical animal welfare staffing per facility.
Speaker #6: approximately 6.5
Speaker #6: million.
Speaker #6: To date, we have spent
Speaker #6: approximately 0.3
Speaker #6: million net of tenant
Speaker #6: allowances related to this
Speaker #6: capital
Speaker #6: investment. In connection
We have integrated improved our systems and our 34% less software platforms. This is inherently more efficient and cost effective domain plus we have invested in improved platforms, which provide much better data improved ability to communicate both internally and with our clients.
Speaker #6: with our revised
Speaker #6: optimization plan, we
Speaker #6: had two properties under contract
Speaker #6: to be
Speaker #6: sold. We closed on
Speaker #6: the sale of one property
Speaker #6: in June, and the net
Speaker #6: proceeds were used to repay
Speaker #6: principal on our term
Speaker #6: loans. The second property is
Speaker #6: Q4 of fiscal
Speaker #6: year 2025. This
Over the last four years, while we focus on integrating our services. We've also been strengthening our scientific group <unk>.
Speaker #6: optimization plan is still on track to be
Speaker #6: completed by March
Speaker #6: of
Speaker #6: 2026. As with previous
As an example, we have more than doubled our board certified veterinary pathologists as well as our pathology support team.
Speaker #6: projects, we have executed in the RMS
Speaker #6: segment. These additional
Speaker #6: investments are intended to help
Speaker #6: modernize our existing
We have improved our capacity expanded our services and increased our scientific strength. We've also grown our sales team to help expand our sales and customer base.
Speaker #6: us to close
Speaker #6: older facilities. The
Speaker #6: revised plan will reduce
Speaker #6: capacity and should
Speaker #6: create operating
Speaker #6: efficiencies while continuing our
Speaker #6: efforts to support our animal
I believe we are just now beginning to see the benefits of these changes we continue to seek improvement and believe we can be agile and evolve as the market and science such as <unk> continued to evolve.
Speaker #6: welfare
Speaker #6: objectives. help modernize our
Speaker #6: Additionally, we believe this
Speaker #6: plan allows us to remain
Speaker #6: agile and increase
Speaker #6: capacity in the future if
Speaker #6: needed.
Speaker #6: We also continued to
Speaker #6: integrate and improve our North
Speaker #6: American
While we have implemented and continue to implement strategies that we believe will address our cash flow and business model. We also recognize the importance of improving our balance sheet.
Speaker #6: transportation and distribution
Speaker #6: systems which we
Speaker #6: brought
Speaker #6: in-house in the first half of
Speaker #6: fiscal
Speaker #6: 2024. We followed increase capacity in the future
Speaker #6: up last quarter's
We recognize that our first lien term loan matures in November of 2026.
Speaker #6: year-over-year increase
Speaker #6: in net DSA
Speaker #6: awards of
Speaker #6: 27%
Speaker #6: with a year-over-year
Speaker #6: Q3 increase in
With our convertible debt maturing in October of 2027.
Speaker #6: net DSA awards of
Speaker #6: 25%. We saw the
Speaker #6: significant awards
Our lenders and convert holders have been a very important partners to us and have been very supportive through some very challenging times over the last three years and we look forward to continuing to work with them in the future.
Speaker #6: growth in our discovery
Speaker #6: business and the safety
Speaker #6: assessment services which
Speaker #6: we expanded and
Speaker #6: started up over the
Speaker #6: last two
Speaker #6: years, such as the
Speaker #6: biotherapeutics, medical
Speaker #6: device services, and
While we are not providing any specific guidance at this time, we are prioritizing a strategic review of our balance sheet and capital structure.
Speaker #6: genetic
Speaker #6: toxicology. For the
Speaker #6: quarter, the discovery
Speaker #6: awards increased
Speaker #6: the same period a year
Speaker #6: ago. For all of
And our plan is to hire a third party to assist us with this process.
Speaker #6: DSA, we
Speaker #6: saw medical device services, a positive quarterly net
We'll provide more information at the appropriate time.
Speaker #6: book to bill of
Speaker #6: $1.07
Before I close and turn it over to Beth.
Speaker #6: times and a
Speaker #6: year-to-date book to bill now is
I want to recognize the knowledge that this is nice to see this increased sales and net awards over the past two quarters and we've seen these trends continue through the first month of this current quarter.
Speaker #6: $1.03
Speaker #6: times. We are pleased with our fiscal 2025 third quarter
However, we are coming off some very weak numbers from a year ago.
And the geopolitical and macroeconomic conditions risks and uncertainties are likely to remain with us and with the industry for the foreseeable future.
We are cautiously optimistic with the keyword being cautious despite.
Despite whatever challenges we face we remain committed to building a business that will create value for our clients employees and our shareholders and look forward to a bright future.
Our leadership team has not only been resilient, but it has gotten stronger as we work through these changes and challenging times, we want everyone on our team and everyone who has been part of this company to know how much. They appreciate it as the journey has required some sacrifices and everyone has been asked put forth extraordinary efforts with their trust time and talents to.
Speaker #1: We continue to evolve as a company. The 14 companies we acquired from 2018 to 2022 have now been working together for three or four years.
Speaker #1: We have gone from being a handful of different entities to a fully integrated non-clinical drug discovery and development company. This has recruited and developed significant scientific strength.
As Bill discussed bini.
Ill now hand things over to Beth to provide the financial overview.
Thank you Bob and good afternoon, everyone for the third quarter of fiscal 2025 total revenue was $137 million compared to $105 8 million in the third quarter of fiscal 2024.
Speaker #1: Examples of some of these changes include a more optimized facility footprint, where we have 30% fewer sites compared to three years ago, providing a much better client experience and operating more efficiently and cost-effectively.
It was a $24 $9 million or 23, 5% increase in revenue from the prior year quarter, primarily driven by increase in HP revenue within our RMS segment.
Speaker #1: While we've reduced our sites by that 30%, we have more than doubled the number of licensed veterinarians we have on staff, significantly increasing the critical animal welfare staffing per facility.
Speaker #1: We have integrated and improved our systems to now have 34% less software platforms. This is inherently more efficient and cost-effective to main plus we've invested in improved platforms, which provide much better data and improved ability to communicate both internally and with our lients.
DSA revenue in the fiscal 2025 third quarter was $48 $2 million compared to $44 $2 million in Q3 fiscal year 2024.
The year over year increase in DSA revenue was primarily driven by an increase in general toxicology services as well as an increase in biotherapeutics services and medical device.
Speaker #1: Over the last four years, while we focus on integrating our services, we've also been strengthening our scientific group. As an example, we have more than doubled our board-certified veterinary pathologists, as well as our pathology support team.
Overall net new DSA awards this quarter were $54 million.
Speaker #1: We have improved our capacity, expanded our services, and increased our scientific strength. We have also grown our sales team to help expand our sales and customer base.
13% increase over Q2 fiscal 2025, and a 25% increase over Q3 of fiscal 2024.
Speaker #1: I believe we are just now beginning to see the benefits of these changes. We continue to seek improvement and believe we can be agile and evolve as the market and science, such as NAMS, continue to evolve.
We have also seen strong quality and awards for the month of July which has been a good start to our last fiscal quarter of 2025.
The backlog conversion rate in the third quarter of fiscal 2025 was 35, 5%.
Speaker #1: While we have implemented and continued to implement strategies that we believe will address our cash flow and business model, we also recognize the importance of improving our balance sheet.
31% in the prior year period.
Do you think cancellations and negative change orders in the third quarter of fiscal 2025.
Speaker #1: We recognize that our first lean term loan matures in November of 2026, with our convertible debt maturing in October of 2027. Our lenders and convert holders have been a very important partners to us, and have been very supportive through some very challenging times over the last three years.
Approximately 31% higher compared to the prior year third quarter.
Cancellations in the trailing 12 months period or approximately 2% more than the prior trailing 12 months period.
RMS revenue for the third quarter of fiscal 2025.
Speaker #1: And we look forward to continuing to work with them in the future. While we are not providing any specific guidance at this time, we are prioritizing a strategic review of our balance sheet and capital structure, and our plan is hire a third party to assist us with this process.
$82 $5 million increased $21 million or 34, 1% compared to Q3 fiscal year 2020 for the.
The increase in RMS revenue was primarily due to higher in HB volumes and higher average selling prices for <unk> and hps compared to the prior year quarter.
Speaker #1: We'll provide more information at the appropriate time. Before I close, I turn it over to Beth. We want to recognize and acknowledge that this has been nice to see this increased sales and net awards over the past two quarters.
The overall operating loss for the third quarter of fiscal 2025 decreased $15 $1 million from $28 million in the third quarter of fiscal 2024 to $5 $7 million in Q3 at this fall 2025, primarily due to the 24.
Speaker #1: And we've en these trends continue through the first month of this current quarter. However, we are coming off some very weak numbers from a year ago.
Speaker #1: And the geopolitical and macroeconomic conditions risk and uncertainties are likely to remain with us, and with the industry for the foreseeable future. We are cautiously optimistic with the keyword being cautious.
$4 $9 million increase in revenue previously mentioned and decreased operating expenses, primarily offset by increased cost of revenue.
Speaker #1: Despite whatever challenges we face, we remain committed to building a business that will create value for our lients, employees, and our shareholders, and look forward a bright future.
The increase in cost of revenue primarily relates to increased costs associated with the increase in <unk> related product and service revenue previously discussed.
Speaker #1: Our leadership team has not only been resilient, but it has gotten stronger as we have worked through these changes and challenging times. We want everyone on our team and everyone who's been part of this company to know how much they are appreciated as the journey has required some sacrifices and everyone has been asked to put forth extraordinary efforts with their trust, time, and talents to help us build this company.
Consolidated net loss attributable to common shareholders in the third quarter of fiscal 2025 totaled $17 $6 million or <unk> 51 loss per diluted share. This is compared to consolidated net loss attributable to common shareholders of 26 point.
Speaker #1: I'll now hand things over to Beth to provide the financial overview.
$1 million for a one dollar loss per diluted share in the third quarter of fiscal 2024.
Speaker #2: Thank you, Bob, and good afternoon, everyone. For the third quarter of fiscal 2025, total revenue was $130.7 million compared to $105.8 million in the third quarter of fiscal 2024.
For the third quarter of 2025, adjusted EBITDA was $11 6 million or eight 9% of total revenue compared to $1 million or 1% of total revenue for the third quarter of 2024.
Speaker #2: This was a 24.9 million dollar or 23.5% increase in revenue from the prior year quarter. Primarily driven by increased NHP revenue within our RMS segment.
non-GAAP operating income for our DSA segment in the third quarter was $7 2 million or five 5% of total revenue compared to $5 million or 4% of total revenue in the second quarter of fiscal 2025, and $7 8 million or <unk>.
Speaker #2: DSA revenue in the fiscal 2025 third quarter was 48.2 million dollars compared to 44.2 million dollars in Q3 fiscal year 2024. The year-over-year increase in DSA revenue was primarily driven by an increase in general toxicology services as well as an increase in biotherapeutic services and medical device services.
7.74% of total revenue in the last fiscal year's third quarter.
As Bob mentioned, we continue to be focused on our DSA margin and we expect to see improvement in future quarters.
Speaker #2: Overall, net new DSA awards this quarter were 50.4 million dollars, a 13% increase over Q2 of fiscal 2025, and a 25% increase over Q3 of fiscal 2024.
We experienced an increase in discovery services revenue and continue to fill the added capacity and services. We've developed over the last 18 months. We believe we will see margin improvement due to operating leverage.
Speaker #2: We have also seen strong quoting and awards for the month of July which has been a good start to our last fiscal quarter of 2025.
In addition, we are seeing a much more stable pricing environment across our GSA services.
The book to Bill ratio for DSA in the third quarter of fiscal 2025 was one seven times to one our trailing 12 month book to Bill was <unk> 97 times to one.
Speaker #2: The backlog conversion rate in third quarter of fiscal 2025 was 35.5%, up from 31% in the prior year period. The DSA cancellations and negative change orders in the third quarter of fiscal 2025 were approximately 31% higher compared to the prior year third quarter.
DSA backlog was $134 3 million at June 32025, compared to $138 million at March 31, 2025, and $139 4 million at June 32024.
Speaker #2: Cancellations in the trailing 12-month period were approximately 2% more than the prior trailing 12-month period. RMS revenue for the third quarter of fiscal 2025 of 82.5 million dollars increased 21 million dollars or 34.1% compared to Q3 fiscal year 2024.
Our RMS segment non-GAAP operating income in the third quarter of fiscal 2025 was $16 9 million or 12, 9% of total revenue compared to $15 $6 million or 12, 5% of total revenue in the second quarter of fiscal 2012.
Speaker #2: The increase in RMS revenue was primarily due to higher NHP volume sold and higher average selling prices for NHPs compared to the prior year quarter.
Five and $6 5 million or six 2% of total revenue in the third quarter of fiscal 2024.
Speaker #2: The overall operating loss for the third quarter of fiscal 2025 decreased 15.1 million dollars from 20.8 million dollars in the third quarter of fiscal 2024 to 5.7 million dollars in Q3 of fiscal 2025, primarily due to the 24.9 million dollar increase in revenue previously mentioned and decreased operating expenses primarily offset by increased cost of revenue.
Interest expense in Q3 fiscal 2025 increased to $13 $6 million.
$12 $1 million in the third fiscal quarter of 2024, primarily due to pik interest incurred in relation to the second lien notes issued in September 2024.
Our balance sheet as of June 32025 included $6 $2 million in cash and cash equivalents as compared to $21 4 million on September 32024. The primary uses of cash during the first nine months of fiscal 2025 or negative working capital of $19 2 million.
Speaker #2: The increase in cost of revenue primarily relates to increased costs associated with the increase in NHP-related products and service revenue previously discussed. Consolidated net loss attributable to common shareholders in the third quarter of fiscal 2025 totaled 17.6 million dollars or a 51.10 loss per diluted share.
As we increase the inventory based on timing of import and $5 $6 million of cash use and consolidated operations.
In the third quarter of fiscal 2025, we saw significant fluctuations in our working capital based on the timing of any purchases.
Speaker #2: This is compared consolidated net loss attributable to common shareholders of 26.1 million dollars or one dollar loss per diluted share in the third quarter of fiscal 2024.
We get paid for sales of NH piece by our clients.
The company has utilized and will continue to utilize its revolving credit facility during the normal course of business as needed.
Speaker #2: For the third quarter 2025, adjusted EBITDA was 11.6 million dollars or 8.9% of total revenue compared to 0.1 million dollars or 0.1% of total revenue for the third quarter of 2024.
As of June 32025, the company had access to the $15 million revolver, which had no balance outstanding.
Recently, the company has requested it all of $3 million on its revolving credit facility.
Speaker #2: Non-GAAP operating income for our DSA segment in the third quarter was 7.2 million dollars or 5.5% of total revenue compared to 5 million dollars or 4% of total revenue in the second quarter of fiscal 2025 and 7.8 million dollars or 7.4% of total revenue in the last fiscal year's third quarter.
Total debt net of debt issuance costs as of June 32025 was.
$396 $5 million compared to $393 3 million on September 32024.
This includes a $114 8 million of convertible notes as of June 32025, and our second lien notes of $21 $8 million.
Speaker #2: As Bob mentioned, we continue to be focused on our DSA margins. And we expect to see improvement in future quarters. As we experienced an increase in discovery service revenue and continue to fill the added capacity and services we have developed over the last 18 months, we believe we will see margin improvement through operating leverage.
Cash used in operating activities was $24 8 million for the nine months ended June 32025, compared to $14 $4 million of cash used in operating activities for the nine months ended June 32024.
Capital expenditures in the third quarter of fiscal 2025 for $4 million or approximately three 1% of total revenue.
Speaker #2: In addition, we are seeing a much more stable pricing environment across our DSA services. The book-to-build ratio for DSA in the third quarter of fiscal 2025 was 1.07 to 1, and our trailing 12-month book-to-build was 0.97 to 1.
Third quarter of fiscal 2024 capital expenditures were $4 $4 million or four 2% of revenue we continue to expect our annual capital.
Spend for fiscal 2025 to be less than 4% of revenue.
Speaker #2: DSA backlog was $134.3 million at June 30, 2025, compared to $130.8 million at March 31, 2025, and $139.4 million at June 30, 2024.
We have not provided formal financial guidance for fiscal 2025, while we continue to feel positive about the progress. We have made in recent quarters. We are not providing formal fiscal 2020 guidance at this time and.
And we have stated previously we hope to resume providing guidance once we have greater clarity on the market and client demand and clarity on any impact to our business. Once there is more information on tariffs.
Speaker #2: In our RMS segment, non-GAAP operating income in the third quarter of fiscal 2025 was 16.9 million dollars or 12.9% of total revenue compared to 15.6 million dollars or 12.5% of total revenue in the second quarter of fiscal 2025, and 6.5 million dollars or 6.2% of total revenue in the third quarter of fiscal 2024.
Our current operating plan forecast compliance with the updated covenants under our latest amendment to the credit agreement entered into in September 2024.
And with that financial overview, we will turn the call over to our operator for questions.
Certainly at this time, if you would like to ask a question. Please press. The Star then one on your telephone keypad you may withdraw your question at any time by pressing Star then two again. It is star then one to register for a question and we will take our first question from Matt Hewitt with Craig Hallum Capital Group. Your line is open.
Speaker #2: Interest expense in Q3 of fiscal 2025 increased to 13.6 million dollars from 12.1 million dollars in the third fiscal quarter of 2024 primarily due to quick interest incurred in relation to the second lean note issued in September 2024.
Good afternoon, and congratulations on the progress.
Speaker #2: Our balance sheet as of June 30, 2025 included 6.2 million dollars in cash and cash equivalents as compared to 21.4 million dollars on September 30, 2024.
Maybe first up it sounds like your cancellations are a negative change orders are still a little bit elevated.
Is it your expectation that you could start to see that decline as we get into the back half of the year maybe into fiscal year 'twenty six or how are you thinking about that metric.
Speaker #2: The primary uses of cash during the first nine months of fiscal 2025 were negative working capital of 19.2 million dollars as we increased NHP inventory based on timing of import and 5.6 million dollars of cash used in consolidated operations.
Yeah.
Right.
I can't predict what's going to happen, but yes. They were elevated this past quarter.
For the year, they are only up 2%, but the last quarter was was it was a fairly good quarter cancellations force.
Speaker #2: In the third quarter of fiscal 2025, we saw a significant fluctuation in our working capital based on the timing of NHP purchases and when we get paid for sales of NHPs by our clients.
As you can probably figure out.
Our book to Bill on a gross basis was was extremely large.
The book to Bill on top of the increased sales we had 8% increased sales we have and you take the cancellations is it was a very very strong quarter for new bookings.
Speaker #2: The company is utilized and will continue to utilize its revolving credit facility during the normal course of business as needed. As of June 30, 2025, the company had access to the 15 million dollar revolver, which had no balance outstanding.
I think we just have to we have to plan for cancellations to continue to be high if theyre not that's great, but as a result it means we.
We need to do have a higher gross book to Bill.
And prepare for that I think we have done a much better job over the last year expecting that and I think last quarter demonstrates now.
Speaker #2: Recently, the company has requested a draw of 3 million dollars on its revolving credit facility. Total debt net of debt issuance costs as of June 30, 2025 was 396.5 million dollars compared to 393.3 million dollars on September 30, 2024.
If we are.
Yes, if that's going to be a new normal for a while they have cancellations that means our gross bookings and expectations for gross bookings have to go up.
That's why we increased our sales force increase our sales team.
And right now I think our organization is doing a good job of managing through that.
Speaker #2: This includes 114.8 million dollars of convertible notes as of June 30, 2025, and our second lean note of 21.8 million dollars. Cash used in operating activities was 24.8 million dollars for the nine-month ended June 30, 2025, compared to 14.4 million dollars of cash used in operating activities for the nine-month ended June 30, 2024.
However, as we've talked in the past.
We sometimes get cancellations it can be one or two that can be fairly big because of the size of our company.
So.
Last quarter was pretty significant.
This quarter it looks to me like it.
Right now it started off.
Much better, but we'll wait and see how that goes but yes, I think we just got to propane, but that's a new normal.
Sell through it.
Speaker #2: Capital expenditures in the third quarter of fiscal 2025 were $4 million, or approximately 3.1% of total revenue. In the third quarter of fiscal 2024, capital expenditures were $4.4 million, or 4.2% of revenue.
We can't change.
We need to prepare for it.
Well I mean, obviously you your sales team is doing a phenomenal job if there are more than covering that.
Maybe second would be what's up next for your site optimization, you've obviously made some significant progress on.
Speaker #2: We continue to expect our annual capital spend for fiscal 2025 to be less than 4% of revenue. We have not provided formal financial guidance for fiscal 2025 while we continue to feel positive about the progress we have made in recent quarters; we are not providing formal fiscal 2025 guidance at this time.
The checklist, there and I'm just curious as you look at Q4, but more importantly fiscal 'twenty six what's next on the site optimization side.
Well I'd like to see less and we have been trying to focus less on brick and mortar changes and more and some fine tuning.
What we what we have so we have these three or four facilities, we're moving now and one that we're significantly improving that'll.
Speaker #2: As we have stated previously, we hope to resume providing guidance once we have greater clarity on the market and client demand and clarity on any impact to our business once there is more information on tariffs.
That will be significant will continue to improve our facilities and Alice Texas.
As we increase.
<unk>.
Some of the service work, we do down there that is increasing demand that we'd probably increase those facilities.
Speaker #2: Our current operating plan forecasts compliance with the updated covenants under our debt amendment to the credit agreement entered into in September 2024. And with that financial overview, we will turn the call over to our operator for questions.
And then right now what we're looking at is how do we fine tune the facilities that we have.
Relocating some work without moving brick and mortar, but but relocating work and how do we do a better job for our client serving our client how do we open up additional capacity. So it's one thing that when you're making these macro changes and now I'd like to really focus on some of the smaller changes, but that are very significant.
Speaker #3: Certainly. At this time, if you would like to ask a question, please press the star then one on your telephone keypad. You may withdraw your question at any time by pressing star then two.
Speaker #3: Again, it is star then one to register for a estion. And we will take our first question from Matt Hewitt with Craig Hallam, Capital Group.
And how do we get more capacity out of existing facilities and so before we get back into the brick and mortar game.
Speaker #3: Your line is open.
Speaker #4: Good afternoon and congratulations on the progress. maybe first up, it sounds like you're cancellations or negative change orders are still a little bit elevated.
Right now I don't think we have any more significantly old facilities to close. This is this is the last big one but I do think we have a lot of tweaks, we can make in order to improve upon the existing facilities that we do have and that will be the focus.
Speaker #4: is it your expectation that you could start to see that decline as we get into the back half of the year, maybe into fiscal year 26?
That's great. Thank you.
Speaker #4: Or how are you thinking about that metric?
And we can take our next question from Dave Windley with Jefferies. Your line is open.
Speaker #1: Well, I can't predict what's going to happen, but yes, they were elevated this past quarter. for the year, they're only up 2%, but the last quarter was was was a fairly big quarter of cancellations for us.
Hi, Thanks for taking my questions I Wonder if first Bob if you could talk about the mix.
Bookings that you're seeing relative to your book of business you've called out.
Speaker #1: So as you can probably figure out, our our our book-to-build on our growth basis was was extremely large. you take that book-to-build on top of the increased sales we had, the 8% increase in sales we , and you take the cancellations, it was it was a very, very strong quarter for new bookings.
New services added a couple of quarter, maybe more quarters.
About momentum in biotherapeutics.
And medical device was another call today are the bookings even more overweighted in those new service directions than the current revenue.
Speaker #1: I think we just have to we have to plan for cancellations to continue to to be high. if they're not, that's great. But as a result, that means we need to to have a higher gross book-to-build.
Yes.
Bookings, yet and the revenues yet to catch up with some of the bookings that we that we recorded last quarter, but we had seen over the last.
Speaker #1: And prepare for that. I ink we have done a much better job over the last year expecting that. And I think last quarter demonstrates now that if we're you know there has if that's going to be a new normal for a to have cancellations, that means our gross bookings and expectations for gross bookings have to go up.
Two quarters part of that we had seen the beginning significant increase.
It kind of started less than our first fiscal Q Q1 and discovery.
Kind of continued into into Q2, and then it really ballooned quite a bit into Q3, so discovery being up 31, 32% year over year is very big for us those.
Speaker #1: that's why we increased our sales force, increased our sales team. And right now, I think our organization is doing a good ob of managing through that.
Speaker #1: However, you ow as we've talked in the past, we sometimes get cancellations that be one or two that can be fairly big. because of the size of our company.
Discovery is probably our most fixed cost business and that as really significant impact on our ability to great margins and create money to the bottom line.
Speaker #1: so last last quarter was pretty significant. this quarter looks to me like it you know right now, started off much better, but we'll we'll wait and see how that goes.
It's also an area, where we had we had expanded some of the services. We brought into scientific talent, we're very pleased with and we developed and put in place really start developing a new sales team there I would say in December of 'twenty.
Speaker #1: But yeah, I think we just got to plan. That's a normal. And sell through it. we can't change it. we need to prepare for it.
23, so it's been about 18 months.
So to see them really come together.
Speaker #3: Well, and obviously, yeah, your sales team is doing a phenomenal job if they're more than covering that. maybe second, would be what's up next for your site optimization?
So.
And really.
Win win new accounts, and then see increasing sales from existing accounts.
Speaker #3: You've viously made some significant progress on the checklist there, and I'm just curious what as ou look at you know Q4 but more importantly at fiscal 26, what's next on the site optimization side?
It's been very very rewarding and I think that they are feeling very good about the momentum that they have but.
It is it's not just safety assessment.
Our safety assessment capacity.
Speaker #1: Well, I'd like to see less, and we have been trying to focus less on brick-and-mortar changes and more on some fine-tuning of what we have.
<unk> fairly full we may see some benefit from safety assessment and pricing, but we don't have a lot of room.
We stayed at 80% to 85% in terms of a lot of our safety assessment capacity. So a lot of this is in niche and scientific areas.
Speaker #1: So we have these you know three four facilities we're ing now and one that we're significantly improving. that will be significant. We'll continue to improve our facilities in Alice, Texas.
Got it.
Shifting to NH fees.
Your.
Speaker #1: as we increase the you ow, the the some of the service work we do down there, that that has increasing demand that we probably increase those facilities.
And you have announced today.
Conclusion of this Doj investigation.
Obviously that is good news to put that behind you to put a kind of a turn it get on the legal costs that you're incurring.
Speaker #1: And then right now, what 're looking at is how do we fine-tune the facilities that we have? relocating some work without moving brick-and-mortar, but but relocating work, and how do we do a better job for our lient serving our client?
I want to understand better what your freedom of movement is within Hps. So Ken are you now free to import from Cambodia broadly speaking.
Speaker #1: open up additional capacity? So it's it's one thing that we you know when you're making How do we these macro changes, and that like is to really focus on some of the smaller changes, but that are very significant.
And then secondary question to that how do you believe that any changes pending or answering my question, but any changes to the market and market pricing that will cause as a result of these changes. Thanks.
Speaker #1: and how do we get more capacity out of existing facilities? And so before we we get back into the brick-and-mortar game, right now, I don't think we have any more significantly old facilities to close.
Speaker #1: This is this is the last big one, but I do think we have a lot of tweaks we can make in to improve upon the existing facilities that we do have and that will be the focus.
Yes first of all with the Doj issues for US I think were resolved.
Several quarters ago, and U S fish and wildlife is.
Speaker #3: That's great. Thank ou. And we can take our xt question from Dave Wendley with Jeffries. Your line is open.
And the Doj I've never told US we cannot import from Cambodia matter of fact, just the opposite they told US that we are free to important from Cambodia, and we have been for the last two or three quarters.
Speaker #5: Hi. Thanks for taking my questions. I wondered first, Bob, if you could talk about the mix of bookings that you're seeing relative to your book of business.
We have not imported from Cambodia, but.
That also is somewhat not only up to the to the.
Speaker #5: You've called out you know new services added a couple of quarters, maybe more quarters. About momentum in biotherapeutics, and medical device was another call out today.
To our U S. Government is also up to the Cambodian government.
So.
And we have.
We have other good Asian suppliers right now so we do work with people in Cambodia at along with many other countries. If we see the opportunity that we can that we can safely.
Speaker #5: You know, are the bookings even more overweighted in those new service directions than the current revenue?
Safely import at a fair price.
Speaker #1: Yeah. So we've seen bookings yet and the revenues yet to catch up with some the bookings that we that we recorded last quarter. But we had seen over the last two quarters prior to that, we'd seen a beginning significant increase you know kind of started last in the in the our first fiscal Q1.
Obviously, something we're going to consider.
That has not transpired yet we've not done that I'm not aware of anybody that's done that but I'm not aware of anybody prohibiting.
The in the U S. So prohibiting the use of imports there may be that that that's a something Cambodia is also has a saying though.
Speaker #1: In discovery, kind of continued into into Q2, and then it really ballooned quite a bit into Q3. So discovery being up 31-32% year over year is very big for us.
So right now I don't believe that we have any plans to change that in the next quarter, but those conversations and those site visits take place frequently throughout the months and throughout the quarters and that could that be.
Speaker #1: Those because discovery is probably our most fixed-cost business. And that has really significant impact on our ability to create margins and create money to the bottom line.
Could always change so.
But right now I don't.
Speaker #1: it's also an area where we had we had expanded some of the services. We brought in some scientific talent. We're very pleased with. And we developed and put in place really started developing a new sales team there I would say in in December of of 2023.
I think we have.
We have plenty of.
<unk>.
Okay.
<unk> ability to meet to meet the demand.
And we'll keep that option open hopefully.
So on the price point.
Speaker #1: So it's been about 18 months. so to see them really come together, and sell, and really you ow win win new accounts and then see increasing sales from existing accounts, has been very, very rewarding.
<unk> still a little elevated in NH P related activities, but I mean yours may not a change, but Charles River situation definitely changed they have inventory that is freed up I think that inventory might have aged out of its usefulness.
But seemingly there is there is more inventory available than less I'm wondering how that impacts price going forward. Thanks.
Speaker #1: And I ink that they're feeling very good about the momentum that they have. But it is it's not just safety assessment. Our safety assessment capacity has stayed fairly full.
Well I can't comment on.
On Charles River obviously.
Speaker #1: We may see some benefit from safety assessment and pricing, but we don't have a lot of room. You know, we've stayed at 85%.
As far as far as pricing, we've not seen.
Pricing really changed much in the last year.
Speaker #1: In terms of a lot of our safety assessment capacity. So a lot of this is in in niche and scientific areas.
Unfortunately, it's it's called down we've not seen price.
Speaker #5: Got it. shifting to NHPs, your competitor and you have announced today a conclusion of this DOJ investigation. Obviously, that's good news to put that behind you to put a kind of a tourniquet on the legal costs that ou were incurring.
Cost or pricing changed much in the U S and I'm not we keep track of what.
As in the U S.
From the USDA and the other government statistics.
And I've not seen a large increase.
And the amount of <unk> available.
In the U S.
Speaker #5: I I want to understand better what your freedom of movement is with NHPs. So can are you now free to import from Cambodia broadly speaking?
But for right now it looks like things are staying pretty stable and I don't see unless Cambodia does open and they changed pricing and Cambodia chooses how they export I'm not sure that we see a changing next year. So there are a lot of factors that go in there I'm not going to get into all of them.
Speaker #5: And then secondary question to that, how do you believe that that any changes, depending on your answer to my question, but any changes to the market and market pricing that will cause as a result of these changes?
On this on this call, but right now we don't see change in pricing.
Okay. Thank you.
Before our next question, we do have a correction to our cash used in operating activities for the nine months ended June 32024, I read this as $14 4 million.
Speaker #5: Thanks.
Speaker #1: Yeah. First of all, with the the DOJ issues for us, I think were resolved several quarters ago. And US Fish and Wildlife is and and and the DOJ have never told us we cannot import from Cambodia.
But it was $4 4 million.
So operator, please continue.
Certainly as a reminder, if you'd like to ask a question. Please press. The Star then one on your telephone keypad.
Speaker #1: Matter of fact, just the opposite. They told us we are free to import from Cambodia. And we have been for the last two or three quarters.
And we can move next to Frank <unk> with Lake Street Capital markets. Your line is open.
Speaker #1: we have not imported from Cambodia. But that also is somewhat not only up to the to the to our US government, it's also up to Cambodian government.
Alright, thanks for taking the questions I was hoping to follow up on some of the discovery commentary. Obviously, you just mentioned that's your largest fixed cost business.
Speaker #1: so and we have you know, we have we have other good Asian suppliers right now. So we do work with people in Cambodia and along with many other countries.
Was hoping you could help maybe put some metrics around what incremental growth in that business would translate to from a EBITDA perspective, I realize you're not providing forward EBITDA commentary at this point, but just kind of understanding just how much leverage is in that that business is some of the strong orders you've seen start to translate to revenue.
Speaker #1: If we see the opportunity that we can that we can safely import at a at a fair price, that obviously is something we're going to consider.
Speaker #1: that is not transpired yet. We've not done that. I'm not aware of anybody that's done that. But I'm aware of the of anybody prohibiting I think the the in the US of prohibiting the use of imports.
Yes.
No.
Let me go back.
We saw a strong increase but its not back to the levels. It was two or three years ago.
Speaker #1: there may be that that that's a something Cambodia is also has a say in though. so right now, I don't believe that we have any any plans to change that in the next quarter.
And it just had a pretty dramatic impact on our margins and our bottom line. When we saw those series deteriorate. So we're now getting back very quickly I should say if we can continue this growth to the levels, we were two years or three years ago, but.
Speaker #1: But those conversations and those site visits take place frequently throughout the months and throughout the quarters. And that could that could that could ways change.
In terms of.
If you were to say safety assessment, you have incremental bottom line. It goes to the bottom line of of.
Speaker #1: So but right now, I don't you know, I think we have we have plenty of of of ability to meet to meet the demand and we'll we'll keep that option open hopefully.
The 50 to variable contribution of 50% to 50%, 60% and.
And the discovery because the fixed cost nature, we could see incremental bottom line, besides 70% to 80%.
Speaker #5: So on the price point, the I an, cogs still a little elevated in NHP-related activities. But I an, yours may not have changed, but Charles River situation definitely changed.
Got it that's helpful.
And then I think we've talked about kind of some of the metrics. You have recently started tracking around kind of customer satisfaction on time delivery of services can you maybe recap some of those metrics for the most recent quarter and the importance of just that and how it translates to.
Speaker #5: They have inventory that is freed up. I think that inventory might have aged out of its usefulness. But seemingly, there's there's more inventory available than less.
New business awards from those customers.
Speaker #5: And I'm wondering how that impacts price going forward. Thanks.
But during the Investor day, I think we alluded to some of these and one of the one of the great advantages of having a lot of a.
Speaker #1: Well, I can't comment on on Charles River obviously. as far as as far as pricing, we've not seen pricing really change much in the last year.
A lot of new and improved systems as we have a very much better metrics and so I think we've talked about this a little bit when we had an investor day is that when we first started together we had 14 sites that we're operating as 14 individual sites and many times that we have and our customers who are using multiple sites.
Speaker #1: fortunately, it's it's calmed down. We've not seen price cost or pricing change much in the US. And I'm not you know, we keep track of what is in the US by you ow, from the USDA and the other governments' statistics.
Three or four sites I think 60% to 70% of our customer base may use multiple sites.
Speaker #1: and I've not seen a large increase in the amount of NHPs ailable. in the US. So I I ink for right now, it looks like things are staying pretty stable.
That's good to hear you check that.
Brendan there if you could check that number for me because I know we've talked about that during the Investor day.
One of the things that is important to us as though if we how do we act like one company and if theyre going to use multiple sites, how do we make that seamless for them. So they are getting the one company experience, where it feels like Youre working with three companies and then when we do that how do we communicate internally and then how do we make sure we deliver that on time. So first of all systems, we had to develop.
Speaker #1: And and I don't see unless Cambodia does open and they change pricing and Cambodia chooses how they export, I'm not sure that we we see a changing next year.
Speaker #1: So there are a lot of factors that go in there. I'm not I'm not going to get into all of to our. On this on this call.
Speaker #1: But right now, we we don't see change in pricing.
The systems to be able to attract this to communicate it.
Speaker #5: Okay. Thank you.
And then be able to track it so now and when we did when we were growing three years ago, we could grow but we weren't didn't have that.
Speaker #2: Before our xt question, we do have a correction to our cash used in operating activities for the nine-month ended June 30, 2024. I read this as 14.4 million, but it was 4.4 million.
Sophistication and the pricing systems, the management systems and the on time delivery now we have that and so when we're seeing growth now I continue to focus on this because I think one of the mistakes. We made three years ago. As we grew very quick but it didn't mean, we are always meeting our customer expectations and we didn't have a way to track that.
Speaker #2: So operator, please continue.
Speaker #3: Certainly. As a reminder, if you'd like to ask a question, please press the star then one on your telephone keypad. And we can move next to Frank Tekanen with Lake Street Capital Markets.
Scientifically as we do today and we didn't have waited to price it as high as typically as we do today and then and so.
Speaker #3: Your line is open.
Speaker #6: All right. Thanks for ing the questions. I was open to follow up on some of the discovery commentary obviously you you just mentioned that's your your largest fixed cost business.
Those are those are some much more improved controls that we have today and as a result, I can now see daily our on time delivery and if we're late on something how many days late and why and we'd go back to address the root cause so I would without giving I don't think we've ever given that dramatic but we were.
Speaker #6: I was hoping you uld help maybe put some metrics around what incremental growth in that business would translate to from an EBITDA perspective? I realize you're not providing forward EBITDA commentary at this point, but just kind of understanding just how much leverage is in that that business as some of the strong orders you've seen start to translate to to revenue.
We are we are significantly better today.
And.
And I.
Actually very very proud of the on time delivery of today, it's improved significantly over the last two years, specifically over the last years that we have much better matrix attractive and once we started tracking it we could see it improve and I think that also has something to do with why we are seeing an increasing amount of revenue and orders with <unk>.
Speaker #1: Yes. So let me go back. In the we we saw a strong increase, but it's not back to the levels it was two or three years ago.
Speaker #1: So and it's this had a pretty dramatic impact on our margins and our ottom line when we saw those series deteriorate. So we're now getting back very ickly, I should say, if we can continue this growth to to the levels we were two or three years ago.
<unk> customers. So again most of our customers are our small and medium pharma or biotech and <unk>.
And as they have a positive experience and they can see that we can communicate and deliver on time then it is.
Speaker #1: But in terms of you ow, if you were to say safety assessment, you have incremental bottom line it goes to the bottom line of of, of, 50 to a variable contribution of 50 to 50 to 60 percent.
Really improves the fact that we have a reoccurring.
And stable customer base.
So.
But I will say that we are significantly better than we were a year ago.
Speaker #1: And in the discovery, because the fixed cost nature, we could see incremental bottom line be as high as 70 to 80 percent.
We're not 100%, but we're striving for 100% and we're a lot closer to it than we've ever been.
Speaker #6: Got it. That's helpful. and then I think we've we've talked about kind of some of the metrics you have recently started tracking around kind of customer satisfaction, on-time delivery of of services.
Got it that's helpful. And then maybe just one last one.
Weighted to cash I heard the comment about some NH be stocking that.
Speaker #6: can you be recap some of those metrics for the most recent quarter and the importance of just that and how it translates to new business awards from those customers?
Took some cash out this quarter I was curious if you could maybe talk to your cash flow expectations going forward is some of that those NH piece, maybe convert to revenue and what that does to your cash balance.
Speaker #1: Well, I think during the estor day, I think we we alluded to some of these. And one of the one of the great advantages of of having a lot of new a lot of new and improved systems is we have a y much better metrics.
Well I think what we will do is.
If possible, we will probably maintain a higher level of hps than we have in the past we were running very thin and they think that that was in.
Speaker #1: And so I think we talked this a little bit. When we had an investor day, is that when we first started together, we had 14 sites that were operating as 14 individual sites.
And I think our customers would like to say that we had a little bit more inventory. So we now are carrying a little bit more inventory.
And I think we will continue to carry more inventory.
Speaker #1: And and many times, we have now customers who are using multiple sites. three, sites. I think 60, 70 percent of our customer base may use multiple sites.
As it comes to it.
Evaluating our balance sheet.
We will look at this is if this is the new normal that we want to carry on inventory, yes, we could reverse some of this the cash if we need to.
Speaker #1: So Beth, can you ck that you and Brandon there if you could ck that number for me? What? Because I know we talked about that during the investor day.
Frank but I think if we want this to be the new normal and when we evaluate how we want to improve our balance sheet. We may need to plan for this to be the new normal and plan accordingly. So.
Speaker #1: One the things that's important to us is that if we how do we act like one company? And if they're going to use multiple sites, how do we make that seamless for them so they're getting the one company experience, not feel like 're working with three companies?
Right now if we needed to.
Speaker #1: And then when we do that, how do we communicate, internally, and then how do make sure we deliver that on time? So the of the systems, we had to develop the systems to be le to track this, to communicate it, and then be able to track it.
If we need to slow down the imports and slow down what we're doing we could do that and converted to cash but.
I think what we're looking to do is make sure we have a much more stable environment to take care of our customers needs.
Speaker #1: So now, you know, when we did when we were growing three years ago, we could grow, but we weren't didn't have the sophistication in the pricing systems, the management systems, and the on-time delivery.
Got it a couple of thanks for taking the questions.
And this does conclude the question and answer session I would like to turn the program back over to Bob leisure for any closing remarks.
Speaker #1: Now we have that. And so when we're seeing growth now, I continue to focus on this because I think one of the mistakes we made three years ago is we grew very quick, but it didn't mean we were always meeting our customer expectations.
Alright. Thank you as you can tell we're very encouraged by these results and the recent growth we've seen in our DSA.
Speaker #1: And we didn't have a way to track that as scientifically as we do today. And we didn't have a way to to to price it as scientifically as we do today.
According awards over the last two quarters and this is this growth develops we will need to remain vigilant on delivering an exceptional experience service and product for our clients as I just outlined.
Speaker #1: And that and so those were those were some much more improved controls that we have today. And as a result, I can now see daily our on-time delivery.
We made progress towards achieving the financial goals, we outlined during our Investor Day and we're also then as I said, we're going to prioritize a strategic review of our capital structure and improving our balance sheet.
Speaker #1: And if we're late, on something, how many days late and why, and we go back and address the root cause. So I would without giving I don't think we've given those dramatic, but we were we are we are significantly better today.
<unk> said in the past we are a much better company today than we have ever been before.
But we still feel like we have a plan for much further improvement in the future.
Thank you very much for your time today, we look forward to talking to many of you later.
Speaker #1: and and I I'm I'm actually very, very proud of the on-time delivery I have today. It's improved significantly over the last two years, specifically over the last two that we have much better matrix to track this.
Thank you for your participation. This does conclude today's program you may disconnect at any time.
Speaker #1: And once we started tracking it, we could see it improve. And I think that also has something to do with why we are seeing an increasing amount of revenue and orders with existing customers.
Speaker #1: So again, most of our customers are are small, medium farmer or or the biotech. And and as they have a positive experience, and they can see that we can communicate and deliver on time, then it it is really improves the fact that we have a reoccurring and stable customer base.
Speaker #1: So but I will I will say that we are we are significantly better than we were a year ago. we're not 100%, but we're struggling for 100%.
Speaker #1: And we're a lot closer to it than 've ever been.
Speaker #6: Got it. That's helpful. And then maybe just one last one. related to cash, I heard the comment about some NHP stocking that that took some cash out this quarter.
Speaker #6: I was curious if you could maybe talk to cash flow expectations going forward as some of that those NHPs maybe convert to revenue, and what that does to your cash balance.
Speaker #1: Well, I think what we will do is if if possible, we'll ably maintain a higher level of NHPs than we have in the past.
Speaker #1: We were running very thin, and they think that that was and I think our customers would like to see that we had a little bit more inventory, so we now are carrying a little more inventory.
Speaker #1: and I think we'll continue to carry more inventory. I think as it comes to so evaluating our balance sheet, you know, we will look at this as if this is the new normal that we want to carry in inventory.
Speaker #1: Yes, we could convert some this to cash if we needed . It Frank. But I think if we want this to be the new normal, and when we evaluate how we want to improve our balance sheet, we we may need to plan for this to be the new normal and plan accordingly.
Speaker #1: So you know, right now, if we needed to if we need to slow down the imports and and slow down what we're doing, we could do and convert it to cash.
Speaker #1: you know, think what we're looking to do is make sure we have a much more stable environment to take care of our customers' eds.
Speaker #6: Got it. That's helpful. Thanks for taking the estions.
Speaker #3: And this does conclude the question and wer session. I'd like to turn the program back over to Bob Leisure for any closing remarks.
Speaker #1: All right. Thank you. As you can tell, we're y encouraged by these results and the recent growth we've seen in our DSA. Business according awards over the last two quarters.
Speaker #1: And this as this growth develops, we will need to remain vigilant on delivering an exceptional experience service and product for our clients, as I just outlined.
Speaker #1: We made progress towards achieving the financial goals we outlined our investor day. And we are also then, as I said, we're going to oritize the strategic review of our capital structure and improving our balance sheet.
Speaker #1: As I said in the past, we are a much better company today than we have ever been before. But we still feel like we have a plan for much further improvement in the future.
Speaker #1: So thank ou very much for your time today. We'll look forward to talking to many of you later.