Inotiv Q1 2026 Inotiv Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Inotiv Inc Earnings Call
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero, and a member of our team will be happy to help you. Please stand by. Your meeting is about to begin. Good day, everyone, and welcome to the Inotiv Q1 2026 earnings call. At this time, all participants are in a listen-only mode. Later, there will be a question and answer session. You may queue for a question at any time by pressing the star key, followed by the number one on your telephone keypad. You may remove yourself from the queue by pressing star two. Please be advised that today's call is being recorded. We are standing by should you need any assistance. I'd now like to turn the call over to Steven Halper with LifeSci Advisors. Please go ahead.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero, and a member of our team will be happy to help you. Please stand by. Your meeting is about to begin. Good day, everyone, and welcome to the Inotiv Q1 2026 earnings call. At this time, all participants are in a listen-only mode. Later, there will be a question and answer session. You may queue for a question at any time by pressing the star key, followed by the number one on your telephone keypad. You may remove yourself from the queue by pressing star two. Please be advised that today's call is being recorded. We are standing by should you need any assistance. I'd now like to turn the call over to Steven Halper with LifeSci Advisors. Please go ahead.
Speaker #2: Your meeting will begin shortly. If you need, you—thank you for your continued patience. Zero, and a member of our team will be happy to help you.
Speaker #2: Please stand by. Your meeting is about to begin. Good day. For assistance at any time, please press star. Everyone, welcome to the Innovative First Quarter 2026 earnings mode.
Speaker #2: Later, there will be a question-and-answer session. You may queue for a question by pressing the star key, followed by the number 1, on your telephone keypad at any time.
Speaker #2: You may remove call. yourself from the queue by pressing star At this time, all 2. Please be advised that participants are in a listen-only today's call is being recorded.
Speaker #2: We are standing by should you need any assistance. I'd now like to turn the call over to Steven Halper with LifeSci Advisors. Please go ahead.
Speaker #2: Thank you, Jamie, and good morning, 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 regarding the company's future operating and financial results and plans.
Steven Halper: Thank you, Jamie, and good morning, 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. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management expectations as of today's close. 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.
Steven Halper: Thank you, Jamie, and good morning, 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. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management expectations as of today's close. 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.
Speaker #2: Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management expectations as of today's close.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: Management will also discuss certain non-GAAP financial Definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in the information for investors.
Steven Halper: 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 Investors section of the company's website, www.inotiv.com, and is also available in the Form 8-K filed with the Securities and Exchange Commission. If you haven't obtained a copy of today's press release yet, you can do so by going to the Investors section of Inotiv's website. Joining us from the company this morning are Bob Leasure, President and Chief Executive Officer, and Beth Taylor, Chief Financial Officer. John Sagert, Chief Strategy Officer, will join us for the question and answer portion of the call.
Steven Halper: 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 Investors section of the company's website, www.inotiv.com, and is also available in the Form 8-K filed with the Securities and Exchange Commission. If you haven't obtained a copy of today's press release yet, you can do so by going to the Investors section of Inotiv's website. Joining us from the company this morning are Bob Leasure, President and Chief Executive Officer, and Beth Taylor, Chief Financial Officer. John Sagert, Chief Strategy Officer, will join us for the question and answer portion of the call.
Speaker #2: The company's current and previous earnings releases 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.
Speaker #2: If you have not obtained a copy of today's press release yet, you can do so by going to the investor section of Inotiv's website.
Speaker #2: Joining us from the company this morning are Bob Leasure, President and Chief Executive Officer, and Beth Taylor, Chief Financial Officer. John Sagartz, Chief Strategy Officer, will join us for the question-and-answer portion of the call.
Speaker #2: Bob will begin with some opening comments, after which Beth will present a summary of the company's financial results for our first quarter of 2026, and then we'll open the floor to Robert Leasure, CEO.
Steven Halper: Bob will begin with some opening comments, after which Beth will present a summary of the company's financial results for our Q1 2026, 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 ahead.
Steven Halper: Bob will begin with some opening comments, after which Beth will present a summary of the company's financial results for our Q1 2026, 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 ahead.
Speaker #2: Bob, please go measure in an effort to provide additional ahead.
Speaker #3: Thank you, Steve, and good morning, everyone. During the first quarter of fiscal 2026, despite the usually weaker seasonality, we saw very strong year-over-year revenue growth in our DSA business.
Bob Leasure: Thank you, Steve, and good morning, everyone. During Q1 of fiscal 2026, despite the usually weaker seasonality, we saw very strong year-over-year revenue growth in our DSA business, with both increased discovery and translational sciences revenue and increased safety assessment revenue, somewhat offset by weak performance of our NHPs and typical seasonal weakness in the rest of our RMS business. We're delighted to see the continued strength in our DSA business, building on several quarters of improvement against a backdrop of generally slow market demand. Q1 of 2026 DSA revenue increased 12% versus the same period last year. Within that, DTS revenues were up 26% and safety assessment revenues were up 7%.
Bob Leasure: Thank you, Steve, and good morning, everyone. During Q1 of fiscal 2026, despite the usually weaker seasonality, we saw very strong year-over-year revenue growth in our DSA business, with both increased discovery and translational sciences revenue and increased safety assessment revenue, somewhat offset by weak performance of our NHPs and typical seasonal weakness in the rest of our RMS business. We're delighted to see the continued strength in our DSA business, building on several quarters of improvement against a backdrop of generally slow market demand. Q1 of 2026 DSA revenue increased 12% versus the same period last year. Within that, DTS revenues were up 26% and safety assessment revenues were up 7%.
Speaker #3: With both increased discovery and translational sciences revenue, and increased safety assessment revenue,
Speaker #3: somewhat offset by weak performance of our NHPs and typical seasonal weakness in the rest of call for questions.
Speaker #3: Our RMS business—we're delighted to see the continued strength in our, it is now my DSA business, building on several quarters of improvement against a backdrop of generally slow market. In 2026, DSA revenue increased 12% versus the same period last year.
Speaker #3: Within that, DTS revenues were up 26% and safety assessment revenues were up 7%. In addition to revenue growth, this quarter, we also saw strong growth in net awards, with discovery awards up 44%, safety assessment demand.
Bob Leasure: In addition to revenue growth this quarter, we also saw strong growth in net awards, with discovery awards up 44%, safety assessment awards up 22% versus the prior year period. With this, our trailing twelve-month DSA awards have increased 34% over the prior twelve-month period. This brought our book-to-bill for the quarter to 1.16 to 1, and for the trailing twelve months to 1.08 to 1. The revenue growth in DSA drove our strongest Q1 DSA margins in the last three years. The RMS business continued to be challenging, in particular for NHPs, where lower volume sales impacted our RMS revenues and margins compared to last year. We remain on track with our site optimization, transportation, fleet optimization plans, which we believe will be positive for margins in future periods.
Bob Leasure: In addition to revenue growth this quarter, we also saw strong growth in net awards, with discovery awards up 44%, safety assessment awards up 22% versus the prior year period. With this, our trailing twelve-month DSA awards have increased 34% over the prior twelve-month period. This brought our book-to-bill for the quarter to 1.16 to 1, and for the trailing twelve months to 1.08 to 1. The revenue growth in DSA drove our strongest Q1 DSA margins in the last three years. The RMS business continued to be challenging, in particular for NHPs, where lower volume sales impacted our RMS revenues and margins compared to last year. We remain on track with our site optimization, transportation, fleet optimization plans, which we believe will be positive for margins in future periods.
Speaker #3: awards up 22% versus the prior year period. Q1 of 12-month DSA awards have increased With this, our trailing 34% over the prior 12-month period.
Speaker #3: This brought our book-to-bill for the quarter to 1.16 to 1, and for the trailing 12 months to 1.08 to 1. The revenue growth in DSA drove our strongest first quarter DSA margins in the last three years.
Speaker #3: The RMS business continued to be challenging, in particular for NHPs, where lower volume sales impacted our RMS revenues and margins compared to last year.
Speaker #3: optimization, transportation, We remain on track with our site fleet optimization plans, which we believe will be positive for margins in future periods. connection with the current phase of In the RMS site optimization plan, we exited two leased facilities during the first fiscal quarter of 2026, one in October and the second in December.
Bob Leasure: In connection with the current phase of the RMS site optimization plan, we exited two lease facilities during the first fiscal quarter of 2026, one in October and the second in December. This phase should be complete by the third quarter of fiscal 2026. Overall, our RMS revenue for the first quarter declined 5.4% compared to the prior-year quarter. As I noted, this was primarily driven by decreased NHP sales, with lower volumes shipped to customers during the quarter. We still expect NHP full-year 2026 revenue to remain flat compared to last year. Despite the lower overall sales in the quarter, we did see growth in RMS services revenue of 13% compared to Q1 of fiscal 2025, mainly due to higher NHP colony management services revenue.
Bob Leasure: In connection with the current phase of the RMS site optimization plan, we exited two lease facilities during the first fiscal quarter of 2026, one in October and the second in December. This phase should be complete by the third quarter of fiscal 2026. Overall, our RMS revenue for the first quarter declined 5.4% compared to the prior-year quarter. As I noted, this was primarily driven by decreased NHP sales, with lower volumes shipped to customers during the quarter. We still expect NHP full-year 2026 revenue to remain flat compared to last year. Despite the lower overall sales in the quarter, we did see growth in RMS services revenue of 13% compared to Q1 of fiscal 2025, mainly due to higher NHP colony management services revenue.
Speaker #3: this phase should be complete by the third quarter of fiscal And 2026. Overall, our RMS revenue for the first quarter declined 5.4% compared to the prior year
Speaker #3: Quarter, as I noted, this was primarily driven by decreased NHP sales with lower volumes shipped to customers during the quarter. We still expect NHP full-year 2026 revenue to remain flat compared to last year.
Speaker #3: Despite the lower overall sales in the quarter, we did see growth in RMS services revenue of 13% compared to Q1 of fiscal. Pleasure to turn the call over to Bob. Colony management services revenue.
Speaker #3: As we disclosed in to provide general financial advisory and investment banking services to assist the company in exploring potential debt refinancing 2025, mainly due to higher NHP alternatives.
Bob Leasure: As we disclosed in September, we engaged Perella Weinberg Partners to provide general financial advisory and investment banking services to assist the company in exploring potential debt refinancing alternatives. We've continued these efforts and remain committed to our goal of refinancing our debt and improving our balance sheet. We will provide any updates at the appropriate time. The company has received a waiver for non-compliance with the financial covenant ratios under our credit agreement for Q1 of fiscal 2026. We again thank our lenders for their continuing support in working with us. Overall, we're generally pleased with our progress and momentum as it relates to the DSA business and the site optimization and cost reduction initiatives we are implementing for the RMS business. We are continuing to navigate the business trends and macroeconomic factors that are affecting our RMS business.
Bob Leasure: As we disclosed in September, we engaged Perella Weinberg Partners to provide general financial advisory and investment banking services to assist the company in exploring potential debt refinancing alternatives. We've continued these efforts and remain committed to our goal of refinancing our debt and improving our balance sheet. We will provide any updates at the appropriate time. The company has received a waiver for non-compliance with the financial covenant ratios under our credit agreement for Q1 of fiscal 2026. We again thank our lenders for their continuing support in working with us. Overall, we're generally pleased with our progress and momentum as it relates to the DSA business and the site optimization and cost reduction initiatives we are implementing for the RMS business. We are continuing to navigate the business trends and macroeconomic factors that are affecting our RMS business.
Speaker #3: We've continued these efforts and remain committed to our goal of refinancing our debt and improving our balance updates at the appropriate sheet time. The company has received a waiver for noncompliance with the financial covenant ratios under our credit agreement for the first quarter of fiscal 2026. We will provide any updates as needed.
Speaker #3: We continuing support in working with us. Overall, we're generally pleased with our progress and momentum as it relates to the DSA business and the site optimization and cost reduction initiatives we are implementing for again thank our lenders for their the RMS business.
Speaker #3: We are continuing to navigate the business are affecting our RMS business. trends and macroeconomic factors that Our focus remains on improving revenue and margins in our DSA business and reducing costs, diversifying our sources of revenue, improving September, we engaged fellow Weinberg partners margins in our RMS new approach methods or NAMS strategy in support of FDA guidance and industry expectations for continued announced important collaborations that bring state-of-the-art machine learning tools, allowing us to integrate, business.
Bob Leasure: Our focus remains on improving revenue and margins in our DSA business and reducing costs, diversifying our sources of revenue, and improving margins in our RMS business. We continue to enhance our New Approach Methods, or NAMs strategy, in support of FDA guidance and industry expectations for continued innovation. Over the last couple of months, we announced important collaborations that bring state-of-the-art machine learning tools, allowing us to integrate, analyze, and visualize complex data sets, as well as providing us access to disease-relevant human tissue. We believe the offerings we are continuing to build within the NAM space will allow us to make our customers' discovery efforts increasingly human-relevant earlier in the process and help speed their important new medicines to successful registration. Finally, we remain committed to improving our financial performance.
Bob Leasure: Our focus remains on improving revenue and margins in our DSA business and reducing costs, diversifying our sources of revenue, and improving margins in our RMS business. We continue to enhance our New Approach Methods, or NAMs strategy, in support of FDA guidance and industry expectations for continued innovation. Over the last couple of months, we announced important collaborations that bring state-of-the-art machine learning tools, allowing us to integrate, analyze, and visualize complex data sets, as well as providing us access to disease-relevant human tissue. We believe the offerings we are continuing to build within the NAM space will allow us to make our customers' discovery efforts increasingly human-relevant earlier in the process and help speed their important new medicines to successful registration. Finally, we remain committed to improving our financial performance.
Speaker #3: We continue to enhance our datasets, as well as disease-relevant human innovation. Over the last couple of months, we tissue. We believe the offerings we are continuing to build within the NAMS space will allow us to make our customers' discovery efforts increasingly human-relevant earlier in the process and help speed their important new medicines to successful registration.
Speaker #3: Finally, we remain committed to improving our financial performance to facilitate this. We will continue to focus on client satisfaction and enhance speed and delivery while simultaneously initiating cost reductions and optimizing our product and services portfolio and now hand things over to Beth to provide a financial operating footprint.
Bob Leasure: To facilitate this, we will continue to focus on client satisfaction, enhanced speed, and delivery, while simultaneously initiating cost reductions and optimizing our product and services portfolio and operating footprint. I will now hand things over to Beth to provide a financial overview.
Bob Leasure: To facilitate this, we will continue to focus on client satisfaction, enhanced speed, and delivery, while simultaneously initiating cost reductions and optimizing our product and services portfolio and operating footprint. I will now hand things over to Beth to provide a financial overview.
Speaker #3: overview.
Speaker #2: Thank you, Bob. And good 2026, total revenue was $120.9 I will $119.9 million in the first million compared to quarter of fiscal 2025. $1 million or This was an increase of 0.8% in revenue from the prior year quarter, primarily driven by increased DSA revenue and partially offset by decreased RMS revenue.
Beth Taylor: Thank you, Bob, and good morning, everyone. For Q1 of fiscal 2026, total revenue was $120.9 million, compared to $119.9 million in Q1 of fiscal 2025. This was an increase of $1 million or 0.8% in revenue from the prior year quarter, primarily driven by increased DSA revenue and partially offset by decreased RMS revenue. DSA revenue in the fiscal 2026 Q1 was $48 million, compared to $42.8 million in Q1 fiscal 2025. The year-over-year increase in DSA revenue was primarily driven by an increase in discovery pharmacology service and surgical services revenue, as well as an increased revenue at our Rockville facility.
Beth Taylor: Thank you, Bob, and good morning, everyone. For Q1 of fiscal 2026, total revenue was $120.9 million, compared to $119.9 million in Q1 of fiscal 2025. This was an increase of $1 million or 0.8% in revenue from the prior year quarter, primarily driven by increased DSA revenue and partially offset by decreased RMS revenue. DSA revenue in the fiscal 2026 Q1 was $48 million, compared to $42.8 million in Q1 fiscal 2025. The year-over-year increase in DSA revenue was primarily driven by an increase in discovery pharmacology service and surgical services revenue, as well as an increased revenue at our Rockville facility.
Speaker #2: morning, everyone. For the first
Speaker #2: quarter of fiscal
Speaker #2: DSA revenue in the fiscal 2026 first quarter was $48 million compared to $42.8 million in Q1 fiscal 2025. Revenue was primarily driven by an increase in discovery pharmacology service and surgical services revenue, as well as an increase in revenue at our Rockville facility.
Speaker #2: Overall, net new DSA awards during the quarter were $53.6 million; a The year-over-year increase in DSA $27% increase over Q1 of fiscal 2025; and a $34% year-over-year increase for the trailing 12-month period into December 31, 2025.
Beth Taylor: Overall, net new DSA awards during the quarter were $53.6 million, a 27% increase over Q1 of fiscal 2025, and a 34% year-over-year increase for the trailing twelve-month period ended December 31, 2025. We have also seen strong quoting and awards for the month of January, representing an encouraging start to our second fiscal quarter of 2026. The backlog conversion rate in the first quarter of fiscal 2026 was 33.2%, compared to 32.8% in the prior year period. DSA cancellations and negative change orders in the first quarter of fiscal 2026 were approximately 51% lower than the prior year first quarter. Cancellations and negative change orders in the trailing twelve-month period were approximately 17% lower than the prior trailing twelve-month period.
Beth Taylor: Overall, net new DSA awards during the quarter were $53.6 million, a 27% increase over Q1 of fiscal 2025, and a 34% year-over-year increase for the trailing twelve-month period ended December 31, 2025. We have also seen strong quoting and awards for the month of January, representing an encouraging start to our second fiscal quarter of 2026. The backlog conversion rate in the first quarter of fiscal 2026 was 33.2%, compared to 32.8% in the prior year period. DSA cancellations and negative change orders in the first quarter of fiscal 2026 were approximately 51% lower than the prior year first quarter. Cancellations and negative change orders in the trailing twelve-month period were approximately 17% lower than the prior trailing twelve-month period.
Speaker #2: seen strong quoting and awards for the month We have also of January, representing fiscal quarter of 2026. The backlog conversion rate in an encouraging start to our second the first quarter of fiscal 2026 was 33.2% compared to 32.8% in the prior year period.
Speaker #2: DSA cancellations and negative change orders in the first quarter of fiscal 2026 were approximately 51% lower than the prior year first quarter. Cancellations and negative change orders in the trailing 12-month period were approximately 17% lower than the prior trailing 12-month period.
Speaker #2: The book-to-bill ratio for DSA in the first quarter of fiscal 2026 was 1.16-to-1, and our trailing 12-month book-to-bill was 1.08-to-1.
Beth Taylor: The book-to-bill ratio for DSA in Q1 of fiscal 2026 was 1.16 to 1, and our trailing twelve-month book-to-bill was 1.008 to 1. DSA backlog was $145.4 million at 31 December 2025, compared to $138.2 million at 30 September 2025, and $130.4 million at 31 December 2024. RMS revenue for Q1 of fiscal 2026 of $72.9 million decreased $4.1 million, or 5.4%, compared to Q1 fiscal 2025. The decrease in RMS revenue was due primarily to lower NHP volumes sold, partially offset by higher average selling prices for NHP, and higher NHP-related services revenue.
Beth Taylor: The book-to-bill ratio for DSA in Q1 of fiscal 2026 was 1.16 to 1, and our trailing twelve-month book-to-bill was 1.008 to 1. DSA backlog was $145.4 million at 31 December 2025, compared to $138.2 million at 30 September 2025, and $130.4 million at 31 December 2024. RMS revenue for Q1 of fiscal 2026 of $72.9 million decreased $4.1 million, or 5.4%, compared to Q1 fiscal 2025. The decrease in RMS revenue was due primarily to lower NHP volumes sold, partially offset by higher average selling prices for NHP, and higher NHP-related services revenue.
Speaker #2: DSA backlog was $145.4 million at December 31, 2025, compared to $138.2 million at September 30, 2025, and $130.4 million at December 31, 2024. RMS 2026 of $72.9 million decreased 4.1 million or 5.4% compared to Q1 revenue for the first quarter of fiscal fiscal 2025.
Speaker #2: The decrease in RMS revenue was due primarily to lower NHP volume sold, partially offset by higher average selling prices for NHPs and higher NHP-related overall operating loss for the first quarter of fiscal 2026 increased 0.8 million from $15.5 services revenue.
Beth Taylor: The overall operating loss for the first quarter of fiscal 2026 increased $0.8 million from $15.5 million in the first quarter of fiscal 2025 to $16.3 million in Q1 of fiscal 2026. The increase in operating loss was primarily driven by an increase in RMS operating loss of $2.4 million in Q1 fiscal 2026, partially offset by an increase in DSA operating income of $1.2 million. The increase in RMS operating loss was primarily due to the $4.1 million decrease in RMS revenue previously mentioned, partially offset by decreased RMS cost of revenue.
Beth Taylor: The overall operating loss for the first quarter of fiscal 2026 increased $0.8 million from $15.5 million in the first quarter of fiscal 2025 to $16.3 million in Q1 of fiscal 2026. The increase in operating loss was primarily driven by an increase in RMS operating loss of $2.4 million in Q1 fiscal 2026, partially offset by an increase in DSA operating income of $1.2 million. The increase in RMS operating loss was primarily due to the $4.1 million decrease in RMS revenue previously mentioned, partially offset by decreased RMS cost of revenue.
Speaker #2: Operating income decreased from $16.3 million in the first quarter of fiscal 2025 to a loss of $2.4 million in Q1 of fiscal 2026. The increase in operating loss was primarily driven by an increase in RMS operating loss, which was primarily due to the previously mentioned increase in RMS revenue, partially offset by decreased RMS cost of revenue. This was also partially offset by an increase in DSA operating income.
Speaker #2: The DSA increase in operating income was driven by a higher DSA increase in RMS operating revenue, partially offset by increased cost of revenue related to $1.2 million.
Beth Taylor: The DSA increase in operating income was driven by higher DSA revenue, partially offset by increased cost of revenue related to increased personnel to support planned DSA growth and increased supplies expense. Non-GAAP operating income for our DSA segment in Q1 was $8.2 million, or 6.8% of total revenue, compared to $7.1 million, or 5.9% of total revenue, in last fiscal year's Q1. As Bob mentioned, we continue to focus on our DSA margins, and we believe we will see improvement in future quarters. As we experience 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.
Beth Taylor: The DSA increase in operating income was driven by higher DSA revenue, partially offset by increased cost of revenue related to increased personnel to support planned DSA growth and increased supplies expense. Non-GAAP operating income for our DSA segment in Q1 was $8.2 million, or 6.8% of total revenue, compared to $7.1 million, or 5.9% of total revenue, in last fiscal year's Q1. As Bob mentioned, we continue to focus on our DSA margins, and we believe we will see improvement in future quarters. As we experience 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.
Speaker #2: Increased personnel to support planned DSA growth and increased supplies drove the expense. First quarter expense was $8.2 million, compared to $7.1 million, or 5.9% of total income, for our DSA segment in the revenue in last fiscal year's first quarter.
Speaker #2: mentioned, we continue to focus on our As Bob DSA margins, and we believe we will $6.8% of total revenue, compared 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.
Speaker #2: In addition, we continue to see a more stable pricing environment across our DSA services. In our RMS segment, non-GAAP operating income in the first quarter of fiscal 2026 was $7.2 million, or 5.9% of total revenue, compared to $9.4 million in the prior year.
Beth Taylor: In addition, we continue to see a more stable pricing environment across our DSA services. In our RMS segment, non-GAAP operating income in the first quarter of fiscal 2026 was $7.2 million or 5.9% of total revenue, compared to $9.4 million or 7.9% of total revenue in the first quarter of fiscal 2025. Lower margins were primarily driven by lower NHP volume sales. Interest expense in Q1 of fiscal 2026 decreased to $13.5 million from $13.8 million in the first quarter of fiscal 2025, primarily due to lower interest rates. Consolidated net loss in the first quarter of fiscal 2026 totaled $28.4 million or an $0.83 loss per diluted share.
Beth Taylor: In addition, we continue to see a more stable pricing environment across our DSA services. In our RMS segment, non-GAAP operating income in the first quarter of fiscal 2026 was $7.2 million or 5.9% of total revenue, compared to $9.4 million or 7.9% of total revenue in the first quarter of fiscal 2025. Lower margins were primarily driven by lower NHP volume sales. Interest expense in Q1 of fiscal 2026 decreased to $13.5 million from $13.8 million in the first quarter of fiscal 2025, primarily due to lower interest rates. Consolidated net loss in the first quarter of fiscal 2026 totaled $28.4 million or an $0.83 loss per diluted share.
Speaker #2: In the first quarter, or Q1, $7.9% of total. As we experienced in fiscal 2025, lower margins were primarily driven by lower NHP volume sales.
Speaker #2: Interest expense in Q1 of fiscal 2026 decreased to $13.5 million from $13.8 million in the first quarter of fiscal 2025, primarily due to lower interest rates.
Speaker #2: Consolidated net loss in the first quarter of fiscal 2026 totaled $28.4 million, or an $0.83 loss per diluted share. This is compared to a consolidated net loss of $27.6 million, or a $1.02 loss per diluted share, in the first quarter of fiscal 2025.
Beth Taylor: This is compared to consolidated net loss of $27.6 million or a $1.02 loss per diluted share in Q1 of fiscal 2025. For Q1 of 2026, total company Adjusted EBITDA was $1.8 million or 1.5% of total revenue, compared to $2.6 million or 2.2% of total revenue for Q1 of fiscal 2025. Our balance sheet as of 31 December 2025 included $12.7 million in cash and cash equivalents as compared to $21.7 million on 30 September 2025. The company has utilized and will continue to utilize its revolving credit facility during the normal course of business as needed.
Beth Taylor: This is compared to consolidated net loss of $27.6 million or a $1.02 loss per diluted share in Q1 of fiscal 2025. For Q1 of 2026, total company Adjusted EBITDA was $1.8 million or 1.5% of total revenue, compared to $2.6 million or 2.2% of total revenue for Q1 of fiscal 2025. Our balance sheet as of 31 December 2025 included $12.7 million in cash and cash equivalents as compared to $21.7 million on 30 September 2025. 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 first quarter of EBITDA was $1.8 million or 2026, total company adjusted $1.5% of total revenue, compared to $2.6 million or $2.2% of total revenue.
Speaker #2: For the first fiscal quarter of 2025, our balance sheet as of December 31, 2025, included $12.7 million in cash and cash equivalents, as compared to $21.7 million on September 30, 2025.
Speaker #2: The company’s revolving credit facility is utilized during the normal course of business and will continue to be utilized as needed. As of December 31, 2025, the company had borrowings of $6 million on the $15 million revolving credit facility, which is still outstanding.
Beth Taylor: As of 31 December 2025, the company had borrowings of $6 million on the $15 million revolving credit facility, which is still outstanding. Total debt, net of debt issuance cost as of 31 December 2025, was $405.8 million, compared to $402.1 million on 30 September 2025. This includes $118.2 million of convertible notes as of 31 December 2025, and our second lien notes of $24.7 million. Cash used in operating activities was $5.4 million for the three months ended 31 December 2025, compared to $4.5 million for the three months ended 31 December 2024.
Beth Taylor: As of 31 December 2025, the company had borrowings of $6 million on the $15 million revolving credit facility, which is still outstanding. Total debt, net of debt issuance cost as of 31 December 2025, was $405.8 million, compared to $402.1 million on 30 September 2025. This includes $118.2 million of convertible notes as of 31 December 2025, and our second lien notes of $24.7 million. Cash used in operating activities was $5.4 million for the three months ended 31 December 2025, compared to $4.5 million for the three months ended 31 December 2024.
Speaker #2: Total debt net of debt issuance cost as of December 31, 2025, was $405.8 million, compared to $402.1 million on September 30, 2025. This includes $118.2 of December 31, 2025, and our secondly notes of $24.7 million.
Speaker #2: Cash used in operating activities was $5.4 million for the three months ended million of convertible notes as December 31, 2025, compared to $4.5 million for the three months ended December 31, 2024.
Speaker #2: Capital expenditures in the first quarter of 2026 were $5.2 million or approximately $4.3% of total revenue. $3 million of the capital expenditures in the first quarter of 2026 related to the current phase of our RMS us to exit two lease site optimization plan, which allowed The first quarter of fiscal 2025 capital facilities during the quarter.
Beth Taylor: Capital expenditures in Q1 2026 were $5.2 million or approximately 4.3% of total revenue. $3 million of the capital expenditures in Q1 2026 related to the current phase of our RMS site optimization plan, which allowed us to exit two lease facilities during the quarter. Capital expenditures in Q1 fiscal 2025 were $4.5 million or 3.7% of revenue. We continue to expect our annual spend for CapEx for fiscal year 2026 to be less than 4% of revenue. At this juncture, we are not providing formal financial guidance for fiscal year 2026. We continue to feel positive about the progress we have made in recent quarters.
Beth Taylor: Capital expenditures in Q1 2026 were $5.2 million or approximately 4.3% of total revenue. $3 million of the capital expenditures in Q1 2026 related to the current phase of our RMS site optimization plan, which allowed us to exit two lease facilities during the quarter. Capital expenditures in Q1 fiscal 2025 were $4.5 million or 3.7% of revenue. We continue to expect our annual spend for CapEx for fiscal year 2026 to be less than 4% of revenue. At this juncture, we are not providing formal financial guidance for fiscal year 2026. We continue to feel positive about the progress we have made in recent quarters.
Speaker #2: or $3.7% of revenue. We continue to expect our annual spend for CapEx for expenditures were $4.5 million 2026 to be less than 4% of revenue.
Speaker #2: fiscal year At this juncture, we are not providing formal financial guidance for fiscal year 2026. We continue to feel positive about the progress greater clarity on the market and client demand and clarity on any further impact to our business as tariff policies overview, we will turn the call over we have made in recent to Jamie, our operator, for evolve. quarters.
Speaker #2: fiscal year At this juncture, we are not providing formal financial guidance for fiscal year 2026. We continue to feel positive about the progress greater clarity on the market and client demand and clarity on any further impact to our business as tariff policies overview, we will turn the call over we have made in recent to Jamie, our operator, for evolve.
Speaker #2: As we have stated previously, we hope to— And with that financial—
Beth Taylor: 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 further impact to our business as tariff policies evolve. With that financial overview, we will turn the call over to Jamie, our operator, for questions.
Beth Taylor: 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 further impact to our business as tariff policies evolve. With that financial overview, we will turn the call over to Jamie, our operator, for questions.
Speaker #1: Thank
Operator: Thank you. At this time, if you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, star one to ask a question and star two to remove yourself. I'll pause for just a moment to allow questions to queue. We'll hear first from Frank Takkinen with Lake Street Capital Markets. Please go ahead.
Operator: Thank you. At this time, if you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, star one to ask a question and star two to remove yourself. I'll pause for just a moment to allow questions to queue. We'll hear first from Frank Takkinen with Lake Street Capital Markets. Please go ahead.
Speaker #1: Star one on your keypad. To leave the queue at any time, press star two. Once you've pressed star one to ask a question, and star two to remove yourself. At this time, if you would like to ask a question, I'll pause for just a moment to queue.
Speaker #1: We'll first allow questions from Freight and Tracking Inn with Lake Street.
Frank Takkinen: Great, thank you for taking my questions. I was hoping to start with a little bit more color on profitability. Sounds like it was likely margins in RMS that weighed on the adjusted EBITDA in the quarter, but I think there's maybe a little bit more OpEx than I was expecting in there, too. I was curious if you could unpack that at all and talk to some of the moving pieces around the adjusted EBITDA number. And then as a second part, how should we be thinking about adjusted EBITDA trending with seasonality through the rest of the fiscal year?
Frank Takkinen: Great, thank you for taking my questions. I was hoping to start with a little bit more color on profitability. Sounds like it was likely margins in RMS that weighed on the adjusted EBITDA in the quarter, but I think there's maybe a little bit more OpEx than I was expecting in there, too. I was curious if you could unpack that at all and talk to some of the moving pieces around the adjusted EBITDA number. And then as a second part, how should we be thinking about adjusted EBITDA trending with seasonality through the rest of the fiscal year?
Speaker #3: Great, thank you for taking my questions. I was hoping to start with a little bit more color on profitability. It sounds like it was likely margins in RMS that weighed on the adjusted, and there was more OPEX than I was expecting in there too.
Speaker #3: I was curious if you could unpack that at all and talk to some of the moving pieces around the adjusted EBITDA, EBITDA in the quarter, but I think there's maybe a little bit number.
Speaker #3: And then as a second part, how should we be thinking about adjusted EBITDA trending with seasonality through the rest of the fiscal year?
Speaker #4: Okay, Frank, good morning. First, I'll address be pretty much the same as last year. The first quarter is always been a—and we'd like to find a way to smooth that
Bob Leasure: Okay, Frank, good morning. First, address seasonality. I think that the seasonality will be pretty much the same as last year. The first quarter has always been, and we'd like to find a way to smooth that out, but unfortunately, the first quarter has always been a little bit tougher. As we go through the closures to the universities and some of our clients, and Thanksgiving over the holiday season, the only other seasonality issue that we may really come across is if weather significantly can impact our business. And we did have some weather in January that, you know, affected the last week of January, but typically, we did make that up during February and March. But you know, sometimes that can also impact shipping, if you will.
Bob Leasure: Okay, Frank, good morning. First, address seasonality. I think that the seasonality will be pretty much the same as last year. The first quarter has always been, and we'd like to find a way to smooth that out, but unfortunately, the first quarter has always been a little bit tougher. As we go through the closures to the universities and some of our clients, and Thanksgiving over the holiday season, the only other seasonality issue that we may really come across is if weather significantly can impact our business. And we did have some weather in January that, you know, affected the last week of January, but typically, we did make that up during February and March. But you know, sometimes that can also impact shipping, if you will.
Speaker #4: Quarter has always been a little bit the closures, to the tougher. As we go through Capital Markets.
Speaker #4: In Thanksgiving and over the holiday season, the only other seasonality issue that we may really come across is business. And we did have some weather in January that affected the last week of universities and some of our clients that up during February and March.
Speaker #4: But sometimes that can also impact shipping, if you seasonality. I think that the seasonality will... will. In terms of our margins and OPEX, I do think we had some increase in expenses that have come through in some sold, mainly if you look at some—if weather significantly can impact our—of the animal costs, or January.
Bob Leasure: In terms of our margins and OpEx, I do think we had some increase in expenses that have come through, you know, in some of our cost of goods sold. Mainly, you know, if you look at some of the animal costs or tariffs that may have come through that we've not passed along. A lot of what we do in terms of our quotes, if you will, and we've alluded to the pricing stabilizing. But again, what we started quoting last summer in March, April, May, June, some of that pricing and some of those price increases that came through that we made amended in our pricing in the summer, we won't see that really come through until 9 to 12 months later.
Bob Leasure: In terms of our margins and OpEx, I do think we had some increase in expenses that have come through, you know, in some of our cost of goods sold. Mainly, you know, if you look at some of the animal costs or tariffs that may have come through that we've not passed along. A lot of what we do in terms of our quotes, if you will, and we've alluded to the pricing stabilizing. But again, what we started quoting last summer in March, April, May, June, some of that pricing and some of those price increases that came through that we made amended in our pricing in the summer, we won't see that really come through until 9 to 12 months later.
Speaker #4: tariffs. That may have come But typically, we didn't make what we do in terms of our quotes, if you will, and we've alluded to the pricing of our cost-of-goods stabilizing, but again, what we started quoting last summer pricing and some of June, some of that and in March, April, May, through that we may have amended in our pricing in the summer, we through that we have not passed along.
Speaker #4: Won't see that really come through until 9 to 12 months later. If you think about it, a lot of our quoting, we may quote one quarter.
Bob Leasure: If you think about it, some of our quoting, we may quote one quarter. It may be 3 or 4 months before it's awarded, maybe another 3 or 4 months before that starts, which means you could be out 9 to 12 months before you start to see those margins. So, I think we'll continue to see margins improve in the back half of this year also, as I think some of the pricing and some of the cost increases get passed along. So, you know, yeah, I mean, it was. I think that we were a little, you know, I said, I think frustrated that we didn't maybe have more volume of the NHPs.
Bob Leasure: If you think about it, some of our quoting, we may quote one quarter. It may be 3 or 4 months before it's awarded, maybe another 3 or 4 months before that starts, which means you could be out 9 to 12 months before you start to see those margins. So, I think we'll continue to see margins improve in the back half of this year also, as I think some of the pricing and some of the cost increases get passed along. So, you know, yeah, I mean, it was. I think that we were a little, you know, I said, I think frustrated that we didn't maybe have more volume of the NHPs.
Speaker #4: It may be three or four months before it's awarded. It may be another three or four months before that starts, which means you could be out nine to twelve months before you start to see those margins.
Speaker #4: So I think we'll continue to see margins improve in the back half of this year. Also, those price increases that came as I think some of the pricing and some of the cost increases got passed along.
Speaker #4: So, yeah, I mean, I think that we were a little—I had more volume of the NHPs that was—I thought, significantly less than we would have expected or significantly less than it was prior year in terms of volume.
Bob Leasure: It was, I thought, significantly less than we would have expected or significantly less it was prior year in terms of volume. But we were able to overcome quite a bit of that with some of the DSA growth and some of our services growth. And, you know, I think we'll be fine going forward. As I said, I think we'll make up the volume also before the year is over.
Bob Leasure: It was, I thought, significantly less than we would have expected or significantly less it was prior year in terms of volume. But we were able to overcome quite a bit of that with some of the DSA growth and some of our services growth. And, you know, I think we'll be fine going forward. As I said, I think we'll make up the volume also before the year is over.
Speaker #4: But we were able to say I think frustrated that we didn't maybe overcome quite a bit of that with some of the DSA growth and some of our services growth.
Speaker #4: And I think we'll be fine going forward. As I said, I think we'll make up the volume also before the year's end.
Speaker #4: over.
Speaker #3: Got it. That's helpful.
Frank Takkinen: Got it. That's helpful. And then maybe just for my second one, I wanted to ask a little bit more on DSA awards. Obviously, that's been trending very positively, fourth quarter over one and, and highest, I think, since fiscal Q3 of 2020 or fiscal Q1 of 2024. So great to see that continue to trend positively. Maybe talk a little bit about, about why that has continued to be a little bit above where the industry is at, and then how that should translate into DSA growth for 2026.
Frank Takkinen: Got it. That's helpful. And then maybe just for my second one, I wanted to ask a little bit more on DSA awards. Obviously, that's been trending very positively, fourth quarter over one and, and highest, I think, since fiscal Q3 of 2020 or fiscal Q1 of 2024. So great to see that continue to trend positively. Maybe talk a little bit about, about why that has continued to be a little bit above where the industry is at, and then how that should translate into DSA growth for 2026.
Speaker #3: And then maybe just for my second one, I wanted to ask a little bit more on DSA awards. Obviously, that's been trending very positively fourth quarter over one and highest, I think, since fiscal Q3 of 2020 or fiscal Q1 of 2020 for—so great to see I continue to trend positively.
Speaker #3: Maybe talk a little bit about why that has continued to be a little bit above where the industry's at, and then how that should translate into DSA growth for—
Speaker #3: 2026. Yeah, if
Bob Leasure: Yeah, if you recall that when we talked last May, Investor Day, there are really a couple key pieces to what our plan was longer term. One is and one was dependent on our DSA growth, and then obviously then growth in margins. And the second one was then the site optimization cost. So again, on the DSA business, I would remind everybody, we are much smaller than some of the other people in the industry you may be comparing us to. So our ability to move the needle may be a little easier because of our size. But I believe that we've done a couple things that we focus on.
Bob Leasure: Yeah, if you recall that when we talked last May, Investor Day, there are really a couple key pieces to what our plan was longer term. One is and one was dependent on our DSA growth, and then obviously then growth in margins. And the second one was then the site optimization cost. So again, on the DSA business, I would remind everybody, we are much smaller than some of the other people in the industry you may be comparing us to. So our ability to move the needle may be a little easier because of our size. But I believe that we've done a couple things that we focus on.
Speaker #4: Last May or yesterday, there were really a—you recall that when we talked, a couple of key pieces to what our plan was on our DSA growth.
Speaker #4: And then obviously, then And the second one was then the side longer term. optimization remind everybody, we are a much smaller than on the DSA business, I would needle may be a little to.
Speaker #4: easier because of growth in margins. our size. But I believe that we've done a couple of things that we focus on. One is really making sure that we're on So our ability to move the time and have a high degree of cost.
Bob Leasure: One is really making sure that we're on time and have a high degree of communication with everything we do, and develop a great deal of trust with our customers. So I think we see increasing reoccurring sales from existing customers. In addition, we're still a fairly young company, so we're still seeing new customers come to us, as they get to know us and get introduced to themselves to us. And sometimes it may take a year or two before we get to know them, before we actually see some business. But we're starting to get, you know, I think, increasing expansion of our brand name out there, and that came with some of the increase in the sales force that we started two years ago.
Bob Leasure: One is really making sure that we're on time and have a high degree of communication with everything we do, and develop a great deal of trust with our customers. So I think we see increasing reoccurring sales from existing customers. In addition, we're still a fairly young company, so we're still seeing new customers come to us, as they get to know us and get introduced to themselves to us. And sometimes it may take a year or two before we get to know them, before we actually see some business. But we're starting to get, you know, I think, increasing expansion of our brand name out there, and that came with some of the increase in the sales force that we started two years ago.
Speaker #4: Deal of trust with our customers. So I think we see increasing—so again, some of the other people in the industry you may be comparing us to—customers. In addition, we're still a fairly young company.
Speaker #4: So we're still seeing new customers come to us as they get to know us and introduce themselves to us. And recurring sales from existing—sometimes it may take a year or two before we get to know them to where we actually see some business.
Speaker #4: But we're starting to communicate. With everything we do and develop, along with some of the increase in the sales force that we started two years ago.
Speaker #4: So, some of these things we initiated two years ago are starting to benefit brand name out there, and that came to them. Finally, we also have, I think, a great deal of scientific strength—a great pathology team, great scientific team.
Bob Leasure: So some of these things we initiated two years ago are starting to benefit. So then finally, we also have, I think, a great deal of scientific strength, a great pathology team, great scientific team, and I believe that we alluded to it in here, but some of the innovation and some of the things that we're doing in discovery, I think are transformational, and I think that will really be one of our strengths going forward. And I think it's starting to show more and more. So I hope that we can continue to expand on that in the future quarters.
Bob Leasure: So some of these things we initiated two years ago are starting to benefit. So then finally, we also have, I think, a great deal of scientific strength, a great pathology team, great scientific team, and I believe that we alluded to it in here, but some of the innovation and some of the things that we're doing in discovery, I think are transformational, and I think that will really be one of our strengths going forward. And I think it's starting to show more and more. So I hope that we can continue to expand on that in the future quarters.
Speaker #4: And I believe that we alluded to it in here, but some of the innovation, and some of the things that I think are transformational—and I think that will really be one of our strengths going forward.
Speaker #4: it's starting to show more and more. So I that in the future we're doing in discovery I hope that we can continue to expand on quarters.
Speaker #4: It's starting to show more and more. So, I think that in the future, as we're doing in discovery, I hope that we can continue to expand on quarters.
Speaker #3: Okay. That's helpful. Thanks.
Frank Takkinen: Okay, that's helpful. Thanks.
Frank Takkinen: Okay, that's helpful. Thanks.
Speaker #1: We'll move now to Dave Winley with Jefferies. Please go ahead.
Operator: We'll move now to Dave Windley with Jefferies. Please go ahead.
Operator: We'll move now to Dave Windley with Jefferies. Please go ahead.
Dave Windley: Hi, good, good morning. Thanks for taking my questions. I wanted to start on DSA revenue, your and backlog, I guess. Your conversion rate had been marching up pretty steadily over the last 6 quarters or so, and took a step back in Q1. I wondered if that has to do with, you mentioned, kind of seasonality and holidays. I wondered if that has to do with that, if it has anything to do with, you know, where your orders are coming and where you have available capacity. And kind of related to that, you're calling out the growth in discovery services, kind of more so than safety assessments.
Dave Windley: Hi, good, good morning. Thanks for taking my questions. I wanted to start on DSA revenue, your and backlog, I guess. Your conversion rate had been marching up pretty steadily over the last 6 quarters or so, and took a step back in Q1. I wondered if that has to do with, you mentioned, kind of seasonality and holidays. I wondered if that has to do with that, if it has anything to do with, you know, where your orders are coming and where you have available capacity. And kind of related to that, you're calling out the growth in discovery services, kind of more so than safety assessments.
Speaker #5: Hi. Good morning. Thanks for taking my questions. I wanted to start on DSA revenue and backlog, I guess. Your conversion rate had been marching up pretty—
Speaker #5: So, and took a step. And I think back in the first quarter. I wondered if that has to do with—you mentioned kind of seasonality and holidays.
Speaker #5: I wondered if that has to do with that, if it has anything to do with where your orders are coming and where you have available capacity, and kind of related to that, you're calling out the growth in discovery services kind of more so than safety assessments.
Speaker #5: I know you've made some investments in the discovery area, but again, is that a function of where you have capacity as much as where the demand is?
Dave Windley: I know you've made some investments in the discovery area, but again, is that, is that a function of where you have capacity as much as where the demand is? Thanks.
Dave Windley: I know you've made some investments in the discovery area, but again, is that, is that a function of where you have capacity as much as where the demand is? Thanks.
Speaker #5: Thanks.
Bob Leasure: Yes, you're correct. That discovery is where we probably have more capacity than some of our safety assessment. And we've grown a little bit of that capacity lately to get ready for next quarter and what we see coming down the road. So, I think, as far as the throughput, I think we are a little higher than conversion rate, I should say. I think we were a little higher than last year, just a point higher, and we've been trending higher quarter-over-quarter. I think some of that comes into the seasonality and the fact that the backlog just went up quite a bit. So, you know, hopefully we'll start to see that conversion rate increase.
Speaker #4: Yes, you're correct. That discovery is where we probably have more capacity than some of our safety. We've grown a little bit of assessment and that capacity lately to get ready for next quarter and what we see coming down the road.
Bob Leasure: Yes, you're correct. That discovery is where we probably have more capacity than some of our safety assessment. And we've grown a little bit of that capacity lately to get ready for next quarter and what we see coming down the road. So, I think, as far as the throughput, I think we are a little higher than conversion rate, I should say. I think we were a little higher than last year, just a point higher, and we've been trending higher quarter-over-quarter. I think some of that comes into the seasonality and the fact that the backlog just went up quite a bit. So, you know, hopefully we'll start to see that conversion rate increase.
Speaker #4: As far as the throughput, I think we are a little higher. So, than conversion rate, I should say, I think we were a little higher than last year—just higher quarter over quarter.
Speaker #4: I think some of that comes into the seasonality and the fact that the backlog just went up quite a bit. So hopefully conversion rate increase.
Speaker #4: And generally, yes, the discovery conversion rate comes a little quicker than the safety assessment usually starts a little bit sooner, may take nine through and the discovery can assessment conversion rate.
Bob Leasure: Generally, yes, the discovery conversion rate comes, it comes a little quicker than the safety assessment conversion rate. Safety assessment usually starts a little bit sooner, may take 9 months once we get PO to get through, and the discovery can take a matter of weeks to fewer months. I also think something a little bit different in the discovery, in the last quarter, is that we were getting some discovery revenue that's much that may have a bit longer lead time than normal, and some blanket POs for some large recurring business that's taking place, and that may have dropped it down a little bit.
Bob Leasure: Generally, yes, the discovery conversion rate comes, it comes a little quicker than the safety assessment conversion rate. Safety assessment usually starts a little bit sooner, may take 9 months once we get PO to get through, and the discovery can take a matter of weeks to fewer months. I also think something a little bit different in the discovery, in the last quarter, is that we were getting some discovery revenue that's much that may have a bit longer lead time than normal, and some blanket POs for some large recurring business that's taking place, and that may have dropped it down a little bit.
Speaker #4: take a matter of we'll start to see that different in the discovery and in the last Safety quarter is that we were getting some discovery revenue that's much that may have a little bit longer lead time than normal.
Speaker #4: And some blanket POs for some large, recurring business that's taking place, and that may have dropped it down a little bit.
Speaker #5: Okay. Flipping Bob to the RMS business, you've taken over a period of time, you've taken significant amounts of operating costs out, lease exits, etc., you had a couple more of those.
Dave Windley: Okay. Flipping, Bob, to the RMS business, you've taken, over a period of time, you've taken significant amounts of operating costs out, lease exits, et cetera. You had a couple more of those. I guess two questions. The simple one would be, were those lease exits late in the quarter such that we should expect some additional incremental, you know, cost outs for the sequential quarter? And then two more, I guess, bigger picture. As you're taking that operating cost out, you're, you know, like, at least in this quarter, and you talked about NHP activity, but we're not seeing the, you know, the operating leverage benefits of that.
Dave Windley: Okay. Flipping, Bob, to the RMS business, you've taken, over a period of time, you've taken significant amounts of operating costs out, lease exits, et cetera. You had a couple more of those. I guess two questions. The simple one would be, were those lease exits late in the quarter such that we should expect some additional incremental, you know, cost outs for the sequential quarter? And then two more, I guess, bigger picture. As you're taking that operating cost out, you're, you know, like, at least in this quarter, and you talked about NHP activity, but we're not seeing the, you know, the operating leverage benefits of that.
Speaker #5: The simple one would, I guess, be: were those lease exits late in the quarter, such that we should expect some additional incremental cost outs for the sequential quarter?
Speaker #5: And then two, more I months.
Speaker #5: Guess bigger operating cost picture, as you're taking that out—at least in this quarter—and you talked about NHP activity, but we're not seeing the operating that.
Dave Windley: Help me understand, you know, what is shading that or when we will begin to see that operating leverage in RMS from those cost outs? Thanks.
Speaker #5: Help me understand what leverage benefits of Once we get PO to get it is shading that or when we will begin to see that operating leverage in RMS from those cost outs?
Dave Windley: Help me understand, you know, what is shading that or when we will begin to see that operating leverage in RMS from those cost outs? Thanks.
Speaker #5: Thanks.
Speaker #4: I think some of the leverage didn't show up because of the HPs, so that overshadowed some of the leverage. But you were also correct that we will see some of those costs come out next quarter.
Bob Leasure: I think some of the operating leverage didn't show up because of the significantly reduced volume in the NHPs. So that overshadowed some of the leverage. But you are also correct that, you know, we will see some of those costs come out next quarter. It's not only the facility, but as you ramp up these new facilities, we're building out and expanding existing facilities that are gonna be much more efficient than the facilities that we are closing. So we are not only closing. We're closing our oldest facilities. These usually have very high maintenance costs, not as efficient, higher labor cost, and then the related lease cost to it.
Bob Leasure: I think some of the operating leverage didn't show up because of the significantly reduced volume in the NHPs. So that overshadowed some of the leverage. But you are also correct that, you know, we will see some of those costs come out next quarter. It's not only the facility, but as you ramp up these new facilities, we're building out and expanding existing facilities that are gonna be much more efficient than the facilities that we are closing. So we are not only closing. We're closing our oldest facilities. These usually have very high maintenance costs, not as efficient, higher labor cost, and then the related lease cost to it.
Speaker #4: It's not only the facility, but as you ramp up these new facilities, we're building out and expanding existing facilities that are going to be much more efficient than the facilities we're closing. We're closing our oldest facilities with significantly reduced volume. I also think something a little bit—facilities that will take weeks to fewer months.
Speaker #4: These are usually have very high maintenance costs. Not as efficient. Higher labor cost to it. And at some point, as you're bringing these new facilities up before you close the other ones down, you're running duplicate facilities.
Bob Leasure: So, at some point, as you're bringing these new facilities up, before you close the other ones down, you're running duplicate facilities. So I think we are starting to see, internally, we can see some of the costs starting to come out, and we can see the margins of this, of the, I should say, small animal business improve, but some of that was overshadowed by the lack of volume in the NHP business this quarter.
Bob Leasure: So, at some point, as you're bringing these new facilities up, before you close the other ones down, you're running duplicate facilities. So I think we are starting to see, internally, we can see some of the costs starting to come out, and we can see the margins of this, of the, I should say, small animal business improve, but some of that was overshadowed by the lack of volume in the NHP business this quarter.
Speaker #4: So I think we are starting to see internally we can see some of the costs starting to come out. And we can see the are closing.
Speaker #4: margins of the I should say small animal business improve but some of that was So we are not only overshadowed by the lack of volume in the NHP business this quarter.
Speaker #5: So last question quickly. On the NHPs, can you give us order of magnitude how year over
Dave Windley: So last question, quickly. On the NHPs, can you give us order of magnitude? How much was that volume down year over year?
Dave Windley: So last question, quickly. On the NHPs, can you give us order of magnitude? How much was that volume down year over year?
Bob Leasure: Probably about 25%. It was-
Speaker #4: Probably about
Bob Leasure: Probably about 25%. It was-
Speaker #4: 25%. It much was that volume down was and the NHPs, we've had that before. Well, it's not a straight line. In terms of when they go
Dave Windley: Okay.
Dave Windley: Okay.
Bob Leasure: And, you know, and NHPs, we've had that before, where it's not a straight line, in terms of when the, when they go out. And I think we've done a nice job of really reducing our dependency on, on the importation of NHPs. But, you know, the, if we had, you know, if we had shipped an additional 25% out, like we did last year or quarter, or, or anywhere close to what we did Q3 or Q4, you know, I think you'd, we'd have, we'd have probably seen a little bit more of those efficiencies come through, Dave. But, hopefully, we'll see that in the, in the, in the future quarters throughout the year.
Bob Leasure: And, you know, and NHPs, we've had that before, where it's not a straight line, in terms of when the, when they go out. And I think we've done a nice job of really reducing our dependency on, on the importation of NHPs. But, you know, the, if we had, you know, if we had shipped an additional 25% out, like we did last year or quarter, or, or anywhere close to what we did Q3 or Q4, you know, I think you'd, we'd have, we'd have probably seen a little bit more of those efficiencies come through, Dave. But, hopefully, we'll see that in the, in the, in the future quarters throughout the year.
Speaker #4: And I think we've done a nice job of really reducing our dependency on NHPs. But if we, on the importation year—25% out like we did at the operating level, like we did Q3 or Q4—I think you'd see that come through, Dave.
Speaker #4: year or a quarter, or we're close to what
Speaker #4: But hopefully we'll see that in the future.
Speaker #5: All
Speaker #5: right. Thank you. I'll drop out. quarters, throughout the year. Thanks.
Dave Windley: All right. Thank you. I'll drop out. Thanks.
Dave Windley: All right. Thank you. I'll drop out. Thanks.
Speaker #4: you.
Bob Leasure: Thank you.
Bob Leasure: Thank you.
Operator: We'll turn next to Matt Hewitt with Craig-Hallum Capital Group. Please go ahead.
Operator: We'll turn next to Matt Hewitt with Craig-Hallum Capital Group. Please go ahead.
Speaker #6: Group, please go ahead. We'll turn.
Speaker #6: Group. Please go ahead. We'll turn
Speaker #7: Good
Matt Hewitt: Good morning. Thanks for taking the questions. Maybe first up, you noted in your prepared remarks that you've been making some progress in signing some new relationships on the NAM side. I'm just curious if you could provide a little bit more color on those relationships and how you expect those to kind of drive incremental revenues going forward.
Matt Hewitt: Good morning. Thanks for taking the questions. Maybe first up, you noted in your prepared remarks that you've been making some progress in signing some new relationships on the NAM side. I'm just curious if you could provide a little bit more color on those relationships and how you expect those to kind of drive incremental revenues going forward.
Speaker #7: remarks that you've been making first up, you noted in your prepared
Speaker #7: the NAMS side. I'm just curious if you could some progress in signing Thank next to Matt Hewitt with Craig Hallam Capital provide a little bit more color on those relationships and how you expect those to kind of drive
Speaker #7: incremental revenues going forward.
Speaker #4: Well, John's on the call. John may be able to help if we had to ship that additional help—more in terms of if you're going to get into the science.
Bob Leasure: Well, we have. John's on the call. John may be able to help more in terms of if we're gonna get into the science. But I think this is part of what we're doing from an innovation standpoint, and we've had. I will say this: we've been doing some R&D. We do have a line for R&D in our budget. We've been working on that and developing these relationships. And I think this innovation and what we're is gonna be a key part of our future and a key part of our industry. And you know, we've got. We don't want to become, and we want to avoid becoming a commodity. And to do that, we've got to be able to lead with innovation.
Bob Leasure: Well, we have. John's on the call. John may be able to help more in terms of if we're gonna get into the science. But I think this is part of what we're doing from an innovation standpoint, and we've had. I will say this: we've been doing some R&D. We do have a line for R&D in our budget. We've been working on that and developing these relationships. And I think this innovation and what we're is gonna be a key part of our future and a key part of our industry. And you know, we've got. We don't want to become, and we want to avoid becoming a commodity. And to do that, we've got to be able to lead with innovation.
Speaker #4: But I think this is part of what we're doing from an innovation standpoint. We've had I will say this. We've been doing some R&D.
Speaker #4: We do have a line for R&D in our budget. We've been working on that and developing these relationships. I think this is a key part of our future and a key part of our industry. We don't want to become, and we want to avoid becoming, a commodity.
Speaker #4: And to do that, we've got to be able to lead with innovation. And I think we have some things that are going to be transformative, as innovation and what is going to be, as I said, in the future.
Bob Leasure: I think we have some things that are gonna be transformative, as I said, in the future, and I think some of our customers see that. I think that's really benefiting right now our brand and is benefiting why we're seeing some increased volume. But I'll let John do you want to add any more to that? We've been somewhat careful, and maybe, Matt, I would tell you, we may have an investor day in the future here where we can talk a little bit more about it. But right now, John, is there anything else you'd want to add to that?
Bob Leasure: I think we have some things that are gonna be transformative, as I said, in the future, and I think some of our customers see that. I think that's really benefiting right now our brand and is benefiting why we're seeing some increased volume. But I'll let John do you want to add any more to that? We've been somewhat careful, and maybe, Matt, I would tell you, we may have an investor day in the future here where we can talk a little bit more about it. But right now, John, is there anything else you'd want to add to that?
Speaker #4: And I think some of our customers see that. I think that's really benefiting right now our brand. And it's benefiting volume. But I'll let John, do you want to add anything more to that?
Speaker #4: We've done somewhat careful and maybe the future here where we can talk a little bit more about it. But right now, John, is there anything else Matt, I would tell you we may have an investor day in you'd want to add to that?
Speaker #3: No, just that the announcements that we've made over the past couple of months have given us access to technologies and tools that allow us really to pursue a program to matching human or matching animal models to human disease through the ability to look at data differently in a big way.
John Sagert: Well, just that the announcements that we've made over the past couple of months have given us access to technologies and tools that allow us really to pursue a program to matching human or matching animal models to human disease through the ability to look at data differently in a big way. And as Bob mentioned, we've got some internal initiatives that are using specific therapeutic areas to integrate those technologies and really validate the overall approach. But we needed to have access to tools that weren't currently robust within our existing footprint, and that was the basis for the announced collaborations.
John Sagert: Well, just that the announcements that we've made over the past couple of months have given us access to technologies and tools that allow us really to pursue a program to matching human or matching animal models to human disease through the ability to look at data differently in a big way. And as Bob mentioned, we've got some internal initiatives that are using specific therapeutic areas to integrate those technologies and really validate the overall approach. But we needed to have access to tools that weren't currently robust within our existing footprint, and that was the basis for the announced collaborations.
Speaker #3: And as Bob mentioned, we've got some internal initiatives that are using specific therapeutic areas to integrate those technologies and really validate the overall approach.
Speaker #3: But we needed to have access to tools that weren't currently robust within our existing footprint, and that was the basis for the announced collaborations.
Speaker #7: Got it. Then—you touched on this a little bit—but, with that’s helpful. And the weather, that impacted shipping and whatnot later in January.
Matt Hewitt: ... Got it. That's helpful. And then, you touched on this a little bit, but with the weather that impacted, you know, shipping and whatnot later in January, maybe, does that also impact your costs? I mean, the cold temperatures in particular reached your facilities, I would think, in Texas. Does that translate into some higher costs to maintain proper heating and all of that for the NHPs in particular? Or how does that impact you?
Matt Hewitt: ... Got it. That's helpful. And then, you touched on this a little bit, but with the weather that impacted, you know, shipping and whatnot later in January, maybe, does that also impact your costs? I mean, the cold temperatures in particular reached your facilities, I would think, in Texas. Does that translate into some higher costs to maintain proper heating and all of that for the NHPs in particular? Or how does that impact you?
Speaker #7: costs? I mean, the cold temperatures Maybe does that also impact your
Speaker #7: In particular, it reached your facilities, I would think, in Texas. Does that translate into some higher costs, to why we’re seeing some increased—to maintain proper heating and all of that—for the NHPs in particular?
Speaker #7: Or how does that impact you?
Speaker #4: Well, this last couple of weeks, by the way, we also had that last year. Some cold weather comes through. But we're not transporting like we do I should say if the roads are going to have ice and the roads are going to and it's going to be dangerous.
Bob Leasure: Well, this last couple weeks, by the way, we also had that last year, some cold weather comes through. But we're not transporting like we do, and I should say, if the roads are gonna have ice and the roads are gonna be dangerous, we're not transporting some of our research models and animals. So, we're gonna be very careful about that. And so that may... And some of our customers are also gonna be impacted, and some of the universities are gonna close and not be able to take orders. So that's one part of it.
Bob Leasure: Well, this last couple weeks, by the way, we also had that last year, some cold weather comes through. But we're not transporting like we do, and I should say, if the roads are gonna have ice and the roads are gonna be dangerous, we're not transporting some of our research models and animals. So, we're gonna be very careful about that. And so that may... And some of our customers are also gonna be impacted, and some of the universities are gonna close and not be able to take orders. So that's one part of it.
Speaker #4: We're not transporting some of our research models and animals, so we're going to be very careful about that. Our customers are also going to be impacted.
Speaker #4: And some of the universities are going to close orders, so that's one part of it. We have some great people that, if it's going to be extra and not be able to take cold and we're concerned—and you could have ice, where you could have electricity issues—we have generators, of course.
Bob Leasure: The second part is, yes, we have some great people that, you know, if it's gonna be extra cold and we're concerned, and you could have ice, we could have electricity issue. We have generators, of course, but we're going to then. We have people that volunteer, and they stay, they stay at the facilities 24/7 to make sure that they're they can provide all, all the care that's, that's needed. And they do an extraordinary job. I wouldn't say it's a lot of, you know, it's not gonna move the needle that much in terms of cost, but it is quite impressive to see the care and the culture that these people have throughout the organization.
Bob Leasure: The second part is, yes, we have some great people that, you know, if it's gonna be extra cold and we're concerned, and you could have ice, we could have electricity issue. We have generators, of course, but we're going to then. We have people that volunteer, and they stay, they stay at the facilities 24/7 to make sure that they're they can provide all, all the care that's, that's needed. And they do an extraordinary job. I wouldn't say it's a lot of, you know, it's not gonna move the needle that much in terms of cost, but it is quite impressive to see the care and the culture that these people have throughout the organization.
Speaker #4: But we're going to then we have people that volunteer. And they stay at the facilities 24/7 to make sure that they're they can needed.
Speaker #4: And they do an extraordinary job. I wouldn't say it's a lot of it's not going to change the needle that impressive to see the care people have with and the culture that these spell went from obviously from Texas all the way all through the throughout the organization.
Speaker #4: Much in terms of cost, but it is quite, Bob Leasure, for any additional or closing awards. And continued focus on customer satisfaction, integration, and growth in the DSA efficiency.
Bob Leasure: This last cold spell went from, you know, obviously from Texas all the way through the East. And there were some just extraordinary efforts and voluntary people volunteering their time and spending weekends and the week, just 24/7, taking care of the facilities and the animals, and it's quite impressive. So, to anyone listening, thank you once again for what you do and for caring for everything we do.
Bob Leasure: This last cold spell went from, you know, obviously from Texas all the way through the East. And there were some just extraordinary efforts and voluntary people volunteering their time and spending weekends and the week, just 24/7, taking care of the facilities and the animals, and it's quite impressive. So, to anyone listening, thank you once again for what you do and for caring for everything we do.
Speaker #4: And there were some just extraordinary efforts and people volunteering their time and spending this last cold 24/7 taking care of the facilities and the animals.
Speaker #4: And it's quite impressive. So to extend it, by just listening, thank you once again for what you provide all the care that's do and for caring for everything we do.
Speaker #7: Understood. All right. Thank
Matt Hewitt: Understood. All right. Thank you.
Matt Hewitt: Understood. All right. Thank you.
Speaker #7: you. With no further questions, Incu at this
Operator: With no further questions in queue at this time, I'd like to turn the floor back over to Bob Leasure for any additional or closing comments.
Operator: With no further questions in queue at this time, I'd like to turn the floor back over to Bob Leasure for any additional or closing comments.
Speaker #6: At this time, I'd like to turn the floor back over to comments.
Speaker #4: Thank you. As I said, we were pleased with the recent
Bob Leasure: Thank you. We're, as I said, we are pleased with the recent growth in the, in the DSA revenue quoting awards and continued focus on customer satisfaction, integration, and efficiency, and the cost reductions in the RMS business. We believe this progress has been made possible by our focus on execution, and we'll maintain our commitment to client satisfaction and continuing innovation. We're making progress on the financial goals outlined last year. We're continuing to prioritize our strategic review of our capital structure and improving our balance sheet. I appreciate the support of our lenders and what they've provided to our management team and the company, and for the shareholders who continue to support us. I continue to believe that we are a stronger company today, and I'm confident in our plan for continued improvement in the future. Thank you for joining us today.
Bob Leasure: Thank you. We're, as I said, we are pleased with the recent growth in the, in the DSA revenue quoting awards and continued focus on customer satisfaction, integration, and efficiency, and the cost reductions in the RMS business. We believe this progress has been made possible by our focus on execution, and we'll maintain our commitment to client satisfaction and continuing innovation. We're making progress on the financial goals outlined last year. We're continuing to prioritize our strategic review of our capital structure and improving our balance sheet. I appreciate the support of our lenders and what they've provided to our management team and the company, and for the shareholders who continue to support us. I continue to believe that we are a stronger company today, and I'm confident in our plan for continued improvement in the future. Thank you for joining us today.
Speaker #4: And the cost reductions in the RMS business. We believe this progress has been made possible by our focus on execution and will maintain our commitment to innovation.
Speaker #4: We're making progress on financial goals outlined last year. We're continuing to prioritize our strategic review of our capital structure sheet. I appreciate the support of our lenders and what they've provided to our management team and the company.
Speaker #4: and improving our balance. Thank you.
Speaker #4: And for the shareholders who continue to support us, I continue to believe that we are a stronger company today, and I'm confident in our plan for continued improvement in the future.
Speaker #4: Thank you for joining us today.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
