Inotiv, Inc. Announces Fourth Quarter and Full Year Fiscal 2021 Financial Results

Inotiv, Inc. Announces Fourth Quarter and Full Year Fiscal 2021 Financial Results

WEST LAFAYETTE, IN, December 16, 2021 - Inotiv, Inc. (NASDAQ: NOTV) (the "Company", "We", "Our" or "Inotiv"), a leading contract research organization specializing in nonclinical and analytical drug discovery and development services and research models and related products and services, today announced financial results for the three months ("Q4 FY 2021") and twelve months ("12M FY 2021") ended September 30, 2021.

4Q FY 2021 Highlights

12M FY 2021 Highlights

Significant Events during Q4 FY 2021

Robert Leasure, Jr., the Company's President and Chief Executive Officer, commented, "Our strong fourth quarter fiscal 2021 financial results capped off a transformational year for Inotiv, reflecting our success expanding existing operations and services, starting up new services, and acquiring strategic assets. In fiscal 2021, we invested in state-of-the-art DMPK and cell and molecular biology laboratories at our St. Louis facility and additional vivarium capacity at our West Lafayette facility. We also developed new in-house capabilities through internal startups in the areas of SEND reporting, cardio safety pharmacology, clinical pathology, biotherapeutics, histopathology for devices, and genetic toxicology. And we consummated the strategic acquisitions of HistoTox Labs, Bolder BioPATH, and Gateway Pharmacology, as well as critical genetic toxicology assets and modern cell and molecular biology instrumentation. Finally, we made significant growth-enabling investments in G&A, including in our people, infrastructure, and systems."

Mr. Leasure concluded, "We continued our momentum after quarter-end, completing the acquisitions of Plato BioPharma, a complementary in vivo pharmacology platform, and Envigo, a leading global provider of research models and services. Envigo adds meaningful scale, expands our geographic footprint, diversifies our customer base, and creates significant cross-selling opportunities. Reported earnings this quarter and fiscal year were impacted by our strategic investments in internal startup costs, acquisition-related expenses, and recruiting and retention-related expenses. We believe that the investments we are making today will drive future growth and deliver higher operating margins and improved service for our clients. Over the longer term, we are targeting organic revenue growth in the high-single to low-double digits and EBITDA margins in the range of 18% to 22%. In the near-term, we are optimistic for continued strong revenue growth based on our quarter-end backlog of $81.4 million as well as anticipated contributions from recent acquisitions, internal expansions and new services."

Revenue increased 90.7% to $30.1 million, compared with $15.8 million in Q4 FY 2020, which was primarily driven by our service segment. Service segment revenue for Q4 FY 2021 increased 93.3% to $29.0 million, from $15.0 million in the prior year period. The increase in Service revenue was due to internal growth year over year as well as incremental revenue from the acquisitions of HistoTox Labs, Bolder BioPATH and Gateway Pharmacology.

Cost of Service revenue as a percentage of Service revenue decreased to 65.8% in Q4 FY 2021, from 71.1% in the prior year period, reflecting greater utilization of recently expanded capacity.

Product segment revenue increased 40.9% to $1.1 million in Q4 FY 2021, from $0.8 million in the prior year period.

Cost of Product revenue as a percentage of Product revenue increased to 64.4% in Q4 FY 2021 from 63.4 % in the prior year period, due to mix of products sold.

Operating expenses increased by 128.8%, or $7.7 million, as the Company continued to build the infrastructure for growth, which included additional headcount, recruiting, relocation expense, sales commissions, non-cash stock compensation expense, costs associated with acquisitions and investments in building out new service offerings. Additionally, there was an increase in selling expenses due to an increase in travel cost as our sales and marketing teams have traveled more as the COVID-19 pandemic eases and an increase in commissions due to higher sales awards. During Q4 FY 2021, we continued investing in additional service offerings that we brought in house such as laboratory solutions, medical device pathology, biotherapeutics and genetic toxicology.

The Company believes that unallocated corporate G&A as a percentage of revenue will decline over the long-term as it continues to scale and grow its business. The Company's long-term objective is for unallocated corporate G&A to reach between 6% and 8% of revenue.

Net income in Q4 FY 2021 totaled $9.4 million, or $0.06 per diluted share, compared to a net loss of $(1.8) million, or $(0.16) per diluted share in Q4 FY 2020. Net income in Q4 FY 2021 was driven by gains of $4.9 million of PPP loan forgiveness and $8.4 million of fair value remeasurement on the convertible notes issued in September 2021.

Adjusted EBITDA increased to $4.3 million in Q4 FY 2021, compared to $156,000 in Q4 FY 2020 due to improved margins on higher revenue.

Total revenue increased 48.2% to $89.6 million in 12M FY 2021, from $60.5 million in the prior year period, driven primarily by our Service segment. Service segment revenue for 12M FY 2021 increased 50.1% to $85.8 million, from $57.2 million in the prior year period. The majority of the increase in revenue was due to internal growth, augmented by $11.8 million of incremental revenue from the acquisitions of HistoTox Labs, Bolder BioPATH, and Gateway Pharmacology.

Cost of Service revenue as a percentage of Service revenue decreased to 66.7% in 12M FY 2021, from 70.0 % in the prior year period. The reduction in Cost of Service revenue as a percentage of Service revenue is due primarily to improved operating leverage and the greater utilization of recently expanded capacity.

Product segment revenue increased 14.6% to $3.8 million in 12M FY 2021, from $3.3 million in the prior year period, reflecting higher sales of analytical instruments, partially offset by a decrease in Culex in-vivo sampling systems and other instruments.

Cost of Product revenue as a percentage of Product revenue in 12M FY 2021 decreased to 58.0%, from 67.6% in the prior year period, due to expense reductions implemented in the last half of FY 2020 and improved margins on higher sales.

Operating expenses in 12M FY 2021 increased year over year by 68.0%, or $14.5 million, as the Company continued to build the infrastructure for anticipated growth, which included additional headcount, recruiting, relocation expense, sales commissions, non-cash stock compensation expense, costs associated with acquisitions and investments in business development to build out new service offerings. For the 12M FY 2021, the Company began investing in additional service offerings such as software solutions and human resources to support existing internal expertise in the area of SEND (Standard for the Exchange of Nonclinical Data) data management and delivery investments in SEND reporting, safety pharmacology, clinical pathology, medical device pathology, biotherapeutics and genetic toxicology.

Net income for 12M FY 2021 totaled $10.9 million, or $0.19 per diluted share, compared to a net loss of $(4.7) million, or $(0.43) per diluted share, in the prior year period. Net income in FY 2021 was driven by gains of $4.9 million of PPP loan forgiveness in the fourth quarter, $8.4 million of fair value remeasurement on the convertible notes issued in September 2021 and the YTD impact of a non-cash tax benefit of $5.0 million relating to a partial release of the Company's valuation allowance for deferred tax liabilities acquired with the acquisitions of Bolder BioPATH and Gateway.

Adjusted EBITDA increased 223.5% to $9.3 million for 12M FY 2021, compared to $2.9 million for 12M FY 2020 due to improved margins on higher revenue.

Cash Provided by Operating Activities and Financial Condition

As of September 30, 2021, the Company had $156.9 million in cash and cash equivalents, $163.9 million of current and long-term debt, a $0 balance and $5.0 million of availability on its general line of credit, and a $1.7 million balance on a $3.0 million equipment loan.

In September 2021, the Company closed an offering of $140.0 million aggregate principal amount of 3.25% convertible senior notes due 2027. The gross proceeds to the Company were approximately $134.2 million after deducting the initial purchaser's discounts and commissions and estimated offering expenses. A portion of the proceeds, together with a new senior secured term loan facility agreement entered into in November 2021 were used in November 2021 to close on the acquisition of Envigo and to repay the outstanding bank debt under the Company's credit facilities that were in place as of September 30, 2021.

Cash provided by operating activities was $10.7 million for 12M FY 2021, compared to $1.3 million in 12M FY 2020. For the twelve months ended September 30, 2021, cash from operations, cash on hand, $2.1 million from an equipment line of credit and $2.8 million on borrowings from a term loan together funded capital expenditures of $12.5 million for the investment in laboratory equipment to increase capacity at all locations, facility improvements at the Fort Collins location and the purchase and expansion of our St. Louis facility. Borrowings on term loans totaling $15.0 million and proceeds from the issuance of common stock together funded the cash paid for acquisitions.

Management will host a conference call on Thursday, December 16, 2021, at 4:30 pm ET to discuss fourth quarter and fiscal year 2021 reported results.

Interested parties may participate in the call by dialing:

(877) 407-9753 (Domestic)

(201) 493-6739 (International)

The live conference call webcast will be accessible in the Investors section of the Company's website and directly via the following link:

For those who cannot listen to the live broadcast, an online replay will be available in the Investors section of Inotiv's web site at: https://www.inotivco.com/investors/investor-information/.

Non-GAAP to GAAP Reconciliation

This press release contains financial measures that are not calculated in accordance with generally accepted accounting principles in the United States (GAAP), including Adjusted EBITDA for the three and twelve months ended September 30, 2021 and 2020 and selected business segment information for those periods. Adjusted EBITDA as reported herein refers to a financial performance measure that excludes from net income (loss) income statement line items interest expense and income taxes (benefit) expense, as well as non-cash charges for depreciation and amortization, stock option (benefit) expense, United Kingdom lease liability reversal benefit, non-recurring acquisition and integration costs and other non-recurring third-party costs, such as recruiting costs, consulting fees related to the adoption of two accounting standards, and expenses for rebranding and new website launch. The adjusted business segment information excludes from operating income and unallocated corporate G&A these same expenses.

The Company believes that these non-GAAP measures provide useful information to investors. Among other things, they may help investors evaluate the Company's ongoing operations. They can assist in making meaningful period-over-period comparisons and in identifying operating trends that would otherwise be masked or distorted by the items subject to the adjustments. Management uses these non-GAAP measures internally to evaluate the performance of the business, including to allocate resources. Investors should consider these non-GAAP measures as supplemental and in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.

Management has chosen to provide this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of our results and to illustrate our results giving effect to the non-GAAP adjustments shown in the reconciliation. Management strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and cautions investors that the non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Inotiv, Inc. is a leading contract research organization dedicated to providing nonclinical and analytical drug discovery and development services and research models and related products and services. The Company's products and services focus on bringing new drugs and medical devices through the discovery and preclinical phases of development, all while increasing efficiency, improving data, and reducing the cost of taking new drugs to market. Inotiv is committed to supporting discovery and development objectives as well as helping researchers realize the full potential of their critical R&D projects, all while working together to build a healthier and safer world. Further information about Inotiv can be found here: https://www.inotivco.com/.

This release may contain forward-looking statements that are subject to risks and uncertainties including, but not limited to, risks and uncertainties related to changes in the market and demand for our services and products, the development, marketing and sales of products and services, changes in technology, industry and regulatory standards, the timing of acquisitions and the successful closing, integration and business and financial impact thereof, the impact of the COVID-19 pandemic on the economy, demand for our services and products and our operations, including the measures taken by governmental authorities to address the pandemic, which may precipitate or exacerbate other risks and/or uncertainties and various other market and operating risks, including those detailed in the Company's filings with the U.S. Securities and Exchange Commission.

Financial Tables Follow:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Note - Certain prior quarter and year to date amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

RECONCILIATION OF GAAP TO NON-GAAP EARNINGS

RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION