Inotiv, Inc. Announces Second Quarter Fiscal 2023 Financial Results Updates Select Full Year Fiscal 2023 Financial Guidance

Announces Second Quarter Fiscal 2023 Financial Results

Full Year Fiscal 2023 Financial Guidance

LAFAYETTE, IN, May 11, 2023- 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 ("Q2 FY 2023") and six months ("YTD FY 2023") ended March 31, 2023.

Q2 FY 2023 Highlights

This is a non-GAAP financial measure. Refer to "Non-GAAP to GAAP Reconciliation"

in this release for further information.

Select Financial Guidance for the Full Fiscal Year Ending September 30, 2023 ("FY 2023")

Company's guidance takes into account a number of factors, including existing DSA backlog, current sales pipeline, trends in cancellations

and delays, trends in pricing, the impact of new products and services and efficiency initiatives including the recent and planned facility

consolidations in the U.S. and globally. In addition, the guidance presented below represents the Company's best efforts to estimate

the impact of the NHP supply disruption that was identified and disclosed in the first quarter of fiscal 2023. For FY 2023, we are confirming

guidance of at least $580 million of revenue and capital expenditures of no more than 5% of revenue during FY 2023. However, as a result

of the increased legal and third party fees incurred during YTD FY 2023, we are updating our guidance for Adjusted EBITDA to at least

$70 million down from previous guidance of $75 million. We continue to expect that we will remain in compliance with our financial covenants

Jr., President and Chief Executive Officer, commented, "We are very pleased with the pace and progress of our integration and site

optimization initiatives, the growth we are achieving in new service lines, and the overall positive returns being delivered by the investments

we have made in expanding our business over the last 12 to 18 months. We also continue to address the current NHP supply disruption issues

in the U.S., which includes establishing procedures aimed at providing additional assurances that future NHP imports are purpose-bred,

and pursuing alternative sourcing to meet client demand."

Leasure continued, "Our recent investments have expanded our services for the drug discovery and development industry. These new

services, including expanded genetic toxicology and safety pharmacology offerings, new biotherapeutics services, and enhanced proteomic

technologies, increase our ability to support the development of important new therapeutics including cell and gene therapies, allow

us to improve speed to market for our clients, expand our market and client base, and help to reduce our outsourcing expenses. We believe

the completion of these growth and consolidation activities will improve our ability to increase sales and enhance margins. I am grateful

for the continuing support of the Inotiv team as we collectively address both the challenges and opportunities facing our business and

industry while continuing to deliver a high level of client service."

Higher total revenue was driven by a

$7.9 million increase in DSA revenue and a $3.3 million increase in RMS revenue. The increase in the DSA revenue was primarily driven

by increasing revenue within the current operating structure. Additionally, we are begining to see increased revenue from genetic toxicology

services in connection with new business at our Rockville facility. The increase in RMS revenue was due primarily to favorable pricing

across several products, particularly NHPs, partially offset by the negative impact of lower volumes of NHP sales.

Profit2 (in millions)

excludes amortization of intangible assets

profit in Q2 FY 2023 was the result of a $2.8 million increase in DSA gross profit from Q2 FY 2022, and a $2.6 million decrease in RMS

gross profit from Q2 FY 2022. The increase in DSA gross profit as a percent of DSA revenue was driven primarily by increasing sales within

the current operating structure. The decrease in RMS gross profit as a percent of RMS revenue was primarily due to the mix of products

sold, inflationary pressure on product expenses, energy and wages and some duplication of expenses as we transfer production to implement

our site optimization plans, partially offset by favorable pricing for several different RMS product lines. Additionally, the Company

experienced favorable margin impacts from the site closures of our Cumberland and Dublin, VA facilities, which partially offset the inflationary

pressures described above.

Consolidated Net Loss

net loss for Q2 FY 2023 was $(9.6) million compared to consolidated net loss of $(6.7) million in Q2 FY 2022. Consolidated net loss for

Q2 FY 2023 included $13.0 million of depreciation and amortization expense, an increase of $3.1 million from Q2 FY 2022, and $1.8 million

of stock compensation expense, an increase of $0.6 million from Q2 FY 2022. Other increases in operating expenses were driven by increases

in general and administrative ("G&A") and other operating expenses, reflecting the integration of previous acquisitions,

increases in start-up costs related to our Rockville facility, higher compensation expense and higher legal and third party fees, among

other costs. Net loss for Q2 FY 2023 included $6.7 million in legal and third party fees. Based on current information, we expect legal

and third party fees to be lower in the third quarter of fiscal 2023. The Company also incurred $10.5 million of interest expense during

Q2 FY 2023 as compared to $7.5 million in Q2 FY 2022.

Higher total revenue

was driven by a $16.2 million increase in DSA revenue and a $33.5 million increase in RMS revenue. The increase in DSA revenue was primarily

driven by additional YTD FY 2023 revenue generated from Integrated Laboratory Systems, LLC ("ILS"), which was acquired on

January 10, 2022, plus new services related to genetic toxicicology and organic growth in general toxicology services. The increase

in the RMS revenue was due primarily to favorable pricing, particularly NHPs, partially offset by the negative impact of lower volumes

of NHP sales. Additionally, the increase in RMS revenue was impacted by the timing of contributions from acquisitions. Envigo was acquired

on November 5, 2021, RSI was acquired on December 29, 2021, and OBRC was acquired on January 27, 2022.

Profit2 (in millions)

excludes amortization of intangible assets

total gross profit in YTD FY 2023 was the result of a $3.6 million increase in DSA gross profit from YTD FY 2022, and a $1.1 million

decrease in RMS gross profit from YTD FY 2022. The decrease in DSA gross profit as a percent of DSA revenue was primarily due to laboratory

capacity investments and costs associated with the successful recruitment of scientists in YTD FY 2023, to begin adding services and

capacity, some of which became available in Q2 FY 2023 and some of which we expect to become available during the remainder of FY 2023.

The decrease in RMS gross profit as a percent of RMS revenue was primarily due to significantly reduced margins in the first fiscal quarter

of 2023 due to the mix of products sold and inflationary pressure on product expenses, energy and wages and some duplication of expenses

as we transfer production to implement our site optimization plans, partially offset by favorable pricing for several different RMS product

lines which were effective beginning in Q2 FY 2023, and favorable margin impacts from the site closures of our Cumberland and Dublin,

Consolidated Net Loss

net loss for YTD FY 2023 was $(96.6) million compared to consolidated net loss of $(90.1) million in YTD FY 2022. Consolidated net loss

for YTD FY 2023 included: a previously announced $66.4 million non-cash goodwill impairment charge related to our RMS segment; $26.3

million of depreciation and amortization expense, an increase of $10.4 million from YTD FY 2022; and $3.8 million of stock compensation

expense, a decrease of $21.2 million from YTD FY 2022. Other increases in operating expenses were driven by higher selling costs, primarily

due to increased revenue, higher G&A expenses, reflecting various acquisitions, higher legal, audit and third party fees and higher

start-up costs related to our Rockville facility, among other costs. Net loss for YTD FY 2023 included $10.1 million in legal and third

party fees. Based on current information, we expect legal and third party fees to be lower in the third quarter of fiscal 2023. Consolidated

net loss for YTD FY 2022 also included one-time charges of $56.7 million of fair value remeasurement of the embedded derivative component

of the convertible notes issued in September 2021 and $23.0 million of post combination stock compensation expense relating to the adoption

of the Envigo Equity Plan. Further, consolidated net loss included $21.0 million of interest expense during YTD FY 2023, up from $12.4

million in YTD FY 2022.

Cash Provided by Operating and

Financing Activities and Financial Condition

of March 31, 2023, the Company had $24.6 million in cash and cash equivalents and no borrowings on its $15.0 million revolving credit

facility. Total debt, net of debt issuance costs, as of March 31, 2023, was $374.1 million. We were in compliance with our debt

covenants as of March 31, 2023. Cash provided by operating activities was $5.4 million for YTD FY 2023, compared to cash provided

by operating activities of $4.0 million for YTD FY 2022. For YTD FY 2023, capital expenditures totaled $16.8 million.

DSA and RMS Activities

extended by one year the maturity of a $3.7 million unsecured seller payable pursuant to the stock purchase agreement ("SPA")

with Orient Bio, Inc. The unsecured seller payable, which was originally due on July 27, 2023, is now due July 27, 2024.

This extension did not affect the rights and remedies of any party to the SPA, nor alter, modify or amend or in any way affect any of

the terms and conditions, obligations, covenants or agreements contained in the SPA.

2023, the Company announced the expansion of its safety pharmacology offering with the validation and verification of a cardiopulmonary

telemetry study model in cynomolgus macaques. Offered through Inotiv's DSA business, telemetry allows for the continuous observation

of ECG, respiratory rate and volume, blood pressure and other cardiovascular parameters during preclinical safety studies.

host a conference call on Thursday, May 11, 2023, at 4:30 pm ET to discuss second quarter results for fiscal year 2023.