Inotiv, Inc. Announces Third Quarter Fiscal 2021 Financial Results

Inotiv, Inc. Announces Third Quarter Fiscal 2021 Financial Results

WEST LAFAYETTE, IN, August 11, 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, today announced financial results for the three months ("Q3 FY 2021") and nine months ("9M FY 2021") ended June 30, 2021.

Q3 FY 2021 Highlights

9M FY 2021 Highlights

Significant Events during Q3 FY 2021

Robert Leasure, Jr., the Company's President and Chief Executive Officer, commented, "We have made significant progress in our strategy to amass the critical building blocks for serving our predominantly emerging biopharma client base across the entire drug discovery and preclinical development continuum. Our strategy consists of (1) the expansion of existing operations and services, (2) the startup of new services, and (3) the acquisition of strategic assets. Our recent acquisitions of HistoTox Labs and Bolder BioPATH have been performing ahead of our expectations and now comprise our Boulder, Colorado operations. We also acquired Missouri-based Gateway Pharmacology Laboratories, which enhances our expertise in cardiovascular and renal pharmacology studies. In May 2021, we purchased the St. Louis facility and commenced the location's expansion, which is expected to add 20,000 square feet of capacity in the second quarter of fiscal 2022. We announced the start up of multiple new services and added assets and personnel to those services. We purchased key genetic toxicology assets from MilliporeSigma's BioReliance portfolio, which will help accelerate the stat up of our genetic toxicology business. We acquired modern cell and molecular biology instrumentation from a Tennessee-based laboratory that ceased operations in order to accelerate the startup of our biotherapeutics business, and we recently announced the hiring of a

leader to build our device histology and pathology business. We also have continued to make other strategic investments in G&A, including in our people, infrastructure, systems, and services."

Mr. Leasure concluded, "Reported earnings this quarter were impacted by our strategic investments in internal startup costs, acquisition-related expenses, and recruiting and retention-related expenses. We believe the investments we are making today will augment future growth and deliver higher operating margins and improved service for our clients over time. Looking ahead, we see tremendous cross-selling opportunities across our integrated services and will continue to strive to deliver superior client experiences. Our optimism for continued strong near-term growth is reinforced by our recent acquisitions and current expansion plans and new services, combined with our quarter-end backlog of $62.0 million."

Revenue increased 45.2% to $22.9 million, compared with $15.8 million in Q3 FY 2020 which was primarily driven by our service segment. Service segment revenue for Q3 FY 2021 increased 47.6% to $21.9 million, from $14.9 million in the prior year period. The increase in Service revenue was due to internal growth year over year as well as two months of revenue from the acquisitions of HistoTox Labs and Bolder BioPATH in Q3 FY 2021.

Cost of Service revenue as a percentage of Service revenue decreased to 67.1% in Q3 FY 2021, from 68.1% in the prior year period, reflecting greater utilization of recently expanded capacity.

Product segment revenue increased 6.0% to $1.0 million in Q3 FY 2021, from $0.9 million in the prior year period.

Cost of Product revenue as a percentage of Product revenue decreased to 56.3% in Q3 FY 2021 from 64.4% in the prior year period, due to expense reductions implemented in the last half of FY 2020 and improved margins on existing sales.

Operating expenses increased by 68.7%, or $3.8 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 Q3 FY 2021, we began 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 percent 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 loss in Q3 FY 2021 totaled $2.3 million, or $(0.15) per diluted share, compared to a net loss of $0.9 million, or $(0.08) per diluted share in Q3 FY 2020.

Adjusted EBITDA increased to $2.2 million in Q3 FY 2021, compared to $894,000 in Q3 FY 2020.

Total revenue increased 33.2% to $59.5 million in 9M FY 2021, from $44.7 million in the prior year period which was driven primarily by our Service segment. Service segment revenue for 9M FY 2021 increased 34.8% to $56.9 million, from $42.2 million in the prior year period. The majority of the increase in revenue

was due to internal growth, augmented by $4.3 million of incremental revenue from two months of revenue from the acquisitions of HistoTox Labs and Bolder BioPATH in Q3 FY 2021.

Cost of Service revenue as a percentage of Service revenue decreased to 67.2% in 9M FY 2021, from 69.0% 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 6.4% to $2.7 million in 9M FY 2021, from $2.5 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 9M FY 2021 decreased to 55.3%, from 68.9% in the prior year period, due to expense reductions implemented in the last half of FY 2020 and improved margins on existing sales.

Operating expenses in 9M FY 2021 increased year over year by 42.0%, or $6.5 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 9M FY 2021, we 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 loss for 9M FY 2021 totaled $3.4 million, or $(0.27) per diluted share, compared to a net loss of $2.9 million, or $(0.27) per diluted share, in the prior year period.

Adjusted EBITDA increased to $5.0 million for 9M FY 2021, compared to $2.6 million for 9M FY 2020.

Cash Provided by Operating Activities and Financial Condition

As of June 30, 2021, the Company had $24.7 million in cash and cash equivalents, a $0 balance and $5.0 million of availability on its general line of credit, and a $0.9 million balance on a $3.0 million equipment loan that is available until April 30, 2022.

In April 2021, the Company completed a public offering of 3,044,117 common shares. The net proceeds after deducting the underwriting discount and offering expenses payable by the Company were approximately $49.0 million. A portion of the proceeds was used in April 2021 to close the acquisitions of HistoTox Labs and Bolder BioPATH.

Cash provided by operating activities was $8.0 million for 9M FY 2021, compared to $1.6 million in 9M FY 2020. For the nine months ended June 30, 2021, cash from operations, cash on hand, $1.3 million from an equipment line of credit and borrowings on a term loan of $2.1 million together funded capital expenditures of $8.4 million for the investment in laboratory equipment to increase capacity at all locations, facility improvements at the Fort Collins location and the purchase of our St. Louis facility.

Management will host a conference call on Wednesday, August 11, 2021, at 4:30 pm ET to discuss third quarter reported results for fiscal year 2021.

Interested parties may participate in the call by dialing:

(877) 407-9753 (Domestic)

(201) 493-6739 (International)

The live conference call webcast also 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 webcast 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 nine months ended June 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 specializing in nonclinical and analytical drug discovery and development services. The Company focuses on developing innovative services supporting its clients' discovery and development objectives for improved decision-making and accelerated goal attainment. The Company's products focus on increasing efficiency, improving data, and reducing the cost of taking new drugs to market. Visit inotivco.com for more information about the Company.

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