Inotiv Q1 FY2026 Earnings Call - DSA Growth Offsets NHP Weakness, Debt Refinancing Underway

Jamie, Call Operator: 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 Stefan Halper with LifeSci Advisors. Please go ahead.

Stefan Halper, Investor Relations, LifeSci Advisors: 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 subjects 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.

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 afternoon, 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.

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 call for questions. It is now my pleasure to turn the call over to Bob Leasure, CEO. Bob, please go ahead.

Bob Leasure, President and Chief Executive Officer, Inotiv: 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, 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%.

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 12-month DSA awards have increased 34% over the prior 12-month period. 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. 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.

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.

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 the first quarter 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.

Our focus remains on improving revenue and margins in our DSA business and reducing costs, diversifying our sources of revenue, 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.

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.

Beth Taylor, Chief Financial Officer, Inotiv: Thank you, Bob, and good morning, everyone. For the first quarter of fiscal 2026, total revenue was $120.9 million, compared to $119.9 million in the first quarter 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 first quarter 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.

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 31st, 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.

The book-to-bill ratio for DSA in the first quarter of fiscal 2026 was 1.16 to 1, and our trailing-twelve-month book-to-bill was 1.08 to 1. 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 revenue for the first quarter 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.

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.

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 the first quarter 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 first quarter. 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. 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.

This is compared to consolidated net loss of $27.6 million or a $1.02 loss per diluted share in the first quarter of fiscal 2025. For the first quarter 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 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. The company has utilized and will continue to utilize its revolving credit facility during the normal course of business 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. Total debt, net of debt issuance costs as of December 31, 2025, was $405.8 million, compared to $402.1 million on September 30, 2025. This includes $118.2 million of convertible notes as of December 31, 2025, and our second lien notes of $24.7 million. Cash used in operating activities was $5.4 million for the three months ended December 31, 2025, compared to $4.5 million for the three months ended December 31, 2024.

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 site optimization plan, which allowed us to exit two lease facilities during the quarter. The first quarter of fiscal 2025 capital expenditures 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.

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.

Jamie, Call 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.

Frank Takkinen, Analyst, Lake Street Capital Markets: 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 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?

Bob Leasure, President and Chief Executive Officer, Inotiv: Okay, Frank, good morning. First, to address seasonality. I think that the seasonality will be pretty much the same as last year. The first quarter has always been a 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. 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 pr-

... price increases that came through, that we made amended in our pricing in the summer, we won’t see that really come through until 9-12 months later. If you think about it, some of our quoting, we may quote 1 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 9-12 months before you start to see those, 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 think frustrated that we didn’t maybe have more volume of the NHPs. 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.

Frank Takkinen, Analyst, Lake Street Capital Markets: 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 1 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.

Bob Leasure, President and Chief Executive Officer, Inotiv: You know, if you recall that when we talked last May, Investor Day, there are really a couple of 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.

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 recurring 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 introduce themselves to us. And sometimes it may take a year or two before we get to know them to where 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.

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, 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.

Frank Takkinen, Analyst, Lake Street Capital Markets: Okay, that’s helpful. Thanks.

Jamie, Call Operator: We’ll move now to Dave Windley with Jefferies. Please go ahead.

Dave Windley, Analyst, Jefferies: Hi, 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 six quarters or so, and took a step back in the first quarter. 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.

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.

Bob Leasure, President and Chief Executive Officer, Inotiv: 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.

Generally, yes, the discovery conversion rate comes a little quicker than the safety assessment conversion rate. Safety assessment usually starts a little bit sooner, may take nine months once we get PO to get it 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 little 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.

Dave Windley, Analyst, Jefferies: 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, is there - 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.

Help, help me understand, you know, what, what is, what is, you know, shading that or when we will begin to see that operating leverage in RMS from those cost outs? Thanks.

Bob Leasure, President and Chief Executive Officer, Inotiv: I think some of the operating leverage didn’t show up because of the significant 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 village, facility, 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 are usually have very high maintenance costs, not as efficient, higher labor cost, and then the related lease cost to it.

So, as 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 small animal business improve, but some of that was overshadowed by the lack of volume in the NHP business this quarter.

Dave Windley, Analyst, Jefferies: 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, President and Chief Executive Officer, Inotiv: Probably about 25%. It was-

Dave Windley, Analyst, Jefferies: Okay.

Bob Leasure, President and Chief Executive Officer, Inotiv: You know, and NHPs, we’ve had that before, where it’s not a straight line in terms of when they go out. And I think we’ve done a nice job of really reducing our dependency on the importation of NHPs. But you know, if we had shipped that additional 25% out, like we did a year or quarter, or we’re close to what we did Q3 or Q4, you know, I think we’d have probably seen a little bit more of those efficiencies come through, Dave. But hopefully we’ll see that in the future quarters throughout the year.

Dave Windley, Analyst, Jefferies: All right. Thank you. I’ll drop out. Thanks.

Bob Leasure, President and Chief Executive Officer, Inotiv: Thank you.

Jamie, Call Operator: We’ll turn next to Matt Hewitt with Craig-Hallum Capital Group. Please go ahead.

Matt Hewitt, Analyst, Craig-Hallum Capital Group: 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?

Bob Leasure, President and Chief Executive Officer, Inotiv: Well, if John’s on the call, John may be able to help more in terms of if you’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.

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. 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?

John Sagartz, Chief Strategy Officer, Inotiv: 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. 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.

Matt Hewitt, Analyst, Craig-Hallum Capital Group: ... 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?

Bob Leasure, President and Chief Executive Officer, Inotiv: 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, 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.

The second part is, yes, we have some great people that, you know, if it’s gonna be extra cold, and they were 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 at the facilities 24/7 to make sure that they can provide all the care that’s needed, and they do an extraordinary job. I wouldn’t say it’s a lot of... It’s, you know, it’s not gonna change 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.

And this last cold spell went from, you know, obviously from Texas all the way, all 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.

Matt Hewitt, Analyst, Craig-Hallum Capital Group: Understood. All right, thank you.

Jamie, Call 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.

Bob Leasure, President and Chief Executive Officer, Inotiv: Thank you. We’re, as I said, we are pleased with the recent growth 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.

Jamie, Call Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.