Inotiv's Q4 2025 Earnings Call: Contradictions Emerge on Cybersecurity Impact, Discovery Growth, and DSA Revenue

Date of Call: None provided

Financials Results

• Revenue: $138.1M in Q4 FY2025, up 5.9% YOY; FY2025 $513.0M, up 4.5% YOY (vs $490.7M FY2024)
• EPS: $0.25 loss per diluted share in Q4 (vs $0.73 loss in Q4 FY2024); FY2025 $2.11 loss per diluted share (vs $4.19 loss in FY2024)

Business Commentary:

• DSA Revenue and Awards Growth:
• Innotiv's DSA revenue increased by 15.7% year-on-year in Q4 2025, with awards increasing by approximately 61%.
• The growth was driven by strong demand for discovery and translational science services, as well as increased activity in biotherapeutics, general toxicology services, and surgical services.

• Cybersecurity Incident Impact:
• The cybersecurity incident in Q4 2025 had a financial impact on the quarterly results, affecting expenses, awards, and customer service.

• The incident necessitated significant overtime, third-party costs, and customer service recovery efforts, but effective responses were made to mitigate the impact.

• RMS Revenue and Margin Improvement:

• RMS revenue for Q4 2025 was slightly ahead of the prior year by approximately 1%, with overall operating loss decreasing by $6.4 million compared to the prior year.

• Margin improvement in the RMS segment was driven by site consolidation efforts, reducing operating expenses and benefiting from increased NHP product and service revenue.

• Operating Cash Flow and Debt Refinancing:

• Innotiv generated $14.3 million of cash from operations in Q4 2025, increasing the cash balance to $21.7 million.
• The company is exploring potential debt refinancing alternatives with the assistance of Perella Weinberg Partners, aiming to improve its balance sheet.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • CEO: 'continuation of some positive trends... strong year-over-year increase in demand for our discovery and safety assessment business.' CFO: Q4 Adjusted EBITDA $11.8M vs $5.4M prior year; generated $14.3M cash from operations in Q4 and raised cash to $21.7M. Management repeatedly cites improving DSA revenue, awards, margins, and successful RMS site consolidation.

Q&A:

• Question from Frank Takkinen (Lake Street Capital Markets): Can you parse out the headwinds in the quarter—specifically the impact and incremental expenses related to the cybersecurity incident and what revenue/earnings might have been without those headwinds?
  Response: The cybersecurity incident was the primary headwind—causing overtime, third‑party costs and some rework that are hard to quantify, but management recovered quickly and awards remained strong.

• Question from Frank Takkinen (Lake Street Capital Markets): Any quarter‑to‑date trends on ordering patterns and a refresher on seasonality (holiday quarter effects) to help model expectations?
  Response: Holiday quarter is typically weakest, but recent quoting and awards in the first two months are strong; sustaining ~20–30% awards growth would support continued revenue improvement.

• Question from Matt Hewitt (Craig‑Hallum Capital Group): With FDA guidance on new approach methodologies and reduced large‑animal use, how is Inotiv positioned—monoclonal antibody exposure and potential impact on NHP demand?
  Response: Monoclonal antibody revenue is minimal; FDA guidance is clarifying but customers will decide safety requirements—management has not seen any material demand impact to date.

• Question from Matt Hewitt (Craig‑Hallum Capital Group): Early signals from customers on 2026 budgets—are budgets flat or up; what are you hearing?
  Response: Quoting and bookings have meaningfully increased and are being booked further out; recurring customer activity is growing—management is optimistic about 2026 revenue but is not providing formal guidance.

• Question from David Windley (Jefferies): How quickly can you start DSA studies and are clients requesting faster starts—what are lead times and current capacity for large‑animal vs discovery work?
  Response: Discovery/small‑animal studies generally start in weeks; large‑animal safety studies typically have 3–9 month lead times; large‑animal capacity is currently highly utilized and visible for a couple quarters.

• Question from David Windley (Jefferies): RMS segment margins moved—was the cyber event differentially impactful on RMS vs DSA, and what drove the sequential margin change in RMS?
  Response: RMS margin improvement is driven by site consolidation and fixed‑cost removal in small‑animal/diet operations; NHP margins are more variable based on procurement, transport, quarantine and spot pricing rather than a discrete cyber cost.

• Question from David Windley (Jefferies): Can you unpack RMS volume vs price, large vs small animal mix, and models vs services—how is the Alice, TX services/breeding business developing?
  Response: Small‑animal/diet and services (including Alice, TX boarding/breeding) are growing and benefiting margins via consolidation; NHP/model business margins fluctuate with sourcing, tariffs, transport and quarantine costs—company generally passes tariffs but these factors drive variability.

Contradiction Point 1

Cybersecurity Incident Impact

It involves the financial impact of a cybersecurity incident, which could influence investor perceptions of operational risks and financial performance.

Can you break down the additional expenses in the model and explain how the quarter would have performed without the cybersecurity expenses? - Frank Takkinen(Lake Street Capital Markets)

2025Q4: Major headwind was the cybersecurity incident, with impacts like overtime, third-party costs, and potential customer hesitation. The impact is difficult to quantify but was managed effectively. - Bob Leasure(CEO)

Are you now free to import from Cambodia? How does this impact NHP market dynamics? - David Howard Windley(Jefferies)

2025Q3: The DOJ has not prohibited imports from Cambodia, and the company is not importing from there currently, focusing on other Asian sources. While the option remains open, there are no immediate plans to change current practices due to stability in pricing and supply. - Robert W. Leasure(CEO)

Contradiction Point 2

Discovery Segment Performance

It highlights differing perspectives on the performance and growth trajectory of the Discovery segment, which is a key driver of the company's financials.

Have you noticed any quarter-to-date trends in ordering patterns? Can you provide an update on seasonality effects? - Frank Takkinen(Lake Street Capital Markets)

2025Q4: The last six months saw a 12.5% DSA revenue increase and a 37% awards increase over nine months. Focus remains on cost reductions and DSA revenue growth. - Bob Leasure(CEO)

Can you clarify the composition of current bookings compared to your overall book of business? - David Howard Windley(Jefferies)

2025Q3: There has been a significant increase in Discovery bookings, up 31%, with the revenue not yet catching up to these bookings. The Discovery segment, with its fixed costs, sees margins improve quickly with increased sales. - Robert W. Leasure(CEO)

Contradiction Point 3

DSA Revenue Growth and Customer Base

It involves differing statements about customer hesitance and the quoting activity, which could impact revenue projections and investor expectations.

Are there any quarter-to-date trends related to ordering patterns and could you provide an update on seasonality? - Frank Takkinen(Lake Street Capital Markets)

2025Q4: We still are experiencing some hesitation from customers with regard to the placing of orders for new studies. - Bob Leasure(CEO)

How has demand in Q3 compared to Q2? - Matt Hewitt(Craig-Hallum Capital Group)

2025Q2: We have sales to the government and universities, but the impact is not significant at this point. We will continue to monitor the situation. - Bob Leasure(CEO)

Contradiction Point 4

Cybersecurity Incident Impact

It highlights differing levels of impact and management of the cybersecurity incident, which could affect financial expectations and operational assessments.

Can you break down the additional expenses in the model and explain how the quarter would have performed without the additional cybersecurity costs? - Frank Takkinen(Lake Street Capital Markets)

2025Q4: Major headwind was the cybersecurity incident, with impacts like overtime, third-party costs, and potential customer hesitation. The impact is difficult to quantify but was managed effectively. - Bob Leasure(CEO)

Were there one-time events affecting cancellations or book-to-bill this quarter? - Nelson Cox(Lake Street Capital Markets)

2025Q2: We have seen a decrease in business coming in through our quotes from the government and research institutions largely due to a cyber security breach that we experienced. - Bob Leasure(CEO)

Contradiction Point 5

RMS Segment Performance and Margins

It highlights differing perspectives on the performance and margin improvements of the RMS segment, which could affect strategic decisions and financial expectations.

How did the cyber event impact the RMS segment compared to DSA, and how is the RMS business performing? - David Windley(Jefferies)

2025Q4: RMS margin improves with site reductions in small animal and diet businesses. NHP segment margins vary based on market demands and costs. Overall, RMS is performing well with some stable pricing across segments. - Bob Leasure(CEO)

What are the main goals of the revised optimization plans for the RMS business? - Matt Hewitt(Craig-Hallum Capital Group)

2025Q2: We have implemented various initiatives to improve operational efficiency, reduce costs and enhance profitability, including site consolidations and right-sizing. - Bob Leasure(CEO)