Inotiv, Inc.

Greetings. Welcome to Initives Incorporated's second quarter fiscal 2022 financial results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I'll now turn the call over to Callie Aul of the Equity Group. Callie, you may now begin.

Thank you. Thank you, everyone, for your patience. We apologize for the delay in the call start time as Innotus' second quarter fiscal 2022 financial results press release was delayed due to a technical issue. However, the company has proceeded to file an 8K with the second quarter fiscal 2022 financial results, which can be found on the SEC's website. A copy of the earnings press release will be available as soon as possible in the Investors section of the company's website at Inno2TheGo.com. As a matter of formality, I need to remind you 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 subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management's expectations as of today's date, 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. Management also will discuss certain non-GAAP financial measures in an effort to provide additional information for investors. A definition of these non-GAAP measures and reconciliation to the most comparable GAAP measures are included in the company's earnings release, which will be posted in the investor section of the company's website at initipco.com and is also filed in the 8K. Joining us from the company this afternoon are Bob Leisure, President and Chief Executive Officer, Beth Taylor, Chief Financial Officer, and John Sagard, Chief Strategy Officer. Bob will begin with some opening remarks. after which Beth will present a summary of the company's financial results. Then we'll open the call for questions. Now it's my pleasure to turn the call over to Bob.

All right. Thank you, Kelly. Good afternoon, everyone, and thank you for joining us today. I apologize for the delay, and we'll find out the reason later and try to remedy that. But in the meantime, I guess we'll listen with renewed interest since you've not seen the results yet. Second quarter fiscal 2022, we achieved another period of very exceptional growth. I'm very pleased and driven by the positive impact of strategic acquisitions and strong ongoing demand across both of our segments. Discovery and Safety and Assessment, or DSA, and Research Model and Services, or RMS. Our DSA quoting levels, awards, and backlog all reached quarterly records. While total revenue grew year-over-year by more than sevenfold to approximately $140.3 million, an adjusted EBITDA increased sharply to $25.3 million, or 18%. This quarter's results highlight our progress in building INITIB into a thriving, world-class contract research organization with comprehensive end-to-end preclinical research services and complementary research model capabilities. Our foundational DSA business continues to perform very well, with segment revenue more than doubling to $39.1 million from $18.8 million in the prior year quarter. DSA benefited from $7.4 million, or 36.5% of internal growth, augmented by incremental revenue from strategic acquisitions of Histotox Labs, Boulder Biopaths, BioReliance, Gateway Pharmacology, Plato Biopharma, and ILS that we have made to expand our suite of preclinical solutions. We continue to optimize and integrate our DSA operations. The ILS acquisition closed on January 10th and therefore contributed only partially to our results this quarter. ILS operates in a 50,000 square foot facility located near Research Triangle Park in North Carolina and brings immediate capacity and expertise to our developing genetic toxicology services, including in vivo and vitro toxicology, pathology, molecular biology, bioinformatics, and computational toxicology services. We believe ILS will eventually integrate with the assets we acquired from Millipore Sigma's Fire Alliance portfolio in July of 2021. Also in January, we announced a collaboration with Synexa Life Sciences, a clinical biomarker and bioanalysis research services company that will accelerate our development of biomarkers essential to the understanding of safety and efficacy on novel biotherapeutics. After the quarter end, we further expanded our specialized pathology services with the April 25th Tuckian acquisition of Histion, which brings us core competencies in highly specialized plastics and medical device pathology. This acquisition supports the expansion of our surgical model and medical device services in Fort Collins, Colorado. This quarter, we continue to make internal investments to drive future growth in our DSA segment. In January, we completed our St. Louis, Missouri facility expansion and are currently recruiting to meet growth opportunities. In Fort Collins, we are expanding operations to double the revenue run rate at this location. We anticipate this additional capacity will become available during the second quarter of fiscal 2023. We are increasing our recently acquired ILS capacity by 30% and hope to have that available by the first quarter of fiscal 2023. We are in the process of building a new 48,000 square foot leased facility in Rockville, Maryland for biotherapeutics and genetic toxicology growth, which should be completed by April of 2023. We are starting to see some revenue from initial phases of establishing this business. And in Boulder, we are building out operations to provide 50 to 70 percent additional capacity. We anticipate this capacity will become available in January of 2023. We are making these investments in response to the strong demand and quoting activity we are experiencing for our preclinical services from current customers, customers acquired in recent acquisitions, and with new clients. In the second quarter, in addition to record DSA sales in Q2, we had record new awards, and our DSA book-to-bill ratio remained a robust 1.52 times. The period ended with the backlog for DSA totaling 133.6 million, which is up 147.9 percent from 53.9 million a year ago, and an increase of 27.7 percent from 104.6 million as of December 31st, 2021. Moving to our RMS segment, the integration and optimization of the recently acquired research model services businesses are proceeding. These businesses contributed $101.2 million of incremental revenue this quarter, well ahead of the run rate when we announced the acquisitions. We have begun investing across the organization to improve facilities and animal welfare and streamline operations. We are also investing in locations to expand capacity in the U.S. and in Europe. By adding capacity and resources, we anticipate supporting growth in services, and consolidating two existing RMS locations and the recently acquired RSI business into these sites by calendar year end. These investments are also part of our plans to enhance RMS margins and improve facilities. The examples of facility improvements we are making to enhance animal welfare include investments in water systems, air quality, electrical upgrades and enhancements, improved sewer systems, housing, and veterinary care facilities. At the end of January, we announced the purchase of OBRC, a non-human primate importer and quarantine facility located near our existing facility in Alice, Texas. This acquisition provides an opportunity to further expand our services and address client needs at a time when the industry demand is outstripping supply. I'd like to note that we are beginning to experience tangible cross-selling opportunities between our RMS and DSA segments. The opportunities we are experiencing are driving some of our expansion decisions. We continue to invest in our people, our systems, and infrastructure to support both business segments. On that note, in February, we were thrilled to recruit and appoint Mo Destiger as Initiv's Chief Technology Officer. Mo is passionate about applying information technology to enable more rewarding experiences for our clients and employees and has knowledge of the life sciences industry. In addition to leading and overseeing global technology operation, his key responsibilities will include continuing development of an industry-leading digital strategy franchise, creating a strategic data analytics and insights platform, building a scalable technology platform to enable additional growth, continually upgrading our cybersecurity program, and creating solutions to improve quality and communication, accelerate speed to market, and drive efficiencies and profitability. In April, we are also very pleased to recruit and appoint Fernanda Baraldi as Company's General Counsel and Corporate Secretary. Fernanda brings with us approximately 15 years of corporate legal counsel, ethics, and compliance experience, including prior executive roles with public companies. Other critical positions were filled over the last four months as we have continued to recruit, upgrade, and build out our scientific team, veterinarian staff, sales, marketing, client experience, finance, technology, human resources, and accounting teams with an eye towards creating best-in-class talent and a proactive contemporary organization to support future growth. The best client experience and continued improvements across both segments. During the second quarter of fiscal 2022, the company spent $9.5 million on capital expenditures, or approximately 6.8% of revenue. And for the six months ended March 31, 2021, the company spent $15.2 million on capital expenditures, or approximately 6.8% of revenue. In addition, we have made investments in our startup activities for new service offerings and expansion of existing services, which includes validation of new equipment, recruiting, and training. Based on the recent trends and backlogs, we are providing guidance for revenue of at least $290 million in total for Q3 and Q4 of fiscal 2022, which will be at least $510 million of total revenue for fiscal 22, implying year-over-year internal growth of 30% or more. We expect our adjusted EBITDA for fiscal 2022 will not be less than our adjusted EBITDA for the six months ended March 31, 2022 of 15%. Our integration and optimization of acquired businesses is going very well. We anticipate additional operating leverage as we complete our investments and continue our expansions and consolidation plans. We are aware of the recent broader market concerns and commentary, so let me address a few of those. We have not seen any cancellations of orders out of the ordinary course of business. We are not aware of any cancellations due to lack of funding. We have not seen any collection issues due to lack of funding. We continue to monitor our top clients' liquidity, and we have not seen any fundamental changes. We believe our business is on solid footing, delivering both strong growth and positive cash flow while we continue to invest in our future. We have developed a strong and reoccurring client base and are the preferred primary supplier for many of our customers. While Initemp has become a much larger organization over the last few years, We remain steadfast in our emphasis on white-glove client service, which we believe is paramount for our continued success. Our investments in recruiting are driven by responding to customer requests and to continually improve our service, enhance communication, accelerate speed to market, and improve the experience and environment for our employees and research models. With that, I'll turn it over to our Chief Financial Officer, Beth Taylor. Beth, please go ahead with the financial overview.