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spk07: Welcome to Initiv, Inc.' 's third quarter fiscal 2022 financial results conference call. At this time, all participants are in a 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 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Devin Sullivan of the Equity Group. Thank you. You may begin.
spk01: Thank you, Alex. Thank you, everyone, for joining INITIV's third quarter fiscal 2022 financial results call. 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 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 expectation as of today's date. You should not place any 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 will also 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 innotiveco.com and is also available in the Form 8-K filed with the Securities and Exchange Commission today. Joining us from the company this afternoon are Bob Leisure, President and Chief Executive Officer, Beth Taylor, Chief Financial Officer, and John Sagarts, 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. It is now my pleasure to turn the call over to Bob Leisure, President and CEO of Innative. Bob, please go ahead.
spk02: Thank you, Devin, and good afternoon, everyone. We appreciate you taking the time to join us today. By almost any measure, our third quarter results were above our expectations at this point in our growth and integration development strategy. Driven by a combination of the positive impact of well-positioned acquisitions, organic growth, and a favorable pricing environment, we reported record revenues, adjusted EBITDA, and backlog. We continue to make investments in expanding capacity and developing new service lines in response to demand from existing clients, clients of businesses reacquired in recent acquisitions, and new clients we've attracted as we've continued to build the product and service portfolio, and positive reputation of Intative as a fully integrated service provider. We've implemented a site optimization plan to enhance services and improve our business model at our research model services or RMS business. This will allow us to achieve scale at RMS sites, augment existing facilities, and improve future margins. We also continue to add scale in our Discovery and Safety Assessment, or DSA, business to meet increasing customer demands, drive revenue growth, and improve efficiencies and margins. This requires that we continue to invest in our recruiting, internal processes, facilities, equipment, technology, and existing personnel. In our view, INITI's performance so far in fiscal 2022 reflects our continuing evolution towards being a world-class provider of preclinical CRO services to the global pharmaceutical and biotech industries as they pursue their development of life-changing new medicines. I think as a company, we're much better today than we were nine months ago, but we're not nearly as good as we need to be nine months from now. The total revenue for fiscal 2022 third quarter grew sevenfold to 172.7 million and adjusted EBITDA increased to 37 million or 21.4% of total revenues. Our DSA and RMS business segments each performed well. Turning first to our DSA business, we had an exceptional quarter generating revenues of 49.2 million an increase of 26.3 million or 115% from the 22.9 million of revenue we achieved in Q3 of 2021, and a 25.8% increase over revenue we achieved just the prior quarter. In the year-over-year growth, the historical internal investments to increase capacity and expand our capabilities allowed us to experience organic growth of 20.9 million, 91.3% from the growth achieved in the same period last year. And 5.4 million of incremental revenue came from the acquisitions of Histatox Labs, Boulder Biopaths, Gateway Pharmacology, Plato Biopharma, BioReliance, ILS, and two months contribution from the recently acquired Histion. Subsequent to the end of the third quarter, we acquired Protipia. an emerging protein and peptide bioanalytical company that adds large molecule bioanalytical capabilities to our already established small molecule bioanalytical offerings. This highly specialized use of mass spectrometry technology significantly enhances our ability to support clients in the development of safe and effective medicines, particularly in the areas of immuno-oncology, cell and gene therapy. We added new capabilities and capacity in Rockville, Maryland to conduct GLP studies for in vitro cytogenetics and bacterial mutation assays as components of the standard battery of genetic toxicology studies required to support first in human evaluations of novel therapeutics. We continue to develop our suite of genetic toxicology services. This began with our acquisition of key genetic toxicology assets from Millipore Sigma's BioReliance portfolio in July of 2021, followed by the acquisition of North Carolina-based integrated laboratory systems, LLC, in January of 2022. We're now offering a wide range of in vivo and in vitro general and genetic toxicology services, including pathology and toxicology expertise, genomics, bioinformatics, and computational toxicology services. To meet current demand for existing services, we're continuing to increase capacity and capabilities across our existing enterprise from Fort Collins and Boulder, Colorado to Rockville, Maryland to North Carolina. These expansions were initiated in early fiscal 2022 and are expected to come online during fiscal 2023 and into fiscal 2024. In aggregate, once completed, these expansions will increase our DSA capacity by approximately an additional 35%. In Fort Collins, we are expanding operations to more than double the revenue run rate capacity at this location. We expect this additional capacity will become available during the third quarter of fiscal 23. We're currently increasing the capacity of our recently acquired ILS facility in North Carolina by 30%. and hope to have this additional capacity available by the first quarter of fiscal 23. We also plan to increase square feet at this facility by approximately 45%, which is expected to be available by the first quarter of fiscal 24. We are in the process of building out a new 48,000 square foot leased facility in Rockville, Maryland for biotherapeutics and genetic toxicology growth. which is still on track to be completed by the end of Q2 fiscal 23. We are starting to see some backlog in revenue from the initial phases, which have been completed. And in Boulder, we are building out operations to provide approximately 30% additional capacity. We anticipate this capacity will become available by the end of Q1 fiscal 2023. While we are very focused on building out new capacity, as clients are continually telling us they want to place more work with us and buy a broader range of services from us, we are very thoughtful about the pace to which we bring up that capacity. It is entirely driven by the customer demand we can see and the customers are talking to us about on a frequent basis. Using this approach in the past, we have generally found that we are able to fill the newly expanded facilities within 12 months of bringing them online. And we feel very good about our ability to do so again with the expansions we are investing in right now. Turning now to our RMS segment. This contributed $123.4 million of revenue in the third quarter, reflecting strong incremental revenue, well above the run rate of the business had when we announced the InVigo acquisition in November of 2021. This quarter also included a full quarter of contribution from Orient BioResource acquisition we completed in January 27th of 2022. In addition to the revenue growth we are achieving, we have taken significant actions at RMS designed to enhance future margins by increasing our operating leverage through optimizing our network footprint. In May, we announced the closure of two InVigo RMS facilities in Virginia. The closure of our Cumberland facility is expected to be completed by mid-September. Cumberland comprised of less than 1% of our total innovative revenue and did not contribute to profits for our RMS segment since the acquisition of that business in November 2021. Operations at our Dublin facility, along with our previously announced facility closures in Hazlett, Michigan and Boyertown, Pennsylvania, are being relocated to other facilities which have recently been expanded or refurbished. We believe these closures and consolidations will help generate operational efficiencies, enhance future margins, reduce the need for capital expenditures from closed sites, and improve our ability to service our clients. The transition for these three sites is underway and is expected to be completed by the end of March 2023. Concurrently, we continue to invest in facility improvements with a focus on animal welfare along with environmental and safety improvements. These include enhanced water systems and air quality controls, electrical upgrades and enhancements, improved sewer systems, housing, and veterinary care facilities. Across our business operations and support functions, we continue to fill critical positions and enhance our bench strength. We have promoted and attracted to INITIV industry veterans with strong track records to take up key operational leadership roles in both the DSA and RMS segments. We recently filled critical roles in facilities management and planning, marketing, information technology, procurement, financial planning, corporate governance, pathology leadership, and veterinarian support. We have made substantial progress in filling many of the organizational changes to allow us to continue to grow and improve our business. Based on recent sales trends and growth in our backlog, we are amending our guidance for fiscal year 2022, a revenue of at least $550 million, up from a prior annual revenue guidance of at least $510 million, and adjusted EBITDA margin of not less than 17% of forecasted revenues, up from prior guidance of adjusted EBITDA margin of not less than 15% of forecasted annual revenues. As implied in the updated guidance, there will likely be a decrease in revenue in EBITDA during Q4 relative to Q3 due to revenue mix and the timing of RMS shipment. As such, we believe that the annualized six-month figure ending Q4 will be more indicative of the underlying run rate of our business. We are aware of the recent broader market concerns and commentary, and as we did in the last quarter, I'd like to further address a few of those. During the last quarter, we saw record requests for quotes and an increasing backlog. As a reminder, when we report new awards, they are net of cancellations. We did see an increase in cancellations this past quarter. However, the total net awards were the same as the previous quarter. The main reason for cancellations in this quarter was due to molecules not being ready as expected for projects that were awarded 12 to 18 months ago. We have seen instances where we have not received awards due to our lead times. which other CROs could meet. We saw a need to outsource some of our services due to high demand, and we still have demand we cannot meet for services which we are currently in the process of building out. Overall, we continue to see high demand for services and believe our current expansion efforts will allow us to accommodate demand from existing clients and increasingly position us as an attractive provider for new clients. We believe we've benefited from continue to grow business from our existing clients, plus the new clients we've secured from several acquisitions. We also believe we further benefited from additional sales and marketing support we have added in the marketplace over the last quarter. We continue to market our clients' liquidity closely. We have continued to build out projects that we started last year, and we have over the last four years As we have over the last four years, we will continue planning for additional expansions and evaluate acquisition opportunities. We have reviewed our capital expansion plans with an eye on the overall economy and our commitment to a disciplined capital allocation. We expect our capital expenditures to be approximately 8% to 9% of revenue versus our planned 10% to 11% we outlined in the fall of 2021. Our maintenance capital expenditures have been 3% of revenue, we expect them to remain at this level, and we will also focus on growth projects. The environment is fluid, and we will continue to monitor developments and react as necessary. As for hiring, over the last six months, we added in incremental positions, which increased our headcount by 13.5% to fill open positions and support our growth. Over the next six months, we expect to increase headcount by approximately 8.5% to continue to fill these open positions and support growth. We have seen our revenue per employee improve, and we continue to work on efficiencies as we grow. Our leadership changes, site optimization plans, building out new services, and scaling our existing operations are significant to our next year's plans. With that, I'll turn it over to our Chief Financial Officer, Beth Taylor. Beth, please go ahead with financial overview.
spk06: Thanks, Bob, and good afternoon. Total revenue for the third quarter of fiscal 2022 rose to $172.7 million from $22.9 million in last year's third quarter, driven by higher revenue at our DSA segment and incremental revenue from our RMS segment. DSA segment revenue grew 114.8% in the fiscal 2022 third quarter to $49.2 million from $22.9 million in the fiscal 2021 third quarter. This was driven by a $20.9 million increase in service revenue from internal growth, which was complemented by $5.4 million of incremental service revenue from the acquisitions that Bob referenced earlier. Our RMS segment revenue was $123.4 million. We did not have any RMS revenue in the comparable prior year period, and as Bob noted, we did realize a full quarter of revenue from the Orient BioResource acquisition. Our total gross profit increased to $50.9 million, or 29.5% of revenue, up from total gross profit of $7.6 million or 28.9% of revenue in last year's third quarter. Gross profit for our DSA segment was $21.8 million or 44.3% of segment revenue compared to segment gross profit of $7.6 million or 33.2% of segment revenue in last year's third quarter. The improvement in gross profit was primarily due to increase revenues as a result of favorable pricing and investments in the DSA segment designed to increase margins and capacity in order to meet growing customer demand. RMS segment gross profit in the third quarter of fiscal 2022 was $29.1 million, or 23.6% of RMS revenue. While we did not have any RMS gross profit in the prior year's comparable period, RMS gross profit in the fiscal 2022 third quarter benefited from improved product mix of higher margin research models, along with a full quarter of margin from the Orient bioresource acquisition. And this was partially offset by $2.8 million of non-cash inventory step-up amortization, which negatively impacted the RMS gross profit percentage by 3.1%. Operating income in the third quarter of fiscal 2022 was $4.8 million compared to an operating loss of $1.7 million in last year's third quarter, reflecting a significant increase in revenue, partially offset by increased operating expenses to support additional future revenue growth, which included additional headcount, recruiting and relocation expense, higher compensation expense, acquisition and integration costs, primarily related to the acquisitions of NVGO, ILS, the Orient BioResource, Histion, and Protipia, and an increase in startup costs for internal investments in new service offerings. Adjusted corporate unallocated G&A totaled $14.6 million, or 8.5% of revenue, in the third quarter of fiscal 2022, compared to 4.2 million or 18.1% of revenue in the third quarter of fiscal 2021. The improvement was due to the advantage of scale as revenue has increased. We continue to maintain a long-term objective for unallocated corporate G&A to be between 6% and 8% of revenue. Interest expense increased to 8.4 million from 0.4 million in last year's Q3 reflecting our higher debt balance for borrowings obtained for the acquisition starting in November 2021 and an increase in interest rates. Consolidated net loss in the third quarter of fiscal 2022 totaled 3.8 million or a negative 16 cents per share compared to net income of 2.6 million or 18 cents per share in the third quarter of 2021. Adjusted EBITDA increased to 37 million or 21.4% of total revenue compared to adjusted EBITDA of 2.2 million or 9.6% of total revenue in the third quarter of fiscal 2021. Our book-to-bill ratio for our DSA segment in the third quarter of fiscal 2022 was 1.19 times. For the year, our book-to-bill ratio is at 1.45 times. The net awards in Q3 were the same as the previous quarter, and the decline in the book-to-bill was due to revenue in the third quarter being approximately $10 million higher than revenue in the second quarter of fiscal 2022. Our DSA backlog at the end of the third quarter was $143.2 million, up 7% from $133.6 million on March 31, 2022, and this is up 131% from $62 million on June 30, 2021. Net cash used in operations during the third quarter of fiscal 2022 totaled $9.4 million compared to cash provided by operations of $3.5 million in the comparable prior year period. The use of cash in the third quarter of fiscal 2022 was primarily due to changes in net working capital with increases in both accounts receivable due to higher revenue and inventory due to the timing of receipt of research models for resale, which we expect to decrease in the fourth quarter of fiscal 2022. These increases were partially offset by increases in accounts payable and accrued expenses. CapEx in the quarter totaled $16.1 million, or 9.3% of revenue, with year-to-date CapEx totaling $31.3 million, or 7.9% of revenue, which included investments in facility improvements, site expansions, enhancements to laboratory technology, and system enhancements to improve the client experience. Our balance sheet as of June 30, 2022 included cash and cash equivalents of $21.2 million and total debt of $338.8 million. At quarter end, we had a zero balance on a $15 million revolving credit facility and a zero balance on our $35 million delayed draw term loan per hour amended credit agreement in January of 2022. We were below our covenant ratios associated with our first lien and secured credit facilities. We remain very pleased with our financial performance balance sheet and general business outlook. We are continuing to invest in the evolution of our business and are confident in our ability to grow and capture a significant portion of the opportunities in our market. And with this overview of the financials and our prepared remarks, we're going to turn the call back to the operator, Alex, for questions.
spk07: Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Frank Takanan with Lake Street Capital Markets. Please proceed with your question.
spk04: Hey, thanks, Bob, Beth, John. Congrats on the results. really all the positive progress here. I wanted to start my questioning on the DSA business and first a clarifying question that organic growth rate, did I hear correct, at 91.3%? And then two, just any specific bright spots in the DSA business driving that organic growth worth calling out would be a great color.
spk02: Well, we have obviously been increasing our capacity through all of our sites. for one to we've benefited from favorable pricing in the market. And three, we've benefited from several acquisitions where we continue to acquire customers. So we've been able to grow our customer base. And then finally, we've actually increased our sales and marketing. So, you know, we talked about this a little bit also going back into I think in our January call is that one of the When the economy goes down, what we want to do is make sure we're picking up. We're a very small part of a very big market. We want to make sure we're picking up our percent and be the first call that our clients make. We need to work very hard to earn that every day. We also, during this time, felt that we may need to pick up some more clients if the market was to go down. We put some extra effort into our sales and marketing, adding people to the sales and I think we benefit a little bit from all of those things. So I don't think it's any one thing. I think it's several things. And the fact that we had the capacity to expand our sales. We've been working on that for a while. People always ask, what is your capacity? And I'm not sure we even know ourselves sometimes what it is. The growth of 48, 49 million, the DSA business, was not something I would have expected this quarter. But very pleased to see. Okay.
spk04: That's helpful. And then maybe just a follow-up related to your commentary on the cancellations. Appreciate the color there. Just so I'm making sure I'm understanding correctly, it sounds like it was more customer by customer basis based on the programs that they were advancing and those programs not making it to the next stage. if I'm understanding correctly, and then just maybe to ask for a little more color on that. Any of those cancellations related to a more challenged biotech funding market where they just don't have the capital to pursue some of their earlier stage projects, or are you not seeing that phenomenon play out?
spk02: Well, I think in the ordinary course of business, sometimes with the biotechs, you do see some people that don't feel like they're making the progress and aren't going to go raise the money. I don't think we've seen anything out of the ordinary course of business in those cancellations. What was unusual is the number of cancellations we saw this quarter because of the molecules not being ready or delays that our clients have had in being able to go forward with their studies. And so that did impact, or their studies just not ready to go forward or will never go forward because it didn't proceed as they expected. I guess that's something we should have expected, seeing that we're booking things 16 to 18 months out, and it's not as well known. But I'm going to ask John. John, do you have something that you could add, anything you want to add to what you've seen there and how you feel about that?
spk05: No, I would just echo what you said, Dan, that I think our clients are prophetically booking studies well into the future, in some cases in which molecules haven't even been properly identified. So there are lots of reasons for compounds to fail, and if they're not ready to go, they don't take the slots that they had previously booked.
spk02: Okay, that's good color. I will add to that also, Frank. Right now, we've been fortunate. We've been able many times to go out. We have those openings. We've been able to go out to the market and say we have an opening, and it's because the market demand is pretty high, we've been able to fill up some of those openings. So we've been fortunate to date with that.
spk04: Okay, that's really helpful. And then just maybe an update around optimizing the network footprint as my last question. Following along, it makes all the sense in the world and I understand the strategy around it. Just curious if when you're looking at the broader business right now, if there's still more significant opportunities network optimization coming from as far as a consolidation or closure of facilities in the research model business goes?
spk02: No, not at this point. We have announced what we intend to do, and we're always evaluating opportunities, but this is all I think we have to announce at this time.
spk04: Okay, perfect. That's helpful. Congrats again on the quarter and thanks for taking the questions.
spk02: Thank you, Frank.
spk07: Our next question comes from the line of Matt Hewitt with Craig Howland Capital Group. Please proceed with your question.
spk03: Thank you for taking the questions and congratulations on the progress. Maybe first up, a big step up in service gross margin in the quarter I know you've obviously been working on some of these optimization projects, but as we think about that, Q4 and going forward, I would assume that that maybe pulls back a little bit based on mix in Q4, it sounds like, but how should we be thinking about that line item going forward?
spk02: I would say that we had a pretty favorable mix and we had some favorable pricing in this quarter in the Q3. As I said before, I think you need to look at a combination of the rolling six months, not just one quarter at a time, because you can't have unusual mix or charges go through a quarter. Beth, do you have anything you want to add to that?
spk06: No, I will just echo, especially on the RMS side, it was a mix of the product sales. And then on the DSA side, I mean, we're definitely getting the benefit of scale as our revenue is increasing.
spk02: Yeah, we have a very fixed cost structure. So some of this incremental revenue, some of it's as much as 50% to 80% drops to the bottom line.
spk03: That's great. Maybe shifting gears, the Protipia acquisition, you know, adding some new capabilities in the immuno-oncology and cell and gene therapy markets. Is that an area where you see some incremental growth and opportunity as we look out over the next couple of years? Is that something customers are seeking out and you're looking at that and trying to balance, okay, near-term capacity expansions, adding headcount, all those types of things? Oh, and by the way, we've got some new markets where there's clearly some opportunities.
spk02: I think this technology fits well into pulling several things together for us, but I'm going to let John answer that.
spk05: Boy, that's a good question. So, yeah, it brings new technology that complements where we're going in our large molecule bioanalytical business. It allows us to take a look at biomarkers in solid tissues where prior to that we were looking at at biomarker development in body fluids. So it complements very much what we're doing in both non-clinical and clinical space. The applications immediately offered are in the immuno-oncology space, but we have an opportunity to leverage the technology into many other therapeutic indications.
spk03: That's great. Thank you very much.
spk02: This is also one of the, as I've said, I think in other times before, this is one of those technologies that, um, you know, we want to build a company we want to be in the future. Um, and when I got here in 2018, you know, there was a, there was a risk of building the company, spending two or three years to build a company. You should have been in 2018. This is 2022 and we're trying to build right now, put together the technology we think is going to be relevant in 2024 and 2025. And this was critical to that strategy.
spk03: That makes complete sense. Thank you.
spk07: Thank you, Matt. Thank you. Our next question comes from the line of Dave Windley with Jefferies. Please proceed with your question.
spk00: Hi. Good evening. Thanks for taking my question. Bob, I wanted to start and ask if you could elaborate on what you're seeing in kind of both the demand side and the supply side of your non-human primate business?
spk02: Oh, wow. Let's see. Switching over to non-human primate. It's been a market where historically the demand has been outstripping our supply. And we still see that today. I think that right now we're trying to evaluate what 2023 is going to look like. It looks like that could continue. We don't see the supply increasing any at this time, but a lot of that has to do with what's taking place in Asia, China, Cambodia, and sometimes it's hard to get that information directly over the phone. So, um, you know, we're on the ground and we're trying to, we're trying to understand that, uh, that what that future is going to look like, what could it look like today? But so far we've seen that demand, uh, remain fairly strong. We're still getting our hand around that, around that business, I think, and what it can be. We also, I believe, um, can really enhance the services of their businesses. One thing to sell the NHP. But it's another to broad all the services that go with that, being boarding and the breeding, the veterinary care and whatnot. So we're looking at all those things as ways to grow the business. But right now, we don't see anything changing over the last six or eight months. And I'd see the demand staying the same. But I understand why you're asking the question. It could be a good bellwether if projects are slowing down or canceling. If we look at our future toxicology request, we're still out 14, 16 months. And we believe that most of our customers are still out quite a bit too. But we'll have to evaluate that as the next 90 days as we start getting more, I guess, more concrete ideas of what our customer base is going to be looking for next year.
spk00: Right. If I could follow up there, are you still seeing pricing escalate? I guess the pricing for monkeys has gone up a tremendous amount, and I guess I'm wondering, is that still escalating, or is it more at an equilibrium now? I appreciate you said you don't see supply increasing. I'm hearing that maybe some
spk02: some breeders are coming back online in the philippines and some other areas i'm wondering if you're seeing any of that we've not seen it yet but um come to market but somebody coming back online and breeding and then having something to sell is going to be a three to four year process um so i'd we will you know i appreciate you mentioning that we'll we'll look into that We've not seen that to date. And as far as pricing goes, I believe the pricing is staying fairly healthy. I believe it's going up in early indications. We've got some indications that pricing may continue to go up. But I think, again, that's something that we'll know more about in the next 60 to 90 days.
spk00: Okay. Let me flip over to DSA and ask, are you having clients approach you – for either take-or-pay, what would be, I guess, more space-oriented agreements, take-or-pay agreements around reserving study rooms or reserving animal colonies to ensure the availability of the colony when they're ready to run the study? Are you seeing clients kind of, you know, willing to take risk around that type of engagement?
spk02: Yeah, I think there's two separate questions. One, we do not have a take-or-pay arrangement in our business model, and we don't have a lot of large pharma toxicology studies. We're still small to medium-sized pharma biotechs, and so we've not had in our client base the take-or-pay request or proposals, and so we've not addressed that. And right now I don't see that we are set up to do that. Um, as far as colonies, yes, we do have, we do in our RMS business sell to large pharma. So we do the other CROs and small and, uh, and the government, and we do see people wanting to reserve colonies and, um, have boarding arrangements. So they do have them available, uh, because they're concerned over the, um, supply, the supply issue going forward.
spk00: Okay. Um, appreciate that. And then. If you could talk, maybe this is a Beth question, but thoughts around capital structure and your ability to, I missed it if you said it, what your kind of exposure to variable rate is and your ability to perhaps lock that in or swap that to minimize your interest rate exposure.
spk02: Beth, I'll let you answer that.
spk06: Yeah, so, yeah, regarding our interest rates, it is like 6.25 on our Senior Secured Debt plus LIBOR. And we have the option of locking that in either every three months or six months.
spk00: And is that a permanent? I'm sorry, I didn't understand that. Is that a permanent lock-in or you can lock it in for a period of time?
spk06: No, we can lock in for a period of time, and we get the option of locking it in for three months at a time or six months at a time.
spk00: Okay. And what are thoughts about, you know, say, hedging interest rate risk or swapping to fixed over the duration of the debt?
spk06: Well, yeah, we have – In looking at the debt market right now in a refinancing option, it would be actually very expensive for us to refinance to a fixed rate.
spk00: Okay. Okay. Great. Appreciate the answers. Thanks a lot.
spk07: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call back over to Bob Leisure for closing remarks.
spk02: Thank you, everyone, today. As I mentioned at the top of the call, we're very pleased with our performance through the first nine months of fiscal 22. Demand from existing and new clients for our services continues to grow. We believe we're in a strong position to provide fully integrated consultative CRO service supporting critical drug medical discovery, device discovery, and development that saves and improves the quality of human lives. We continue to make careful customer-led investments. and our business to drive future growth, and we continue to attract and promote world-class talent to develop and implement our strategic plans. In closing, I'd like to take a moment to thank our 2,000-plus employees who work tirelessly every day to provide a unique, innovative experience for all of our customers. They're the reason our customers want to grow with us and truly appreciate what they do for us. This concludes our prepared remarks. And with that, operator, I think we can close the session. Thank you very much.
spk07: Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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