Inotiv (NASDAQ:NOTV) management highlighted strong momentum in its Discovery and Safety Assessment (DSA) segment during its fiscal first quarter 2026 earnings call, while acknowledging continued pressure in its Research Models and Services (RMS) business—particularly related to non-human primates (NHP). The company also discussed ongoing balance sheet and refinancing efforts, including a covenant waiver under its credit agreement for the quarter.
DSA growth, awards momentum, and improving mix
CEO Bob Leasure said the first quarter—typically a seasonally weaker period—still delivered “very strong year-over-year revenue growth” in DSA. DSA revenue rose 12% year over year in the quarter, with Discovery and Translational Sciences (DTS) revenue up 26% and safety assessment revenue up 7%.
Taylor reported DSA backlog of $145.4 million at December 31, 2025, up from $138.2 million at September 30, 2025 and $130.4 million at December 31, 2024. Backlog conversion in the quarter was 33.2% versus 32.8% a year ago. She also noted that DSA cancellations and negative change orders were approximately 51% lower than the prior-year first quarter.
On the call, management attributed DSA’s award performance to execution and customer engagement. Leasure pointed to on-time delivery, communication, recurring work from existing customers, and the impact of a sales force expansion that began two years ago. He also said the company’s scientific capabilities—including pathology and discovery innovation—were contributing to the trend.
RMS declines driven by NHP volumes; optimization continues
The RMS segment remained “challenging,” according to Leasure, with NHP performance weighing on both revenue and margins. RMS revenue declined 5.4% year over year to $72.9 million, driven primarily by lower NHP volumes sold. Taylor said the decrease was partially offset by higher average selling prices for NHP and increased NHP-related services revenue.
Management said RMS services revenue rose 13% versus the year-ago quarter, primarily due to higher NHP colony management services revenue. During the Q&A, Leasure quantified the NHP volume decline at approximately 25% year over year, describing NHP shipments as “not a straight line” due to timing variability. Despite the weak quarter, he reiterated the company’s expectation that full-year fiscal 2026 NHP revenue will be flat compared to last year.
Leasure also provided an update on the RMS site optimization plan, stating the company exited two leased facilities during the quarter (one in October and one in December). He said the current phase of the plan is expected to be completed by the third quarter of fiscal 2026. Management indicated that some cost benefits from facility exits should be more visible in subsequent quarters, noting that as newer, more efficient facilities ramp up, the company has at times operated “duplicate facilities” before closing older sites.
Profitability: segment margin trends and seasonality
For the quarter, total revenue was $120.9 million, up 0.8% from $119.9 million a year earlier. Operating loss widened to $16.3 million from $15.5 million, which Taylor said was driven by a larger operating loss in RMS (up $2.4 million) partially offset by higher operating income in DSA (up $1.2 million).
On a non-GAAP basis, Taylor reported DSA segment operating income of $8.2 million, or 6.8% of total revenue, compared with $7.1 million, or 5.9%, in the prior-year quarter. RMS non-GAAP operating income was $7.2 million (5.9% of total revenue), down from $9.4 million (7.9%) a year ago, with lower NHP volumes cited as the main driver.
Adjusted EBITDA for the total company was $1.8 million (1.5% of revenue), compared with $2.6 million (2.2% of revenue) in the prior-year quarter.
Responding to questions about profitability and expense trends, Leasure said seasonality tends to make the fiscal first quarter tougher due to holiday-related closures at universities and clients. He also noted that some cost increases, including animal costs or tariffs, may not yet have been fully passed through pricing. He described a lag between quoting and when pricing changes show up in revenue and margins, suggesting that pricing actions taken in the summer could take 9–12 months to impact results. Management said it expects margin improvement in the back half of the year as pricing catches up and as operating leverage builds with higher volume.
Balance sheet, covenant waiver, and refinancing efforts
The company said it continues to work with Perella Weinberg Partners as it explores potential debt refinancing alternatives. Leasure said Inotiv remains committed to refinancing its debt and improving its balance sheet and will provide updates “at the appropriate time.”
Management disclosed the company received a waiver for non-compliance with financial covenant ratios under its credit agreement for the first quarter of fiscal 2026.
As of December 31, 2025, Inotiv had $12.7 million in cash and cash equivalents, down from $21.7 million at September 30, 2025. The company had $6 million outstanding on its $15 million revolving credit facility. Total debt, net of issuance costs, was $405.8 million, compared with $402.1 million at September 30, 2025. Taylor said this included $118.2 million of convertible notes and $24.7 million of second lien notes.
Cash used in operating activities was $5.4 million for the quarter, versus $4.5 million a year earlier. Capital expenditures were $5.2 million (4.3% of revenue), including $3 million tied to RMS site optimization. Taylor said the company expects full-year fiscal 2026 CapEx to be less than 4% of revenue.
NAMs collaborations and guidance posture
Leasure said Inotiv continues to develop its new approach methods (NAMs) strategy, aligning with FDA guidance and industry expectations. He referenced recent collaborations involving machine learning tools for integrating and visualizing complex datasets and access to “disease-relevant human tissue.” During the Q&A, Chief Strategy Officer John Sagartz added that the collaborations provide access to technologies and tools to help match animal models to human disease “through the ability to look at data differently in a big way,” while the company works to validate the approach in select therapeutic areas.
Taylor said the company is not providing formal fiscal 2026 guidance at this time, citing a desire for greater clarity on market and client demand and on any further impact from evolving tariff policies. Leasure closed the call by reiterating management’s focus on execution, customer satisfaction, innovation, RMS cost reductions, and continued work on improving the capital structure.
About Inotiv (NASDAQ:NOTV)
Inotiv, Inc, formerly known as Bioanalytical Systems, Inc (NASDAQ: NOTV), is a global contract research organization (CRO) specializing in preclinical drug discovery, development and testing services. The company partners with pharmaceutical, biotech and medical device companies to advance candidate molecules through early‐stage research and safety assessment. Inotiv’s integrated platform spans in vivo and in vitro pharmacology, drug metabolism and pharmacokinetics (DMPK), toxicology, pathology and bioanalysis.
The company’s core service offerings include discovery pharmacology, safety assessment toxicology, pathology, bioanalysis and regulatory support.
