Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Jun. 30, 2022 | Aug. 03, 2022 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2022 | |
Entity File Number | 000-23357 | |
Entity Registrant Name | INOTIV, INC. | |
Entity Incorporation, State or Country Code | IN | |
Entity Tax Identification Number | 35-1345024 | |
Entity Address, Address Line One | 2701 KENT AVENUE | |
Entity Address, City or Town | WEST LAFAYETTE | |
Entity Address, State or Province | IN | |
Entity Address, Postal Zip Code | 47906 | |
City Area Code | 765 | |
Local Phone Number | 463-4527 | |
Title of 12(b) Security | Common Shares | |
Trading Symbol | NOTV | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 25,593,313 | |
Entity Central Index Key | 0000720154 | |
Current Fiscal Year End Date | --09-30 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 21,243 | $ 138,924 |
Restricted cash | 476 | 18,000 |
Trade receivables and contract assets, net of allowances for doubtful accounts of $3909 and $668, respectively | 107,719 | 28,364 |
Inventories, net | 66,401 | 602 |
Prepaid expenses and other current assets | 38,939 | 3,129 |
Total current assets | 234,778 | 189,019 |
Property and equipment, net | 187,492 | 47,978 |
Operating lease right-of-use assets, net | 29,116 | 8,358 |
Goodwill | 397,337 | 51,927 |
Other intangible assets, net | 311,628 | 24,233 |
Other assets | 7,427 | 341 |
Total assets | 1,167,778 | 321,856 |
Current liabilities: | ||
Accounts payable | 31,352 | 6,163 |
Accrued expenses and other liabilities | 28,494 | 8,968 |
Capex line of credit | 0 | 1,749 |
Fees invoiced in advance | 75,481 | 26,614 |
Current portion on long-term operating lease | 6,151 | 1,959 |
Current portion of long-term debt | 4,985 | 9,656 |
Total current liabilities | 146,463 | 55,109 |
Long-term operating leases, net | 22,901 | 6,554 |
Long-term debt, less current portion, net of debt issuance costs | 333,773 | 154,209 |
Other liabilities | 1,514 | 512 |
Deferred tax liabilities, net | 49,494 | 344 |
Total liabilities | 554,145 | 216,728 |
Contingencies (Note 15) | ||
Shareholders' equity and noncontrolling interest: | ||
Common shares, no par value: Authorized 74,000,000 shares; 25,515,791 issued and outstanding at June 30, 2022 and 15,931,485 at September 30, 2021 | 6,341 | 3,945 |
Additional paid-in capital | 715,387 | 112,198 |
Accumulated deficit | (104,646) | (11,015) |
Accumulated other comprehensive loss | (3,306) | 0 |
Total equity attributable to common shareholders | 613,776 | 105,128 |
Noncontrolling interest | (143) | 0 |
Total shareholders' equity and noncontrolling interest | 613,633 | 105,128 |
Total liabilities and shareholders' equity and noncontrolling interest | $ 1,167,778 | $ 321,856 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Allowance for doubtful accounts | $ 3,909 | $ 668 |
Common Stock, No Par Value | $ 0 | $ 0 |
Common Stock, Shares Authorized | 74,000,000 | 74,000,000 |
Common Stock, Shares, Issued | 25,515,791 | 15,931,485 |
Common Stock, Shares, Outstanding | 25,515,791 | 15,931,485 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Total revenue | $ 172,666 | $ 22,892 | $ 397,190 | $ 59,529 |
Costs and expenses: | ||||
Selling | 4,802 | 838 | 12,187 | 2,343 |
General and administrative | 21,652 | 7,306 | 56,251 | 17,653 |
Amortization of intangible assets | 8,854 | 619 | 18,664 | 931 |
Other operating expense | 10,841 | 586 | 48,871 | 1,131 |
Operating income (loss) | 4,787 | (1,703) | (20,986) | (2,210) |
Interest expense | (8,441) | (449) | (20,816) | (1,163) |
Other income (expense) | 440 | 1 | (57,426) | 180 |
Loss before income taxes | (3,214) | (2,151) | (99,228) | (3,193) |
Income tax (expense) benefit | (342) | 4,753 | 5,597 | 4,706 |
Consolidated net (loss) income | (3,556) | 2,602 | (93,631) | 1,513 |
Less: Net income (expense) attributable to noncontrolling interests | 172 | (769) | ||
Net (loss) income attributable to common shareholders | $ (3,728) | $ 2,602 | $ (92,862) | $ 1,513 |
(Loss) per common share | ||||
Basic net (loss) income per share (in dollars per share) | $ (0.15) | $ 0.18 | $ (3.88) | $ 0.12 |
Diluted net (loss) income per share (in dollar per share) | $ (0.15) | $ 0.17 | $ (3.88) | $ 0.12 |
Weighted-average number of common shares outstanding: | ||||
Basic (in shares) | 25,510 | 14,656 | 23,938 | 12,274 |
Diluted (in shares) | 25,510 | 15,383 | 23,938 | 12,948 |
Service | ||||
Total revenue | $ 60,119 | $ 21,924 | $ 147,879 | $ 56,858 |
Total cost of revenue | 34,477 | 14,701 | 91,991 | 38,204 |
Product | ||||
Total revenue | 112,547 | 968 | 249,311 | 2,671 |
Total cost of revenue | $ 87,253 | $ 545 | $ 190,212 | $ 1,477 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED) | ||||
Consolidated net (loss) income | $ (3,556) | $ 2,602 | $ (93,631) | $ 1,513 |
Other comprehensive (loss), net of tax | ||||
Foreign currency translation adjustment | (2,851) | 0 | (3,718) | 0 |
Defined benefit plans: | ||||
Amortization of periodic benefit costs | 173 | 0 | 403 | 0 |
Other comprehensive (loss), net of tax | (2,678) | 0 | (3,315) | 0 |
Consolidated comprehensive (loss) income | (6,234) | 2,602 | (96,946) | 1,513 |
Less: Comprehensive income (loss) attributable to non-controlling interests | 172 | 0 | (769) | 0 |
Comprehensive (loss) income attributable to common stockholders | $ (6,406) | $ 2,602 | $ (96,177) | $ 1,513 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST - USD ($) | Preferred Shares [Member] | Common Shares [Member] | Additional paid-in capital [Member] | Accumulated deficit. | Accumulated deficit [Member] | Noncontrolling Interests | Total |
Balance at Sep. 30, 2020 | $ 25,000 | $ 2,706,000 | $ 26,775,000 | $ (21,910,000) | $ 7,596,000 | ||
Balance (in shares) at Sep. 30, 2020 | 25 | 10,977,675 | |||||
Consolidated net income (loss) | $ 0 | $ 0 | 0 | (366,000) | $ 0 | $ 0 | (366,000) |
Stock option exercises | $ 6,000 | 39,000 | 0 | 45,000 | |||
Stock option exercises (in shares) | 23,350 | ||||||
Stock based compensation | $ 0 | $ 29,000 | 152,000 | 0 | 0 | 0 | 181,000 |
Stock based compensation (in shares) | 0 | 116,974 | |||||
Balance at Dec. 31, 2020 | $ 25,000 | $ 2,741,000 | 26,966,000 | (22,276,000) | 7,456,000 | ||
Balance (in shares) at Dec. 31, 2020 | 25 | 11,117,999 | |||||
Balance at Sep. 30, 2020 | $ 25,000 | $ 2,706,000 | 26,775,000 | (21,910,000) | 7,596,000 | ||
Balance (in shares) at Sep. 30, 2020 | 25 | 10,977,675 | |||||
Consolidated net income (loss) | 1,513,000 | ||||||
Foreign currency translation adjustment | 0 | ||||||
Balance at Jun. 30, 2021 | $ 3,928,000 | 110,230,000 | (20,397,000) | 93,761,000 | |||
Balance (in shares) at Jun. 30, 2021 | 15,866,655 | ||||||
Balance at Dec. 31, 2020 | $ 25,000 | $ 2,741,000 | 26,966,000 | (22,276,000) | 7,456,000 | ||
Balance (in shares) at Dec. 31, 2020 | 25 | 11,117,999 | |||||
Consolidated net income (loss) | $ 0 | 0 | (723,000) | (723,000) | |||
Stock option exercises | $ 9,000 | 56,000 | 0 | 65,000 | |||
Stock option exercises (in shares) | 36,040 | ||||||
Stock based compensation | $ 3,000 | 275,000 | 0 | 278,000 | |||
Stock based compensation (in shares) | 12,502 | ||||||
Preferred stock conversion | $ (25,000) | $ 3,000 | 22,000 | 0 | 0 | ||
Preferred stock conversion (in shares) | (25) | 12,500 | |||||
Balance at Mar. 31, 2021 | $ 2,756,000 | 27,319,000 | (22,999,000) | 7,076,000 | |||
Balance (in shares) at Mar. 31, 2021 | 11,179,041 | ||||||
Consolidated net income (loss) | $ 0 | 0 | 2,602,000 | 2,602,000 | |||
Stock issued in acquisitions | $ 397,000 | 34,055,000 | 0 | 34,452,000 | |||
Stock issued in acquisitions (In shares) | 1,588,235 | ||||||
Stock option exercises | $ 10,000 | 68,000 | 0 | 78,000 | |||
Stock option exercises (in shares) | 39,910 | ||||||
Stock based compensation | $ 4,000 | 577,000 | 0 | 581,000 | |||
Stock based compensation (in shares) | 15,352 | ||||||
Foreign currency translation adjustment | 0 | ||||||
Equity Raise, net of fees | $ 761,000 | 48,211,000 | 0 | 48,972,000 | |||
Equity Raise, net of fees (in shares) | 3,044,117 | ||||||
Balance at Jun. 30, 2021 | $ 3,928,000 | 110,230,000 | (20,397,000) | 93,761,000 | |||
Balance (in shares) at Jun. 30, 2021 | 15,866,655 | ||||||
Balance at Sep. 30, 2021 | $ 0 | $ 3,945,000 | 112,198,000 | (11,015,000) | 105,128,000 | ||
Balance (in shares) at Sep. 30, 2021 | 0 | 15,931,485 | |||||
Consolidated net income (loss) | $ 0 | $ 0 | 0 | (83,411,000) | 364,000 | (83,047,000) | |
Stock issued in acquisitions | $ 0 | $ 2,094,000 | 459,289,000 | 0 | 461,383,000 | ||
Stock issued in acquisitions (In shares) | 0 | 8,374,138 | |||||
Noncontrolling interest related to Envigo acquisition | $ 0 | $ 0 | 0 | 0 | (983,000) | (983,000) | |
Issuance of stock under employee stock plans | $ 0 | $ 11,000 | 38,000 | 0 | 49,000 | ||
Issuance of stock under employee stock plans (in shares) | 0 | 42,971 | |||||
Stock based compensation | $ 0 | $ 0 | 19,160,000 | 0 | 19,160,000 | ||
Pension cost amortization | 0 | 0 | 0 | 0 | (110,000) | (110,000) | |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | 247,000 | 247,000 | |
Reclassification of convertible note embedded derivative to equity (Note 7) | 0 | 0 | 88,576,000 | 0 | 88,576,000 | ||
Balance at Dec. 31, 2021 | $ 0 | $ 6,050,000 | 679,261,000 | (94,426,000) | 137,000 | (619,000) | 590,403,000 |
Balance (in shares) at Dec. 31, 2021 | 0 | 24,348,594 | |||||
Balance at Sep. 30, 2021 | $ 0 | $ 3,945,000 | 112,198,000 | (11,015,000) | 105,128,000 | ||
Balance (in shares) at Sep. 30, 2021 | 0 | 15,931,485 | |||||
Consolidated net income (loss) | $ (92,862,000) | ||||||
Stock issued in acquisitions (In shares) | 9,498,213 | ||||||
Foreign currency translation adjustment | $ (3,718,000) | ||||||
Balance at Jun. 30, 2022 | $ 0 | $ 6,341,000 | 715,387,000 | (104,646,000) | (3,306,000) | (143,000) | 613,633,000 |
Balance (in shares) at Jun. 30, 2022 | 0 | 25,515,791 | |||||
Balance at Dec. 31, 2021 | $ 0 | $ 6,050,000 | 679,261,000 | (94,426,000) | 137,000 | (619,000) | 590,403,000 |
Balance (in shares) at Dec. 31, 2021 | 0 | 24,348,594 | |||||
Consolidated net income (loss) | $ 0 | $ 0 | 0 | (6,664,000) | 577,000 | (6,087,000) | |
Stock issued in acquisitions | $ 0 | $ 276,000 | 32,599,000 | 0 | 32,875,000 | ||
Stock issued in acquisitions (In shares) | 0 | 1,106,457 | |||||
Noncontrolling interest related to Envigo acquisition | $ 0 | $ 0 | 0 | 0 | (191,000) | (191,000) | |
Issuance of stock under employee stock plans | $ 0 | $ 10,000 | 36,000 | 0 | 46,000 | ||
Issuance of stock under employee stock plans (in shares) | 0 | 40,650 | |||||
Stock based compensation | $ 0 | $ 0 | 1,138,000 | 0 | 1,138,000 | ||
Pension cost amortization | 0 | 0 | 0 | 0 | 340,000 | 340,000 | |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (1,105,000) | (9,000) | (1,114,000) |
Balance at Mar. 31, 2022 | 0 | $ 6,336,000 | 713,034,000 | (101,090,000) | (628,000) | (242,000) | 617,410,000 |
Balance (in shares) at Mar. 31, 2022 | 25,495,701 | ||||||
Consolidated net income (loss) | 0 | $ 0 | 0 | (3,556,000) | (172,000) | (3,728,000) | |
Stock issued in acquisitions | $ 0 | $ 4,000 | 360,000 | 0 | $ 364,000 | ||
Stock issued in acquisitions (In shares) | 0 | 17,618 | 17,618 | ||||
Noncontrolling interest related to Envigo acquisition | $ 0 | $ 0 | 0 | 0 | (271,000) | $ (271,000) | |
Issuance of stock under employee stock plans | $ 0 | $ 1,000 | 6,000 | 0 | 7,000 | ||
Issuance of stock under employee stock plans (in shares) | 0 | 2,472 | |||||
Stock based compensation | $ 0 | $ 0 | 1,987,000 | 0 | 1,987,000 | ||
Stock based compensation (in shares) | 0 | 0 | |||||
Pension cost amortization | $ 0 | $ 0 | 0 | 0 | 173,000 | 173,000 | |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (2,851,000) | (2,851,000) | |
Balance at Jun. 30, 2022 | $ 0 | $ 6,341,000 | $ 715,387,000 | $ (104,646,000) | $ (3,306,000) | $ (143,000) | $ 613,633,000 |
Balance (in shares) at Jun. 30, 2022 | 0 | 25,515,791 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Operating activities: | ||
Consolidated net (loss) income | $ (93,631) | $ 1,513 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisitions: | ||
Depreciation and amortization | 31,867 | 4,087 |
Undistributed earnings of noncontrolling interest | 769 | 0 |
Employee stock compensation expense | 22,285 | 1,040 |
Changes in deferred taxes | (8,385) | (4,867) |
Provision for doubtful accounts | 661 | 50 |
Unrealized foreign currency loss | (634) | 0 |
Amortization of debt issuance costs and original issue discount | 1,907 | 0 |
Noncash interest and accretion expense | 3,906 | 0 |
Loss on fair value remeasurement of embedded derivative | 56,714 | 0 |
Other non-cash operating activities | 2 | 190 |
Loss on debt extinguishment | 877 | 0 |
Non-cash amortization of inventory fair value step-up | 10,039 | 0 |
Non-cash restructuring costs | 2,990 | |
Gain on disposal of property and equipment | (231) | 0 |
Changes in operating assets and liabilities: | ||
Trade receivables and contract assets | (30,565) | (4,010) |
Inventories | (26,589) | (277) |
Prepaid expenses and other current assets | (14,743) | 0 |
Operating lease right-of-use assets and liabilities, net | 447 | 0 |
Accounts payable | 8,129 | 1,306 |
Accrued expenses and other liabilities | (3,327) | 1,594 |
Fees invoiced in advance | 32,789 | 7,451 |
Other asset and liabilities, net | (665) | (28) |
Net cash provided by operating activities | (5,388) | 8,049 |
Investing activities: | ||
Capital expenditures | (31,275) | (8,358) |
Proceeds from sale of equipment | 277 | 2 |
Cash paid in acquisitions | (287,129) | (40,698) |
Net cash used in investing activities | (318,127) | (49,054) |
Financing activities: | ||
Payments on finance lease liability | 0 | (277) |
Payments of long-term debt | (37,746) | (2,620) |
Payments of debt issuance costs | (10,067) | (409) |
Payments on promissory notes | (1,362) | 0 |
Payments on revolving credit facility | (20,749) | 0 |
Payments on senior term notes | (1,025) | 0 |
Payments on delayed draw term loan | (175) | 0 |
Borrowings on long-term loan | 0 | 17,087 |
Borrowings on revolving credit facility | 20,184 | 1,318 |
Borrowings on delayed draw term loan | 35,000 | 0 |
Borrowings on senior term notes | 205,000 | 0 |
Proceeds from exercise of stock options | 102 | 188 |
Proceeds from issuance of common stock, net | 0 | 48,972 |
Net cash provided by (used in) financing activities | 189,162 | 64,259 |
Effect of exchange rate changes on cash and cash equivalents | (852) | 0 |
Net (decrease) increase in cash and cash equivalents | (135,205) | 23,254 |
Cash, cash equivalents, and restricted cash at beginning of period | 156,924 | 1,406 |
Cash, cash equivalents, and restricted cash at end of period | 21,719 | 24,660 |
Noncash financing activity: | ||
Seller financed acquisition | 6,288 | 0 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 11,914 | 832 |
Income taxes paid, net | $ 666 | $ 0 |
DESCRIPTION OF THE BUSINESS AND
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 9 Months Ended |
Jun. 30, 2022 | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION Inotiv, Inc. and its subsidiaries and a variable interest entity (“VIE”) (“we,” “our,” “us,” the “Company,” and “Inotiv”) comprise a leading contract research organization specializing in nonclinical and analytical drug discovery and development services. The Company also manufactures scientific instruments for life sciences research, which it sells with related software for use by pharmaceutical companies, universities, government research centers and medical research institutions. On November 5, 2021, the Company completed the acquisition of Envigo RMS Holding Corp. (“Envigo”) by merger of a wholly owned subsidiary of the Company with and into Envigo. As a result of the Envigo transaction, the Company’s business now includes breeding, importing and selling research-quality animal models for use in laboratory tests, manufacturing and distributing standard and custom diets, distributing bedding and enrichment products, and providing other services associated with these products. With over 130 different species and strains, the Company is a global leader in the production and sale of some of the most widely used rodent research model strains, among other species. The Company maintains production and distribution facilities in the United States (“U.S.”), United Kingdom (“U.K.”), mainland Europe, and Israel. Basis of Presentation The Company has prepared the accompanying unaudited interim condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”), and therefore should be read in conjunction with the Company’s audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In the opinion of management, the condensed consolidated financial statements for the three and nine months ended June 30, 2022 and 2021 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of the Company’s financial position at June 30, 2022. The results of operations for the three and nine months ended June 30, 2022 may not be indicative of the results for the fiscal year ending September 30, 2022. The acquisition of Envigo was transformational to the Company’s underlying business. As a result, certain reclassifications have been made to prior periods in the unaudited condensed consolidated financial statements and accompanying notes to conform with current presentation, which more closely reflects management’s perspective of the business as it currently exists. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgements that may affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. These include, but are not limited to, management estimates in the calculation and timing of revenue recognition, pension liabilities, deferred tax assets and liabilities and the related valuation allowance. Although estimates are based upon management’s best estimate using historical experience, current events, and actions, actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known. Consolidation The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company, including all subsidiaries and a VIE it consolidates in accordance with GAAP. The Company consolidates a VIE as a result of the Envigo acquisition. The VIE does not materially impact our net assets or net (loss) income. The Company accounts for noncontrolling interests in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”). ASC 810 requires companies with noncontrolling interests to disclose such interests as a portion of equity but separate from the parent’s equity. The noncontrolling interests’ portion of net income (loss) is presented on the condensed consolidated statements of operations. Summary of Significant Accounting Policies The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for fiscal year 2021. As a result of the Envigo acquisition, the following policies have been added or adjusted to reflect our combined business. Pension Costs As a result of the Envigo acquisition, the Company has a defined benefit pension plan for one of its U.K. subsidiaries. The projected benefit obligation and funded position of the defined benefit plan is estimated by actuaries and the Company recognizes the funded status of its defined benefit plan on its condensed consolidated balance sheets and recognizes gains, losses and prior service costs or credits that arise during the period that are not recognized as components of net periodic benefit cost as a component of accumulated other comprehensive income (loss), net of tax. The Company measures plan assets and obligations as of the date of the Company’s year-end consolidated balance sheet, using assumptions to anticipate future events. The valuation of assets acquired and liabilities assumed in the Envigo acquisition had not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of the unfunded defined benefit plan obligation, among other items. Additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations are disclosed in the notes to the condensed consolidated financial statements (see Note 14 – Defined Benefit Plan). Comprehensive Income (Loss) Comprehensive income (loss) for the periods presented is comprised of consolidated net income (loss) plus the change in the cumulative translation adjustment equity account and the adjustments, net of tax, for the current period actuarial gains (losses) in connection with the Company’s defined benefit plan. Foreign Currencies Transactions in currencies other than the functional currency of each entity are recorded at the rates of exchange on the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange on the balance sheet date and the related transaction gains and losses are reported in the condensed consolidated statements of operations, in Operating income (loss). The Company records gains and losses from re-measuring intercompany loans within Other income (expense) in the condensed consolidated statements of operations. The results of operations of subsidiaries whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rate, assets and liabilities are translated at period-end exchange rates, capital accounts are translated at historical exchange rates, and retained earnings are translated at the weighted average of historical rates. Translation adjustments are excluded from the determination of net income (loss) and are recorded as a separate component of equity within accumulated other comprehensive income (loss) in the condensed consolidated financial statements. Concentration of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables from customers in the biopharmaceutical, contract research, academic, and governmental sectors. The Company believes its exposure to credit risk is minimal, as the majority of the customers are predominantly well established and viable. Additionally, the Company maintains allowances for potential credit losses. The Company’s exposure to credit loss in the event that payment is not received for revenue recognized equals the outstanding trade receivables and contract assets less fees invoiced in advance. During the three and nine months ended June 30, 2022, one customer accounted for 30.9% and 28.9% of sales, respectively. During the three and nine months ended June 30, 2021, no customer accounted for more than 10% of sales. During the the three and nine months ended June 30, 2022, one vendor accounted for 13.0% and 13.7% of cost of revenues, respectively. During the three and nine months ended June 30, 2021, no vendor accounted for more than 10% of cost of revenues. |
EQUITY
EQUITY | 9 Months Ended |
Jun. 30, 2022 | |
EQUITY | |
EQUITY | 2. EQUITY Common Stock Offering On April 23, 2021, we closed an underwritten public offering of 3,044,117 of our common shares, including 397,058 common shares sold pursuant to the full exercise by the underwriter of its option to purchase additional shares to cover over-allotments. All of the shares were sold at a price Increase in Authorized Shares and Equity Plan Reserve On November 4, 2021, the Company’s shareholders approved an amendment to the Company’s Second Amended and Restated Articles of Incorporation to increase the number of authorized shares from 20,000,000 shares, consisting of 19,000,000 common shares and 1,000,000 preferred shares, to 75,000,000 shares, consisting of 74,000,000 common shares and 1,000,000 preferred shares. Approval of this matter by the Inotiv shareholders was a condition to the closing of the Envigo acquisition. The amendment was effective on November 4, 2021. On November 4, 2021, the Company’s shareholders approved an amendment to the Company’s 2018 Equity Incentive Plan (the “Equity Plan”) to increase the number of shares available for awards thereunder by 1,500,000 shares and to make certain corresponding changes to certain limitations in the Equity Plan. At June 30, 2022, 926,647 shares remained available for grants under the Equity Plan. Stock Issued in Connection with Acquisitions During the three and nine months ended June 30, 2022, 17,618 and 9,498,213 common shares, respectively, were issued in relation to acquisitions. See Note 10 – Business Combinations for further discussion of consideration for each acquisition. Stock Based Compensation The Company expenses the estimated fair value of stock options, restricted stock and restricted stock units over the vesting periods of the grants. The Company recognizes expense for awards subject to graded vesting using the straight-line attribution method. The Company adopted a change in accounting policy effective October 1, 2020 for forfeitures. Stock based compensation expense for the three and nine months ended June 30, 2022, was $1,987 and $27,057, respectively, and for the three and nine months ended June 30, 2021 was $581 and $1,040, respectively. Of the $27,057 stock based compensation expense in the nine months ended June 30, 2022, $23,014 related to post-combination expense recognized in connection with the Envigo transaction (see Note 10 – Business Combinations), which was inclusive of $4,772 of stock based compensation settled in cash. |
NET (LOSS) INCOME PER SHARE
NET (LOSS) INCOME PER SHARE | 9 Months Ended |
Jun. 30, 2022 | |
NET (LOSS) INCOME PER SHARE | |
NET (LOSS) INCOME PER SHARE | 3. NET (LOSS) INCOME PER SHARE The Company computes basic income (loss) per share using the weighted average number of common shares outstanding. The Company computes diluted earnings per share using the if-converted method for preferred shares and convertible debt, if any, and the treasury stock method for stock options and restricted stock units. Shares issuable upon exercise of 1,967,080 options and shares issuable upon vesting of 541,434 restricted stock units were not considered in computing diluted loss per share for the three and nine months ended June 30, 2022 because they were anti-dilutive. Additionally, there are 3,040,268 shares of common stock issuable upon conversion in connection with the convertible debt entered into on September 27, 2021. These shares were not considered in computing diluted loss per share for the three and nine months ended June 30, 2022 because they were anti-dilutive. Shares issuable upon the exercise of 671 options and seven common shares issuable upon conversion of preferred shares were not considered in computing diluted income per share for the three and nine months ended June 30, 2021 because they were anti-dilutive. The following table reconciles the computation of basic net (loss) income per share to diluted net loss per share: Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Basic and diluted net (loss) income per share: Net (loss) income applicable to common shareholders $ (3,728) $ 2,602 $ (92,862) $ 1,513 Weighted average common shares outstanding (in thousands) Basic 25,510 14,656 23,938 12,274 Diluted 25,510 15,383 23,938 12,948 Basic net (loss) income per share $ (0.15) $ 0.18 $ (3.88) $ 0.12 Diluted net (loss) income per share $ (0.15) $ 0.17 $ (3.88) $ 0.12 |
OTHER OPERATING EXPENSE
OTHER OPERATING EXPENSE | 9 Months Ended |
Jun. 30, 2022 | |
OTHER OPERATING EXPENSE | |
OTHER OPERATING EXPENSE | 4. OTHER OPERATING EXPENSE Other operating expense consisted of the following: Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Acquisition and integration costs $ 3,682 $ — $ 14,575 $ — Restructuring costs 1 4,861 — 4,861 — Startup costs 1,731 479 4,162 841 Remediation costs 364 — 1,310 — Other costs 203 107 949 290 Acquisition-related stock compensation costs — — 23,014 — $ 10,841 $ 586 $ 48,871 $ 1,131 1 Restructuring costs represent costs incurred in connection with the exit of our Dublin and Cumberland facilities. See Note 12 – Restructuring for additional information. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Jun. 30, 2022 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 5. SEGMENT INFORMATION Due to the Envigo acquisition, the Company reports its results in two reportable segments – Discovery and Safety Assessment (“DSA”) and Research Models and Services (“RMS”). The DSA segment provides preclinical research services on a contract basis directly to biopharma and pharmaceutical companies as well as certain research products. Preclinical research services include screening and pharmacological testing, nonclinical safety testing, formulation development, regulatory compliance and quality control testing, which are services required to take a drug through the early development process including discovery services, which are non-regulated services to assist clients with the identification, screening, and selection of a lead compound for drug development, and regulated and non-regulated (Good Laboratory Practice (“GLP”) and non-GLP) safety assessment services. This segment also provides research products, such as liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. The Company’s RMS reportable segment includes the research models, research model services and Teklad diet, bedding and enrichment products (“Teklad”). Research models include the commercial production and sale of small research models and large research models and the production and sale of certain biological products. Research model services include: Genetically Engineered Models and Services (“GEMS”), which performs contract breeding and other services associated with genetically engineered models; client-owned animal colony care; and health monitoring and diagnostics services related to research models. Teklad includes standard, custom and medicated diets as well as bedding and environmental enrichment products, which enhance the welfare of research animals. During the three and nine months ended June 30, 2022, the RMS segment reported intersegment revenue of $2,257 and $4,574, respectively, to the DSA segment. The following table presents revenue and other financial information by reportable segment: Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Revenue DSA $ 49,224 $ 22,892 $ 121,103 $ 59,529 RMS 123,442 — 276,087 — $ 172,666 $ 22,892 $ 397,190 $ 59,529 Operating Income (Loss) DSA $ 13,171 $ 3,929 $ 22,965 $ 11,144 RMS 11,902 — 34,544 — Unallocated Corporate (20,286) (5,632) (78,495) (13,354) $ 4,787 $ (1,703) $ (20,986) $ (2,210) Interest expense (8,441) (449) (20,816) (1,163) Other income (expense) 440 1 (57,426) 180 Loss before income taxes $ (3,214) $ (2,151) $ (99,228) $ (3,193) Total assets by reporting segment is as follows: June 30, September 30, 2022 2021 DSA $ 274,570 $ 321,856 RMS 893,208 — $ 1,167,778 $ 321,856 Revenue by geographic area is as follows: Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 United States $ 150,540 $ 22,892 $ 340,875 $ 59,529 Netherlands 12,894 — 31,549 — Other 9,232 — 24,766 — $ 172,666 $ 22,892 $ 397,190 $ 59,529 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Jun. 30, 2022 | |
INCOME TAXES | |
INCOME TAXES | 6. INCOME TAXES The Company uses the asset and liability method of accounting for income taxes. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date. The Company records valuation allowances based on a determination of the expected realization of tax assets. The difference between the enacted federal statutory rate of 21% and the Company’s effective tax rate of 5.6% for the nine months ended June 30, 2022 was primarily related to a release of valuation allowance due to deferred tax liabilities established as part of the acquisition of Envigo, as well as, the impact on tax expense of certain book to tax differences on the deductibility of transaction costs, loss on fair value remeasurement of the embedded derivative component of the convertible notes, compensation and other permanent items. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company measures the amount of the accrual for which an exposure exists as the largest amount of benefit determined on a cumulative probability basis that it believes is more likely than not to be realized upon settlement of the position. As of June 30, 2022, the Company’s only uncertain tax position was derived from a business combination. The Company records interest and penalties accrued in relation to the uncertain income tax position as a component of income tax expense (benefit). Any changes in the liability for the uncertain tax position would impact the effective tax rate. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months. The Company is subject to income taxes in the U.S. federal jurisdiction, and the various states and foreign jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the normal course of business, the Company is subject to examination by federal, state, local and foreign taxing authorities. State and other income tax returns are generally subject to examination for a period of three On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of the employer portion of social security payments (“FICA deferral”), and expanded income tax net operating loss carryback provisions. As of June 30, 2022, the Company has a FICA deferral of approximately $916 related to the Envigo acquisition. Payment of the deferral is due on December 31, 2022. On December 27, 2020, the U.S. enacted the Consolidated Appropriations Act of 2021 (“CAA”), which extended and expanded certain tax relief measures created by the CARES Act. On March 11, 2021, the U.S. enacted the American Rescue Plan Act of 2021 (“ARPA”), which expands Section 162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees,” effective for taxable years beginning after December 31, 2026. We continue to examine the elements of the CAA and ARPA and the impact they may have on our future business. |
DEBT
DEBT | 9 Months Ended |
Jun. 30, 2022 | |
DEBT | |
DEBT | 7. DEBT Credit Facility On November 5, 2021, the Company, certain subsidiaries of the Company (the “Subsidiary Guarantors”), the lenders party thereto, and Jefferies Finance LLC, as administrative agent, entered into a Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a term loan facility in the original principal amount of $165,000, a delayed draw term loan facility in the original principal amount of $35,000 (available to be drawn up to 18 months from the date of the Credit Agreement), and a revolving loan facility in the original principal amount of $15,000. In addition, the Credit Agreement provides for an aggregate combined increase of the revolving loan facility and the term loan facility of up to $35,000, which amount will be available to be drawn once the delayed draw term loan facility is no longer available. On November 5, 2021, the Company borrowed the full amount of the term loan facility, but did not borrow any amounts on the delayed draw term loan facility or the revolving loan facility. The Company may elect to borrow on each of the loan facilities at either an adjusted LIBOR rate of interest or an adjusted prime rate of interest. Adjusted LIBOR rate loans shall accrue interest at an annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The LIBOR rate must be a minimum of 1.00%. The initial adjusted LIBOR rate of interest is the LIBOR rate plus 6.25%. Adjusted prime rate loans shall accrue interest at an annual rate equal to the prime rate plus a margin of between 5.00% and 5.50%, depending on the Company’s then current Secured Leverage Ratio. The initial adjusted prime rate of interest is the prime rate plus 5.25%. Actual interest accrued at 7.82% through June 30, 2022. The Company must pay (i) a fee based on a percentage per annum equal to 0.50% on the average daily undrawn portion of the commitments in respect of the revolving loan facility and (ii) a fee based on a percentage per annum equal to 1.00% on the average daily undrawn portion of the commitments in respect of the delayed draw loan facility. In each case, such fee shall be paid quarterly in arrears. Each of the term loan facility and delayed draw term loan facility require annual principal payments in an amount equal to 1.00% of their respective original principal amounts. The Company shall also repay the term loan facility on an annual basis in an amount equal to a percentage of its Excess Cash Flow (as defined in the Credit Agreement), which percentage will be determined by its then current Secured Leverage Ratio. Each of the loan facilities may be repaid at any time with premium or penalty. The Company is required to maintain an initial Secured Leverage Ratio of not more than 4.25 to 1.00. The maximum permitted Secured Leverage Ratio shall reduce to 3.75 to 1.00 beginning with the Company’s fiscal quarter ending September 30, 2023 and to 3.00 to 1.00 beginning with the Company’s fiscal quarter ending March 31, 2025. The Company is required to maintain a minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement), which ratio shall be 1.00 to 1.00 during the first year of the Credit Agreement and shall be 1.10 to 1.00 from and after the Credit Agreement’s first anniversary. Each of the loan facilities is secured by all assets (other than certain excluded assets) of the Company and each of the Subsidiary Guarantors. Repayment of each of the loan facilities is guaranteed by each of the Subsidiary Guarantors. Utilizing proceeds from the Credit Agreement on November 5, 2021, the Company repaid all indebtedness and terminated the credit agreement related to the First Internet Bank of Indiana (“FIB”) credit facility and recognized an $877 loss on debt extinguishment. On January 7, 2022, the Company drew $35,000 on the delayed draw term loan facility. The delayed draw term loan facility in the original principal amount of $35,000 is referred to herein as the “Initial DDTL”. Amounts outstanding under the Initial DDTL accrue interest at an annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The initial adjusted LIBOR rate of interest is the LIBOR rate of 1.00% plus 6.25% for a total rate of 7.25%. Actual interest accrued at 7.49% through June 30, 2022. First Amendment to Credit Agreement On January 27, 2022, the Company, Subsidiary Guarantors, the lenders party thereto, and Jefferies Finance LLC, as administrative agent, entered into a First Amendment (the “Amendment”) to the existing Credit Agreement. The Amendment provides for, among other things, an increase to the existing term loan facility in the amount of $40,000 (the “Incremental Term Loans”) and a new delayed draw term loan facility in the original principal amount of $35,000, which amount is available to be drawn up to 24 months from the date of the Amendment (the “DDTL”). The Incremental Term Loans and any amounts borrowed under the DDTL are referred to herein as the “Additional Term Loans”. On January 27, 2022, the Company borrowed the full amount of the Incremental Term Loans, but did not borrow any amounts under the DDTL. Amounts outstanding under the Additional Term Loans will accrue interest at an annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The initial adjusted LIBOR rate of interest is the LIBOR rate of 1.00% plus 6.25% for a total rate of 7.25%. Actual interest accrued at 7.82% through June 30, 2022. The Additional Term Loans require annual principal payments in an amount equal to 1.0% of the original principal amount. Voluntary prepayments of the Additional Term Loans will be subject to a 2% prepayment premium if made on or prior to November 5, 2022 and a 1% prepayment premium if made on or prior to November 5, 2023. Voluntary prepayments made after November 5, 2023 are not subject to a prepayment premium. Each of the Additional Term Loans require annual principal payments in an amount equal to 1.0% of its respective original principal amounts. The Company shall also repay the term loans on an annual basis in an amount equal to a percentage of its Excess Cash Flow (as defined in the Credit Agreement), which percentage will be determined by its then current Secured Leverage Ratio. The Additional Term Loans are secured by all assets (other than certain excluded assets) of the Company and each of the Subsidiary Guarantors. Repayment of the Additional Term Loans is guaranteed by each of the Subsidiary Guarantors. The Additional Term Loans will mature on November 5, 2026. Long term debt as of June 30, 2022 and September 30, 2021 is detailed in the table below. June 30, 2022 September 30, 2021 FIB Term Loans $ — $ 36,185 Seller Note – Bolder BioPath 883 1,500 Seller Note – Smithers Avanza — 280 Seller Note – Preclinical Research Services 632 685 Seller Note – Plato BioPharma 2,143 — Seller Payable - Orient BioResource Center 3,426 — Seller Note – Histion 409 — Economic Injury Disaster Loan 140 — Convertible Senior Notes 103,617 131,673 Term Loan Facility, Initial DDTL and Incremental Term Loans 238,800 — 350,050 170,323 Less: Current portion (4,985) (9,656) Less: Debt issue costs not amortized (11,292) (6,458) Total Long-term debt $ 333,773 $ 154,209 Acquisition-related Debt In addition to the indebtedness under the Credit Agreement, certain of the Company’s subsidiaries have issued unsecured notes as partial payment of the purchase prices of certain acquisitions as described herein. Each of these notes is subordinated to the indebtedness under the Credit Agreement. As part of the acquisition of Plato BioPharma, Inc. (“Plato”), which is a part of the Company’s Inotiv Boulder subsidiary, Inotiv Boulder, LLC, the Company issued unsecured subordinated promissory notes payable to the former shareholders of Plato in an aggregate principal amount of $3,000. The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of June 1, 2023. As part of the acquisition of Orient BioResource Center (“OBRC”), the Company agreed to leave in place a payable owed by OBRC to the seller in the amount of $3,700, which the Company determined to have a fair value of $3,325 as of January 27, 2022. The payable does not bear interest and is required to be paid to seller on the date that is 18 months after the closing date of January 27, 2022. The Company has the right to set off against the payable any amounts that become payable by the seller on account of indemnification obligations under the purchase agreement. As part of the acquisition of Histion, LLC (“Histion”) which is a part of the Company’s subsidiary, Bronco Research Services, LLC, the Company issued unsecured subordinated promissory notes payable to the former shareholders of Histion in an aggregate principal amount of $433. The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of April 1, 2025. Convertible Senior Notes On September 27, 2021, the Company issued $140,000 principal amount of its 3.25% Convertible Senior Notes due 2027 (the “Notes”). The Notes were issued pursuant to, and are governed by, an indenture, dated as of September 27, 2021, among the Company, the Company’s wholly-owned subsidiary, BAS Evansville, Inc., as guarantor (the “Guarantor”), and U.S. Bank National Association, as trustee (the “Indenture”). Pursuant to the purchase agreement between the Company and the initial purchaser of the Notes, the Company granted the initial purchaser an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $15,000 principal amount of the Notes. The Notes issued on September 27, 2021 included $15,000 principal amount of the Notes issued pursuant to the full exercise by the initial purchaser of such option. The Company used the net proceeds from the offering of the Notes, together with borrowings under a new senior secured term loan facility, to fund the cash portion of the purchase price of the Envigo acquisition and related fees and expenses. The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s non-guarantor subsidiaries. The Notes are fully and unconditionally guaranteed, on a senior, unsecured basis, by the Guarantor. The Notes accrue interest at a rate of 3.25% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on April 15, 2022. The Notes will mature on October 15, 2027, unless earlier repurchased, redeemed or converted. Before April 15, 2027, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 15, 2027, noteholders may convert their Notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, its common shares or a combination of cash and its common shares, at the Company’s election. The initial conversion rate is 1.7162 common shares per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $46.05 per common share. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. The Notes are redeemable, in whole and not in part, at the Company’s option at any time on or after October 15, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per common share of the Company exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. The redemption price is a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling the Notes for redemption pursuant to the provisions described in this paragraph will constitute a Make-Whole Fundamental Change, which will result in an increase to the conversion rate in certain circumstances for a specified period of time. If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the Fundamental Change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common shares. The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, are subject to a 30-day If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company or the Guarantor (and not solely with respect to a significant subsidiary of the Company or the Guarantor) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then the trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes. In accordance with ASC 815, at issuance, the Company evaluated the convertible feature of the Notes and determined it was required to be bifurcated as an embedded derivative and did not qualify for equity classification. The convertible feature of the Notes is subject to fair value remeasurement as of each balance sheet date or until it meets equity classification requirements and is valued utilizing Level 3 inputs as described below. The discount resulting from the initial fair value of the embedded derivative will be amortized to interest expense using the effective interest method. Non-cash interest expense during the period primarily related to this discount. In the first quarter of 2022, the Company adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). The update simplifies the accounting for convertible debt instruments and convertible preferred shares by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. As a result of the approval of the increase in authorized shares on November 4, 2021 (see Note 2 – Equity), the Note conversion rights met all equity classification criteria in ASC 815. As a result, the derivative liability was remeasured as of November 4, 2021 and reclassified out of long-term liabilities and into additional paid-in capital. Based upon the above, the Company remeasured the fair value of the embedded derivative as of November 4, 2021, which resulted in a fair value measurement of $88,576 and a loss on remeasurement included in other income (loss) for the nine months ended June 30, 2022 of $56,714. The embedded derivative liability of $88,576 was then reclassified to additional paid-in capital in accordance with ASC 815. In connection with the evaluation at November 4, 2021, the Company rechallenged its analysis of the initial allocation of value between the embedded derivative and debt component of the convertible debt included in long-term liabilities at September 30, 2021. This resulted in a change in the allocation of the underlying long-term debt from $76,716 to $99,776 and the allocation of the conversion feature from $54,922 to $31,862. These changes did not result in any change to long-term liabilities or any material changes to net income (loss) as of September 30, 2021. Fair Value The provisions of the fair value measurements and disclosure topic define fair value, establish a consistent framework for measuring fair value and provide the disclosure requirements about fair value measurements. This topic also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s judgment about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows: ● Level 1 – Valuations based on quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. ● Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. ● Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Up until November 4, 2021, the embedded derivative conversion feature of the Notes was subject to fair value measurement on a recurring basis as they included unobservable and significant inputs in determining the fair value. The Company utilized a single factor trinomial lattice model to determine the related fair value of the embedded derivative convertible feature of the Notes at November 4, 2021, and the inputs used included a volatility of 40.0%, a bond yield assumption of 10.44% and a remaining maturity period of 5.95 years. Former Credit Agreement On October 4, 2021, the Company entered into a Third Amendment to Amended and Restated Credit Agreement (the “FIB Amendment”), which amended the Amended and Restated Credit Agreement between the Company and FIB, as amended (the “FIB Credit Agreement”). Pursuant to the FIB Amendment, FIB consented to the acquisition by the Company of Plato by merger of Plato with a wholly owned subsidiary of the Company and the subsequent merger of the surviving corporation of that merger with another wholly owned subsidiary of the Company. In addition, the FIB Amendment amended the FIB Credit Agreement to (i) add the promissory notes to be issued to former Plato shareholders in the Plato acquisition as permitted indebtedness, which notes were issued by the surviving company, guaranteed by the Company and subordinated in favor of FIB, and (ii) add references to the Plato acquisition to certain provisions of the FIB Credit Agreement relating to subordination agreements, representations and warranties, and certain covenants to permit the Plato acquisition to occur. The FIB Amendment included agreements by the Company to obtain certain landlord waivers within 30 days of the closing of the Plato acquisition and to deliver to FIB signed subordination agreements. The Company consummated the Envigo acquisition and repaid all of its obligations under the FIB Credit Agreement in November 2021. |
SUPPLEMENTAL BALANCE SHEET INFO
SUPPLEMENTAL BALANCE SHEET INFORMATION | 9 Months Ended |
Jun. 30, 2022 | |
SUPPLEMENTAL BALANCE SHEET INFORMATION | |
SUPPLEMENTAL BALANCE SHEET INFORMATION | 8. SUPPLEMENTAL BALANCE SHEET INFORMATION Trade receivables and contract assets, net consisted of the following: June 30, September 30, 2022 2021 Trade receivables $ 94,328 $ 22,838 Unbilled revenue 17,300 6,194 Total 111,628 29,032 Less: Allowance for doubtful accounts (3,909) (668) Trade receivables and contract assets, net of allowances for doubtful accounts $ 107,719 $ 28,364 Inventories, net consisted of the following: June 30, September 30, 2022 2021 Raw materials $ 1,727 $ 513 Work in progress 262 37 Finished goods 4,987 192 Research Model Inventory 64,925 — Total 71,901 742 Less: Obsolescence reserve (5,500) (140) Inventories, net $ 66,401 $ 602 Prepaid expenses and other current assets consisted of the following: June 30, September 30, 2022 2021 Advances to suppliers $ 27,030 $ — Income tax receivable 2,593 — Prepaid research models 3,696 1,931 Other 5,620 1,198 Prepaid expenses and other current assets $ 38,939 $ 3,129 The composition of other assets is as follows: June 30, September 30, 2022 2021 Long-term advances to suppliers $ 3,393 $ — Security deposits and guarantees 915 51 Finance lease right-of-use assets, net 51 60 Debt issuance costs 2,468 — Other 600 230 Other assets $ 7,427 $ 341 Accrued expenses consisted of the following: June 30, September 30, 2022 2021 Accrued compensation $ 20,409 $ 3,528 Non-income taxes 1,448 18 Accrued interest 3,516 169 Other 3,121 366 Consideration payable — 4,887 Accrued expenses and other liabilities $ 28,494 $ 8,968 The composition of fees invoiced in advance is as follows: June 30, September 30, 2022 2021 Customer deposits $ 37,262 $ — Deferred revenue 38,219 26,614 Fees invoiced in advance $ 75,481 $ 26,614 |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Jun. 30, 2022 | |
NEW ACCOUNTING PRONOUNCEMENTS. | |
NEW ACCOUNTING PRONOUNCEMENTS | 9. NEW ACCOUNTING PRONOUNCEMENTS In the first quarter of 2022, the Company early adopted ASU 2020-06. The update simplifies the accounting for convertible debt instruments and convertible preferred shares by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share. See Note 7 for discussion of the impact on the Company’s condensed consolidated financial statements. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Jun. 30, 2022 | |
BUSINESS COMBINATIONS | |
BUSINESS COMBINATIONS | 10. BUSINESS COMBINATIONS The Company accounts for acquisitions in accordance with ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, liabilities assumed and non-controlling interests to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as incurred, (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense (benefit). ASC 805 requires that any excess of the purchase price over the fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill. HistoTox Labs Acquisition Overview On April 30, 2021, the Company completed the acquisition of substantially all of the assets of HistoTox Labs, Inc. (“HistoTox Labs”). HistoTox Labs is a provider of services in connection with non-clinical consulting, laboratory and strategic support services and products related to routine and specialized histology, immunohistology, histopathology and image analysis/digital pathology. Consideration for the HistoTox Labs acquisition consisted of $22,389 in cash, including $68 payable in net working capital adjustments. HistoTox Labs, Bolder BioPATH, Inc. (“Bolder BioPATH”) and Plato (discussed below) were combined into one business unit and recorded combined revenues of $8,845 and $26,328 for the three and nine month periods ended June 30, 2022, respectively, and recorded combined net income of $932 and $2,497 for the three and nine month periods ended June 30, 2022, respectively. HistoTox Labs and Bolder BioPATH recorded combined revenues of $4,251 and combined net income of $585 for the three and nine month periods ended June 30, 2021. The HistoTox Labs business is reported as part of our DSA reportable segment. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Accounts receivable 977 Unbilled revenues 337 Operating lease right of use ("ROU") asset 2,239 Property and equipment 3,929 Intangible assets 8,300 Goodwill 9,339 Accounts payable (150) Accrued expenses (136) Customer advances (207) Operating lease liability (2,239) $ 22,389 Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined using a combination of cost and market-based methodologies. Intangible assets relate to customer relationships and a non-compete agreement. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately eight years for customer relationships and five years for the non-compete agreement on a straight-line basis. The fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment. Bolder BioPATH Acquisition Overview On May 3, 2021, the Company completed the acquisition of Bolder BioPATH in a merger of Bolder BioPATH with a wholly owned subsidiary of the Company. Bolder BioPATH is a provider of services specializing in in vivo models of rheumatoid arthritis, osteoarthritis, and inflammatory bowel disease as well as other autoimmune and inflammation models. Consideration for the Bolder BioPATH acquisition consisted of (i) $17,530 in cash, including a net working capital adjustment of $970, which was settled through a reduction of the seller note of $470 and receipt of $500 cash, and inclusive of $1,250 being held in escrow for purposes of securing any amounts payable by the selling parties on account of indemnification obligations, purchase price adjustments, and other amounts payable under the merger agreement, (ii) 1,588,235 of the Company’s common shares valued at $34,452 using the closing price of the Company’s common shares on May 3, 2021 and (iii) unsecured subordinated promissory notes payable to the former shareholders of Bolder BioPATH in an aggregate principal amount of $1,500. The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of May 1, 2026. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Bolder BioPATH acquisition as a result of book-to-tax differences primarily related to the customer relationship intangible and property and equipment. This business is reported as part of our DSA reportable segment. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Accounts receivable 2,146 Unbilled revenues 1,798 Operating lease ROU asset 2,750 Property and equipment 6,523 Intangible asset 12,700 Other assets 34 Goodwill 36,206 Accounts payable (153) Accrued expenses (243) Deferred revenue (662) Deferred tax liability (4,867) Operating lease liability (2,750) $ 53,482 Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined using a combination of cost and market-based methodologies. Intangible assets primarily relate to customer relationships. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately eight years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment. Gateway Acquisition Overview On August 2, 2021, the Company completed the acquisition of Gateway Pharmacology Laboratories LLC (“Gateway Laboratories”) to further expand its drug metabolism and pharmacokinetics technology and capability as well as expand service offerings to include in vitro solutions in pharmacology and toxicology early in drug discovery. Consideration for the Gateway Laboratories acquisition consisted of (i) $1,704 in cash, including working capital and subject to customary purchase price adjustments, and (ii) 45,323 of the Company’s common shares valued at $1,182 using the closing price of the Company’s common shares on August 2, 2021. This business is reported as part of our DSA reportable segment. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Gateway Laboratories acquisition as a result of book-to-tax differences primarily related to the customer relationship intangible and property and equipment. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and the Company’s ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Accounts receivable 409 Operating lease ROU asset 120 Property and equipment 359 Intangible asset 100 Other assets 4 Goodwill 2,260 Accounts payable (3) Accrued expenses (72) Deferred tax liability (171) Operating lease liability (120) $ 2,886 BioReliance Acquisition Overview On July 9, 2021, the Company completed the acquisition of certain assets of BioReliance Corporation (“BioReliance”) to further expand its service offerings to include genetic toxicology services. The assets acquired consisted of fixed assets and an intangible asset related to customer relationships. The Company accounted for the transaction as a business combination as it was determined that the transaction included inputs and substantive processes capable of producing outputs which constitute a business. Consideration for the BioReliance acquisition consisted of (i) $175 in cash and (ii) 10% of net sales through December 2023 derived from the provision by the Company of services comprising the business to existing customers related to the intangible asset acquired. The Company estimated the fair value of 10% of net sales and recorded a contingent consideration liability of $640 in the consolidated balance sheets for the year ended September 30, 2021. The $175 consideration payable was included in accrued expenses in the consolidated balance sheets for the year ended September 30, 2021 and subsequently paid in the first quarter of fiscal 2022. This business is reported as part of our DSA reportable segment. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Property and equipment 175 Intangible asset 640 $ 815 As of June 30, 2022, the Company had approximately $579 of contingent consideration related to the BioReliance acquisition that is subject to fair value measurement on a recurring basis as it includes unobservable and significant inputs in the determination of fair value. The fair value of the contingent consideration related to BioReliance was estimated using a discounted cash flow analysis and Level 3 inputs including projections representative of a market participant view for net sales through December 2023 and an estimated discount rate. The amount to be paid is calculated as a percentage of net sales as described above. Plato BioPharma Acquisition Overview On October 4, 2021, the Company completed the acquisition of Plato to expand its market reach in early-stage drug discovery. Consideration for the Plato acquisition consisted of (i) $10,530 in cash, including working capital and subject to customary purchase price adjustments, (ii) 57,587 of the Company’s common shares valued at $1,776 using the closing price of the Company’s common shares on October 4, 2021 and (iii) seller notes to the former shareholder of Plato in an aggregate principal amount of $3,000. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Plato acquisition as a result of book-to-tax differences primarily related to the customer relationship intangible and property and equipment. The valuation of assets acquired and liabilities assumed had not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes, goodwill and net working capital among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 1,027 Trade receivables and contract assets 868 Prepaid expenses and other current assets 141 Property and equipment 1,148 Operating lease ROU assets 2,566 Intangible asset 4,800 Goodwill 9,247 Accounts payable (110) Fees invoiced in advance (99) Operating lease liability (2,549) Accrued expenses and other liabilities (245) Deferred tax liability (1,488) $ 15,306 Property and equipment is mostly composed of lab equipment, furniture and fixtures, and computer equipment. The fair value of property and equipment was determined to approximate net book value at the time of the acquisition based on the information currently available and pending finalization of our fair value assessment, which is subject to change as we complete our valuation procedures. Intangible assets primarily relate to customer relationships. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately eight years for customer relationships on a straight-line basis. The fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Plato acquisition as a result of book-to-tax differences primarily related to the intangible assets. Envigo RMS Holding Corp Acquisition Overview On November 5, 2021, the Company completed the acquisition of Envigo by merger of a wholly owned subsidiary of the Company with and into Envigo to expand its market reach in early-stage drug discovery. The aggregate consideration paid to the holders of outstanding capital stock in Envigo in the merger consisted of cash of $217,808, including adjustments for net working capital, and 8,245,918 of the Company’s common shares valued at $439,590 using the opening price of the Company’s common shares on November 5, 2021. In addition, the Company assumed certain outstanding Envigo stock options, including both vested and unvested options, that were converted to the right to purchase 790,620 Company common shares at an exercise price of $9.93 per share. The stock options were valued at $44.80 per option utilizing a Black-Scholes option valuation model with the inputs below. The total value of options issued was $35,418, of which $18,242 was excluded from the purchase price as those options were determined to be post-combination expense. The previously vested stock options are reflected as purchase consideration of approximately $17,176. Stock price $ 53.31 Strike price $ 9.93 Volatility 75.93 % Expected term 3.05 Risk-free rate 0.62 % The Company recognized transaction costs related to the acquisition of Envigo of $0 and $8,945 for the three and nine months ended June 30, 2022. These costs were associated with legal and professional services related to the acquisition and are reflected within other operating expenses in the Company’s condensed consolidated statements of operations. The valuation of assets acquired and liabilities assumed had not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, inventory, intangible assets, income taxes, goodwill, and the finalization of net working capital, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 3,091 Restricted cash 435 Trade receivables and contract assets 44,205 Inventory 42,338 Prepaid expenses and other current assets 18,960 Operating lease ROU assets 8,423 Property and equipment 109,956 Other assets 7,676 Intangible asset 257,000 Goodwill 291,319 Accounts payable (15,913) Fees invoiced in advance (7,040) Current portion of long-term operating lease (3,168) Accrued expenses and other liabilities (22,383) Long-term operating leases, net (5,045) Other liabilities (4,205) Long-term debt (140) Long-term deferred tax liabilities (51,815) Noncontrolling interest 880 $ 674,574 Property and equipment is mostly composed of land, buildings and equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined to approximate net book value at the time of the acquisition based on the information currently available and pending finalization of our fair value assessment, which is subject to change as we complete our valuation procedures. Intangible assets primarily relate to customer relationships and technology associated with the ability to produce and care for the research models. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 13.5 years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of June 30, 2022 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Envigo acquisition as a result of book-to-tax differences primarily related to the intangible assets, step up on the fair value of inventory and property and equipment. Within the deferred tax liability, $8,949 of acquired foreign net operating losses are offset by an uncertain tax benefit of $8,304. Goodwill, which is derived from the expanded client base, the ability to provide products and services for the entirety of discovery and nonclinical development within one organization, and to ensure supply for internal use, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s RMS reportable segment. Robinson Services, Inc. Acquisition Overview On December 29, 2021, the Company completed the acquisition of the rabbit breeding and supply business of Robinson Services, Inc. (“RSI”). The acquisition was another step in Inotiv’s strategic plan for building its RMS business and is reported as part of the Company’s RMS reporting segment. The aggregate consideration paid in the transaction consisted of cash consideration of $3,250 and 70,633 of the Company’s common shares valued at $2,898 using the closing price of the Company’s common shares on December 29, 2021. The valuation of assets acquired and liabilities assumed had not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of intangible assets, non-compete agreement, supply agreement and goodwill. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of the Company’s RMS reportable segment. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Customer relationship 4,700 Non-compete agreement 300 Supply agreement 200 Goodwill 948 $ 6,148 Intangible assets primarily relate to customer relationships. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 7.5 years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of June 30, 2022 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s RMS reportable segment. Integrated Laboratory Systems, LLC acquisition Overview On January 10, 2022, the Company completed the acquisition of Integrated Laboratory Systems, LLC (“ILS”). ILS is a provider of services specializing in nonclinical and analytical drug discovery and development services and research models and related products and services. Consideration for the ILS acquisition consisted of $38,993 in cash, including adjustments for net working capital, and inclusive of $3,800 being held in escrow for purposes of securing any amounts payable by the selling parties on account of indemnification obligations, purchase price adjustments, and other amounts payable under the merger agreement and 429,118 of the Company’s common shares valued at $14,466 using the opening price of the Company’s common shares on January 10, 2022. The valuation of assets acquired and liabilities assumed had not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, inventory, intangible assets, income taxes, goodwill, and the finalization of net working capital, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our DSA reportable segment. ILS recorded revenue of $5,856 and $10,722 for the three and nine month periods ended June 30, 2022, respectively, and a net loss of ($756) and ($647) for the three and nine month periods ended June 30, 2022, respectively. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 797 Trade receivables and contract assets 4,257 Prepaid expenses and other current assets 64 Operating lease ROU assets 3,603 Property and equipment 3,911 Intangible asset 22,600 Goodwill 26,062 Accounts payable (1,156) Fees invoiced in advance (2,420) Current portion on long-term operating lease (738) Accrued expenses and other liabilities (942) Long-term operating leases, net (2,425) Other liabilities (41) Long-term deferred tax liabilities (113) $ 53,459 Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment) and leasehold improvements. The fair value of property and equipment was determined using a combination of cost and market-based methodologies. The fair value of property and equipment as of June 30, 2022 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Intangible assets primarily relate to customer relationships. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately nine years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of June 30, 2022 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment. Orient BioResource Center, Inc. acquisition Overview On January 27, 2022, the Company completed the acquisition of OBRC from Orient Bio, Inc., a preclinical contract research organization and animal model supplier based in Seongnam, South Korea (“Seller”). OBRC is a primate quarantine and holding facility. Consideration for the OBRC acquisition consisted of (i) $26,522 in cash, including certain adjustments, (ii) 677,339 of the Company’s common shares valued at $18,410 using the closing price of the Company’s common shares on January 27, 2022, (iii) the effective settlement of a preexisting relationship of $1,017 and (iv) a payable owed by OBRC to the Seller in the amount of $3,325. The preexisting relationship represents the return of fees invoiced in advance and paid to OBRC by the Company prior to the acquisition offset by the payment of trade receivables by the Company to OBRC. As these were settled at the stated value, no gain or loss was recorded as a result of the settlement of this preexisting relationship. The payable will not bear interest and is required to be paid to the Seller on the date that is 18 months after the closing. The Company will have the right to set off against the payable any amounts that become payable by the Seller on account of indemnification obligations under the purchase agreement. In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the OBRC acquisition as a result of book-to-tax differences primarily related to the intangible assets and property and equipment. The valuation of assets acquired and liabilities assumed has not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes, goodwill, and the finalization of net working capital, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts re |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Jun. 30, 2022 | |
REVENUE RECOGNITION | |
REVENUE RECOGNITION | 11. REVENUE RECOGNITION In accordance with ASC 606, the Company disaggregates its revenue from clients into two revenue streams, service revenue and product revenue. At contract inception the Company assesses the services promised in the contract with the clients to identify performance obligations in the arrangements. Service revenue DSA The Company enters into contracts with clients to provide drug discovery and development services with payments based on mainly fixed-fee arrangements. The Company also offers archive storage services to its clients. The Company’s fixed fee arrangements may involve nonclinical research services (toxicology, pathology, pharmacology), bioanalytical, and pharmaceutical method development and validation, nonclinical research services and the analysis of bioanalytical and pharmaceutical samples. For bioanalytical and pharmaceutical method validation services and nonclinical research services, revenue is recognized over time using the input method based on the ratio of direct costs incurred to total estimated direct costs. For contracts that involve in-life study conduct, method development or the analysis of bioanalytical and pharmaceutical samples, revenue is recognized over time when samples are analyzed or when services are performed. The Company generally bills for services on a milestone basis. These contracts represent a single performance obligation and due to the Company’s right to payment for work performed, revenue is recognized over time. Research services contract fees received upon acceptance are deferred until earned and classified within customer advances on the condensed consolidated balance sheets. Unbilled revenues represent revenues earned under contracts in advance of billings. Archive services provide climate controlled archiving for clients’ data and samples. The archive revenue is recognized over time, generally when the service is provided. These arrangements include one performance obligation. Amounts related to future archiving or prepaid archiving contracts for clients where archiving fees are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable archive service is performed. RMS The Company provides GEMS, which includes the performance of contract breeding and other services associated with genetically engineered models, client-owned animal colony care, and health monitoring and diagnostics services related to research models. For contracts that involve creation of a specific type of animal, revenue is recognized over time with each milestone as a separate performance obligation. The Company is due payment for work performed even if subsequent milestones are unable to be met. Contract breeding revenue and client-owned animal colony care revenue are recognized over time and are billed as per diems. Health monitoring revenue and diagnostic services revenue are recognized once the service is performed. Product revenue DSA DSA product revenue includes internally-manufactured scientific instruments for life sciences research and the related software for use by pharmaceutical companies, universities, government research centers and medical research institutions under the Company’s BASi product line. These products can be sold to multiple clients and have alternative use. Both the transaction sales price and shipping terms are agreed upon in the client order. For these products, all revenue is recognized at a point in time, generally when title of the product and control is transferred to the client based upon shipping terms. These arrangements typically include only one performance obligation. RMS RMS product revenue includes research models, diets and bedding, bioproducts and GEMS. Research models revenue represents the commercial production and sale of research models, principally purpose-bred rats and mice for use by researchers, and large-animal models. Diets and bedding revenue represents laboratory animal diets, bedding, and enrichment products under the Company’s Teklad product line. Bioproducts revenue represents the sale of serum and plasma, whole blood, tissues, organs and glands, embryo culture serum and growth factors. Research models and diets and bedding include freight costs associated with the delivery of the product to customers. For these products, all revenue is recognized at a point in time, generally when title and control of the product is transferred to the client based upon shipping terms. These arrangements typically include only one performance obligation. The following table presents changes in the Company’s contract assets and contract liabilities for the nine months ended June 30, 2022. Balance at Balance at September 30, June 30, 2021 Additions Deductions 2022 Contract Assets: Unbilled revenue $ 6,194 $ 31,794 $ (20,688) $ 17,300 Contract liabilities: Fees invoiced in advance $ 26,614 $ 389,849 $ (340,982) $ 75,481 |
RESTRUCTURING
RESTRUCTURING | 9 Months Ended |
Jun. 30, 2022 | |
RESTRUCTURING | |
RESTRUCTURING | 12. During June 2022, the Company approved and announced a plan to close its facility in Cumberland, Virginia (“Cumberland facility”) and to close and relocate its operations in Dublin, Virginia (“Dublin facility”) into its other existing facilities, as a part of the Company’s ongoing restructuring and site optimization plan. The Cumberland facility exit is also a part of the transfer plan settlement, as further described in Note 15 – Contingencies. The operations at both the Cumberland facility and the Dublin facility are within the RMS segment. The Cumberland facility exit is expected to be complete by October 2022. Any potential decision to sell the facility and related property may extend past that date. The Company expects the Dublin facility transition to be complete by December 2022. As part of its restructuring activities, the Company has incurred and expects to continue to incur further expenses that qualify as exit and disposal costs under GAAP. For the three and nine months ended June 30, 2022, these costs included employee severance and other costs related to workforce reductions (“employee-related”) of $1,193 and other exit costs (“other”) of $2,614, which primarily relate to inventory write-downs related to the exit of the Cumberland facility and to costs to maintain the facilities until each facility has been exited. Exit and disposal costs have been charged to Other operating expense. The liability balance for restructuring costs that qualify as exit and disposal costs under GAAP is shown below. Employee Related Other Total Liability as of September 30, 2021 — — — Charges $ 1,193 $ 364 $ 1,557 Cash Payments — — — Liability as of June 30, 2022 $ 1,193 $ 364 $ 1,557 The Company has also incurred asset-related costs that relate to our restructuring activities, which do not qualify as exit and disposal costs under GAAP. Asset-related costs include asset impairment charges. As of June 30, 2022, the Company incurred asset-related costs of $1,054 in connection with the impairment of property, plant and equipment at the Dublin and Cumberland facilities, as a result of obtaining market quotes for the value of the real property at the facility and the review of the usefulness of the personal property if transferred to other sites in connection with exit plans. |
LEASES
LEASES | 9 Months Ended |
Jun. 30, 2022 | |
LEASES | |
LEASES | 13. LEASES The Company records a ROU asset and lease liability for substantially all leases for which it is a lessee, in accordance with ASU 842. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet. The Company recognizes lease expense for the leases on a straight-line basis over the lease term. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company has various operating and finance leases for facilities and equipment. Facilities leases provide office, laboratory, warehouse, or land that the Company uses to conduct its operations. Facilities leases range in duration from two renewal options Equipment leases provide for office equipment, laboratory equipment or services the Company uses to conduct its operations. Equipment leases range in duration from 30 to 60 months, with either subsequent annual ROU lease assets and lease liabilities that are reported in the Company’s condensed consolidated balance sheets are as follows: June 30, 2022 September 30, 2021 Operating ROU assets, net $ 29,116 $ 8,358 Current portion of operating lease liabilities 6,151 1,959 Long-term operating lease liabilities 22,901 6,554 Total operating lease liabilities $ 29,052 $ 8,513 Finance ROU assets, net $ 51 $ 60 Current portion of finance lease liabilities 21 24 Long-term finance lease liabilities 33 39 Total finance lease liabilities $ 54 $ 63 During the three and nine months ended June 30, 2022, the Company had operating lease amortization of $2,421 and $4,989, respectively, and had finance lease amortization of $6 and $18, respectively. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense related to the Company’s leases for the three and nine months ended June 30, 2022 and June 30, 2021 were: Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Operating lease costs: Fixed operating lease costs $ 2,187 $ 292 $ 5,882 $ 736 Short-term lease costs 11 32 56 66 Lease income (566) (159) (1,732) (477) Finance lease costs: Amortization of ROU asset expense 6 25 18 97 Interest on finance lease liability 1 46 2 183 Total lease cost $ 1,639 $ 236 $ 4,226 $ 605 The Company serves as lessor to a lessee in five facilities. The gross rental income and underlying lease expense are presented net in the Company’s condensed consolidated statement of operations. Supplemental cash flow information related to leases was as follows: Nine Months Ended Nine Months Ended June 30, June 30, 2022 2021 Cash flows included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,205 $ 4,927 Operating cash flows from finance leases 5 18 Finance cash flows from finance leases 1 2 Non-cash lease activity: ROU assets obtained in exchange for new operating lease liabilities $ 7,658 $ 25,747 Right-of-use assets obtained in exchange for new finance lease liabilities — 9 The weighted average remaining lease term and discount rate for the Company’s operating and finance leases as of June 30, 2022 and June 30, 2021 were: June 30, 2022 June 30, 2021 Weighted-average remaining lease term (in years) Operating lease 5.60 4.91 Finance lease 2.79 3.43 Weighted-average discount rate (in percentages) Operating lease 5.45 % 4.46 % Finance lease 4.86 % 4.86 % Lease duration was determined utilizing renewal options that the Company is reasonably certain to execute. As of June 30, 2022, maturities of operating and finance lease liabilities for each of the following five fiscal years and a total thereafter were as follows: Operating Leases Finance Leases 2022 (remainder of fiscal year) $ 1,145 $ 6 2023 7,558 21 2024 6,547 21 2025 5,737 8 2026 4,902 1 Thereafter 8,087 — Total minimum future lease payments 33,976 57 Less interest (4,924) (3) Total lease liability 29,052 54 |
DEFINED BENEFIT PLAN
DEFINED BENEFIT PLAN | 9 Months Ended |
Jun. 30, 2022 | |
DEFINED BENEFIT PLAN | |
DEFINED BENEFIT PLAN | 14. DEFINED BENEFIT PLAN The Company has a defined benefit plan in the U.K., the Harlan Laboratories UK Limited Occupational Pension Scheme (the "Pension Plan"), which operated through April 2012. As of April 30, 2012, the accumulation of plan benefits of employees in the Pension Plan was permanently suspended and therefore the Pension Plan was curtailed. During the year ending September 30, 2022, the Company expects to contribute $1,078 to the Pension Plan. As of June 30, 2022, the underfunded defined benefit plan obligation of $185 is included in other liabilities (non-current) in the condensed consolidated balance sheets. The following table provides the components of net periodic benefit costs for the Pension Plan, which is included in general and administrative expenses in the condensed consolidated statement of operations. Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Components of net periodic benefit expense: Interest cost $ 207 $ - $ 344 $ - Expected return on assets (352) - (681) - Amortization of prior loss 177 - 454 - Net periodic benefit cost $ 32 $ - $ 117 $ - |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended |
Jun. 30, 2022 | |
CONTINGENCIES | |
CONTINGENCIES | 15. CONTINGENCIES Litigation Envigo RMS, LLC (“Envigo RMS”) is a defendant in a purported class action and a related action under California’s Private Attorney General Act of 2004 (“PAGA”) brought by Jacob Greenwell, a former employee of Envigo RMS, on June 25, 2021 in the Superior Court of California, Alameda County. The complaints allege that Envigo RMS violated certain wage and hour requirements under the California Labor Code. PAGA authorizes private attorneys to bring claims on behalf of the State of California and aggrieved employees for violations of California’s wage and hour laws. The class action complaint seeks certification of a class of similarly situated employees and the award of actual, consequential and incidental losses and damages for the alleged violations. The PAGA complaint seeks civil penalties pursuant to the California Labor Code and attorney’s fees. The Company intends to continue to vigorously defend these claims. The Company is party to certain other legal actions arising out of the normal course of its business. In management's opinion, none of these actions will have a material effect on the Company's operations, financial condition or liquidity. Government Investigations and Actions During the period from July 2021 through March 2022, Envigo RMS’s Cumberland facility was inspected on several occasions by the U.S. Department of Agriculture (“USDA”). USDA issued inspection reports with findings of non-compliance with certain USDA laws and regulations. Envigo RMS formally appealed certain of the findings, and made multiple remediations and improvements at the Cumberland facility, of which it kept USDA apprised. On May 18, 2022, the U.S. Department of Justice ("DOJ"), together with federal and state law enforcement agents, executed a search and seizure warrant on the Cumberland facility. The warrant was issued by the U.S. District Court for the Western District of Virginia on May 13, 2022. Certain employees also received a grand jury subpoena requested by the U.S. Attorney’s Office for the Western District of Virginia (“USAO-VA”). Consistent with Company policy, the Company is cooperating with DOJ and USAO-VA and other involved authorities. On May 19, 2022, a civil complaint was filed against Envigo RMS in the U.S. District Court for the Western District of Virginia. The complaint was a civil action by DOJ alleging violations of the Animal Welfare Act at the Cumberland facility. The complaint sought declaratory and injunctive relief and costs. A temporary restraining order was issued on May 21, 2022 and, following Envigo RMS’s announcement on June 13, 2022 of its plans to permanently decommission the Cumberland facility, a preliminary injunction was issued on June 17, 2022. On July 15, 2022, the court approved a settlement entered into by Envigo RMS, the DOJ and the USDA on the civil case, which also comprises USDA’s administrative claims against Envigo RMS for the Cumberland facility. The settlement does not require that Envigo RMS pay any fines or penalties to any governmental agencies. In addition, it is expressly stated that the settlement is not an admission of liability or wrongdoing by Envigo RMS with regard to its past operation of the Cumberland facility. The settlement incorporates the transfer plan that was mutually agreed to by the DOJ and Envigo RMS on July 1, 2022 (the “Transfer Plan”), and it concludes all related civil and administrative complaints related to the Cumberland facility. As of the filing date of this Report, the Transfer Plan was still being executed by all parties involved. After the Transfer Plan is fully executed, in accordance with the settlement, Envigo RMS will refrain from any operations requiring a USDA license at the Cumberland facility. On June 15, 2021, Envigo Global Services, Inc. (“EGSI”), a subsidiary of the Company acquired in the Envigo acquisition, received a grand jury subpoena requested by the U.S. Attorney’s Office for the Southern District of Florida (“USAO-FL”) for the production of documents related to the procurement of non-human primates (“NHPs”) from foreign suppliers for the period January 1, 2018 through June 1, 2021. The subpoena relates to an earlier grand jury subpoena requested by the USAO-FL and received by EGSI’s predecessor entity, Covance Research Products, in April 2019. Envigo acquired EGSI from Covance, Inc. (“Covance”), a subsidiary of Laboratory Corporation of America Holdings, in June 2019. The EGSI transaction agreement provides for indemnification of Envigo and its officers, directors and affiliates by Covance for any liabilities arising out of or related to the USAO-FL’s investigation in connection with the subpoena to Covance Research Products, as well as certain other matters, subject to an overall indemnification limit for the investigation and certain other matters of $5,500. On January 27, 2022, EGSI acquired OBRC, which owns and operates a primate quarantine and holding facility located near Alice, Texas. In 2019, OBRC received grand jury subpoenas requested by the USAO-FL requiring the production of documents and information related to its importation of NHPs into the United States. On June 16, 2021, OBRC received a grand jury subpoena requested by the USAO-FL requiring the production of documents related to the procurement of NHPs from foreign suppliers for the period January 1, 2018 through June 1, 2021. The OBRC purchase agreement provides for indemnification of EGSI and its officers, directors and affiliates by the seller, Orient Bio, Inc., for liabilities resulting from actions, inactions, errors or omissions of Orient Bio, Inc. or OBRC related to any period prior to the closing date. Consistent with Company policy, the Company is cooperating with USAO-FL. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Jun. 30, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 16. SUBSEQUENT EVENTS On July 7, 2022, the Company entered into a Stock Purchase Agreement with Protypia, Inc. (“Protypia”), which is a strategic element of the Company’s expansion of its mass spectrometry-based bioanalytical offerings providing for the acquisition by the Company of all of the outstanding stock of Protypia on that date. Consideration for the Protypia stock consisted of $9,640 in cash, subject to certain adjustments, $600 in seller notes and 75,000 common shares having a value of approximately $806 based on the opening stock price of the Company’s common shares as reported by Nasdaq on the closing date. On July 27, 2022, Envigo RMS entered into a Purchase Agreement for the sale of the Dublin facility. The sale is expected to close in first quarter of fiscal year 2023. The Company does not expect any material gain or loss as a result of the sale. |
DESCRIPTION OF THE BUSINESS A_2
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Jun. 30, 2022 | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | |
Basis of Presentation | Basis of Presentation The Company has prepared the accompanying unaudited interim condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”), and therefore should be read in conjunction with the Company’s audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In the opinion of management, the condensed consolidated financial statements for the three and nine months ended June 30, 2022 and 2021 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of the Company’s financial position at June 30, 2022. The results of operations for the three and nine months ended June 30, 2022 may not be indicative of the results for the fiscal year ending September 30, 2022. The acquisition of Envigo was transformational to the Company’s underlying business. As a result, certain reclassifications have been made to prior periods in the unaudited condensed consolidated financial statements and accompanying notes to conform with current presentation, which more closely reflects management’s perspective of the business as it currently exists. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgements that may affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. These include, but are not limited to, management estimates in the calculation and timing of revenue recognition, pension liabilities, deferred tax assets and liabilities and the related valuation allowance. Although estimates are based upon management’s best estimate using historical experience, current events, and actions, actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known. |
Consolidation | Consolidation The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company, including all subsidiaries and a VIE it consolidates in accordance with GAAP. The Company consolidates a VIE as a result of the Envigo acquisition. The VIE does not materially impact our net assets or net (loss) income. The Company accounts for noncontrolling interests in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”). ASC 810 requires companies with noncontrolling interests to disclose such interests as a portion of equity but separate from the parent’s equity. The noncontrolling interests’ portion of net income (loss) is presented on the condensed consolidated statements of operations. |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for fiscal year 2021. As a result of the Envigo acquisition, the following policies have been added or adjusted to reflect our combined business. |
Pension Costs | Pension Costs As a result of the Envigo acquisition, the Company has a defined benefit pension plan for one of its U.K. subsidiaries. The projected benefit obligation and funded position of the defined benefit plan is estimated by actuaries and the Company recognizes the funded status of its defined benefit plan on its condensed consolidated balance sheets and recognizes gains, losses and prior service costs or credits that arise during the period that are not recognized as components of net periodic benefit cost as a component of accumulated other comprehensive income (loss), net of tax. The Company measures plan assets and obligations as of the date of the Company’s year-end consolidated balance sheet, using assumptions to anticipate future events. The valuation of assets acquired and liabilities assumed in the Envigo acquisition had not yet been finalized as of June 30, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of the unfunded defined benefit plan obligation, among other items. Additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations are disclosed in the notes to the condensed consolidated financial statements (see Note 14 – Defined Benefit Plan). |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) for the periods presented is comprised of consolidated net income (loss) plus the change in the cumulative translation adjustment equity account and the adjustments, net of tax, for the current period actuarial gains (losses) in connection with the Company’s defined benefit plan. |
Foreign Currencies | Foreign Currencies Transactions in currencies other than the functional currency of each entity are recorded at the rates of exchange on the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange on the balance sheet date and the related transaction gains and losses are reported in the condensed consolidated statements of operations, in Operating income (loss). The Company records gains and losses from re-measuring intercompany loans within Other income (expense) in the condensed consolidated statements of operations. The results of operations of subsidiaries whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rate, assets and liabilities are translated at period-end exchange rates, capital accounts are translated at historical exchange rates, and retained earnings are translated at the weighted average of historical rates. Translation adjustments are excluded from the determination of net income (loss) and are recorded as a separate component of equity within accumulated other comprehensive income (loss) in the condensed consolidated financial statements. |
New Accounting Pronouncements | In the first quarter of 2022, the Company early adopted ASU 2020-06. The update simplifies the accounting for convertible debt instruments and convertible preferred shares by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share. See Note 7 for discussion of the impact on the Company’s condensed consolidated financial statements. |
NET (LOSS) INCOME PER SHARE (Ta
NET (LOSS) INCOME PER SHARE (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
NET (LOSS) INCOME PER SHARE | |
Schedule of computation of basic net (loss) income per share to diluted loss per share | Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Basic and diluted net (loss) income per share: Net (loss) income applicable to common shareholders $ (3,728) $ 2,602 $ (92,862) $ 1,513 Weighted average common shares outstanding (in thousands) Basic 25,510 14,656 23,938 12,274 Diluted 25,510 15,383 23,938 12,948 Basic net (loss) income per share $ (0.15) $ 0.18 $ (3.88) $ 0.12 Diluted net (loss) income per share $ (0.15) $ 0.17 $ (3.88) $ 0.12 |
OTHER OPERATING EXPENSE (Tables
OTHER OPERATING EXPENSE (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
OTHER OPERATING EXPENSE | |
Schedule of other operating expense | Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Acquisition and integration costs $ 3,682 $ — $ 14,575 $ — Restructuring costs 1 4,861 — 4,861 — Startup costs 1,731 479 4,162 841 Remediation costs 364 — 1,310 — Other costs 203 107 949 290 Acquisition-related stock compensation costs — — 23,014 — $ 10,841 $ 586 $ 48,871 $ 1,131 1 Restructuring costs represent costs incurred in connection with the exit of our Dublin and Cumberland facilities. See Note 12 – Restructuring for additional information. |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
SEGMENT INFORMATION | |
Schedule of operating segments | Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Revenue DSA $ 49,224 $ 22,892 $ 121,103 $ 59,529 RMS 123,442 — 276,087 — $ 172,666 $ 22,892 $ 397,190 $ 59,529 Operating Income (Loss) DSA $ 13,171 $ 3,929 $ 22,965 $ 11,144 RMS 11,902 — 34,544 — Unallocated Corporate (20,286) (5,632) (78,495) (13,354) $ 4,787 $ (1,703) $ (20,986) $ (2,210) Interest expense (8,441) (449) (20,816) (1,163) Other income (expense) 440 1 (57,426) 180 Loss before income taxes $ (3,214) $ (2,151) $ (99,228) $ (3,193) Total assets by reporting segment is as follows: June 30, September 30, 2022 2021 DSA $ 274,570 $ 321,856 RMS 893,208 — $ 1,167,778 $ 321,856 |
Schedule of geographical Information | Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 United States $ 150,540 $ 22,892 $ 340,875 $ 59,529 Netherlands 12,894 — 31,549 — Other 9,232 — 24,766 — $ 172,666 $ 22,892 $ 397,190 $ 59,529 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
DEBT | |
Schedule of long-term debt | June 30, 2022 September 30, 2021 FIB Term Loans $ — $ 36,185 Seller Note – Bolder BioPath 883 1,500 Seller Note – Smithers Avanza — 280 Seller Note – Preclinical Research Services 632 685 Seller Note – Plato BioPharma 2,143 — Seller Payable - Orient BioResource Center 3,426 — Seller Note – Histion 409 — Economic Injury Disaster Loan 140 — Convertible Senior Notes 103,617 131,673 Term Loan Facility, Initial DDTL and Incremental Term Loans 238,800 — 350,050 170,323 Less: Current portion (4,985) (9,656) Less: Debt issue costs not amortized (11,292) (6,458) Total Long-term debt $ 333,773 $ 154,209 |
SUPPLEMENTAL BALANCE SHEET IN_2
SUPPLEMENTAL BALANCE SHEET INFORMATION (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
SUPPLEMENTAL BALANCE SHEET INFORMATION | |
Schedule of supplemental balance sheet information related to trade receivables and contract assets, net | June 30, September 30, 2022 2021 Trade receivables $ 94,328 $ 22,838 Unbilled revenue 17,300 6,194 Total 111,628 29,032 Less: Allowance for doubtful accounts (3,909) (668) Trade receivables and contract assets, net of allowances for doubtful accounts $ 107,719 $ 28,364 |
Schedule of supplemental balance sheet information related to inventories | June 30, September 30, 2022 2021 Raw materials $ 1,727 $ 513 Work in progress 262 37 Finished goods 4,987 192 Research Model Inventory 64,925 — Total 71,901 742 Less: Obsolescence reserve (5,500) (140) Inventories, net $ 66,401 $ 602 |
Schedule of supplemental balance sheet information related to the composition of prepaid expenses and other current assets | June 30, September 30, 2022 2021 Advances to suppliers $ 27,030 $ — Income tax receivable 2,593 — Prepaid research models 3,696 1,931 Other 5,620 1,198 Prepaid expenses and other current assets $ 38,939 $ 3,129 |
Schedule of supplemental balance sheet information related to other assets | June 30, September 30, 2022 2021 Long-term advances to suppliers $ 3,393 $ — Security deposits and guarantees 915 51 Finance lease right-of-use assets, net 51 60 Debt issuance costs 2,468 — Other 600 230 Other assets $ 7,427 $ 341 |
Schedule of accrued expenses | June 30, September 30, 2022 2021 Accrued compensation $ 20,409 $ 3,528 Non-income taxes 1,448 18 Accrued interest 3,516 169 Other 3,121 366 Consideration payable — 4,887 Accrued expenses and other liabilities $ 28,494 $ 8,968 |
Schedule of fees invoiced in advance | June 30, September 30, 2022 2021 Customer deposits $ 37,262 $ — Deferred revenue 38,219 26,614 Fees invoiced in advance $ 75,481 $ 26,614 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
BUSINESS COMBINATIONS | |
Schedule of unaudited pro forma information | Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Total revenues $ 172,793 $ 109,184 $ 441,889 $ 326,658 Net loss (3,680) (1,398) (101,870) (23,535) |
HistoTox Labs | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Accounts receivable 977 Unbilled revenues 337 Operating lease right of use ("ROU") asset 2,239 Property and equipment 3,929 Intangible assets 8,300 Goodwill 9,339 Accounts payable (150) Accrued expenses (136) Customer advances (207) Operating lease liability (2,239) $ 22,389 |
Bolder BioPATH | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Accounts receivable 2,146 Unbilled revenues 1,798 Operating lease ROU asset 2,750 Property and equipment 6,523 Intangible asset 12,700 Other assets 34 Goodwill 36,206 Accounts payable (153) Accrued expenses (243) Deferred revenue (662) Deferred tax liability (4,867) Operating lease liability (2,750) $ 53,482 |
Gateway Pharmacology Laboratories LLC | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Accounts receivable 409 Operating lease ROU asset 120 Property and equipment 359 Intangible asset 100 Other assets 4 Goodwill 2,260 Accounts payable (3) Accrued expenses (72) Deferred tax liability (171) Operating lease liability (120) $ 2,886 |
BioReliance Corporation | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Property and equipment 175 Intangible asset 640 $ 815 |
Plato BioPharma Inc | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 1,027 Trade receivables and contract assets 868 Prepaid expenses and other current assets 141 Property and equipment 1,148 Operating lease ROU assets 2,566 Intangible asset 4,800 Goodwill 9,247 Accounts payable (110) Fees invoiced in advance (99) Operating lease liability (2,549) Accrued expenses and other liabilities (245) Deferred tax liability (1,488) $ 15,306 |
Envigo RMS Holding Corp | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 3,091 Restricted cash 435 Trade receivables and contract assets 44,205 Inventory 42,338 Prepaid expenses and other current assets 18,960 Operating lease ROU assets 8,423 Property and equipment 109,956 Other assets 7,676 Intangible asset 257,000 Goodwill 291,319 Accounts payable (15,913) Fees invoiced in advance (7,040) Current portion of long-term operating lease (3,168) Accrued expenses and other liabilities (22,383) Long-term operating leases, net (5,045) Other liabilities (4,205) Long-term debt (140) Long-term deferred tax liabilities (51,815) Noncontrolling interest 880 $ 674,574 |
Schedule of information related to measurement assumptions | Stock price $ 53.31 Strike price $ 9.93 Volatility 75.93 % Expected term 3.05 Risk-free rate 0.62 % |
Robinson Services, Inc. | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Customer relationship 4,700 Non-compete agreement 300 Supply agreement 200 Goodwill 948 $ 6,148 |
Integrated Laboratory Systems, LLC (ILS) | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 797 Trade receivables and contract assets 4,257 Prepaid expenses and other current assets 64 Operating lease ROU assets 3,603 Property and equipment 3,911 Intangible asset 22,600 Goodwill 26,062 Accounts payable (1,156) Fees invoiced in advance (2,420) Current portion on long-term operating lease (738) Accrued expenses and other liabilities (942) Long-term operating leases, net (2,425) Other liabilities (41) Long-term deferred tax liabilities (113) $ 53,459 |
Orient BioResource Center, Inc | |
BUSINESS COMBINATIONS | |
Schedule of purchase price allocation | Preliminary Allocation as of June 30, 2022 Assets acquired and liabilities assumed: Cash 5,481 Trade receivables and contract assets 2,025 Inventory 9,600 Prepaid expenses and other current assets 2,609 Property and equipment 8,336 Intangible asset 16,600 Goodwill 16,115 Accounts payable (552) Fees invoiced in advance (6,548) Accrued expenses and other liabilities (287) Long-term deferred tax liabilities (4,105) $ 49,274 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
REVENUE RECOGNITION | |
Schedule of changes in contract assets and liabilities | The following table presents changes in the Company’s contract assets and contract liabilities for the nine months ended June 30, 2022. Balance at Balance at September 30, June 30, 2021 Additions Deductions 2022 Contract Assets: Unbilled revenue $ 6,194 $ 31,794 $ (20,688) $ 17,300 Contract liabilities: Fees invoiced in advance $ 26,614 $ 389,849 $ (340,982) $ 75,481 |
RESTRUCTURING (Tables)
RESTRUCTURING (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
RESTRUCTURING | |
Schedule of liability balance for restructuring costs | Employee Related Other Total Liability as of September 30, 2021 — — — Charges $ 1,193 $ 364 $ 1,557 Cash Payments — — — Liability as of June 30, 2022 $ 1,193 $ 364 $ 1,557 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
LEASES | |
Summary of right-of-use lease assets and lease liabilities that are reported in the Company's condensed consolidated balance sheets | June 30, 2022 September 30, 2021 Operating ROU assets, net $ 29,116 $ 8,358 Current portion of operating lease liabilities 6,151 1,959 Long-term operating lease liabilities 22,901 6,554 Total operating lease liabilities $ 29,052 $ 8,513 Finance ROU assets, net $ 51 $ 60 Current portion of finance lease liabilities 21 24 Long-term finance lease liabilities 33 39 Total finance lease liabilities $ 54 $ 63 |
Summary of components of lease expense | Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Operating lease costs: Fixed operating lease costs $ 2,187 $ 292 $ 5,882 $ 736 Short-term lease costs 11 32 56 66 Lease income (566) (159) (1,732) (477) Finance lease costs: Amortization of ROU asset expense 6 25 18 97 Interest on finance lease liability 1 46 2 183 Total lease cost $ 1,639 $ 236 $ 4,226 $ 605 |
Summary of supplemental cash flow information related to leases | Nine Months Ended Nine Months Ended June 30, June 30, 2022 2021 Cash flows included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,205 $ 4,927 Operating cash flows from finance leases 5 18 Finance cash flows from finance leases 1 2 Non-cash lease activity: ROU assets obtained in exchange for new operating lease liabilities $ 7,658 $ 25,747 Right-of-use assets obtained in exchange for new finance lease liabilities — 9 |
Summary of weighted average remaining lease term and discount rate | June 30, 2022 June 30, 2021 Weighted-average remaining lease term (in years) Operating lease 5.60 4.91 Finance lease 2.79 3.43 Weighted-average discount rate (in percentages) Operating lease 5.45 % 4.46 % Finance lease 4.86 % 4.86 % |
Summary of maturities of operating lease liabilities for each of the following five years and a total thereafter | Operating Leases Finance Leases 2022 (remainder of fiscal year) $ 1,145 $ 6 2023 7,558 21 2024 6,547 21 2025 5,737 8 2026 4,902 1 Thereafter 8,087 — Total minimum future lease payments 33,976 57 Less interest (4,924) (3) Total lease liability 29,052 54 |
Summary of maturities of finance lease liabilities for each of the following five years and a total thereafter | Operating Leases Finance Leases 2022 (remainder of fiscal year) $ 1,145 $ 6 2023 7,558 21 2024 6,547 21 2025 5,737 8 2026 4,902 1 Thereafter 8,087 — Total minimum future lease payments 33,976 57 Less interest (4,924) (3) Total lease liability 29,052 54 |
DEFINED BENEFIT PLAN (Tables)
DEFINED BENEFIT PLAN (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
DEFINED BENEFIT PLAN | |
Schedule of components of net periodic benefit costs | Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Components of net periodic benefit expense: Interest cost $ 207 $ - $ 344 $ - Expected return on assets (352) - (681) - Amortization of prior loss 177 - 454 - Net periodic benefit cost $ 32 $ - $ 117 $ - |
DESCRIPTION OF THE BUSINESS A_3
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details) | 3 Months Ended | 9 Months Ended |
Jun. 30, 2022 customer | Jun. 30, 2022 customer | |
Sales revenue | Customer concentration risk | One customer | ||
Business Acquisitions | ||
Percentage of sales | 30.90% | 28.90% |
Number of customers | 1 | 1 |
Cost of revenues | Vendor concentration risk | One vendor | ||
Business Acquisitions | ||
Percentage of cost of sales | 13% | 13.70% |
Number of vendors | 1 | 1 |
EQUITY - Common stock offering
EQUITY - Common stock offering (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Nov. 04, 2021 | Apr. 23, 2021 | Jun. 30, 2022 | Jun. 30, 2022 | Nov. 03, 2021 | Sep. 30, 2021 | |
Equity | ||||||
Net proceeds | $ 49,000 | |||||
Common and preferred shares authorized | 75,000,000 | 20,000,000 | ||||
Common Stock, Shares Authorized | 74,000,000 | 74,000,000 | 74,000,000 | 19,000,000 | 74,000,000 | |
Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 | ||||
Number of shares added under amended and restated plan | 1,500,000 | |||||
Stock issued in acquisitions (In shares) | 17,618 | 9,498,213 | ||||
2021 Equity Incentive Plan | ||||||
Equity | ||||||
Number of shares remained available for grants | 926,647 | 926,647 | ||||
Public offering | ||||||
Equity | ||||||
Stock issued (in shares) | 3,044,117 | |||||
Price per share | $ 17 | |||||
Underwriting option | ||||||
Equity | ||||||
Stock issued (in shares) | 397,058 | |||||
Price per share | $ 17 |
EQUITY - Stock Based Compensati
EQUITY - Stock Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
STOCK-BASED COMPENSATION | ||||
Stock based compensation expense | $ 1,987 | $ 581 | $ 27,057 | $ 1,040 |
Envigo equity plan | ||||
STOCK-BASED COMPENSATION | ||||
Stock based compensation expense | 23,014 | |||
Post-combination expense recognized in connection acquisition inclusive of cash | $ 4,772 |
NET (LOSS) INCOME PER SHARE (De
NET (LOSS) INCOME PER SHARE (Details) - shares | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Employee stock options | |||||
LOSS PER SHARE | |||||
Shares excluded in computing diluted (loss) | 671 | 1,967,080 | 671 | ||
Shares issuable upon conversion | 3,040,268 | ||||
Common shares issuable upon conversion of preferred shares | |||||
LOSS PER SHARE | |||||
Shares excluded in computing diluted (loss) | 7 | 7 | |||
Restricted stock units | |||||
LOSS PER SHARE | |||||
Shares excluded in computing diluted (loss) | 541,434 |
NET (LOSS) INCOME PER SHARE- Re
NET (LOSS) INCOME PER SHARE- Reconciliation of basic net loss to diluted net loss per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
NET (LOSS) INCOME PER SHARE | ||||
Basic Net loss (income) applicable to common shareholders | $ (3,728) | $ 2,602 | $ (92,862) | $ 1,513 |
Weighted average common shares outstanding, basic (in thousands) (in shares) | 25,510 | 14,656 | 23,938 | 12,274 |
Weighted average common shares outstanding, diluted (in thousands) (in shares) | 25,510 | 15,383 | 23,938 | 12,948 |
Basic net (loss) income per share (in dollars per share) | $ (0.15) | $ 0.18 | $ (3.88) | $ 0.12 |
Diluted net (loss) income per share (in dollar per share) | $ (0.15) | $ 0.17 | $ (3.88) | $ 0.12 |
OTHER OPERATING EXPENSE (Detail
OTHER OPERATING EXPENSE (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
OTHER OPERATING EXPENSE | ||||
Acquisition costs | $ 3,682 | $ 0 | $ 14,575 | $ 0 |
Start up costs | 1,731 | 479 | 4,162 | 841 |
Restructuring costs | 4,861 | 0 | 4,861 | 0 |
Remediation costs | 364 | 0 | 1,310 | 0 |
Other costs | 203 | 107 | 949 | 290 |
Acquisition-related stock compensation costs | 0 | 0 | 23,014 | 0 |
Total | $ 10,841 | $ 586 | $ 48,871 | $ 1,131 |
SEGMENT INFORMATION - Operating
SEGMENT INFORMATION - Operating Segments Revenue and Operating Income (Loss) (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) segment | Jun. 30, 2021 USD ($) | Sep. 30, 2021 USD ($) | |
SEGMENT INFORMATION | |||||
Number of segments | segment | 2 | ||||
Revenue | $ 172,666 | $ 22,892 | $ 397,190 | $ 59,529 | |
Operating Income (Loss) | 4,787 | (1,703) | (20,986) | (2,210) | |
Interest expense | (8,441) | (449) | (20,816) | (1,163) | |
Other income (expense) | 440 | 1 | (57,426) | 180 | |
Loss before income taxes | (3,214) | (2,151) | (99,228) | (3,193) | |
Assets | 1,167,778 | 1,167,778 | $ 321,856 | ||
United States | |||||
SEGMENT INFORMATION | |||||
Revenue | 150,540 | 22,892 | 340,875 | 59,529 | |
Netherlands | |||||
SEGMENT INFORMATION | |||||
Revenue | 12,894 | 0 | 31,549 | 0 | |
Other. | |||||
SEGMENT INFORMATION | |||||
Revenue | 9,232 | 0 | 24,766 | 0 | |
Intersegment | |||||
SEGMENT INFORMATION | |||||
Revenue | 2,257 | 4,574 | |||
Discovery and Safety Assessment Segment (DSA) | |||||
SEGMENT INFORMATION | |||||
Revenue | 49,224 | 22,892 | 121,103 | 59,529 | |
Operating Income (Loss) | 13,171 | 3,929 | 22,965 | 11,144 | |
Assets | 274,570 | 274,570 | 321,856 | ||
Research Models And Services Segment (RMS) | |||||
SEGMENT INFORMATION | |||||
Revenue | 123,442 | 0 | 276,087 | 0 | |
Operating Income (Loss) | 11,902 | 0 | 34,544 | 0 | |
Assets | 893,208 | 893,208 | $ 0 | ||
Unallocated Corporate Segment | |||||
SEGMENT INFORMATION | |||||
Operating Income (Loss) | $ (20,286) | $ (5,632) | $ (78,495) | $ (13,354) |
INCOME TAXES (Details)
INCOME TAXES (Details) $ in Thousands | 9 Months Ended |
Jun. 30, 2022 USD ($) | |
Maximum | |
INCOME TAXES | |
Income tax examination period | 5 years |
Minimum | |
INCOME TAXES | |
Income tax examination period | 3 years |
Envigo RMS Holding Corp | |
INCOME TAXES | |
Federal statutory income tax rate (as a percent) | 21% |
Effective income tax rate (as a percent) | 5.60% |
Deferral amount | $ 916 |
DEBT (Details)
DEBT (Details) $ / shares in Units, $ in Thousands | 9 Months Ended | |||||||
Jan. 27, 2022 USD ($) | Jan. 07, 2022 USD ($) | Nov. 05, 2021 USD ($) | Nov. 04, 2021 USD ($) | Sep. 27, 2021 USD ($) D item $ / shares | Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Sep. 30, 2021 USD ($) | |
DEBT | ||||||||
Gain (loss) on extinguishment of debt | $ (877) | $ 0 | ||||||
Long-term debt | 350,050 | $ 170,323 | ||||||
Borrowings on delayed draw term loan | $ 35,000 | $ 0 | ||||||
LIBOR | ||||||||
DEBT | ||||||||
Basis points adjustments | 6.25% | |||||||
Prime Rate | ||||||||
DEBT | ||||||||
Basis points adjustments | 5.25% | |||||||
Maximum | LIBOR | ||||||||
DEBT | ||||||||
Basis points adjustments | 6.50% | |||||||
Maximum | Prime Rate | ||||||||
DEBT | ||||||||
Basis points adjustments | 5.50% | |||||||
Minimum | LIBOR | ||||||||
DEBT | ||||||||
Variable interest rate (as a percent) | 1% | |||||||
Basis points adjustments | 6% | |||||||
Minimum | Prime Rate | ||||||||
DEBT | ||||||||
Basis points adjustments | 5% | |||||||
Revolving Facility | ||||||||
DEBT | ||||||||
Maximum amount of line of credit | $ 35,000 | |||||||
Principal amount of revolving loan facility | $ 15,000 | |||||||
Commitment fee percentage | 0.50% | |||||||
Line Of Credit Facility, Initial Leverage Ratio | ||||||||
DEBT | ||||||||
Threshold secured leverage ratio | 4.25 | |||||||
Line Of Credit Facility, Leverage Ratio To Be Maintained Beginning Quarter Ending March 31, 2025 | ||||||||
DEBT | ||||||||
Minimum fixed charge coverage ratio | 3 | |||||||
Line Of Credit Facility Leverage Ratio To Be Maintained Beginning Quarter Ending September 20, 2023 | ||||||||
DEBT | ||||||||
Threshold secured leverage ratio | 3.75 | |||||||
Line Of Credit Facility, Minimum Fixed Charge Coverage Ratio To Be Maintained During First Anniversary | ||||||||
DEBT | ||||||||
Minimum fixed charge coverage ratio | 1 | |||||||
Line Of Credit Facility, Minimum Fixed Charge Coverage Ratio To Be Maintained From And After First Anniversary | ||||||||
DEBT | ||||||||
Minimum fixed charge coverage ratio | 1.10 | |||||||
Credit Agreement | First Internet Bank of Indiana | ||||||||
DEBT | ||||||||
Gain (loss) on extinguishment of debt | $ 877 | |||||||
First Amendment to Credit Agreement | ||||||||
DEBT | ||||||||
Annual Interest Rate (as a percent) | 7.25% | 7.82% | ||||||
First Amendment to Credit Agreement | LIBOR | ||||||||
DEBT | ||||||||
Variable interest rate (as a percent) | 1% | |||||||
Basis points adjustments | 6.25% | |||||||
First Amendment to Credit Agreement | Maximum | LIBOR | ||||||||
DEBT | ||||||||
Basis points adjustments | 6.50% | |||||||
First Amendment to Credit Agreement | Minimum | LIBOR | ||||||||
DEBT | ||||||||
Basis points adjustments | 6% | |||||||
Purchase Agreement | Orient Bio, Inc. (OBRC) | ||||||||
DEBT | ||||||||
Liabilities incurred | $ 3,700 | |||||||
Fair value | $ 3,325 | |||||||
Period for payment of consideration | 18 months | |||||||
Term Loan | ||||||||
DEBT | ||||||||
Principal amount | $ 165,000 | |||||||
Term Loan | First Amendment to Credit Agreement | ||||||||
DEBT | ||||||||
Annual principal payments percentage | 1% | |||||||
Principal amount | $ 40,000 | |||||||
Term Loan | First Amendment to Credit Agreement | Line Of Credit Facility Prepayment Premium If Made On or Prior To November 5, 2022 | ||||||||
DEBT | ||||||||
Annual principal payments percentage | 2% | |||||||
Term Loan | First Amendment to Credit Agreement | Line Of Credit Facility Prepayment Premium If Made on Or Prior To November 5, 2023 | ||||||||
DEBT | ||||||||
Annual principal payments percentage | 1% | |||||||
Delayed Draw Term Loan | ||||||||
DEBT | ||||||||
Maximum term for drawing loan facility | 18 months | |||||||
Commitment fee percentage | 1% | |||||||
Principal amount | $ 35,000 | $ 35,000 | ||||||
Annual Interest Rate (as a percent) | 7.25% | 7.49% | ||||||
Borrowings on delayed draw term loan | $ 35,000 | |||||||
Delayed Draw Term Loan | LIBOR | ||||||||
DEBT | ||||||||
Variable interest rate (as a percent) | 1% | |||||||
Basis points adjustments | 6.25% | |||||||
Delayed Draw Term Loan | Maximum | LIBOR | ||||||||
DEBT | ||||||||
Basis points adjustments | 6.50% | |||||||
Delayed Draw Term Loan | Minimum | LIBOR | ||||||||
DEBT | ||||||||
Basis points adjustments | 6% | |||||||
Delayed Draw Term Loan | First Amendment to Credit Agreement | ||||||||
DEBT | ||||||||
Maximum term for drawing loan facility | 24 months | |||||||
Principal amount | $ 35,000 | |||||||
Credit Facility Term Loan and Delayed Draw Term Loan | ||||||||
DEBT | ||||||||
Annual principal payments percentage | 1% | |||||||
Seller Note - Smithers Avanza | ||||||||
DEBT | ||||||||
Long-term debt | $ 0 | 280 | ||||||
Seller Note - Pre-Clinical Research Services | ||||||||
DEBT | ||||||||
Long-term debt | 632 | 685 | ||||||
Seller Note - Bolder BioPATH | ||||||||
DEBT | ||||||||
Long-term debt | 883 | 1,500 | ||||||
Seller Note - Plato BioPharma | ||||||||
DEBT | ||||||||
Principal amount | $ 3,000 | |||||||
Annual Interest Rate (as a percent) | 4.50% | |||||||
Long-term debt | $ 2,143 | 0 | ||||||
Seller Note - Histion | ||||||||
DEBT | ||||||||
Principal amount | $ 433 | |||||||
Annual Interest Rate (as a percent) | 4.50% | |||||||
Long-term debt | $ 409 | 0 | ||||||
Convertible Senior Notes | ||||||||
DEBT | ||||||||
Principal amount | $ 140,000 | |||||||
Annual Interest Rate (as a percent) | 3.25% | 7.82% | ||||||
Settlement period | 13 days | |||||||
Additional principal amount | $ 15,000 | |||||||
Long-term debt | $ 99,776 | $ 103,617 | 131,673 | |||||
Fair value of the conversion | 31,862 | |||||||
Initial conversion rate | 1.7162 | |||||||
Initial conversion price | $ / shares | $ 46.05 | |||||||
Number of scheduled trading days | item | 40 | |||||||
Conversion price | 130% | |||||||
Number of trading days | D | 20 | |||||||
Number of consecutive trading days | D | 30 | |||||||
Cure period | 30 days | |||||||
Cure or waiver period | 60 days | |||||||
Guarantor or subsidiaries for the payment | $ 20,000 | |||||||
Period for discharge or stay | 60 days | |||||||
Percentage of noteholders | 25% | |||||||
Right to receive special interest maximum term | 180 days | |||||||
Right to receive special interest maximum rate | 0.50% | |||||||
Convertible Senior Notes | Other Income (loss) | ||||||||
DEBT | ||||||||
Gain (loss) on fair value remeasurement | (56,714) | |||||||
Convertible Senior Notes | ASU 2020-06 | ||||||||
DEBT | ||||||||
Long-term debt | 76,716 | |||||||
Fair value of the conversion | 54,922 | |||||||
Fair value remeasurement of embedded derivative | 88,576 | |||||||
Fair value remeasurement, reclassified to additional paid in capital | $ 88,576 | |||||||
EIDL Loan | ||||||||
DEBT | ||||||||
Long-term debt | $ 140 | $ 0 |
DEBT - Schedule of long-term de
DEBT - Schedule of long-term debt (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Nov. 04, 2021 | Sep. 30, 2021 |
DEBT | |||
Long-term debt | $ 350,050 | $ 170,323 | |
Less: Current portion | (4,985) | (9,656) | |
Less: Debt issue costs not amortized | (11,292) | (6,458) | |
Total Long-term debt | 333,773 | 154,209 | |
FIB Term Loans | |||
DEBT | |||
Long-term debt | 0 | 36,185 | |
Seller Note - Bolder BioPATH | |||
DEBT | |||
Long-term debt | 883 | 1,500 | |
Seller Note - Smithers Avanza | |||
DEBT | |||
Long-term debt | 0 | 280 | |
Seller Note - Pre-Clinical Research Services | |||
DEBT | |||
Long-term debt | 632 | 685 | |
Seller Note - Plato BioPharma | |||
DEBT | |||
Long-term debt | 2,143 | 0 | |
Seller Payable Orient Bio Resource Center | |||
DEBT | |||
Long-term debt | 3,426 | 0 | |
Seller Note - Histion | |||
DEBT | |||
Long-term debt | 409 | 0 | |
EIDL Loan | |||
DEBT | |||
Long-term debt | 140 | 0 | |
Convertible Senior Notes | |||
DEBT | |||
Long-term debt | 103,617 | $ 99,776 | 131,673 |
Term Loan Facility, Initial DDTL and Incremental Term Loans | |||
DEBT | |||
Long-term debt | $ 238,800 | $ 0 |
DEBT - Weighted-average assumpt
DEBT - Weighted-average assumptions used to compute fair-value (Details) - Convertible Senior Notes | Nov. 04, 2021 |
Measurement input - Bond Yield | |
DEBT | |
Measurement input | 40 |
Volatility | |
DEBT | |
Measurement input | 10.44 |
Measurement input - maturity period | |
DEBT | |
Maturity period (in years) | 5 years 11 months 12 days |
SUPPLEMENTAL BALANCE SHEET IN_3
SUPPLEMENTAL BALANCE SHEET INFORMATION - Trade Receivables (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Trade receivables and contract assets | ||
Trade receivables | $ 94,328 | $ 22,838 |
Unbilled revenue | 17,300 | 6,194 |
Total | 111,628 | 29,032 |
Less: Allowance for doubtful accounts | (3,909) | (668) |
Trade receivables and contract assets, net of allowances for doubtful accounts | $ 107,719 | $ 28,364 |
SUPPLEMENTAL BALANCE SHEET IN_4
SUPPLEMENTAL BALANCE SHEET INFORMATION - Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Inventories | ||
Raw materials | $ 1,727 | $ 513 |
Work in progress | 262 | 37 |
Finished goods | 4,987 | 192 |
Research Model Inventory | 64,925 | 0 |
Total | 71,901 | 742 |
Less: Obsolescence reserve | (5,500) | (140) |
Inventories, net | $ 66,401 | $ 602 |
SUPPLEMENTAL BALANCE SHEET IN_5
SUPPLEMENTAL BALANCE SHEET INFORMATION - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Prepaid expenses and other current assets | ||
Advances to suppliers | $ 27,030 | $ 0 |
Income tax receivable | 2,593 | 0 |
Prepaid research models | 3,696 | 1,931 |
Other | 5,620 | 1,198 |
Prepaid expenses and other current assets | $ 38,939 | $ 3,129 |
SUPPLEMENTAL BALANCE SHEET IN_6
SUPPLEMENTAL BALANCE SHEET INFORMATION - Composition of Other Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Other assets | ||
Long-term advances to suppliers | $ 3,393 | $ 0 |
Security deposits and guarantees | 915 | 51 |
Finance lease right-of-use assets, net | 51 | 60 |
Debt issuance costs | 2,468 | 0 |
Other | 600 | 230 |
Other assets | $ 7,427 | $ 341 |
SUPPLEMENTAL BALANCE SHEET IN_7
SUPPLEMENTAL BALANCE SHEET INFORMATION - Accrued expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Accrued expenses | ||
Accrued compensation | $ 20,409 | $ 3,528 |
Non-income taxes | 1,448 | 18 |
Accrued interest | 3,516 | 169 |
Other | 3,121 | 366 |
Consideration payable | 0 | 4,887 |
Accrued expenses and other liabilities | $ 28,494 | $ 8,968 |
SUPPLEMENTAL BALANCE SHEET IN_8
SUPPLEMENTAL BALANCE SHEET INFORMATION - Fees invoiced in advance (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Fees invoiced in advance | ||
Customer deposits | $ 37,262 | $ 0 |
Deferred revenue | 38,219 | 26,614 |
Fees invoiced in advance | $ 75,481 | $ 26,614 |
BUSINESS COMBINATIONS - Prelimi
BUSINESS COMBINATIONS - Preliminary fair value of assets acquired and liabilities assumed (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | May 03, 2021 |
HistoTox Labs | ||
Assets acquired and liabilities assumed: | ||
Trade receivables and contract assets | $ 977 | |
Unbilled receivables | 337 | |
Operating lease right of use ("ROU") asset | 2,239 | |
Property and equipment | 3,929 | |
Intangible assets | 8,300 | |
Goodwill | 9,339 | |
Accounts payable | (150) | |
Accrued expenses | (136) | |
Customer advances | (207) | |
Current portion on long-term operating lease | (2,239) | |
Total | 22,389 | |
Bolder BioPATH | ||
Assets acquired and liabilities assumed: | ||
Cash. | $ 500 | |
Trade receivables and contract assets | 2,146 | |
Unbilled receivables | 1,798 | |
Operating lease right of use ("ROU") asset | 2,750 | |
Property and equipment | 6,523 | |
Intangible assets | 12,700 | |
Other assets | 34 | |
Goodwill | 36,206 | |
Accounts payable | (153) | |
Accrued expenses | (243) | |
Deferred revenue | (662) | |
Deferred tax liability | (4,867) | |
Current portion on long-term operating lease | (2,750) | |
Total | 53,482 | |
Gateway Pharmacology Laboratories LLC | ||
Assets acquired and liabilities assumed: | ||
Trade receivables and contract assets | 409 | |
Operating lease right of use ("ROU") asset | 120 | |
Property and equipment | 359 | |
Intangible assets | 100 | |
Other assets | 4 | |
Goodwill | 2,260 | |
Accounts payable | (3) | |
Accrued expenses | (72) | |
Deferred tax liability | (171) | |
Current portion on long-term operating lease | (120) | |
Total | 2,886 | |
BioReliance Corporation | ||
Assets acquired and liabilities assumed: | ||
Property and equipment | 175 | |
Intangible assets | 640 | |
Total | 815 | |
Plato BioPharma Inc | ||
Assets acquired and liabilities assumed: | ||
Cash. | 1,027 | |
Trade receivables and contract assets | 868 | |
Prepaid expenses and other current assets | 141 | |
Operating lease right of use ("ROU") asset | 2,566 | |
Property and equipment | 1,148 | |
Intangible assets | 4,800 | |
Goodwill | 9,247 | |
Accounts payable | (110) | |
Deferred tax liability | (1,488) | |
Fees invoiced in advance | (99) | |
Current portion on long-term operating lease | (2,549) | |
Accrued expenses and other liabilities | (245) | |
Total | 15,306 | |
Envigo RMS Holding Corp | ||
Assets acquired and liabilities assumed: | ||
Cash. | 3,091 | |
Restricted cash | 435 | |
Trade receivables and contract assets | 44,205 | |
Inventory | 42,338 | |
Prepaid expenses and other current assets | 18,960 | |
Operating lease right of use ("ROU") asset | 8,423 | |
Property and equipment | 109,956 | |
Intangible assets | 257,000 | |
Other assets | 7,676 | |
Goodwill | 291,319 | |
Accounts payable | (15,913) | |
Fees invoiced in advance | (7,040) | |
Other liabilities | (4,205) | |
Current portion on long-term operating lease | (3,168) | |
Accrued expenses and other liabilities | (22,383) | |
Long-term operating leases, net | (5,045) | |
Long-term debt | (140) | |
Long-term deferred tax liabilities | (51,815) | |
Noncontrolling interest | 880 | |
Total | 674,574 | |
Robinson Services, Inc. | ||
Assets acquired and liabilities assumed: | ||
Customer relationship | 4,700 | |
Non-complete agreement | 300 | |
Supply agreement | 200 | |
Goodwill | 948 | |
Total | 6,148 | |
Integrated Laboratory Systems, LLC (ILS) | ||
Assets acquired and liabilities assumed: | ||
Cash. | 797 | |
Trade receivables and contract assets | 4,257 | |
Prepaid expenses and other current assets | 64 | |
Operating lease right of use ("ROU") asset | 3,603 | |
Property and equipment | 3,911 | |
Intangible assets | 22,600 | |
Goodwill | 26,062 | |
Accounts payable | (1,156) | |
Fees invoiced in advance | (2,420) | |
Current portion on long-term operating lease | (738) | |
Accrued expenses and other liabilities | (942) | |
Other liabilities, net | (41) | |
Long-term operating leases, net | (2,425) | |
Long-term deferred tax liabilities | (113) | |
Total | 53,459 | |
Orient BioResource Center, Inc | ||
Assets acquired and liabilities assumed: | ||
Cash. | 5,481 | |
Trade receivables and contract assets | 2,025 | |
Inventory | 9,600 | |
Prepaid expenses and other current assets | 2,609 | |
Property and equipment | 8,336 | |
Intangible assets | 16,600 | |
Goodwill | 16,115 | |
Accounts payable | (552) | |
Fees invoiced in advance | (6,548) | |
Accrued expenses and other liabilities | (287) | |
Long-term deferred tax liabilities | (4,105) | |
Total | $ 49,274 |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Apr. 25, 2022 USD ($) shares | Jan. 27, 2022 USD ($) shares | Jan. 10, 2022 USD ($) shares | Dec. 29, 2021 USD ($) shares | Nov. 05, 2021 USD ($) $ / shares shares | Oct. 04, 2021 USD ($) shares | Aug. 02, 2021 USD ($) shares | Jul. 09, 2021 USD ($) | May 03, 2021 USD ($) shares | Apr. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) | Mar. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Jun. 30, 2021 USD ($) | Mar. 31, 2021 USD ($) | Dec. 31, 2020 USD ($) | Jun. 30, 2022 USD ($) segment | Jun. 30, 2021 USD ($) | Sep. 30, 2021 USD ($) | |
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 287,129 | $ 40,698 | |||||||||||||||||
Income tax (expense) benefit | $ (342) | $ 4,753 | 5,597 | 4,706 | |||||||||||||||
Revenues | 172,666 | 22,892 | 397,190 | 59,529 | |||||||||||||||
Net income (loss) | (3,728) | $ (6,087) | $ (83,047) | 2,602 | $ (723) | $ (366) | (92,862) | 1,513 | |||||||||||
HistoTox Labs | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 22,389 | ||||||||||||||||||
Adjustments for net working capital | $ 68 | ||||||||||||||||||
Intangible assets | 8,300 | $ 8,300 | |||||||||||||||||
HistoTox Labs | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 8 years | ||||||||||||||||||
HistoTox Labs | Non-Compete Agreements | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 5 years | ||||||||||||||||||
Bolder BioPATH | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 17,530 | ||||||||||||||||||
Adjustments for net working capital | 970 | ||||||||||||||||||
Reduction of seller note as part of acquisition | $ 470 | ||||||||||||||||||
Shares issued | shares | 1,588,235 | ||||||||||||||||||
Common shares value | $ 34,452 | ||||||||||||||||||
Principal amount | 1,500 | ||||||||||||||||||
Escrowed amount | 1,250 | ||||||||||||||||||
Intangible assets | 12,700 | $ 12,700 | |||||||||||||||||
Cash and equivalents assumed | $ 500 | ||||||||||||||||||
Goodwill deductible for tax purposes | 0 | $ 0 | |||||||||||||||||
Bolder BioPATH | Promissory Note | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Annual interest rate | 4.50% | ||||||||||||||||||
Bolder BioPATH | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 8 years | ||||||||||||||||||
Gateway Pharmacology Laboratories LLC | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 1,704 | ||||||||||||||||||
Shares issued | shares | 45,323 | ||||||||||||||||||
Common shares value | $ 1,182 | ||||||||||||||||||
Intangible assets | 100 | $ 100 | |||||||||||||||||
Goodwill deductible for tax purposes | 0 | $ 0 | |||||||||||||||||
HistoTox Labs, Bolder BioPATH and Plato BioPharma combined | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Number of operating segments | segment | 1 | ||||||||||||||||||
Revenues | 8,845 | $ 26,328 | |||||||||||||||||
Net income (loss) | 932 | 4,251 | 2,497 | 585 | |||||||||||||||
BioReliance Corporation | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 175 | ||||||||||||||||||
Intangible assets | 640 | 640 | |||||||||||||||||
Tangible and identifiable intangible assets | 815 | 815 | |||||||||||||||||
Percentage of net sales from services to existing customers | 10% | 10% | |||||||||||||||||
Percentage of estimated fair value of net sales | 10% | ||||||||||||||||||
Contingent consideration | 579 | 579 | $ 640 | ||||||||||||||||
BioReliance Corporation | Accrued Liabilities, Current | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Contingent consideration | $ 175 | ||||||||||||||||||
Plato BioPharma Inc | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 10,530 | ||||||||||||||||||
Shares issued | shares | 57,587 | ||||||||||||||||||
Common shares value | $ 1,776 | ||||||||||||||||||
Intangible assets | 4,800 | 4,800 | |||||||||||||||||
Cash and equivalents assumed | 1,027 | $ 1,027 | |||||||||||||||||
Acquisition term | 1 year | ||||||||||||||||||
Goodwill impairment losses | $ 0 | ||||||||||||||||||
Plato BioPharma Inc | Promissory Note | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Principal amount | $ 3,000 | ||||||||||||||||||
Plato BioPharma Inc | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 8 years | ||||||||||||||||||
Envigo RMS Holding Corp | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Aggregate consideration paid, including adjustments for net working capital | $ 217,808 | ||||||||||||||||||
Shares issued | shares | 8,245,918 | ||||||||||||||||||
Common shares value | $ 439,590 | ||||||||||||||||||
Shares issuable upon the exercise of stock option | shares | 790,620 | ||||||||||||||||||
Exercisable weighted-average exercise price (in dollars per share) | $ / shares | $ 9.93 | ||||||||||||||||||
Total value of options | $ 35,418 | ||||||||||||||||||
Value of options excluded from purchase price | $ 18,242 | ||||||||||||||||||
Share Price | $ / shares | $ 44.80 | ||||||||||||||||||
Vested stock options reflected as purchase consideration | $ 17,176 | ||||||||||||||||||
Intangible assets | 257,000 | $ 257,000 | |||||||||||||||||
Cash and equivalents assumed | 3,091 | 3,091 | |||||||||||||||||
Transaction costs | 0 | 8,945 | |||||||||||||||||
Goodwill deductible for tax purposes | 0 | $ 0 | |||||||||||||||||
Unrecognized tax benefit | 8,304 | ||||||||||||||||||
Net income (loss) | $ 8,949 | ||||||||||||||||||
Acquisition term | 1 year | ||||||||||||||||||
Goodwill impairment losses | $ 0 | ||||||||||||||||||
Principal assumptions | |||||||||||||||||||
Stock price | $ / shares | $ 53.31 | ||||||||||||||||||
Strike price | $ / shares | $ 9.93 | ||||||||||||||||||
Volatility | 75.93% | ||||||||||||||||||
Expected term | 3 years 18 days | ||||||||||||||||||
Risk-free rate | 0.62% | ||||||||||||||||||
Envigo RMS Holding Corp | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 13 years 6 months | ||||||||||||||||||
Robinson Services, Inc. | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 3,250 | ||||||||||||||||||
Shares issued | shares | 70,633 | ||||||||||||||||||
Common shares value | $ 2,898 | ||||||||||||||||||
Acquisition term | 1 year | ||||||||||||||||||
Goodwill impairment losses | $ 0 | ||||||||||||||||||
Robinson Services, Inc. | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 7 years 6 months | ||||||||||||||||||
Integrated Laboratory Systems, LLC (ILS) | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Aggregate consideration paid, including adjustments for net working capital | $ 38,993 | ||||||||||||||||||
Shares issued | shares | 429,118 | ||||||||||||||||||
Common shares value | $ 14,466 | ||||||||||||||||||
Escrowed amount | $ 3,800 | ||||||||||||||||||
Intangible assets | 22,600 | $ 22,600 | |||||||||||||||||
Cash and equivalents assumed | 797 | 797 | |||||||||||||||||
Goodwill deductible for tax purposes | 0 | 0 | |||||||||||||||||
Revenues | 5,856 | 10,722 | |||||||||||||||||
Net income (loss) | (756) | $ (647) | |||||||||||||||||
Acquisition term | 1 year | ||||||||||||||||||
Goodwill impairment losses | $ 0 | ||||||||||||||||||
Integrated Laboratory Systems, LLC (ILS) | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 9 years | ||||||||||||||||||
Orient BioResource Center, Inc | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 26,522 | ||||||||||||||||||
Shares issued | shares | 677,339 | ||||||||||||||||||
Common shares value | $ 18,410 | ||||||||||||||||||
Intangible assets | 16,600 | $ 16,600 | |||||||||||||||||
Cash and equivalents assumed | 5,481 | 5,481 | |||||||||||||||||
Goodwill deductible for tax purposes | 0 | 0 | |||||||||||||||||
Net income (loss) | $ 17,676 | $ 2,555 | $ 24,985 | $ 4,948 | |||||||||||||||
Acquisition term | 1 year | ||||||||||||||||||
Goodwill impairment losses | $ 0 | ||||||||||||||||||
Period for payment of consideration | 18 months | ||||||||||||||||||
Settlement of a preexisting relationship | $ 1,017 | ||||||||||||||||||
Liabilities incurred | 3,325 | ||||||||||||||||||
Gain or loss on settlement | $ 0 | ||||||||||||||||||
Orient BioResource Center, Inc | Customer Relationships | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Weighted-average estimated useful life | 6 years | ||||||||||||||||||
Histion LLC Acquisition | |||||||||||||||||||
BUSINESS COMBINATIONS | |||||||||||||||||||
Consideration in cash | $ 950 | ||||||||||||||||||
Shares issued | shares | 17,618 | ||||||||||||||||||
Common shares value | $ 364 | ||||||||||||||||||
Principal amount | $ 433 |
BUSINESS COMBINATIONS - Unaudit
BUSINESS COMBINATIONS - Unaudited pro forma (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
BUSINESS COMBINATIONS | ||||
Total revenues | $ 172,793 | $ 109,184 | $ 441,889 | $ 326,658 |
Net income (loss) | $ (3,680) | $ (1,398) | $ (101,870) | $ (23,535) |
REVENUE RECOGNITION - Changes i
REVENUE RECOGNITION - Changes in contract assets and liabilities (Details) $ in Thousands | 9 Months Ended |
Jun. 30, 2022 USD ($) | |
Contract assets | |
Opening balance | $ 6,194 |
Additions | 31,794 |
Deductions | (20,688) |
Ending balance | 17,300 |
Contract liabilities | |
Opening balance | 26,614 |
Additions | 389,849 |
Deductions | (340,982) |
Ending balance | $ 75,481 |
RESTRUCTURING (Details)
RESTRUCTURING (Details) - Site Optimization Plan $ in Thousands | 9 Months Ended |
Jun. 30, 2022 USD ($) | |
Liability balance for restructuring costs | |
Liability as of beginning | $ 0 |
Charges | 1,557 |
Cash Payments | 0 |
Liability as of ending | 1,557 |
Asset-related costs | 1,054 |
Employee Related | |
RESTRUCTURING | |
Incurred and expects to continue to incur further expenses | 1,193 |
Liability balance for restructuring costs | |
Liability as of beginning | 0 |
Charges | 1,193 |
Cash Payments | 0 |
Liability as of ending | 1,193 |
Other | |
RESTRUCTURING | |
Incurred and expects to continue to incur further expenses | 2,614 |
Liability balance for restructuring costs | |
Liability as of beginning | 0 |
Charges | 364 |
Cash Payments | 0 |
Liability as of ending | $ 364 |
LEASES (Details)
LEASES (Details) | 9 Months Ended |
Jun. 30, 2022 | |
LEASES | |
Renewal option, operating lease | true |
Renewal option, finance lease | true |
Facilities leases | Minimum | |
LEASES | |
Lease term, operating lease | 2 years |
Lease term, finance lease | 2 years |
Facilities leases | Maximum | |
LEASES | |
Lease term, operating lease | 10 years |
Lease term, finance lease | 10 years |
Equipment leases | Minimum | |
LEASES | |
Lease term, operating lease | 30 months |
Lease term, finance lease | 30 months |
Equipment leases | Maximum | |
LEASES | |
Lease term, operating lease | 60 months |
Lease term, finance lease | 60 months |
LEASES - Right-of-use lease ass
LEASES - Right-of-use lease assets and lease liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Right-of-use lease assets and lease liabilities | ||
Operating right-of-use assets, net | $ 29,116 | $ 8,358 |
Current portion of operating lease liabilities | 6,151 | 1,959 |
Long-term operating lease liabilities | 22,901 | 6,554 |
Total operating lease liabilities | 29,052 | 8,513 |
Finance lease right-of-use assets, net | 51 | 60 |
Current portion of finance lease liabilities | 21 | 24 |
Long-term finance lease liabilities | 33 | 39 |
Total finance lease liabilities | $ 54 | $ 63 |
LEASES - Operating and Finance
LEASES - Operating and Finance leases (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) facility | Jun. 30, 2021 USD ($) | |
LEASES | ||||
Amortization of operating leases | $ 2,421 | $ 4,989 | ||
Amortization of right-of-use asset expense | 6 | $ 25 | 18 | $ 97 |
Financing lease interest expense | 1 | 46 | $ 2 | 183 |
Number of facilities the Company serves as a lessor to a lessee | facility | 5 | |||
Rental income | $ 566 | $ 159 | $ 1,732 | $ 477 |
LEASES - Components of lease ex
LEASES - Components of lease expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Operating lease costs: | ||||
Fixed operating lease costs | $ 2,187 | $ 292 | $ 5,882 | $ 736 |
Short-term lease costs | 11 | 32 | 56 | 66 |
Lease income | (566) | (159) | (1,732) | (477) |
Finance lease costs: | ||||
Amortization of right-of-use asset expense | 6 | 25 | 18 | 97 |
Interest on finance lease liability | 1 | 46 | 2 | 183 |
Total lease cost | $ 1,639 | $ 236 | $ 4,226 | $ 605 |
LEASES - Supplemental cash flow
LEASES - Supplemental cash flow information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Jun. 30, 2022 | Jun. 30, 2022 | |
Cash flows included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 2,205 | $ 4,927 |
Operating cash flows from finance leases | 5 | 18 |
Finance cash flows from finance leases | 1 | 2 |
Non-cash lease activity: | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | 7,658 | 25,747 |
Right-of-use assets obtained in exchange for new finance lease liabilities | $ 0 | $ 9 |
LEASES - Weighted average remai
LEASES - Weighted average remaining lease term and discount rate (Details) | Jun. 30, 2022 | Jun. 30, 2021 |
LEASES | ||
Operating lease, weighted-average remaining lease term (in years) | 0 years | 4 years 10 months 28 days |
Finance lease, weighted-average remaining lease term (in years) | 0 years | 3 years 5 months 4 days |
Operating lease, weighted-average discount rate (as a percent) | 5.45% | 4.46% |
Finance lease, weighted-average discount rate (as a percent) | 4.86% | 4.86% |
LEASES - Maturities of operatin
LEASES - Maturities of operating and finance lease (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Sep. 30, 2021 |
Maturities of operating lease liabilities | ||
2022 (remainder of fiscal year) | $ 1,145 | |
2023 | 7,558 | |
2024 | 6,547 | |
2025 | 5,737 | |
2026 | 4,902 | |
Thereafter | 8,087 | |
Total minimum future lease payments | 33,976 | |
Less interest | (4,924) | |
Total operating lease liabilities | 29,052 | $ 8,513 |
Maturities of finance lease liabilities | ||
2022 (remainder of fiscal year) | 6 | |
2023 | 21 | |
2024 | 21 | |
2025 | 8 | |
2026 | 1 | |
Thereafter | 0 | |
Total minimum future lease payments | 57 | |
Less interest | (3) | |
Total finance lease liabilities | $ 54 | $ 63 |
DEFINED BENEFIT PLAN (Details)
DEFINED BENEFIT PLAN (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
DEFINED BENEFIT PLAN | ||
Contributions to the plan | $ 1,078 | |
Unfunded defined benefit plan obligation | $ 185 |
DEFINED BENEFIT PLAN - Componen
DEFINED BENEFIT PLAN - Components of net periodic benefit costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Components of net periodic benefit expense: | ||||
Interest cost | $ 207 | $ 0 | $ 344 | $ 0 |
Expected return on assets | (352) | 0 | (681) | 0 |
Amortization of prior loss | 177 | 0 | 454 | 0 |
Net periodic benefit cost | $ 32 | $ 0 | $ 117 | $ 0 |
CONTINGENCIES (Details)
CONTINGENCIES (Details) $ in Thousands | Jun. 30, 2022 USD ($) |
Government Investigations | |
Loss Contingencies | |
Indemnification limit for investigation | $ 5,500 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Jul. 07, 2022 | Apr. 25, 2022 | Jan. 27, 2022 | Jan. 10, 2022 | Nov. 05, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jan. 07, 2022 | |
SUBSEQUENT EVENTS | |||||||||
Consideration in cash | $ 287,129 | $ 40,698 | |||||||
Value of shares issued | $ 48,972 | ||||||||
Revolving Facility | |||||||||
SUBSEQUENT EVENTS | |||||||||
Maximum amount of line of credit | $ 35,000 | ||||||||
Integrated Laboratory Systems, LLC (ILS) | |||||||||
SUBSEQUENT EVENTS | |||||||||
Escrowed amount | $ 3,800 | ||||||||
Shares issued | 429,118 | ||||||||
Orient Bio, Inc. (OBRC) | Purchase Agreement | |||||||||
SUBSEQUENT EVENTS | |||||||||
Period for payment of consideration | 18 months | ||||||||
Histion LLC Acquisition | |||||||||
SUBSEQUENT EVENTS | |||||||||
Consideration in cash | $ 950 | ||||||||
Shares issued | 17,618 | ||||||||
Principal amount | $ 433 | ||||||||
Delayed Draw Term Loan | |||||||||
SUBSEQUENT EVENTS | |||||||||
Principal amount | $ 35,000 | $ 35,000 | |||||||
Maximum term for drawing loan facility | 18 months | ||||||||
Delayed Draw Term Loan | First Amendment to Credit Agreement | |||||||||
SUBSEQUENT EVENTS | |||||||||
Principal amount | $ 35,000 | ||||||||
Maximum term for drawing loan facility | 24 months | ||||||||
Subsequent events. | Protypia Inc | Purchase Agreement | |||||||||
SUBSEQUENT EVENTS | |||||||||
Consideration in cash | $ 9,640 | ||||||||
Shares issued | 75,000 | ||||||||
Principal amount | $ 600 | ||||||||
Value of shares issued | $ 806 |