Inotiv Inc (NOTV) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2012 Bioanalytical Systems earnings conference call. My name is Derek and I will be your operator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Ms. Jackie Lemke, Interim President, Chief Executive Officer, and Chief Financial Officer. Please proceed.

Thank you, Operator, and thank you all for joining us for the BASi 2012 fourth quarter and fiscal 2012 financial results conference call and webcast. Sorry it got off to a bad start in terms of not being delivered at 11 a.m. when it was planned, but thank you for hanging in there.

Please note that various remarks we may make on this conference call about future expectations, plans, and prospects for the Company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Company's filings with the Securities and Exchange Commission. The statements made on this call are made only as of the date of this call, and the Company assumes no obligation to update these statements.

I'm pleased to report that we delivered the substantially improved bottom-line performance before restructuring charges we had discussed on our last conference call. This was a major and, I am proud to say, successful effort by all of us at the Company. I want to thank our employees for their diligence and their constructive response to the many changes that have taken place at BASi over the past few months. The cliche is true -- change is never easy, but it's often necessary, and I'm confident that the changes at BASi set the stage for a bright future for our Company.

Let's turn to the financial results. For the three months ended September 30, 2012, revenue decreased to $6.540 million, compared to $8.153 million for the fourth quarter of fiscal 2011. This decrease partly reflected the consolidation of BASi's Oregon facility into our West Lafayette facility and the closure of our UK lab, as well as a decrease in preclinical services and product revenue compared to the prior year.

Gross margin for the fourth quarter of fiscal 2012 increased to 32.9%, compared to 27.6% for the fourth quarter of fiscal 2011.

Operating expenses also decreased to $1.785 million for the fourth quarter of fiscal 2012, compared to $2.630 million for the same period a year earlier. Operating income before restructuring increased to $369,000, compared to an operating loss of $382,000 the fourth quarter of fiscal 2011. And income before income taxes and restructuring charges increased to $199,000, compared to a loss of $618,000 for the prior-year Quarter 4.

Earnings before interest, taxes, depreciation, amortization, restructuring, and non-cash compensation expenses, or EBITDAR, increased to $891,000, compared to $205,000 for the fourth quarter of fiscal 2011, and increased sequentially compared to $716,000 for the third quarter of fiscal 2012.

The GAAP net loss for the fourth quarter of fiscal 2012 included restructuring charges of $2.508 million, primarily consisting of UK exit costs. The resultant GAAP net loss for the three months ended September 30, 2012, was $2.311 million, or $0.32 per share. This compares to a GAAP net loss for the fourth quarter of fiscal 2011 of $668,000, or $0.10 per share. No further restructuring charges are expected.

For the 12 months ended September 30, 2012, revenue decreased to $28.208 million from $33.144 million for fiscal 2011. EBITDAR for fiscal 2012 was a negative $118,000. This compares to EBITDAR for fiscal 2011 of negative $682,000 after accounting for the preferred dividend.

The GAAP net loss for the year ended September 30, 2012, was $6.390 million, or $0.89 per share. This includes the recorded restructuring charges for the 12 months ended September 30, 2012, of $3.195 million. The GAAP net loss for the year ended September 30, 2011, included the accounting for the value of the warrants and preferred stock issued in a public offering in May 2011 that resulted in a deemed dividend to preferred stockholders, which was deducted from net earnings to compute GAAP earnings per share. After accounting for the preferred dividend, the net loss for the year ended September 30, 2011, was $3.725 million, or $0.66 per share.

On the balance sheet at September 30, 2012, BASi reported cash and cash equivalents of $721,000, total long-term obligations of $5.998 million, and shareholders' equity of $9.590 million, or $1.26 per outstanding share.

In comparison, at September 30, 2011, cash and cash equivalents were $2.963 million, total long-term obligations were $6.913 million, and shareholders' equity was $15.586 million, or $2.26 per outstanding share.

As I mentioned in our last conference call, the decrease in our cash balance versus the end of fiscal 2011 underscores the reality that in the short term the strategic reductions we have implemented are costly. However, we are managing our cash in order to continue to meet our everyday liabilities while financing the Company's transformation, with the result that cash increased by more than $300,000 compared to the end of the third quarter.

I'm also pleased to report that we recently received a further extension on the maturity of our mortgage debt to October 31, 2013, from May 4. This debt originally was scheduled to mature in November 2012; however, we worked with our bank to successfully negotiate this latest extension, which considerably enhances our flexibility at a critical time for the Company. We continue to look at several ways to permanently deal with this debt, including a possible sale and leaseback of our building in West Lafayette.

To put our progress over the past six months into perspective, consider that in the first half of fiscal 2012, we operated four facilities that generated combined revenue of about $14.5 million and an EBITDA loss of $1.7 million. In contrast, in the year's second half we operated two facilities that generated combined revenue of $13.7 million and positive EBITDA of $1.6 million. That's a $3.3 million improvement in operating profitability, despite the reduction in revenue.

Keep in mind that the reduction in revenue was itself largely the planned consequence of the consolidation of our Oregon laboratory into our West Lafayette facility and the closure of our UK lab. Capacity utilization is up and so are gross margins. Our costs are in line, and we have systems and the right personnel in place to keep them in line.

Now, we're turning our attention to growth. In this connection, what's important to point out is that we built a healthy and sustainable business model while maintaining the high-quality services BASi has long been known for and while completing the development of our advanced new Culex NxT system, which we formally launched this morning. We are now accepting orders for Culex NxT and we expect to begin shipping the new system in January.

Developed by BASi to collect pharmacokinetic and pharmacodynamic data, our original Culex system is used by nine of the world's top 10 pharmaceutical companies, universities, and contract research organizations. Culex can automatically collect blood, bile, metabolites, dialysates, and more from awake and freely moving animals as small as mice and as large as swine. Scientists use Culex over manual sampling because it delivers better data, which leads to better decision-making.

Our new Culex NxT incorporates innovative hardware and software improvements and features the same small footprint, robust design, and ease of use as the original, providing its users peace of mind when away from the lab. Culex's ability to run experiments around the clock versus just during business hours significantly increases our clients' efficiency and productivity in the early stages of drug discovery, including safety pharmacology.

We've also made it easy for current owners to seamlessly and cost-effectively upgrade their existing systems, which we think will be a significant positive factor in our marketing effort.

In addition to launching our new Culex system, earlier this month we announced a collaboration with DSI international (sic), a biomedical research company focused on pre-clinical systems, physiology, and pharmacology, to conduct a first-of-its-kind study using Culex together with DSI's newest telemetry technology. In this pivotal study, DSI telemetry centers will collect heart rate, blood pressure, and cardiovascular information, while Culex will simultaneously collect biological samples at preprogrammed intervals.

Previously, gathering all of these types of data required two separate experiments and only discontinuous data collection was possible. By combining Culex with telemetry, the automated blood sampling and telemetry system will reduce costs, the number of test subjects, subject stress levels, and, to repeat our catchphrase, will deliver better data, which will lead to better decisions. This is the first of a number of collaborative research projects and preferred provider partnerships we are negotiating and expect to announce over the coming months, which should contribute to our performance in the new fiscal year.

Naturally, it will take some time to offset the loss of revenue due to the restructuring, but we believe our aggressive approach to sales and marketing focused on our competitive strengths, namely specialty assay and discovery capabilities, a long history of regulatory excellence, and our market-changing Culex system, in time will deliver the renewed revenue growth and greatly enhanced profitability we are striving for.

In conclusion, we feel good about where we are today and we are optimistic that we will deliver significantly improved operating performance in fiscal 2013.

Operator, we're ready for the first question.

(Operator Instructions). Jeffrey Cohen, Ladenburg Thalmann.

Hi, thanks for taking my questions. Firstly, any guidance?

No. No, I'm not going to give guidance for this year, except to say that we are going to be profitable, bottom line. We're going to try to build back what we lost in revenues and control our costs.

(Technical difficulty). Could you talk about the cost of revenues a little bit? Obviously, they are lower from fiscal 2011. In 2013, does it seem reasonable that approximately the fourth quarter extrapolated, giving us around $17.5 million makes sense?

Sorry, I can't hear you. It's (multiple speakers)

I'm sorry.

It's cutting out.

(Technical difficulty) and it's lower for 2012, do you expect that to amortize around $17.5 million?

Okay, I heard the $17.5 million. For what number are we talking about?

So, for fourth quarter, you had $4.3 million.

In costs?

Costs of revenue, yes.

Yes, no, I can't do that way because in the fourth quarter, we had the UK opened through the end of August and we had (multiple speakers) structurings rolling off at the end of July, so in terms of what the run rate will be in expenses, I can't tell you that number off the top of my head.

But I can tell you that we have increased our gross profit margin significantly and decreased our operating costs. I don't think (multiple speakers) -- I don't recognize that number, $17 million, for a full-year number.

Okay, but it would be lower going forward from the $4.38 million from Q4?

Yes, oh, yes. Are you talking about operating expenses?

Yes.

Oh, yes, definitely.

Okay, got it. Could you talk about the Culex NxT? What is the expected list price? Or approximate range, please?

(Technical difficulty)

Lenny Dunn, Freedom Investors Corporation.

Yes, good morning or good afternoon, Jackie. Again, very much appreciate what you've done to turn this Company around, and clearly, even at a low level of sales, were profitable. So we certainly will be around for the next upturn.

But a couple of things, are you going to be dedicating a separate sales person to selling the Culex or is this the normal sales process?

(Technical difficulty)

Hello?

Pardon the interruption. It seems we're having technical difficulties with the speaker's line, if you could please hold.

Certainly.

Hello?

Hello, Jackie, I can hear you now, but I think that the guy from Ladenburg Thalmann didn't get his question answered, and then eventually they switched you to me, and I asked the question. But I wasn't sure if you heard mine or (multiple speakers)

I did not because I got cut off, somehow. Go ahead. This is Jackie.

Okay, well, I'll -- this is Lenny Dunn.

Hi, Lenny.

Hi. First, again, I wanted to congratulate you on getting the Company turned around to the point where even at a very low level of sales were profitable, so we can be there for the next upturn.

Thank you.

But I guess this conference call between not being able to start on time and everything else certainly isn't the greatest, but what I was -- my first question was, will you be selling the Culex through a separate sales person or will you be using your normal sales force to sell the Culex?

Well, we'll be using our normal sales force and we have -- in Europe, we have a distributor network that we will be using, but it will all be coming through BASi's sales team.

Okay, and it's my understanding now that we have, including the original one which probably you're going to discontinue selling, you have the Culex NxT and you have the Culex for large animals. So will the same people be selling both of those or --

Yes, yes. The same people are trained in both the Culex for the small animals and the Culex-L for the large animals.

Okay, and clearly there's a lot of leverage here, if we can get all of our sales hitting on eight cylinders, including our (multiple speakers)

Right, we are going to have user group workshops and workshops to introduce the use of the Culex to not-current users, but new users who are interested. And those will be posted on our website. We're going to have four of those across the country this year.

Okay, and have things pretty well settled down from all the natural disruption that comes from the changes that you were forced to make? And I'm glad you made, but are morale and everything picking up again?

Yes, I think so. I think things are starting to settle in. It's been a lot of change in a quick but long six months, but everybody is adjusting well.

Okay. Now we at this point now have any restructuring and one-time charges behind us, so that our next reports should be clean.

Exactly.

Okay, good, good. And are you getting some things back into the pipeline for our larger business, so that the pipeline is getting a little better?

Yes, we're working on all areas of our business. We have growth plans for all areas -- preclinical, pharm, bio, and product, and discovery.

Okay, and I was glad to note that though it certainly is miraculous, but I'm glad to note that we accumulated cash during the quarter, which is certainly a good thing to do.

Yes, thanks.

Okay, well, thank you, and I'll let somebody else ask if there are still people on the line.

I know (laughter). I hope there are. Thank you, Lenny.

(Operator Instructions). Jeffrey Cohen.

Hi there; hopefully, you can hear me okay.

Yes, I'm sorry. I don't know how we got disconnected.

That's okay. So I was asking if there were any list prices associated with the Culex NxT?

I don't have the exact price, but I think it's in the range of $120,000 for a four-station cart.

Okay, that's very helpful. Could you talk about the building a little bit? I know that it looks like, A, it's still for sale for $11.5 million, and B, I think it's still for rent or a portion of it is still for rent. Could you clarify that?

Yes, it's listed for $12.5 million. It's still for sale.

The plan, if we can make it work, is to sell it and then lease back about 80% of it for our own use. And we right now have some interest from an interested buyer for the whole building, and then interested renters for the empty space, so we're just working through our options.

Okay, so about 30,000 feet to be rented (multiple speakers)

Yes, pretty much.

Okay, perfect. Thank you very much.

Sure, thanks.

At this time, I'm showing no further questions in the queue. I would like to turn the call back over to Ms. Lemke for any closing remarks.

Okay, thank you. Thank you, everybody, for putting up with our little technical difficulties today. I'm sorry about that, but I just want to say thank you for being on this call and I look forward to speaking with you on our fiscal 2013 first-quarter results conference call in a couple of months.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Everyone, have a great day.

Thank you.

You're welcome.