Inotiv Inc's stock experienced a notable rise in aftermarket trading despite reporting a decline in revenue for the fourth quarter of 2024. The company's financial performance reflected challenges in the biotech sector, yet investors responded positively to strategic initiatives and a hopeful outlook for 2025.
Key Takeaways
- Inotiv's Q4 revenue fell 7.3% year-over-year to $130.4 million.
- The stock price increased by 4.87% in aftermarket trading.
- The company reported a net loss of $18.9 million for Q4 2024.
- Inotiv anticipates industry recovery and growth in 2025.
- Strategic site optimizations and expense reductions are underway.
Company Performance
Inotiv reported a decrease in both quarterly and annual revenues, with Q4 2024 revenue down by 7.3% compared to the previous year. The company's fiscal year 2024 consolidated revenue fell by 14.3% year-over-year to $490.7 million. Despite these declines, Inotiv is positioning itself for future growth through strategic initiatives and operational improvements.
Financial Highlights
- Revenue: $130.4 million in Q4 2024 (↓7.3% YoY)
- Fiscal Year Revenue: $490.7 million (↓14.3% YoY)
- Net Loss: $18.9 million in Q4 2024 ($0.73 loss per diluted share)
- Adjusted EBITDA: $5.4 million (4.1% of total revenue)
- Cash and Equivalents: $21.4 million as of September 30, 2024
Market Reaction
Following the earnings release, Inotiv's stock rose by 4.87% in aftermarket trading, closing at $4.09. This increase suggests investor optimism about the company's strategic direction and potential recovery in the biotech sector. The stock remains below its 52-week high of $11.417 but has shown resilience from its low of $1.227.
Company Outlook
Inotiv is focusing on growth areas such as non-human primate (NHP) supply, diet and bedding services, and discovery services. The company expects volume-driven growth and aims to return to adjusted EBITDA margins of 18-22%. While no specific guidance for fiscal 2025 was provided, the management expressed confidence in future demand cycles.
Executive Commentary
CEO Bob Leisure emphasized the company's confidence heading into 2025, acknowledging geopolitical and market risks. He stated, "We expect to see a much more consistent demand cycle," and assured stakeholders that "Our best days are ahead."
Q&A
During the earnings call, analysts inquired about margin pressures and inventory costs, particularly concerning NHP sales. Management highlighted improved sales and colony management services as key areas for margin recovery.
Risks and Challenges
- Continued pricing pressures in discovery services and research models.
- Potential delays in biotech industry recovery impacting revenue.
- Geopolitical risks affecting supply chains and market stability.
- High costs associated with NHP inventory management.
- Dependence on successful execution of site optimization initiatives.
Full transcript - Inotiv Inc (NOTV) Q4 2024:
Conference Operator: Today's conference is being recorded. I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Steven Halper.
Steven Halper, Investor Relations, Inativ: Thank you, Marjorie, and good afternoon, everyone. Thank you for joining today's quarterly call with Inativ's management team. Before we begin, I'd like to remind everyone that some of the statements that management will make on this call are considered forward looking statements, including statements about the company's future operating and financial results and plans. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management's expectations as of today's date.
You should not place undue reliance on these forward looking statements, and the company does not undertake any obligation to update or revise forward looking statements whether as a result of new information, future events or otherwise. Please refer to the company's SEC filings for further guidance on this matter. Management will also discuss certain non GAAP financial measures in an effort to provide additional information for investors. Definition of these non GAAP measures and reconciliations to the most comparable GAAP measures are included in the company's earnings release, which has been posted to the Investors section of the company's website, www.innative.com, and is also available in the Form 8 ks filed with the Securities and Exchange Commission. If you haven't obtained a copy of today's press release yet, you could do so by going to the Investors section of the of Init's website.
Joining us from the company this afternoon are Bob Leisure, President and Chief Executive Officer and Beth Taylor, Chief Financial Officer. John Sagarz, Chief Strategy Officer, will join us for the question and answer portion of the call. Bob will begin with some opening remarks, after which Beth will present a summary of the company's financial results for our fiscal Q4 and full year ended September 30, 2024. And then we'll open the call for your questions. It is now my pleasure to turn the call over to Bob Leisure, CEO.
Bob, please go ahead.
Bob Leisure, President and Chief Executive Officer, Inativ: Thank you, Steve, and good afternoon to everyone joining our call today. The 4th quarter was again productive for Innovative. We accomplished many of our goals during the quarter and believe we are in good position going into 2025. As you are aware, during 2024, we experienced volatility within our earnings and cash flow. Volatility was mainly related to challenges in our NHP business within the RMS model business model, but we also saw continued conservative spending within the biotech industry.
The initiatives we put in place over the last year were designed to reduce risk and address volatility, improve the customer experience and draw new customers to the business, all while enhancing our cash flow model in calendar 20 25. I'd like to spend a few minutes on our Q4 'twenty four results and fiscal 'twenty four highlights. For the fiscal 2024 Q4, total revenue was $130,400,000 compared to $105,800,000 in the Q3 of 2024, representing a 23% increase in quarter over quarter revenue. Though it was down 7.3% compared to the Q4 in fiscal 2023. During the Q4 of 2024, in the RMS business, we continue to make progress improving our North American transportation and distribution systems.
We also completed the RMS site consolidation of facility improvements we announced almost 2 years ago as we completed the closure of our Blackthorn facility in the UK and the planned investments in our UK Hillcrest facility. We saw a significant increase in HPs sold in Q4 compared to Q3 as we more than doubled the number sold in Q3. During Q4, we sold much of our higher cost in HP (NYSE:HPQ) inventory, which impacted margins in the quarter and will continue to impact margins in Q1 of fiscal 2025. We also already have strong commitments for purchases from both existing and new customers for calendar 2025. Within the RMS business, we also saw strong performances in the NHP Colony Management Services, the Diet, Bedding and Enrichment business line, as well as our European and UK RMS business lines.
DSA revenue and operating income decreased in Q4 2024 as compared to Q4 2023 due to safety assessment study mix and lower discovery service revenue. However, DSA revenue and operating income were relatively consistent in Q4 2024 compared to Q3 2024. From Q3 2024 to Q4 2024, we saw a continued trend of strong revenue for new services at our Rockville facility and a decrease in revenue related to Discovery (NASDAQ:WBD) Services. On the operational side, we continue to drive efficiency, which allowed us to further reduce our general and administrative expenses on a year over year basis. While we made some incremental improvements to the balance sheet this quarter, we continue to evaluate opportunities to improve our balance sheet further and enhance our liquidity.
In Q4, we still saw some of the same trends experienced in previous quarters, which we monitor closely and continue to navigate through. These include overall general business conditions in the biotech industry impacted and created price pressures in our business. Although biotech funding in the market increased in the 1st 9 months of calendar 2024, we believe that the reduced biotech funding in the market during 20222023 and the increased cost of capital has continued to influence our clients' spending patterns for early stage research and development. Now let me provide some comments on what we are seeing in the market today and some forward looking thoughts on our different business segments. We expect biopharma companies in the short term to continue to take a restrained conservative approach to the preclinical pipeline products in order to prioritize the use of capital to their most important projects.
We will continue to capitalize on our innovation and scientific expertise to assist our clients in the improvement of speed of product development and achieve the appropriate economic returns. We are emphasizing our efforts on growing our existing customer base to cross selling our broad portfolio of products and services and attracting new customers to gain market share. We believe the additional investments we've made in our sales team in 2024 will continue to benefit us in fiscal 2025. For the 12 months ended September 30, 2024, net new orders for DSA were ahead of the prior year's pace by approximately 5%. We are pleased we've been able to accomplish this in spite of industry price pressure that we've seen in fiscal 2024 and an approximate 11% decline in revenue and 23% decline in orders in Discovery Business.
In the RMS segment, we are optimistic that we will see reduced volatility in 2025. We have added new customers and based on our pre sales of NHPs and demand for Colony Management Services, we are cautiously optimistic about increased NHP related revenue in calendar 2025. We have expanded our NHP supply base and continue to work with our existing and newly qualified NHP suppliers in multiple countries. Critically, we continue to audit them for animal welfare, health standards and compliance related matters and will not source from suppliers who do not or cannot meet those standards. In the RMS non HP business in 2025, we will initiate the next phase of our site optimization program to further improve and consolidate facilities in the U.
S. This next phase is another important program, which is projected to eliminate another $4,000,000 to $5,000,000 in operating expenses and further improve our RMS margins when completed. Most of these financial improvements are not expected to be seen until fiscal 2026. We also believe we can achieve another $500,000,000 to $1,000,000 in cost reductions from our continued integration of our North America transportation and distribution system. We're confident going into 2025, but recognize there are geopolitical market conditions, risks and uncertainties.
In 2023 2024, we incurred several challenges as did some of our customers and others in our industry. As a company, I'm proud of our people, our leadership, board, suppliers, customers and lenders who work together to address these challenges, creating a stronger foundation for our business going into 2025. As we overcome the challenges we've faced over the past 2 years, we believe our business is well positioned for the future. We have continued to integrate our acquisition to optimize our facilities as we have also implemented several initiatives to mitigate these risks and related challenges. We have lowered our cost, improved our service and responsiveness to our customers.
Inattive is well positioned as a midsized full service CRO and provider of research models, diet, bedding and enrichment products and services. We remain committed to building a business that will create value for our customers, employees and our shareholders and look forward to 2025. With that, I'll turn the call over to Beth, who will provide a more detailed synopsis of Enanta's results for the quarter and full year.
Beth Taylor, Chief Financial Officer, Inativ: Thank you, Bob, and good afternoon, everyone. For the fiscal 2024 Q4, total revenue was $130,400,000 compared to $105,800,000 in our Q3 2024 and $140,700,000 during and $140,700,000 during the fiscal 2023 Q4. Compared to Q3 of 2024, we saw our RMS revenue increase $24,200,000 or 39.3 percent and our DSA revenue increased $400,000 or 0.9 percent. Compared to Q4 of 2023, we saw a decrease in total revenue of 7.3%, primarily due to an 11.2% decrease in DSA revenue and a 5.2% decrease in RMS revenue. We actually saw a 177.9% increase in the number of NHPs sold in Q4 2024 compared to Q3 2024 and a 48.9% increase in the number of NHPs sold versus Q4 of 2023.
The NHP average selling price in Q4, 2024 was 7.7% higher compared to Q3 of 2024 and the NHP average selling price in the current quarter compared to the prior year period was down approximately 33.4%. 2023 RMS revenue also included revenue of $1,700,000 from our Israeli operation, which was sold in August of 2023. For the 12 months ended September 30, 2024 consolidated revenue was $490,700,000 down 14.3% compared to $572,400,000 for fiscal 2023, mainly due to the decrease in NHP sold in Q2 and Q3 of fiscal 2024 as well as a decrease in NHP pricing and the sale of the Israeli businesses in August of 2023. DSA revenue in the 2024 Q4 was $44,600,000 compared to $44,200,000 in Q3 of 2024 and $50,200,000 in Q4 of 2023. The decrease in the DSA revenue from prior year period was primarily driven by a decrease in general toxicology services due to a change in study mix and a decrease in discovery services revenue as a result of lower overall biotech activity in the market.
These impacts were partially offset by growth in the newer service lines at our Rockville, Maryland facility. DSA revenue for the 12 months ended September 30, 2024 was $180,100,000 2.7 percent lower compared to prior year revenue of $185,100,000 The decrease in DSA revenue was primarily driven by a $5,000,000 decrease in discovery services revenue as a result of the decline in overall biotech activity in the market. Overall, net new DSA orders this quarter were $33,700,000 versus $32,000,000 in the same quarter last year. For fiscal year ended September 30, 2024, we booked net new orders of $173,000,000 versus $165,200,000 for the 12 months ended September 30, 2023. The conversion rate in the 2024 Q4 was 33%, slightly down from 34% in the prior year period.
The DSA cancellations and negative change orders in the 2024 Q4 were approximately 32% lower compared to the prior year period and in fiscal 2024 were approximately 16% less than in fiscal 2023. RMS revenue for the fiscal 4th quarter increased $24,200,000 or 39.3 percent compared to Q3 2024 and declined by 5.2 percent to $85,800,000 compared to $90,500,000 in the same Q4 of 2023. The decrease in the Q4 2024 compared to the same quarter in 2023 was due to lower NHP related product and service revenue mainly as a result of pricing. Additionally, in Q4 of fiscal 2024, there was a decrease in RMS revenue as a result of the sale of our Israeli businesses in Q4 fiscal 2023, with the remaining decrease primarily due to a decline in small animal model sales. For the 12 months ended September 30, 2024, RMS revenue was down 19.8% to $310,600,000 compared to $387,300,000 in fiscal 2023.
The decrease was primarily due to the negative impact of lower volumes and lower pricing of NHP sales of $60,400,000 and lower revenue as a result of the sale of our Israeli business in fiscal 2023 of $10,600,000 The remaining decrease in RMS revenue was due primarily to decreases in small animal sales and RMS services in the U. S. Due to lower demand, partially offset by an increase in diet, bedding and enrichment product sales and an increase in small animal sales and services outside the U. S. Regarding NHP pricing, we indicated on our past conference calls that NHP prices were coming down from the highs we saw in Q4 of fiscal 2023 and the 1st two quarters in fiscal 2024.
As noted above, the average sales price of NHP did increase slightly in Q4 of 2024 compared to Q3 2024. As we sold higher cost NHPs that were purchased in late calendar 2023 and early calendar 2024, we saw lower margins in fiscal year 2024. Now that we have worked through much of our higher cost in HP inventory, we believe our RMS margins in calendar 2025 should begin to improve. Overall operating loss for the Q4 fiscal 2024 was $13,200,000 and improved from operating loss in Q3 fiscal year 2024 of $20,800,000 The operating loss in the Q4 of 2024 compared to operating income of $2,500,000 from last year's Q4 was primarily due to lower NHP margins on increased costs and reduced revenue and lower DSA margins on reduced revenue. These items were partially offset by decreases from the impact of the sale of our Israeli businesses, decreases in restructuring costs, transportation costs and costs related to sites closed in connection with our site optimization plan.
Operating income for our DSA segment in the 4th quarter was $1,900,000 or 1.5 percent of total revenue compared to $6,800,000 or 4.8 percent of total revenue in last year's Q4. Operating income for our RMS segment in the Q4 was $1,000,000 or 0.8 percent of total revenue compared to $11,800,000 or 8.4 percent of total revenue in last year's Q4. Consolidated net loss attributable to common shareholders in the Q4 of fiscal 2024 totaled $18,900,000 or a $0.73 loss per diluted share. This compared to consolidated net loss attributable to common shareholders of $9,700,000 or $0.38 of loss per diluted share in the Q4 of fiscal 2023. For the Q4, adjusted EBITDA was $5,400,000 or 4.1 percent of total revenue compared to $23,700,000 or 16.8 percent of total revenue for last fiscal year's Q4.
For the 12 months ended September 30, 2024 adjusted EBITDA was $18,200,000 or 3.7 percent of total revenue compared to fiscal 2023 adjusted EBITDA of $65,800,000 or 11.5 percent of total revenue. Consolidated net loss attributable to common shareholders for the 12 months ended September 30, 2024 totaled $108,400,000 or a $4.19 loss per diluted share. This compared to consolidated net loss attributable to common shareholders of $105,100,000 or $4.10 loss per diluted share for fiscal 2023. Non GAAP operating income for our DSA segment for the Q4 was $7,400,000 or 5.6 percent of total revenue compared to $12,600,000 or 9% of total revenue in last year's fiscal year's Q4. Non GAAP operating income for our DSA segment for fiscal 2024 was $30,300,000 or 6.2 percent of total revenue compared to $38,600,000 or 6.7 percent of total revenue in fiscal 2023.
As our new GSA services come fully online and we begin to fill newly added capacity, we believe we will see margin improvement through operating leverage. The book to bill for DSA in the Q4 of fiscal 2024 was 0.78x to 1. Our full year fiscal 2024 book to bill was 0.99x to 1. GSA backlog was $129,900,000 at September 30, 2024 compared to $132,100,000 at September 30, 2023. In our RMS segment, non GAAP operating income in the Q4 of fiscal 2024 was $12,700,000 or 9.7 percent of total revenue compared to $24,000,000 or 17% of total revenue in last year's period.
In our RMS segment, non GAAP operating income for fiscal 2024 was $44,300,000 or 9% compared to $88,900,000 or 15.5 percent for fiscal 2023. Again, the NHP pricing and margins in the sale of our Israeli businesses in August of 2023, partially offset by favorable cost reductions related to restructuring costs accounted for most of these changes. Interest expense in Q4, 2024 increased to $12,300,000 up from $11,300,000 in last year's fiscal Q4 due to an increase in interest rates, additional second lien debt and periodic draw on our revolving credit facility. Our balance sheet as of September 30, 2024 included $21,400,000 in cash and cash equivalents as compared to $35,500,000 on September 30, 2023. Total (EPA:TTEF) debt net of debt issuance costs as of September 30, 2024 was $393,300,000 compared to $377,700,000 at September 30, 2023.
This includes $110,000,000 of convertible notes as of September 30, 2024 and our new 2nd lien debt of $17,800,000 Net cash used in operations for the 12 months ended September 30, 2024 was $6,800,000 compared to cash provided by operations of $27,900,000 in fiscal 2023. Cash used in operations during fiscal 2024 included $6,500,000 paid under the resolution agreement with the DOJ. In October 2024, we entered into a 3rd amendment with the seller of OVRC and extended the note payable to January 27, 2026. The 7th amendment to our credit agreement entered into on September 13, 2024 established a maximum capital expenditure limit and a minimum adjusted EBITDA test effective September 13, 2024, it waived the previously existing financial covenants from the date of the 7th Amendment until June 30, 2025 and established additional new financial covenants for quarter starting June 30, 2025 and thereafter. Capital expenditures in the 4th quarter were $5,300,000 or approximately 4.1 percent of total revenue.
For the 12 months ended September 30, 2024, capital expenditures were $22,300,000 or approximately 4.5 percent of total revenue as compared to 27 point $5,000,000 or 4.8 percent for the fiscal year 2023. The capital expenditures reflect investments in facility improvements, finalizing the Hillcrest UK site expansion, enhancements to laboratory technology, improvements for animal welfare and system enhancements to improve the client experience. In terms of our capital improvements and site optimization plans, I'm pleased to report that we've completed the investments and initiatives started mid calendar year 2022. We expect to spend less to spend less than 4% of revenue per CapEx in fiscal 2025. With respect to guidance, as you know, we withdrew our fiscal 2024 financial guidance after we reported fiscal Q2, 2024 results.
While we feel good about the progress we made in the most recent quarter, we are not providing fiscal 2025 guidance at this juncture. We hope to provide guidance once we have greater clarity on the market and customer demand. Management has developed a comprehensive fiscal 2025 annual operating plan designed to continue to optimize our capital allocation and expense base and improve our operating results as discussed above. The plan forecasts compliance with the updated covenants under our latest amendment to the credit agreement in September 2024. And with that financial overview, we will turn the call over to our operator for questions.
Conference Operator: Thank you so much. We'll take our first question from Frank Tanquion from Lake Street Capital Markets. Please go ahead.
Bob Leisure, President and Chief Executive Officer, Inativ: All right. Thanks for taking
Frank Tanquion, Analyst, Lake Street Capital Markets: the questions. Congrats on all the progress. I was hoping to start with one clarifying question around gross margins, really around gross margins in NHPs. Anything you can do to help quantify exactly how much of a headwind it was that quarter? The reason I'm asking is it seems like there was really good sequential improvement in both volume and units.
And I think that that gross margin is just lagging because of some of that higher dollar old inventory. But anything you can quantify in there to kind of give us a feel for what that gross margin may mature into once we get into a more normalized environment?
Bob Leisure, President and Chief Executive Officer, Inativ: I don't have a way to do that off the top of my head. Beth, if you have a way that you can articulate those, but I'm guessing we were probably half at least half of what we would normally achieve. Beth, can you see that?
Beth Taylor, Chief Financial Officer, Inativ: Yes. If we look quarter over quarter, this 24 Q4 to last year's, we were about half of the margin percentage.
Bob Leisure, President and Chief Executive Officer, Inativ: And it was important for us to move that out. 1, we needed to move the higher cost inventory. But 2, from a space standpoint, we really needed to start bringing in additional lower cost inventory. And we really need to move that to make room as our bottleneck is how much boarding capacity we have. So it was important that we could move that out.
The market was there, demand was there. So we were able to move those out.
Frank Tanquion, Analyst, Lake Street Capital Markets: Okay, got it. And that was going to be kind of my second half. It feels like we're seeing that really stabilize. I mean, what can you say about 2025? Can you maybe speak to just how much of the business is now contracted?
Any inventory commentary from your customers? Just any other commentary around that to kind of give us a feel for NHP's next year?
Bob Leisure, President and Chief Executive Officer, Inativ: Well, yes, the NHP business, when we have definitely pre sold more going into 2025 than we did going into 2024 and that includes multiple new customers. In addition, what we've really done is a pretty good job with over the last couple of years is growing our Colony Management Services and it's mainly boarding and services related around that. It's been growing about 20%, 25% a year, which is very good reoccurring revenue for us. So we've been expanding those boarding capabilities and services. So we expect that will continue to grow next year.
So I think for us, it's important that we see that a more consistent reoccurring sales base as we have all really we had 2 week quarters. It was our fiscal Q2 and Q3 of last year that somewhat caught us by surprise and had lower demand. And we're working with our customers this year to make sure that that is that does not happen. And I think we're doing a better job of communicating with them. So I think we'll see a much more consistent demand cycle.
And I think what we sold last quarter should be more of a reoccurring quarter going forward. I think we will still have some depressed margins in our fiscal Q1, the quarter we're in today. But after that, I think we'll be a much more normalized base, much like we probably saw in 2022 and early 2023.
Frank Tanquion, Analyst, Lake Street Capital Markets: Okay, that's helpful. And then maybe just for my last one, a bigger picture question. I know in the past, you've talked to adjusted EBITDA margins maturing over a longer period of time into the 18% to 22% range. In light of all the site optimizations you've done, the contracted NHP business, do you feel that that 18% to 22% target is still a reasonable, we'll call it, midterm target over time for the business to mature into?
Bob Leisure, President and Chief Executive Officer, Inativ: I do. I think to get to the higher end of that, we'd have to see some recovery in the industry because there's some pricing pressure right now and some volume issues because I think of the overall demand in small animals in some of those areas. But if you look at where we're going to see our improvements next year, because of some of the site optimization things that we did, what we're seeing in our diet enrichment business, what we're seeing in the UK and Europe, what were costs we're able to take out in transportation in the U. S. Combined within our improvements in the NHP business and then what we're seeing in our DSA business currently.
And I do expect we'll probably see some recovery in the DSA business next year, one from a new services and from some of the other things that we've been able to grow. So anyway, I'm optimistic that we'll be able to get back to that 18% to 22%. But I think to get to the higher end of that, it's going to require recovery in the industry.
Frank Tanquion, Analyst, Lake Street Capital Markets: Perfect. That's helpful. I'll stop there. Thank you.
Conference Operator: Thank you. Our next question comes from Matt Hewitt from Craig Hallum. Please go ahead.
Matt Hewitt, Analyst, Craig Hallum: Good afternoon. Thank you for taking the questions. Maybe first up and I appreciate that you're not providing guidance, but is it safe to assume that we should anticipate growth in 2025 off of 2024s kind of a low watermark?
Bob Leisure, President and Chief Executive Officer, Inativ: Yes. Yes. I think just on the NHPs, we'll see some growth. I think we'll also see it in diet, bedding and enrichment. We'll see continued growth, I believe, right now in the U.
S. And in, say, U. K, in Europe. So those and it wouldn't surprise me completely that we see growth next year in the discovery. I think I believe that we're hopefully seeing the bottom of that and starting to see some maybe some recovery.
So I think we will see growth in all those areas. I don't think we'll see a lot of growth in pricing. I think it will be mainly in the NXP (NASDAQ:NXPI) business. I think it will come mainly from volume.
Matt Hewitt, Analyst, Craig Hallum: Got it. That's helpful. Thank you. And then I just want to maybe touch on the price. It's come up a couple of times.
Obviously, you're seeing some price competition. Are you being forced to match to retain or even pick up some incremental share? Or are you able to kind of highlight your white glove treatment of customers and so you're not having to perfectly match? You can maybe have to come down a little bit, but you're still able to retain or pick up incremental share because of the treatment and your strong customer relationships?
Bob Leisure, President and Chief Executive Officer, Inativ: Well, I think pricing is coming down for a couple of reasons. One, pricing is coming down because the NHP prices have come down. And so people's costs have come down. And second of all, I think there's been some margin compression also. So I think in general, there's been some pricing.
And that's mainly in the DSA business, more so than the other businesses. But I think the NHP business also drove some of that pricing down.
Matt Hewitt, Analyst, Craig Hallum: Got it. Okay. And maybe one last one for me and I'll hop back into the queue. But I just want to mention a couple of comments. So I think earlier in your prepared comments, Bobby, you had stated that the higher cost in HPs are going to impact gross margins for that segment in 2025.
And then, Beth, you commented that you're expecting RMS gross margins to improve over the course of 2025. Is that kind of as you were just alluding to Bob, maybe Q1, you've got some of that higher cost inventory that you have to kind of get through. Once you're through that, you should start to see some lift in gross margins over the remainder of the year. Am I hearing that correctly?
Bob Leisure, President and Chief Executive Officer, Inativ: Yes, Matt. I think what we're saying is that we think that there'll be some margin pressure in this quarter, but what we saw and what we will see in calendar 2025 should be much stronger.
Matt Hewitt, Analyst, Craig Hallum: Got it. All right. Thank you.
Bob Leisure, President and Chief Executive Officer, Inativ: So I think it was a calendar versus a fiscal issue. But we're fairly optimistic going into calendar 'twenty five. But we want to make sure that what we have left, we kind of clear out in this quarter.
Matt Hewitt, Analyst, Craig Hallum: Got it. All right. Thank you.
Conference Operator: Thank you. And with no further questions, I'd like to turn the call back over to Mr. Bob Leisure for any closing remarks.
Bob Leisure, President and Chief Executive Officer, Inativ: All right. Well, thank you everyone for joining today's call. I think our site optimization, integration, ability to reduce our 3rd party expenses and presales of NHPs have put us in a much better position going into our fiscal 2025. In 2025, we'll continue to build InTevis a high touch, flexible provider with strong scientific capabilities that's focused on our customer needs. We'll continue to pay attention to the details.
Our metrics related to customer service, quality and delivery are continuing to improve and we continue to get better every day. We're still a young company in our industry and we believe our best days are ahead. Thank you for your time today.
Beth Taylor, Chief Financial Officer, Inativ: Thank you. And ladies
Conference Operator: and gentlemen, that does conclude today's program. Thank you for your participation. You may disconnect at any
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