Frank Takkinen: Yes. Just trying to get a feel for when you expect to confirm whether or not the Cambodian NHPs in inventory are purpose-bred? Just trying to get a feel for the timing around that and when we could see some of those shift and hit the model?
Bob Leasure: As we are able to get comfortable ourselves, we are beginning to ship those, I think that’s what we said. So we have begun to ship for those. So we are comfortable in shipping some of them. And we’re also evaluating other processes and procedures before we ship on them. We’re not aware of any wild costs that we are holding, but we’re going to continue to do our due diligence and look for before we ship everything or anything and we get comfortable with each one. So it’s just not a — each one gets — each one gets evaluated separately.
Frank Takkinen: Okay. That’s helpful. And then maybe last one, just as it relates to guidance, in line with expectations on the adjusted EBITDA loss for the first quarter, do you expect to flip back to a positive adjusted EBITDA next quarter and then grow that sequentially through year-end to hit that 75 figure? Or how do we — how should we think about that cadence of EBITDA sequentially throughout the year?
Bob Leasure: Yes, we would. I think we have to put back deposit this quarter to be able to hit that cadence of $75 million for the year. But if you remember, Frank, we made a lot of changes — we talked about in the last call. We had a reduction in workforce or some because we said we’re going to stop some of the M&A work, to some of the — we said that we’re going to hire a lot less people. So that created some changes to take some cost out. We are still looking — we did have substantial pricing increases, specifically in NHP, but also in other parts of the RMS business. We also are — as we go about closing eventually eight, nine facilities and then we — each one of those facilities has a pretty significant fixed cost infrastructure that we’ll take out.
And then we are also — with us that will allow us to revamp our transportation system. So there are some pretty significant moves that are taking place that will allow us to go from what last quarter was to this quarter.
Frank Takkinen: Okay, great. Thanks.
Operator: Thank you. Next question is coming from David Windley from Jefferies. Your line is now live.
David Windley: Hi, good afternoon. Thanks for taking my question. I want to start on your testing of NHPs, Bob. The — could you distinguish for us the difference at this point between the ones you’re comfortable shipping and the ones you’re not, what are you able to do to get comfortable with that. I’m thinking about the discussion about developing tests that sounds forward-looking. And so I’m wondering what tests are already developed that allow you to make those determinations.
Bob Leasure: Well, remember two things. We have existing inventory and then we have what are we going to do before we import again. So — and we have not commented on what specific testing we are doing or we’ve not even comment on what third parties we’re working with and what new testing may become available. So I do — I will say that I think it will involve third parties. And so that’s currently the evaluation. But we’re not — we have not openly talked about the test that we are performing or that we will be performing.
David Windley: Okay. So your point about your first part in your answer, your current inventory — am I interpreting that correctly that you believe — I mean, you did say this before, I guess, that you don’t believe you have any wild costs in your inventory. But I guess I’m assuming that you would need to confirm that in some way, am i interpreting that?
Bob Leasure: No, you are correct. Our intention is to continue to confirm that. So we’re not taking anything for granted and regarding each and every one.
David Windley: Okay. Okay. The — sticking within RMS, you talked on the last call, you just mentioned it, I think, to Frank’s question, that you took price in NHP, but also in non-NHP. Can you comment how those prices in the small animal part of the RMS business are sticking? How are those being accepted?
Bob Leasure: We’ve not — those have all been accepted so far, they seem to be doing fairly well actually. We — I think most of the market understood some of the cost increases that were taking place. And so they have been accepted. And so we’re starting to see the benefits of that now.
David Windley: Okay. Flipping over to DSA and the cancellations. I want to make sure I’m clear that when we talk about the clients that had booked well in advance, and then the test article is not ready, I’m interpreting in so much as those are culminating in a cancellation as opposed to a delay, I’m interpreting that to be either the client abandon that molecule or that family of molecules like they didn’t work in the discovery or other activities leading up to the preclinical tests or they’ve decided to — that there’s enough time lag that they decided to cancel and maybe come back later. I guess what I’m interested in is do you believe these are delays where the business could come back to you at a later date? Or should we interpret those cancellations has gone?
Bob Leasure: Good question. We’re interpreting something we are getting some that are delays and then they reschedule. But those do happen, and we do rescheduled. We don’t call rescheduling a cancellation as the orders still exist. I do think that the market is being much more cautious in how they spend their money. And I think the cost of capital went up significantly and have people reevaluate how they want to go forward and what changes the market may make. I think we’re seeing all the above. So — but when we see a cancellation free cash flow, they choose to bring it back, then that’s great, but we’re not holding out an open spot or we’re not leaving into the backlog and assuming it’s going to come back. And so if we — if they rebook a new study going forward, it would be a new order going forward. And the cancellation we’re aware of it is a cancellation, and it’s not — it’s taken out of the log.
David Windley: Got it. Okay. I appreciate that clarification. Last question for me is around the pricing on the DSA side. So from our previous conversations, I believe, and your answer is confirmed today that most of your activity in DSA is more small animal oriented or lab or related lab. I guess I’m wondering, in light of the book-to-bill the last couple of quarters, what are you seeing from a DSA pricing environment as clients are scrutinizing what they want to do more closely? And is that an area where you would say price is actually favorable versus a quarter or 2 ago? Or is that an area where in order to fill the backlog, you may need to consider a little bit of selective price-cutting to attract business.
Bob Leasure: I’ve not seen us discounting on our service business. And I think the challenges to the market is that with this supply and demand issue with the large animals, being (ph), NHPs, there’s really a shortage of both. And so I think as a result, the pricing has stayed fairly strong. I don’t think we’re in a position right now where the bottleneck is by various rooms or maybe people as it has been in the past, but it may be now access to the research models. And so I think that’s where the pricing is probably stayed high. Again, we’re fairly small compared to some of our competitors and how many rooms we have available. But we’ve stayed fairly busy, and I think we have seen our pricing stay fairly strong as a result of that. Because again, we’re just a small piece of a very big market. And we do these. So that’s probably helped us a little bit.
David Windley: Got it. Got it. Appreciate the answers. Thanks very much.
Bob Leasure: Thank you.
Operator: Thank you. Next question is coming from Tim Daley from Wells Fargo. Your line is now live.
