Q4 2019 Earnings Call
Good afternoon, and welcome to the infill biochemical fourth quarter in fiscal year 2018 operating results conference call I will now read the company's safe Harbor statement, except for historical information the matters discussed in this news release, maybe considered forward looking statements within the meaning of section 27.
Eight other Securities Act of 1933 as amended and section 21 do you have to Securities Exchange Act of 1934 at summit.
Such statements include declarations regarding the intent belief or current current expectations that the company and this management, including those related to cash flow gross margins revenues and expenses are dependent on a number of factors outside of the control of the company, including internally the markets of the company's products and services cost of goods to the server.
Other expenses government regulations litigation and general business conditions.
The risk factors and the company's Form 10-K for the fiscal year ended July 31, or 2018 investors are cautioned that any such forward looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results.
Anthony disclaims any obligation to update any forward looking statements as a result of development occurring after the date at this conference call. During this conference call the company they refer to EBITDA a non-GAAP measure.
<unk> is not and should not be considered an alternative to net loss loss from operations or any other measure for determining operating performance.
The company has provided a reconciliation of the difference to gap on its website.
You Www Dot Com and then it's press release issued last night I were speaker today as Barry Weiner President at this time, all participants have been placed on the listen only mode and the floor will be opened for your questions and comments. Following the presentation I would now like to turn up the floor for to your host Mr. Weiner the floor is yours.
Before we get into a discussion of the financial and operational results for the fiscal quarter in the yearend I thought it would take a few minutes to talk about our position in the marketplace. The progress towards our three prong short term value creation program and share some highlights and accomplishments from the last 12 months.
That's what's it articulated in our press release this afternoon, and so structure in business strategy represents the culmination of a number of years of extensive planning a productive work.
We have developed the ability to offer low cost high performance products and services in diagnostics, specifically in the areas of molecular immunohistochemistry and cytogenetics.
While reimbursement pressures facing diagnostic labs remained a headwind our unique products position us well to capitalize on the secular trends over the long term.
Our pioneering work in genomic analysis, coupled with our extensive patent estate and enabling platforms have built the foundation for the company to continue to play an important role in the rapidly growing molecular medicines marketplace.
And so technology solutions in platforms and unique operational structure are designed to reduce overall health care cost for consumers government and private insurers.
Our proprietary technology platforms reduce our current and prospective customers needs for multiple specialized instruments and offer a variety of high throughput capabilities together with it demonstrated high level of accuracy and reproducibility.
Our test panels are focused on large and growing markets primarily in the area of women's health infectious diseases genetic disorders in personalized medicine.
The company continues to make significant progress toward unlocking shareholder value guided by three core pillars of our strategy.
Strategic relationships, creating a new paradigm for the laboratory and diagnostic market places and driving operational profitability and lab segment growth.
One of our chief goals as we stated previously is to achieve clinical laboratory profitability, despite very challenging reimbursement environment.
We feel confident we are progressing towards accomplishing this objective.
Our diagnostic products developed and manufactured at Enzo Life Sciences and format invalidated at Enzo clinical labs are perfect. Examples of the integrated nature of our company's businesses and the value and leverage we generate from these synergies.
Be extremely difficult to costly to replicate as two separate units.
More importantly, this combination creates efficiency and cost savings benefits for products for labs around the country.
And then adverse laboratory wide climate shrinking margins and declining profitability, our proprietary platforms that offer high sensitivity compatibility with existing systems and low cost higher margins are tailor made for both products sales that being systems reagents and can see.
The Bulls and the lab to lab services growth opportunities that we are actively pursuing.
One important note related to our strategic activities.
As we noted in our release and so has retained lazard to assist in strategic relationships and new venture creation across the company's for core platforms molecular immunohistochemistry cytology and immunology.
We expect to update the market by the end of the calendar year on these discussions.
I would like to now highlight some of the key accomplishments of the company over the last year.
In September and so clinical Labs received New York State Department of Health approval for its Ampiprobe HBV hepatitis B virus viral load monetary monitoring essay and this was based on performance versus an F.D. approved competitive product.
So it's growing portfolio in the viral load monitoring market includes previous New York State Department of health approval for a viral load monitoring gassy for hepatitis C virus or HCV.
Andy viral load monitoring gassy under development for human immunodeficiency virus.
The companys expanding menu will allow enzo to provide one of the most comprehensive panels for sexually transmitted disease testing a rapidly growing health care segment were reported common S.T. ice in the U.S. have increased for the fifth consecutive year.
Approval of the HBV Assai follows the July announcement of New York State Department of Health approval for our gonorrhea and Chlamydia test for extra agenda till specimens.
And the announcement that answer was creating a direct to consumer testing business for S.T.I.s.
Furthermore, the company is developing an additional test for human papilloma virus testing it in multiple sample types.
Also the company was issued 74 patents worldwide during this fiscal year 2019.
Notably the company was issued U.S. pet number 103 to three to seven two which is entitled nucleic acid probes for insight to hybridization June 18th.
2019, which is directed to a new probe technology that allows for significantly more cost effective simple and scalable processes across the multi billion dollar diagnostic testing drug development and academic research marketplaces.
Probes can be used to detect clinically relevant your gnomic targets with high sensitivity in cell samples and biopsy tissue.
Compared to competitive probes insoles ensco's novel approach will be lower cost decreased complexity save time and avoid disruptions of sample integrity.
Also in fiscal year, 2019, Enzo life Sciences, and laboratory divisions invested approximately $10 million and strategic growth initiatives, such as developing good manufacturing laboratory.
Practices in facilities, expanding strategic Salesforce, and marketing practices and ramping up R&D and laboratory developed test initiatives.
This investment is already resulting in cost reductions for the laboratory and diagnostic operations.
Currently approximately $4 million or the company's revenues associated with these strategic strategic growth initiatives.
Over the past five years Enzo has systematically introduced its technology onto its clinical production floor through lab developed tests that are validated by the New York State Department of Health.
Over this period and so has run over 100000 of these Enzo LD teas, resulting in savings of over $5 million by substituting third party vendor test with into his own internally developed tests.
We expect to annual savings from these tests to increase in the next fiscal year to 3 million and then to 5 million in the following year.
At the lab. It is noteworthy to point out that testing activity in volume is up sequentially. This quarter as overall lab revenues grew 11% in the fourth quarter versus the third quarter of fiscal 2019.
Our expanding panel this T.I. testing enhanced by the recent diagnostic approval. It's one of the most extensive available including the highly comprehensive women's health diagnostic panel we are offering.
I'd like to spend a few minutes reviewing the financial results of the quarter in the year.
Looking at the fourth quarter operating results.
Total revenues amounted to $21 million compared to 22.8 million in the year ago period, the decline of 8%, reflecting new sharply lower industry wide, Pam or reimbursement rates also reflecting sequential total testing volume, which increased by about 4%.
Sequentially clinical laboratory services revenue increased 11% from the prior quarters 11.8 million, while product revenues for the quarter were up 3% over the prior year period as a result of the successful implementation of new marketing and sales initiatives.
Lab revenues declined to 13.1 million from 15.1 million in the year ago period. This is due to the reduced insurance reimbursement payments and changes to medical in procedural requirements for genetic testing by payers.
Overall gross profit improved sequentially by 21% to 6.3 million with clinical lab gross profit more than doubling to 1.8 million from point 8 million and product gross margin, increasing 2% to 4.6 million.
As noted previously clinical services revenues for the fourth quarter in the full year ended July 31, 2019 reflect adoption of new revenue recognition accounting rules on a full retrospective basis under the new rules and so reports uncollectible balances associated with patient responsibility.
As a reduction in net revenues.
Historically these amounts were separately classified in operating expenses as a provision for uncollectible accounts receivable and amounted to 3.1 million in 3.7 million respectively. In the fiscal years ended July 31, 2019 in 2000 in 18, and 1 million and one point.
7 million for the respective fourth quarter periods.
Consolidated gross margins for the quarter of 30.3% compared with 35.2% a year ago and were up 300 basis points sequentially.
Clinical services gross margins were 13.8% compared to 25.4% a year ago and sequentially improved from the third quarter.
The improvement reflected both higher testing volume and enhanced efficiency.
Product gross margins for the quarter increased to 58% from 54% and sequentially was up 200 basis points.
Operating expenses declined 12% or 1.6 million to 12 million year over year and sequentially remained flat adjusted for net legal settlements.
Legal fee expenses declined by 1 million compared to the fourth quarter last year of point Threemillion and sequentially were flat in both periods.
GAAP net loss was 5.4 million or 11 cents per share an improvement of 7% compared to a year ago quarter net loss of 5.8 million or 12 cents per share.
The non-GAAP net loss was 5.4 million compared to 5.8 million ego and 6.7 million in the preceding quarter.
On a per share basis, the non-GAAP loss equaled 11 cents per share compared with 12 cents a year ago and 14 cents in the third COVID-19 in third quarter night on an adjusted basis.
EBITDA loss in the quarter and year ago, approximated 5 million and 5.3 million, respectively and decrease sequentially from 6.1 million on adjusted basis.
Looking at full year operating results.
Total revenues were 81.2 million compared to one a 1 million a year ago, a decline of 20% and as noted earlier reflected newly instituted reduced reimbursement payments insurance company claim rejections and changes to medical and procedural requirements for genetic testing by payers.
Gross profit was 23.2 million compared to 40.7 million in the prior year with gross margins at 28.6% and 40.3% respectively.
Legal fees declined by 41% to 3 million and tailed off sharply towards year end, well SGN a declined to 44.2 million from 44.5 million.
GAAP net income amounted to 2.5 million or five cents per share.
On a diluted basis compared to a net loss of 10.3 million or a loss of 22 cents per share a year earlier.
non-GAAP net loss amounted to 26.4 million, excluding legal settlements compared to a non-GAAP fiscal 2018 loss of approximately 11.4 million.
EBITDA was 4.5 million compared to a year ago EBITDA loss of 9.1 million.
At year end cash and cash equivalents unrestricted cash totaled close to $70 million and working capital amounted to $65.4 million.
I would like to turn this over for questions at this point in time.
Before we take question I would like to inform you that the company.
Sector and certain Davis executive officer will be.
Proxies and the company shareholder in connection with the 2019.
The company.
Oxy statement and accompanying proxy card the FCC in connection with.
Proxies for the 2000.
Shareholder of the company are strongly encouraged to read the proxy statement.
See card and all other documents.
If you see carefully and in their entirety when they become available as they will contain important information.
Documents can be found on FCC website at Www Dot FCC.
Well the company's website at Www Dot dot com born such corporate.
Investor information.
We will not be commenting on the 2019 meeting.
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Thank you very much for your attendance on the call. We look forward to reporting to you in the middle of December on our first quarter have a good day.
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Turning at Www Dot Dot Com. This concludes today's teleconference. You may disconnect. Your lines at this time and have a wonderful day.