Q4 2022 Enzo Biochem Inc Earnings Call

Speaker 1: off these levels. These products already have attractive margins but we have the ability to leverage our growth and achieve higher margins through manufacturing economies of scale. We recently announced our MPBU RNA probes that are designed with Enzo's loop RNA-ish technology that hybridized to a specific RNA-DNA or RNA-DNA target of interest. With first products targeting detection of HPV and SARS-CoV-2 MPBU, this significantly expands Enzo's position in the oncology market and paves the way for expansion into growing spatial biology space. We're working on building a team of success. We appointed a new executive management and sales team members in the quarter to position the company for continued growth. Enzo's management team shared a philosophy of identifying and developing local talent augmented by experienced mid-level and senior hires. Enzo is strategically located on Long Island within the New York tri-state area, an area with a large pool of talented individuals with industry experience and advanced degrees. Our management team is focused on growth more specifically

Speaker 1: revenue generating opportunities to help Enzo into its next chapter. We are creating an environment of happy, career satisfied employees, making the right decisions, engaging with strategic partners by leveraging our core strengths and capabilities.

Speaker 1: This approach is poised to yield long-term success for Enzo.

Speaker 1: A team of talented individuals are ready to leverage our existing and emerging technologies to solve industry pain points and expand in our addressable market adding to the industry.

Speaker 1: to offer future innovations. To this end, Enzo Biochem is preparing to launch its Enzo Diagnostics Division, which will focus specifically on clinical diagnostics platforms for laboratories and physician offices.

Speaker 1: The success of ENSO's diagnostics platforms can be measured by milestones.

Speaker 1: It must meet timelines and regulatory hurdles necessary to launch these platforms.

Speaker 1: We are confident that we have the assets and resources in-house but must continue to execute.

Speaker 1: For example, we demonstrated steady advancement along the regulatory path with GenFlex, a flexible and fully automated molecular testing platform, with pending submission for monkeypox UA approval, and other regulatory filings.

Speaker 1: Earlier this year, we received New York State approval for the use of Enzo's Chlamydia-Gonorrhea trichomonas tests on gen flex.

Speaker 1: Building out our portfolio of laboratory-developed tests using GenFlex platform.

Speaker 1: More recently, we received another New York State Department of Health approval for HPV other diagnostic tests on the Gen Flex platform.

Speaker 1: These milestones provide confidence to us at Enzo and to market.

Speaker 1: Gaining regulatory approval from New York State, a state with one of the toughest reputations, provides us with confidence.

Speaker 1: that we will be successful on the federal front.

Speaker 1: On the capital expenditure side, earlier this month we announced the opening of an expanded life sciences laboratory and office facilities in Farmingdale, New York.

Speaker 1: The 100,000-foot facility

Speaker 1: will support

Speaker 1: plans for continued growth in clinical laboratory services, drug development services, and product innovation.

Speaker 1: A recent launch event featured updates on ENZO's plans for business growth and perspectives on our prospects for the Long Island business community from community leaders.

Speaker 1: On the banking front, we continue to engage with our previously announced investment bank to provide advisory services, including the evaluation of strategic alternatives for the company. We will update investors when appropriate but have nothing to report at this time.

Speaker 1: BS Management are fully aware of the headwinds that we are facing, whether it's COVID-19 testing decline, an unfavorable unemployment market, and an inflationary environment.

Speaker 1: However, the past is behind us and we are focused on the future. This team can manage any storm.

Speaker 1: I would be remiss if I would not acknowledge that we had a challenging quarter.

Speaker 1: Economic headwinds and reduction in COVID testing were a huge contributor in what has impacted us and our sector.

Speaker 1: We have a talented team and we remain steadfast in our strategic efforts as well as maximizing the potential that we have within our company.

Speaker 1: Our commercial team at the lab is focused on optimizing the lab's potential and life sciences has a bright future for us.

Speaker 1: We are enthused regarding the opportunities that lie ahead and prepare for a year of revenue growth in fiscal year 23, particularly in our ENDSO Life Sciences Division.

Speaker 1: During the next few quarters, we expect to provide our investors with updates regarding our progress towards delivery of our initiatives during our quarterly calls as well as providing more information about our strategy and opportunities on a go-forward basis.

Speaker 1: I would like to turn the call over to our CFO , Mr. David Bench, for a detailed review of our fourth quarter financials. David? Thank you for joining us today, Mr. Deputy Indeed.

Speaker 2: Thanks, Hamid.

Speaker 2: I'll now provide a review of the financials for the fiscal fourth quarter and year end, July 31, 2022.

Speaker 2: Total fourth quarter 2022 revenues were $20.3 million compared to $24.8 million in the fourth quarter of 2021.

Speaker 2: The decline reflects a continued slowdown in COVID-19 testing.

Speaker 2: We anticipate the rate of decline to taper in the months ahead as COVID-19 testing becomes a regular part of influenza panel testing.

Speaker 2: From a revenue mix perspective.

Speaker 2: Q4 2022 revenue include a more balanced mix of products and services, 61% ECL and 39% SLS in the quarter versus 68% and 32% respectively in Q4 2021.

Speaker 2: Full fiscal year revenues were $107.1 million compared to a revenue of $117.7 million for the same period in 2021.

Speaker 2: The slight decrease is again primarily related to reduction in COVID-19 testing volumes and lower reimbursement rates.

Speaker 2: However, it's worth noting that fiscal year 2022 was the second highest historical annual revenue for ENSO from its operating divisions.

Speaker 2: Enzo Clinical Lab revenue was $12.4 million in the fiscal fourth quarter, as compared to $16.8 million in the fourth quarter of 2021.

Speaker 2: The decrease was predominantly attributable to the aforementioned reduced COVID-19 testing.

Speaker 2: Clinical services gross margin decreased to 11.8% from 35.9% in the fourth quarter period of 2021, due to a one-time charge related to cash collections and fewer COVID tests and lower reimbursement rates.

Speaker 2: ENDSO's accessions declined by approximately 42,500 compared to the fourth quarter of fiscal 2021.

Speaker 2: ECL fiscal 2022 total revenues were $74.4 million compared to $87 million in fiscal 2021. ECL fiscal 2022 total revenues were $74.4 million compared to $87.4 million compared

Speaker 2: primarily due to reduction in COVID testing volume and reimbursement rates.

Speaker 2: Enzo's accessions declined by approximately 165,000 compared to fiscal year 2021.

Speaker 2: Post fiscal year 2022, total accessions per annum are now trending at approximately 700,000 per annum versus 1.2 million per annum at the height of COVID-19.

Speaker 2: ECL operating profit for fiscal 2022 was 0.8 million compared to a year ago period, a year ago operating profit of $11.9 million.

Speaker 2: ELS revenue in the fourth quarter was $7.9 million as compared to $8.1 million in the fourth quarter of 2021 for organic growth of 2% when accounting for the foreign exchange impact.

Speaker 2: Gross margin was 36.4% compared to 47.2% in the previous year's quarter, largely due to reorganization of operational structure, increasing industry-wide salaries, and impact of inflation on materials. This report causes reference tonight to share currentUSS standard across MRC breakfasts..

Speaker 2: ELS fiscal 2022 revenue amounted to $32.6 million, up 6% from fiscal 2021, or 8% on a foreign exchange adjusted basis.

Speaker 2: This increase of $1.9 million represents growth in most segments.

Speaker 2: with the largest increase driven by GMP bulk sales.

Speaker 2: Operating loss for 2022 was $0.2 million compared to operating income of $1.2 million in 2021.

Speaker 2: Consolidated gross profit totaled $42.0 million compared to $53.6 million a year ago. The company's gross margin was 39% as compared to 46% in the year prior.

Speaker 2: ECL gross margin for fiscal 2022 with 38% compared to 45% in the year ago period, primarily due to the lower COVID-19 testing mix.

Speaker 2: ELS gross margin was reduced to 41% as compared to 48% in 2021, primarily due to investments to support future growth and inflation impact.

Speaker 2: Research and development expenses were $1.07 million in the fourth quarter of 2022, or 5.3% of total revenues, an increase from $0.9 million, or 3.5% of total revenues, in the same quarter in the year prior.

Speaker 2: This increase was primarily related to investments made in translation, lab-developed testing, and gen flex systems.

Speaker 2: Research and development expenses for the full year were higher at $3.8 million or 3.5% of total revenue compared to $3.3 million or 2.8% of total revenue for the same period in 2021. Again, due to the investments in resources, translation, and LDTs.

Speaker 2: Selling general and administrative expenses were $11.1 million in the fourth quarter, as compared to $11.8 million in the previous year's fourth quarter, primarily due to reduced selling expenses.

Speaker 2: However, as a percentage of revenues, SG&A for the fourth quarter of 2022 equals 54.5% compared to 47.5% a year ago.

Speaker 2: selling general and administrative expenses for the fiscal 2022 year for $48.0 million, or 44.8% of total revenue, compared to $45.0 million, or 38% of total revenue for fiscal 2021.

Speaker 2: Legal and other expenses amounted to $5.2 million, an increase from $4.7 million in the previous year.

Speaker 2: For the fourth quarter, 2022, GAP net loss was $8.4 million, or 17 cents per share, versus a net profit of $3.3 million, or 7 cents per share in the year-ago period.

Speaker 2: Annual net income amounted to negative $18.3 million, or 38 cents per diluted share, compared to a year ago net income of $7.9 million, or 16 cents per share.

Speaker 2: Adjusted EBITDA amounted to negative $5.2 million compared to a year ago EBITDA of $5.5 million.

Speaker 2: Cash, cash equivalents and short-term investments total $21.6 million at the end of the fiscal year and working capital amounted to approximately $30 million.

Speaker 2: Cash, cash equivalents, and short-term investments are lower compared to year-end 2021, due primarily to corporate legal and strategic expenses, investments in inventory, and capital expenditures.

Speaker 2: The company's current ratio remains strong at 2.2 times.

Speaker 2: As of July 31, 2022, the company had 48.7 million shares outstanding, a less than 1% increase from the previous year. I will now turn the call back over to Hamid for closing remarks.

Speaker 1: Thank you, David. Over the past months,

Speaker 1: year we've made exceptional progress in advancing the fundamentals of the business.

Speaker 1: adapted to the challenging landscape.

Speaker 1: particularly around COVID-19 and positioned ourselves well for the future success through execution and innovation. Our focused return strategy remains firmly on track.

Speaker 1: and hit both short-term and long-term shareholder values.

Speaker 1: top-level mind, top-level in mind.

Speaker 1: On behalf of the management team, I'd like to thank the entire Enzo team for their perseverance and steadfast dedication as we continue to build upon our strong history to forge a strong future for Enzo Biochem across ECL, ELS and our emerging diagnostics business.

Speaker 1: Due to our ongoing banking process, we will not have a Q&A period on this call. However, feel free to email any questions you may have to IR at ENZO.com.

Speaker 1: Thank you very much for joining us today. We remain fully committed to creating value for our shareholders and appreciate your patience and support through challenging macroeconomics and geopolitical uncertainty.

Speaker 1: We look forward to discussing further progress with you on our Q1, fiscal 2023.

Speaker 1: Call in December .

Speaker 1: Now, I'll turn the call over to our operator.

Speaker 3: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.