Enzo Biochem Inc. (NYSE:ENZ) today reported strong results for
the fourth quarter and fiscal year ended July 31, 2016, paced by
revenue growth, margin expansion and litigation successes.
Highlights
- Fourth quarter fiscal 2016 revenue was
$26.6 million and full year fiscal 2016 revenue was $102.8 million;
increases of 4% and 5%, over the respective prior year periods.
Enzo Clinical Labs revenue grew 5% in the fourth quarter of 2016
and generated double digit year over year revenue growth of
12%.
- Clinical Labs and Life Sciences
operating segments continue to be profitable and generate positive
cash flow from operations.
- Gross profit margins increased both
quarterly and full year in both Life Sciences and Clinical Labs. In
the fourth quarter of fiscal 2016, consolidated gross margin was
45% compared to 44% in the prior year period.
- Net income for the fourth fiscal
quarter was $36.1 million or $0.77 on a diluted share basis
compared to $8.4 million or $0.18 on a diluted share basis in the
prior year period. Full year net income was $45.3 million or $0.97
on a diluted basis compared to a loss of $2.3 million or $0.05 on a
diluted share basis in the prior year.
- New product approvals, along with a
strong product development pipeline, underscore Enzo’s growth
opportunities as a supplier of advanced lower cost molecular
diagnostics for reimbursement constrained independent clinical
labs.
- Enzo Clinical Labs is growing market
share in the women’s health market and expanding beyond the current
regional New York area. During the year, three assays were approved
by New York State.
- At July 31, 2016, cash and cash
equivalents were $67.8 million; working capital was $70.8 million.
Cash flow provided by operations in the fourth quarter and year
ended July 31, 2016 was $36.1 million and $53.1 million,
respectively, driven by legal settlements and licenses and
operating performance of business segments.
Comments by Barry Weiner, Enzo
President:
“Fiscal 2016 was a highly successful year for Enzo Biochem. We
solidified our growth opportunities on every front, setting a
strong foundation for the future. Life Sciences’ product
development emphasis on high profit margin products is paying off
with several key approvals awarded in 2016. Enzo Labs came off a
strong year with solid forward momentum from its expanding line of
innovative molecular diagnostics, especially in the women’s health
category, and a growing client roster. The unique combination of
our Life Sciences development and marketing team with our Clinical
Labs’ hands-on testing capabilities, and our deep patent estate,
has resulted in a formidable development program, to prepare our
broad pipeline of products for regulatory approval.
“This past year, New York State’s Health Department
conditionally approved three new, highly efficient assays. We also
have reported to the scientific community new analysis pointing to
the effectiveness of our AmpiProbe ® platform technology. Included
among the approved tests was our Candidiasis™ assay based on
AmpiProbe® and, last month, that of the stand-alone PLAQPRO™
Lp-PLA2 activity assay for identifying arterial inflammation, a
possible potential indicator of coronary risk. Notably, both
received approval for laboratory use just months after submission,
and both are testaments to our growing expertise and recognition as
a leading diagnostics supplier-producer in the women’s health
field.
“On the operating side, we have also made significant progress.
Costs are well under control, profit margins are enjoying an upward
trend, and operating income at both Clinical Labs and Life Sciences
remains positive. By bringing to resolution several court cases,
legal expenses have trended lower, though this might change as
possible trials could take place in calendar 2017. Meanwhile, with
total patent infringement settlements and licenses in the past
twenty-four months of over $100 million, our financial condition is
robust and highly liquid. This is enabling us to pursue our growth
strategies in the diagnostics market where, with Enzo’s highly
efficient, economic and effective products, we are increasingly
making our mark.”
Fourth Quarter Results
Total revenues increased to $26.6 million, a $0.9 million or 4%
improvement over a year ago. Gross profit was up 7%, to $12.1
million, equal to gross margin of 45%, compared to 44% a year ago.
Research and development expenses held steady, as a percentage of
revenues declined 100 basis points to 3%, while selling, general
and administrative (“SG&A”) costs likewise improved 100 basis
points, to 42%, all of which underscores the Company’s effective
management controls. The provision for uncollectible expenses
remained flat at 3% of revenues, as a result of the Company’s
effective credit procedures. Legal fees for the quarter declined by
more than half, to $0.7 million, from $1.6 million a year ago.
Including $38.8 million legal settlements and licensing
agreements, and a $0.4 million foreign currency loss, net income
amounted to $36.1 million, or $0.77 per fully diluted share. In the
year ago quarter, with net legal settlements at $11.3 million, net
income totaled $8.4 million, or $0.18 per fully diluted share.
Adjusted for the 2016 legal settlements and licensing agreements,
the non-GAAP quarterly net loss amounted to $1.9 million or $0.04
on a fully diluted share basis, compared to a year ago non-GAAP net
loss of $2.6 million, a 27% improvement. Non-GAAP adjusted EBITDA
(earnings before interest, taxes, depreciation and amortization)
was a negative $0.7 million, compared to a year ago negative $1.5
million, a 53% improvement.
Fiscal 2016 Results
With Clinical Labs revenues increasing by double digits,
consolidated revenues rose to $102.8 million, up 5% from fiscal
2015’s $97.6 million. Gross profit for the year increased 6%, to
$45.6 million, equaling gross margin of 44% in both years. R&D
expenses were up modestly by 5% year over year, but flat at 3% as a
percentage of revenues; SG&A increased 6%, but again held firm
at 42% of revenues for both years; and legal expenses declined $2.4
million, or 27%, to $6.4 million.
Net income amounted to $45.3 million, or $0.97 per fully diluted
share, including $57.3 million in net legal settlements and license
agreement for the year. This compared to a year ago net loss of
$2.3 million, or ($0.05) per share fully diluted, with net legal
settlements and license agreements at $11.5 million in the prior
year period. On a non-GAAP basis, adjusted for legal settlements
and license agreements, extraordinary proxy and other expenses and
related tax effects, the net loss was $9.2 million, or ($0.20) per
share fully diluted, vs. a year earlier loss on a similar adjusted
basis of $13.5 million, or ($0.30) per fully diluted share, a $4.3
million improvement. Non-GAAP adjusted EBITDA was a negative $5.0
million and $9.4 million, respectively, for the past two years, a
$4.4 million improvement. Excluding direct legal litigation costs,
adjusted EBITDA would be positive in the full year 2016
results.
As of July 31, 2016, cash and cash equivalents amounted to $67.8
million and total assets of were approximately $112.0 million.
Segment Results
Enzo Clinical Labs continued
its strong growth, the result of the increased role of molecular
diagnostics in its services mix, particularly those targeted to
women’s health, as well as adding new clients and effective
management of the Labs’ cost base. Fourth quarter revenues grew 5%,
to $18.1 million. Gross profit improved 7%, to $12.1 million, and
the gross margin percentage increased to 40%, from 39%. Operating
income amounted to $0.8 million, compared to $0.5 million, up
60%.
Full year Lab revenues grew 12%, to $70.9 million. Gross profit
consequently increased 18%, to $28.1 million, with the gross margin
up 200 bps, to 40%, from 38%. The provision for uncollected
receivables improved to 3.3%, from 3.8%, the result of improved
collection procedures. Operating income more than doubled, to $1.2
million, from $0.5 million.
Enzo Life Sciences benefited
from both higher margin product revenue and tight cost controls,
although continuing to be challenged by a highly competitive
environment and continued lower research funding, especially in
academia. Product revenues were $8.1 million for the fourth
quarters of both fiscal 2016 and 2015, with cost of revenues
declining 6% in 2016, to $3.7 million. Gross profit on product
revenues increased 5%, to $4.4 million, from $4.2 million, and
gross margin advanced to 55%, from 52%. Excluding legal
settlements, net, operating income improved to $1.0 million,
compared to $0.6 million a year ago, up 66%.
Full year product revenues in 2016 amounted to $30.3 million,
compared to $31.7 million in 2015. Products gross margin percentage
increased by 200 basis points to 53% from 52%. Operating income
amounted to $3.1 million, excluding $58.8 million from patent
litigation settlements, compared to $4.4 million, excluding $11.5
million in settlements a year ago. Royalty and fee income declined
to $1.5 million from $2.5 million a year earlier.
Product Development
In line with Enzo’s objective to develop, manufacture and sell
high- throughput, high value reliable and affordable molecular
diagnostic products and services that use our proprietary
technologies to allow customers to meet their clinical needs, and
to offer independent labs a counterweight to reduced reimbursement,
Enzo has underway an aggressive product development program. This
past year, the Company obtained conditional approval for several
tests and assays from the New York State Department of Health,
allowing the Company to provide these tests across the majority of
the United States.
These approvals included our AmpiProbe® technology platform that
encompasses high sensitivity, real time nucleic acid amplification
assays that is expected to provide low cost molecular diagnostics
to benefit independent laboratories. At the same time, the
AmpiProbe® HCV Assay was approved for the quantitative detection of
hepatitis C virus, which is expected to be the first in a line of
expanded applications using the AmpiProbe® platform. Last year,
Enzo scientists presented data at the prestigious American Society
for Clinical Pathology annual meeting showing new thresholds of
sensitivity for the Company’s AmpiProbe® - based HCV Assay. This
demonstrated that the limit of detection was greater in sensitivity
than leading commercially available HCV viral load assays.
Also approved was the Candidiasis™ Assay, the Company’s second
test aimed at the rapidly expanding women’s health market, and Enzo
Clinical Labs’ PLAQPRO™ Lp-PLA2 Assay, for evaluating
lipoprotein-associated phospholipase A2 activity, a marker
associated with the potential for coronary heart disease. Currently
under development are tests for Hepatitis B virus, HIV viral
diseases, and cancers, as well as a full spectrum of tests designed
to identify a number of infectious diseases related to women’s
health, one of the fastest growing segments of the molecular
diagnostic market.
Conference Call
The Company will conduct a conference call Friday, October 14,
2016 at 8:30 AM ET. The call can be accessed by dialing
1-888-459-5609. International callers can dial 1-973-321-1024.
Please reference PIN number 85947927. Interested parties may also
listen over the Internet at http://tinyurl.com/hlgvp9k. To listen
to the live call on the Internet, please go to the web site at
least fifteen minutes early to register, download and install any
necessary audio software. For those who cannot listen to the live
broadcast, a replay will be available approximately two hours after
the end of the live call, through midnight (ET) on Friday, October
28, 2016. The replay of the conference call can be accessed by
dialing 1-800-585-8367, and when prompted, use PIN number 85947927.
International callers can dial 1-404-537-3406, using the same PIN
number.
NON-GAAP Financial
Measures
To comply with Regulation G promulgated pursuant to the
Sarbanes-Oxley Act, Enzo Biochem attached to this news release and
will post to the Company's investor relations web site
(www.enzo.com) any reconciliation of differences between non-GAAP
financial information that may be required in connection with
issuing the Company's quarterly financial results.
The Company uses EBITDA as a measure of performance to
demonstrate earnings exclusive of interest, taxes, depreciation and
amortization. Adjustments to EBITDA are for items of a
non-recurring nature and are reconciled on the table provided. The
Company manages its business based on its operating cash flows. The
Company, in its daily management of its business affairs and
analysis of its monthly, quarterly and annual performance, makes
its decisions based on cash flows, not on the amortization of
assets obtained through historical activities. The Company, in
managing its current and future affairs, cannot affect the
amortization of the intangible assets to any material degree, and
therefore uses EBITDA as its primary management guide. Since an
outside investor may base its evaluation of the Company's
performance based on the Company's net loss not its cash flows,
there is a limitation to the EBITDA measurement. EBITDA is not, and
should not be considered, an alternative to net loss, loss from
operations, or any other measure for determining operating
performance of liquidity, as determined under accounting principles
generally accepted in the United States (GAAP). The most directly
comparable GAAP reference in the Company's case is the removal of
interest, taxes, depreciation and amortization.
We refer you to the tables attached to this press release which
includes reconciliation tables of GAAP to Non-GAAP net income
(loss) and EBITDA to Adjusted EBITDA.
About Enzo Biochem
Enzo Biochem is a pioneer in molecular diagnostics, leading the
convergence of clinical laboratories, life sciences and
intellectual property through the development of unique diagnostic
platform technologies that provide numerous advantages over
previous standards. A global company, Enzo Biochem utilizes
cross-functional teams to develop and deploy products, systems and
services that meet the ever-changing and rapidly growing needs of
health care today and into the future. Underpinning Enzo Biochem’s
products and technologies is a broad and deep intellectual property
portfolio, with patent coverage across a number of key enabling
technologies.
Except for historical information, the matters discussed in this
news release may be considered "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include declarations regarding the intent,
belief or current expectations of the Company and its 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, inter alia, the markets for the
Company’s products and services, costs of goods and services, other
expenses, government regulations, litigations, and general business
conditions. See Risk Factors in the Company’s Form 10-K for the
fiscal year ended July 31, 2016. 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. The Company disclaims any
obligations to update any forward-looking statement as a result of
developments occurring after the date of this press release.
ENZO BIOCHEM, INC. (in thousands, except per share
data)
Three months ended Fiscal year
ended
Selected
operations data:
July 31 July 31 (unaudited) (unaudited)
2016
2015
2016
2015
Revenues: Clinical laboratory services $ 18,140 $ 17,210 $ 70,915 $
63,414 Product revenues 8,071 8,059 30,337 31,690 Royalty and
license fee income 392 428 1,521
2,495 Total revenues $ 26,603 $
25,697 $ 102,773 $ 97,599 Gross profit
$ 12,085 $ 11,317 $ 45,583 $ 42,827
Gross profit % 45 % 44 % 44 % 44
%
Income (loss) before income taxes (1)
37,068 8,523 46,515 (2,292 )
(Provision) benefit for income taxes
(933 ) (81 ) (1,229 ) 7 Net income
(loss) $ 36,135
$ 8,442 $ 45,286 $ (2,285 ) Basic net income
(loss) per share $ 0.78 $ 0.18 $ 0.98
($0.05 ) Diluted net income (loss) per share $ 0.77 $ 0.18
$ 0.97 ($0.05 ) Weighted average shares
outstanding - basic 46,267 46,061
46,153 45,355 Weighted average shares
outstanding - diluted 46,717 46,091
46,602 45,355
(1) - includes legal settlements of $38.8
million, $11.3 million, $57.3 million and $11.5 million for the
three months ended July 31, 2016 and 2015and for the fiscal year
ended July 31, 2016 and 2015, respectively.
Selected balance
sheet data:
July 31, 2016 July 31, 2015 Cash and cash
equivalents $ 67,777 $ 18,109 Working capital $ 70,829 $
22,528 Stockholders' equity $ 89,554 $ 42,606 Total
assets $ 111,821 $ 68,394
The following table presents a
reconciliation of reported net income (loss) and basic and diluted
net income (loss) per share to non-GAAP netincome (loss) and basic
and diluted net income (loss) per share for the three months and
fiscal year ended July 31, 2016 and 2015, respectively:
ENZO BIOCHEM, INC. Non-GAAP, Reconciliation
Table (Unaudited, in thousands, except per share data)
Three months ended Fiscal year ended
July 31 July 31
2016
2015
2016
2015
Reported GAAP net income (loss) $ 36,135 $ 8,442 $ 45,286 $
(2,285 ) Adjusted for: Legal settlements, net (38,800 ) (11,288 )
(57,250 ) (11,458 ) Legal fees associated with settlements - 217 -
217 Costs related to contested proxy - 16 1,483 76 Separation
payments - - 207 - Tax effect on adjusted items 721
- 1,064 - Non-GAAP net
loss $ (1,944 ) $ (2,613 ) $ (9,210 ) $ (13,450 )
Weighted Shares Outstanding Basic 46,267 46,061 46,153 45,355
Diluted 46,717 46,091 46,602 45,355 Basic and diluted earnings per
share Basic net income (loss) per share GAAP $ 0.78 $ 0.18 $ 0.98
($0.05 ) Diluted net income (loss) per share GAAP $ 0.77 $ 0.18 $
0.97 ($0.05 ) Basic net income (loss) per share non-GAAP
($0.04 ) ($0.06 ) ($0.20 ) ($0.30 ) Diluted net income (loss) per
share non-GAAP ($0.04 ) ($0.06 ) ($0.20 ) ($0.30 )
The following table presents a
reconciliation of reported net income (loss) for the three months
and fiscal year ended July 31, 2016 and 2015,respectively to EBITDA
and Adjusted EBITDA:
ENZO BIOCHEM, INC. EBITDA & Adjusted EBITDA,
Reconciliation Table (Unaudited, in thousands)
Three months ended Fiscal year ended July
31 July 31
2016
2015
2016
2015
GAAP net income (loss) $ 36,135 $ 8,442 $ 45,286 $ (2,285 )
Plus: Depreciation and amortization 978 992 3,840 3,789 Interest
expense 14 69 136 245 Provision (benefit) for income taxes
933 81 1,229 (7 ) EBITDA
$ 38,060 $ 9,584 $ 50,491 $ 1,742 Adjusted for: Legal
settlements, net (38,800 ) (11,288 ) (57,250 ) (11,458 ) Legal fees
associated with settlements - 217 - 217 Costs related to contested
proxy - 16 1,483 76 Separation payments - -
207 - Adjusted EBITDA $ (740 ) $
(1,471 ) $ (5,069 ) $ (9,423 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161013006525/en/
For: Enzo Biochem, Inc.Steve Anreder,
212-532-3232steven.anreder@anreder.comorCEOcast, Inc.Michael Wachs,
212-732-4300mwachs@ceocast.com
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