Growth of Molecular Diagnostics Products and
Services Drives Increased Clinical Labs Revenues
Enzo Biochem Inc. (NYSE:ENZ) today reported increased results
for the fourth quarter and fiscal year ended July 31, 2017, along
with advances in its corporate strategy in molecular diagnostics
products and services.
Fourth Quarter
Highlights
- Total revenues in the fourth fiscal
quarter increased to $28.2 million, or 6%, from $26.6 million in
the prior year period.
- Clinical Labs revenue totaled $20.4
million, a 13% increase from $18.1 million in the prior year
period, due to an increase in molecular diagnostic (MDx) activity,
especially from increased market penetration and wider geographic
reach, in addition to growing women’s health diagnostics testing.
Gross profit margins in the Lab were 41% compared to 40% in the
prior year period.
- Enzo Life Sciences product revenues of
$7.5 million were up 2% sequentially, but down 7% from the prior
year period as a result of a strategy shift focusing on clinical
markets. In addition, academic and government sponsored R&D
market remained soft in the U.S. and abroad.
- GAAP and Non-GAAP net income was
approximately $0.1 million, compared to a year ago GAAP income of
$36.1 million or $0.77 per diluted share and Non-GAAP net loss of
($1.9) million or ($0.04) per share. The prior period included
legal settlements and licensing payments of $38.8 million.
- Consolidated cash flows from operations
in the quarter were $1.7 million. After investing $1.8 million for
the full year in capital expenditures related to the expansion and
execution of Enzo’s business plan, total cash and cash equivalents
were $64.2 million. Working capital at July 31, 2017 was $71.3
million.
Barry Weiner, President,
Comments:
“This quarter was one of tremendous growth across Enzo and an
auspicious close to a remarkable year of progress and
accomplishment. While more remains to be done to become a leader in
providing quality, medically relevant, versatile and cost effective
diagnostic products and services to the margin challenged
independent lab industry, we have made significant progress due to
our vertically integrated structure. We have been rapidly expanding
the diagnostic services we provide to patients in the leading
national healthcare insurance networks , which has begun to drive
fresh growth at Enzo Clinical Labs. Our position as an innovative
provider of low cost but highly versatile women’s health
diagnostics has likewise resulted in expanding opportunities that
soon will allow for diagnosis from a single blood sample for a
variety of female infections, making life easier for physician and
patient alike. We are completing final steps to launch our
AmpiProbe® PCR platform specialized 14-analyte panel, that will
further establish Enzo’s strong MDx position in women’s health.
“Enzo’s technical know-how and abilities are rapidly coming
together to drive growth. Our Polyview product, an enhanced
detection system used by pathologists in reading tissue biopsies,
was the subject of a favorable article in the prestigious peer
reviewed Annals of Diagnostic Pathology because it resulted in no
false-positives in tests as compared to others, including some of
the leaders in the field, whose tests indicated a large percentage
of false positives. The article in which the results were discussed
was among the publication’s most downloaded articles in the last 90
days, indicating substantial interest. False positives could lead
to unnecessary treatments. On the diagnostic front, we anticipate
experiencing growing demand both in our immediate service market,
and from our expanding presence as both a products and reference
lab service provider in the fast-growing MDx market.
“Noteworthy, too, are Enzo’s financial results. With fourth
quarter revenues up 6%, including a 13% increase at Clinical Labs,
we realized net income of nearly $100,000. The year ago quarter net
income was $36.1 million, including legal settlements of $38.8
million without which the year ago quarter would have shown a $1.9
million net loss. Despite the cost challenges of the market,
especially those related to medical reimbursements, we are aiming
for continued growth as we gain market share and further benefit
from new and future product developments.
“Enzo Clinical Labs had an excellent quarter and full year, and
Enzo Life Sciences, with a shift of business emphasis to the
clinical market, together achieved increased revenues quarter over
quarter, while still maintaining operating profitability and
positive cash flow. The integration of those two units has provided
us with a decided edge in the highly competitive and margin
compressed MDx market that is now, as the quarter’s results
strongly suggest, starting to pay off.”
Fourth Quarter Results
Revenues were $28.2 million or 6% higher than the prior year
period, driven by increased Clinical Lab results from MDx tests,
particularly women’s health diagnostics, and growth resulting from
expanding activities with healthcare providers and insurers. Gross
profit increased to $12.4 million or 2% from $12.1 million a year
ago. Operating expenses were $13.0 million compared with $13.5
million in the prior year period. Selling, general and
administrative expenses were $10.9 million compared to $11.2
million, a decrease of 3% from the prior year period. The provision
for doubtful accounts increased to $0.8 million from $0.6 million
in the prior year period due to higher Clinical Labs revenue. As a
percentage of revenues, the provision for doubtful accounts was 4%
compared to 3% in the prior year period. Legal expenses at $0.4
million were 43% lower than a year ago.
GAAP and Non-GAAP net income amounted to $0.1 million or break
even per fully diluted share. This compared to GAAP net income a
year ago of $36.1 million or $0.77 per fully diluted share,
including, as noted, legal settlements and licensing payments of
$38.8 million. On a Non-GAAP basis, net loss in the prior year
period was ($1.9) million or ($0.04) per share basis.
EBITDA and Adjusted EBITDA amounted to $0.9 million, compared to
EBITDA and Adjusted EBITDA of $38.1 million and ($0.7) million
respectively, a year ago.
Quarterly Segment
Results
Enzo Clinical Labs revenues increased to $20.4 million,
or 13%, from $18.1 million, reflecting increased market penetration
and expanding higher value MDx activity. Gross profit totaled $8.3
million, or 41% of revenues, compared to $7.3 million, or 40% of
revenues a year ago. SG&A amounted to $6.5 million, up from
$6.0 million a year ago, largely due to higher commissions as a
result of business growth, but as a percentage of revenues declined
to 32% from 33%. The provision for doubtful accounts was $0.8
million compared to $0.6 million in the prior year period.
Operating income amounted to $1.0 million, compared to $0.8
million, a 25% increase over the prior year period.
With a shift of business emphasis, Enzo Life Sciences
product revenues were $7.5 million or a decline of 7% over the
prior year period, although sequentially they increased 2% with
greater volume of higher margin products. Gross profit was $4.1
million, or 53% of revenue, compared to $4.8 million or 57% of
revenue a year ago, reflecting lower sales and product sales at
lower gross margins. SG&A declined to $2.6 million or 14%.
Operating income amounted to $0.8 million, compared to $1.0 million
a year ago excluding legal settlement and licensing payments
recorded in the segment.
Fiscal 2017 Results
Full year revenues amounted to $107.8 million, an increase of
$5.0 million or 5%, from fiscal 2016, with Clinical labs volume
ahead 9% year over year and Life Sciences down 4%. Gross profit was
$48.3 million compared to $45.6 million in the prior year, an
increase of 6%. Consolidated gross margins increased 100 basis
points to 45%. SG&A was up slightly to $44.0 million reflecting
higher sales commissions and compensation related expenses but as a
percentage of total revenues, declined 100 basis points to 41%.
The provision for uncollected accounts receivables increased to
$2.8 million or 19%, from $2.3 million and legal expenses were $1.7
million, a decline of 74% from $6.4 million. GAAP and non-GAAP net
loss totaled ($2.5) million or ($0.05) compared to GAAP net income
of $45.3 million or $0.97 per fully diluted share and non-GAAP net
loss, adjusted for settlements, of ($9.2) million or ($0.20) per
fully diluted share, respectively. EBITDA and Adjusted EBITDA
amounted to $0.6 million, compared to EBITDA and Adjusted EBITDA of
$50.5 million and ($5.1) million, respectively, in the prior year
period.
Cash and cash equivalents as of July 31, 2017 was $64.2 million,
after fully paying down $1.6 million in bank loans and utilizing
$1.8 million in capital expenditures during the fiscal year.
Working capital at July 31, 2017 was $71.3 million, leaving the
Company, with no debt other than lease obligations, in a solid
position to continue pursuing its growth objectives.
Conference Call
The Company will conduct a conference call Thursday, September
28, 2017 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 83042522.
Interested parties may also listen over the Internet at:
https://tinyurl.com/yafy94jl. 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 October
12, 2017. The replay of the conference call can be accessed by
dialing 1-800-585-8367, and when prompted, use PIN number 83042522.
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 which 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, litigation, and general business
conditions. See Risk Factors in the Company’s Form 10-K for the
fiscal year ended July 31, 2017. 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) 2017
2016
2017 2016
Revenues: Clinical laboratory services $ 20,429 $ 18,140 $
77,407 $ 70,915 Product revenues 7,471 8,071 29,192 30,337 Royalty
and license fee income 272 392
1,205 1,521 Total revenues $ 28,172
$ 26,603 $ 107,804 $ 102,773
Gross profit $ 12,387 $ 12,085 $ 48,326 $
45,583 Gross profit % 44 % 45 %
45 % 44 % Income (loss) before income taxes (1) 71
37,068 (2,422 ) 46,515 Provision for income taxes 23 (933 )
(82 ) (1,229 ) Net income (loss) $ 94
# $ 36,135 $ (2,504 ) $ 45,286 Basic
net income (loss) per share $ 0.00 $ 0.78
($0.05 ) $ 0.98 Diluted net income (loss) per share $ 0.00
$ 0.77 ($0.05 ) $ 0.97 Weighted
average shares outstanding - basic 46,473
46,267 46,351 46,153 Weighted
average shares outstanding - diluted 47,720
46,717 46,351 46,602 (1)
- includes legal settlements, net of $38.8 million and $57.3
million for the three months and fiscal year ended July 31, 2016.
Selected balance
sheet data:
7/31/2017(unaudited)
7/31/2016(unaudited)
Cash and cash equivalents $ 64,167 $ 67,777 Working
capital $ 71,274 $ 70,829 Stockholders' equity $ 88,872 $
89,554 Total assets $ 107,815 $ 111,821
The following table presents a reconciliation of reported net
income (loss) and basic and diluted net income (loss) per share to
non-GAAP net income (loss) and basic and diluted net income (loss)
per share for the three months and fiscal year ended July 31, 2017
and 2016:
ENZO BIOCHEM, INC. Non-GAAP Reconciliation Table (Unaudited,
in thousands, except per share data)
Three months
ended Fiscal year ended July 31, July 31,
2017 2016
2017
2016 Reported GAAP net income
(loss) $ 94 $ 36,135 $ (2,504 ) $ 45,286 Adjusted for: Legal
settlements, net - (38,800 ) - (57,250 ) Costs related to contested
proxy - - - 1,483 Separation payments - - - 207 Tax effect on
adjusted items 721 1,064
Non-GAAP net loss $ 94 $ (1,944 ) $ (2,504 ) $ (9,210 )
Weighted Shares Outstanding: Basic 46,473 46,267 46,351
46,153 Diluted 47,720 46,717 46,351 46,602 Basic and diluted
earnings per share: Basic net income (loss) per share GAAP $ 0.00 $
0.78 ($0.05 ) $ 0.98 Diluted net income (loss) per share GAAP $
0.00 $ 0.77 ($0.05 ) $ 0.97 Basic net income (loss) per
share non-GAAP $ 0.00 ($0.04 ) ($0.05 ) ($0.20 ) Diluted net income
(loss) per share non-GAAP $ 0.00 ($0.04 ) ($0.05 ) ($0.20 )
The following table presents a reconciliation of reported net
income (loss) for the three months and fiscal year ended July 31,
2017 and 2016 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,
2017 2016
2017 2016 GAAP net
income (loss) $ 94 $ 36,135 $ (2,504) $ 45,286 Plus: Depreciation
and amortization 906 978 3,598 3,840 Interest expense (income)
(144) 14 (384) 136 Provision for income taxes 23 933 (82) 1,229
EBITDA $ 879 $ 38,060 $ 628 $ 50,491 Adjusted for: Legal
settlements, net - (38,800) - (57,250) Costs related to contested
proxy - - - 1,483 Separation payments - - - 207 Adjusted EBITDA $
879 $ (740) $ 628 $ (5,069)
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For Enzo Biochem, Inc.Steve Anreder,
212-532-3232steven.anreder@anreder.comorCEOcast, Inc.Michael Wachs,
212-732-4300mwachs@ceocast.com
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