Enzo Biochem, Inc. Common Stock ($0.01 Par Value)

Q3 2021 Earnings Conference Call

6/9/2021

spk_0: reading luggage and your bio chem third quarter twenty twenty one final results and been the at this time operators return to listen only whole a serious recession will follow the formal presentation the friendly what's your for operator assistant started conference play sports stars hirohito phone keypad please note this conference is being recorded on now through the conference or with ios jamshedpur you made good
spk_1: thank you and good afternoon joining us today from the company or barry weiner cofounder president and david bench chief financial officer a press release announcing the results and the corporate update was issued this afternoon and is available now on the enzo website
spk_0: i will i'll read the company safe harbor statement except for historical information the matters discussed in this news release may be considered forward looking statements within the meaning of section twenty seven eight the securities act of nineteen thirty three as amended and section twenty one he of the securities exchange act like in thirty four as amended such statements includes declarations regarding the intent belief or current expectations
spk_1: the company and that management including those related to cash flow gross margins revenues and expenses which are dependent on a number of factors outside of the controlled company including the markets for the company's products and services costs of goods and services other expenses government regulations litigation and general business conditions
spk_0: please see risk factors in the company's form ten k for the fiscal year and a july thirty first two thousand and twenty investors are cautioned that any such forward looking statements are not guarantee the 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 statements as
spk_2: result of developments occurring after the data press conference call
spk_1: during a conference call the company may refer to a bit of a non gap measure but that is not and should not be considered an alternative to net income are that lost in summer loss from operations or any other major for determining operating performance the company has provided a reconciliation of the different to gap on it's website www dot amazon dot com and in it's press release issued the again i would now like to turn the floor of to bury weiner cofounder president of and your bio chem very please go ahead
spk_3: thank you jeremy good afternoon and thank you for joining us and are clearly business and financial update call today we issued our third quarter fiscal twenty twenty one financial of an operating sought after the closer the market today and i hope you've been able to review them briefly the past quarter and indeed a year has been one of challenges and opportunities as culminating dominated the healthcare industry and a good part of the world news is absorbed this proved to be a double edged sword for enzo that pandemic resulted in vast changes in health care for it for a prayer tish nurse and patients are like physician offices were shut down with all but emergency testing and treatments undertaken academic institutions were initially closed and remain partially so in the following months throughout the country and internationally and demand for clinical and diagnostics supplies at the same time massive testing became an international mandate with enzo rising to the challenge by providing actionable accurate and timely diagnosis for individuals industry and educational institutions among others for and so it was an environment in which we proved are metal we successfully transition into cove igniting with record revenue growth in operating profitability we demonstrated our scientific expertise flexibility and nimble operating environment our capabilities were also reflected in the promptness and effectiveness with which we deployed our products and services to our community as the pandemic intensified during this period we demonstrated the validation of our strategy that was developed and implemented of being a vertically integrated diagnostic company supporting a new industry paradigm this country is it to our success of both sustaining and growing our testing capabilities during the most severe supply chain crisis in recent history it also enabled us to drive enhanced margin improvements in our laboratory operations counter to the rising class structure of the environment our structure afforded us independence volume growth and profitability our searched fiscal quarter which are see if okay bench will discuss in detail shortly represented another solid period both operationally and financially quickly i would just like to highlight a couple of financial points to start our total revenue for the third quarter with thirty two point eight million an increase of ninety four percent year over year we cheat gross margins of almost fifty percent and adjusted ebitda two point seven million resulting in a nine point seven million dollar improvement from last year's third quarter these results solidify the trend we have posted over the last several letters and we are extremely proud of our teams continued success i'd like to reduce some highlights for the third quarter our core focus remains and the development and application of high value opportunities which we insisted he will provide meaningful initiatives as headwinds remain in the reimbursement environment the higher margins achieved by our vertically integrated model of are closing nineteen testing as being extended to an increasing range of molecular tests as well as other types of testing beyond molecular a cornerstone of our growth strategy are open system approach on jan flex are molecular platform allows for the highest levels of flexibility and adaptability in the post cultic nineteen environment the platforms open system architecture enables laboratories to use and so's lower cost three agents or other third party reagents with ease and flexibility within a month or clinical level has been stalled approximately twenty can flex diagnostic platforms each capable of generating multi million dollars that the annual molecular testing from a business development standpoint we are actively engaged in detailed discussions regarding business relationships and partnerships that one able us to pursue fresh opportunities for our proprietary products and services these include possible talk and acquisitions that will compliment existing activities as part of our growth blueprint in addition from an approval standpoint we were pleased to receive as to a new way of clearance for mp collect sample collection kit which is now available for culprit nineteen testing protocols throughout the united states another key proprietary innovation that we anticipate will be a strong commercialization opportunity he says few years twenty twenty two his are so far in april technology and those loop are in a probe approach was featured in an independent publication of work derive from and so scientific collaborators in conjunction with him some scientists it details improvements regarding insect to hybridization reflecting higher sensitivity and lower background noise when compared to current leading commercially available technology and probes uniquely identify a single genetic sequence within a cell phone without destroying the cell structure this allows for dental medical interpretation accelerated drug development and improved research capabilities are innovative technology may reduce the risk of false positives and false negatives for early stage detection of hpv are human papilloma virus and potentially other are a based in sections it's a technological advancements that may have broad implications in the future testing and interest of hell
spk_4: drug development
spk_3: on a logistical front we are integrating answers campus to include gmt manufacturing are clear clinical laboratory are and d as well as sales and marketing capabilities all within four jason buildings and are farmingdale campus disintegration includes the forthcoming closure of our ann arbor michigan manufacturing facility this summer in february we announced the issuance of us patent for poly clonal antibodies against the osteoporosis drug talk target slow rusty and more recently in fact just last week and so received approval from united healthcare the largest insurance provider in the united states as a designated diagnostic provider this means that united healthcare members will be guided to laugh such as hours for non emergent laugh services which should expand the amount of products and services we already delivered to united healthcare customers and members focusing on a post the strategy and so successfully navigated the most challenging times of coping ninety as we indicated last quarter we have already begun implementing our strategy for a post office environment with a successful roll of the vaccine program in the united states having just hit forty two percent of the total population fully vaccinated last week company has begun implementing operational protocols any modified sales strategy to address the realities of a postcode is nineteen pandemic environment we were well positioned prior to the coated nineteen pandemic having successfully navigated our team to these difficult times and we are confident we will navigate successfully out of the coven nineteen environment our ability to change in the cold environment is indicative of our team's ability to adapt with the times just is that teams did it start of the pandemic i teams now must remain nimble to the reopening and meeting our customers vendors and partner's needs as a evolve while they still haven't fully recovered we see the gradual return to regular doctors visits and the products i academic institutions remain partially clothed throughout the country however and speaking with these customers we anticipate the majority these academic institutions plan to reopen by the end the summer and then reach for capacity by the end of the year we expect cultic nineteen testing to continue to to travel return to the workplace and the reopening of entertainment and then use of the it tapered to lower levels we are justin and implementing are post felt a business strategy as follows on the product side we had shit we have shifted our sales focus from academia to industry on the surface side we are experiencing from primarily doctors to include lab to lab in commercial opportunities providing a little more color i would like to take a minute to add on our strategy in the post comments environment and the opportunity that now exists and so go forward commercials strategy is clear we are leveraging are higher margin testing model demonstrated during cold nineteen to other markets such as women's health sexually transmitted diseases and other testing needs based on the applications and versatility of the jen sex molecular platform the platform has already been scaled commercially and our internal lab as we have been processing thousands of specimens per day and are proprietary installations we are also in the early stage of commercialization into laboratories academic institutions and other commercial entities throughout the country we are currently validating testaments in panel extinctions to drive utility in the high volume molecular space these areas include chlamydia gonorrhea trichomonas human papilloma virus and and those full women's health panel management will follow this molecular diagnostic test role love with cost effective flexible solutions involving other technologies and platforms including cytology immunology them you know has to chemistry and other key clinical areas in conclusion on behalf of the management thing i want to reiterate that we are extremely grateful to all of our employees for their perseverance and dedication to the health care providers and patients we serve we made important achievements in the first nine months of the skin your twenty twenty one and we are confident or strategic vision in our ability to execute on and in the year ahead enzo can another strong quarters we reported in the recent three month period ended april thirtieth this is evidenced by the results we announced today we're delighted to be in such a solid position at this point in twenty twenty one our results for the plotters demonstrated solid achievements total revenue was thirty two point eight million a year and a year over year improvement of ninety four percent in revenue consolidated gross margins increased to forty nine percent improving twenty three hundred basis points year over year gasps earnings per share with positive for sense for the water versus and dps lots of twenty one sense into three twenty twenty and adjusted ebitda of two point seven million compare favorably versus an adjusted loss in the corresponding period a year ago of seven point one million and improvement of nearly ten million dollars he suggests highlights of the quarters financial accomplishments which david will expand done in greater detail before looks elaborating further on the clutter it's important to highlight the company's core objectives as we have outlined before it it's critical to stress management commitment to these objectives as they are fundamental to the continued success of so first we are transforming in to an integrated end to end diagnostic products and solutions company second we are building and investing in our infrastructure for growth third we are implementing efficiency measures to better bring in line or class structure with the market needs and forth we are building out forty platform technologies to address enhanced value in the diagnostic sector i believe it's important to reiterate these objectives once again as they have accelerated answers position as a leading vertically integrated into and diagnostic something and so continues to build it's reputation of side of the medical last is now as it expands testing access and it's go test me now online platform or go test me now online portal is our first direct to consumer offering that brings quit convenient testing to individuals overseen by licensed physician we expect this platform to extend its are from to other types of testing within the next few weeks we finish the third quarter with greater clarity across the business and are targeting for your profitability for our fiscal year ending life in july looking forward i believe are robust progress for the first three quarters of fiscal two thousand and twenty one reflects the strong foundation that we have built during the most challenging environment we are excited for what is the next phase of growth and so as we transition into a post coven environment with the new appreciation for cost effective testing globally with these insights i was i'm like to turn our call over to date adventure cfl for more details you of our third quarter twenty twenty
spk_5: thanks barry
spk_6: as their he indicated the third quarter was another impressive period of advancement and development across all segments of the business total revenue reach thirty two point eight million dollars for the third quarter an increase of ninety four percent from the sixteen point nine million dollars generated in the year ago period this reflects a robot expansion of revenue and improvement from operation
spk_7: under sequential faces
spk_6: third quarter revenue increased one point three million dollars or four percent over the second quarter of two thousand twenty one arkansas the gross margin for the quarter was forty nine percent up significantly from the twenty six percent and the your ago period i'm a divisional bases clinical services revenue increased nearly one hundred forty percent to twenty five million dollars from ten point five million dollars in the third quarter two thousand and twenty the year over year performance was largely largely driven by volume growth in tobruk sessions which reached more than three hundred forty thousand in the most recent quarter or an annualized rate of one point three six million accession first is creek hope is internalized levels of approximate hundred thousand it's important to know that we saw clinical services gross margin increased to forty nine point one percent from twelve point nine percent in the third quarter two thousand twenty an improvement of more than thirty six hundred basis points this is largely attributed to immigration and use of our proprietary platforms as laws are ongoing costs ignition it and so like science product gross margin was forty eight point four percent an increase in the year ago period from forty seven point nine percent and the larger increase substantially based on forty seven point four percent gross margins in the second quarter of two thousand twenty one it's worth noting that the life sign segment we significantly higher gross margin at fifty three percent prior to accounting for inter company sale improving gross margins division will meet a high priority for the coming quarters supported by improved product menu offering selling into a more stable ordering volume though in general ministry of expenses and twelve point one million dollars rose significantly from a lot of point one million dollars a year ago period leveraging are offering efficiencies as a increased only nine percent year over year during a period where refuge of nearly one hundred was burned and excessive i'm increase approximately one hundred forty percent got married couple with two point zero million dollars or four cents a share written a lot of nine point nine million dollars or negative twenty one cents per share in the year ago period i just leave it on the quarter with the positive two point seven million dollars compared to an adjusted ebitda a lot of seven million dollars in the third quarter two thousand and twenty your day and so is generated positive adjusted ebitda in excess of eight point one million dollars enter balance sheet remain strong financially with cash cash equivalents restrict the cast and marketable securities as of april thirtieth two thousand twenty one of forty five twenty million dollars i'm going to capital expenditures higher inventory and increase accounts receivable today be fine this was slightly lower than the fiscal two thousand and twenty year and cash account of approximately forty six nine dollars however working capital korean was thirty forty two point one million dollars which compared favorably to thirty six point zero nine dollars nine month earlier at the fiscal two thousand twenty your and or want a highlight that the current ratio improvements to two point four a text from to point one extra in the first nine months of fiscal year two thousand twenty is indicative of a very clean and improving she additionally we showed improvement of six point six million dollars the shareholder equity your day finally as we have indicated previously many times the only significant data and on our box is a poor million dollar mortgage principal and what about buildings and farmingdale and seven million dollar ppp loan which we are actively working out with your fiancee and expected decision on the forgiveness by it and of month and of this month actually as a april three two thousand twenty one the company or forty eight point five million shares outstanding we believe into financial profile will continue to improve and will benefit significantly and oppose pandemic world from our vertically integrated and to end solutions approach of turned the called back over to pay for closing remarks
spk_8: thank you david
spk_3: what today's call is intended to discuss the company's operations and financial results i'd like to note a few corporate development as well david make clear we believe we are well in line with wrapping up a solid year heading into fiscal twenty twenty two be anticipated anything from among others new molecular diagnostics developments are now demonstrated well integrated and expanded capabilities are opportunities to expand our portfolio the a partnerships and perhaps acquisitions and enhancements to our operations and tighter control on our class as announced in the previous quarter the company strategic initiatives and succession planning are proceeding the company management board are working in unison to translate into capability to benefit all shareholders and enhanced shareholder value our internal focus remains an intriguing for their efficiencies and enhanced integration while leveraging commercial opportunities we are determined to drive topline growth while targeting profitability from operations in the future we are very excited about the future of and so and it's opportunities we would now like to open a call for questions
spk_0: and as this i will be conducting a question and answer session if you like to ask a question please for star one on the telephone keep him he got confirmation phone will indicate your line is in the questions you you may press nine if you like to remove your question from keep a participant speaker equipment he may be necessary pick up your hands it before person is turkey's one moment please why we call for question our first question is from and you discover would be ready security company people she was your question
spk_9: a good as new thanks for taking my questions set off a cliff once for me i'm south you've been working with various academic institutions i believe and and have been providing cover nineteen casting i was curious if you see those channels of valve and in a post pandemic world where you can actually start sell and diagnostics outside activate covered i heard reference women's health and sexually transmitted diseases and ah if that is possible be trees and what the process or that one that's like
spk_6: yes of the think years under absolutely we are you know very much focused on the long term relationship that we have created during tobacco which include the earth academic institution and sell them in their health center interested sense than going forward with to be in other areas oh yes we we are are we are working on moses and we do like we have a strong in those areas
spk_9: great it would you expect that easy going through that the clear path or and d a approved pathway are some hybrid of the to
spk_3: our processes to proceed through the ft a catholic on our party platform technologies we have ld tier lab developed test approval on many of them they can select platform as well as are other platforms and development are all proceeding on a pathway
spk_10: to which we will
spk_3: attempt to attain as the approval
spk_9: okay okay that makes sense and that last question for me and i know earlier i during the pandemic a it was a difficult sword diagnostic companies to the source adequate amount of employees
spk_11: the first various specialties
spk_12: has has up
spk_9: that that market started improve it all and if not or if so can just give us a call around that
spk_3: yes the market is absolutely improving one of the key challenges that confronted laboratories such as ours it was the maintenance of staffing during a period of time when the country was basically telling people to stay home or paying people to stay home we are an operation that can only operate with people on the ground and one of the key challenges of management and one the key issues that had to be dealt with was a maintenance of staffing and the implementation of programs were able to move people off site where possible but yet maintain people in the operational roles in the operations of the laboratory during the most stringent and difficult times of the coven environment
spk_13: and i must say
spk_3: i i am internally grateful to the staff of this company who rose to the occasion and in the most dire times put themselves in the face of danger in the front mine have ah the diagnostic sector here and provided the testing the sample collection that solutions and showed up for work when most of the country was basically maintaining a home presence today we have still opening said we are filling it is a ongoing process but certainly did as a credit to our staff a credit to the management of this company that was able to motivate and to drive people not only to improve developed mental processes in the most rapid time and in a period of incredibly critical short supply chain capabilities to build develop the platforms we developed to produce the reagents that allowed us to operate within a supply chain that was freezing everyone across the country and deliver a surface to our community of providing testing and security to do those that needed it and i cannot say more about that but it was a very very challenging period in fortunately i believe the organization has emerged stronger more effective operating on a leaner basis and incredibly focused in it's goals and objectives
spk_9: great are thank you for the teller and i really can grasp on the progress we've made over last twelve months i'll hop back into
spk_14: thank you
spk_15: and again as a quick reminder for anyone
spk_0: our next question he had this brant race janney montgomery scott was he your question
spk_16: thank you gentlemen surat give me the up to ask a couple questions could you update us on the finding of the new ceo is you previously announced
spk_3: as was stated in are prepared comments and in the press release that was put forward today love we are in the process of exploring opportunities both on the strategic front as well as in succession planning these are binary events it was not much more to say but when there is news to report it will be reported that would be about the most i can comment on that at this point okay
spk_16: the there's a company said which is now a division of diana her group that has a whole array of pcr tests does your testing platforms you know compete with with suffered how high your mouse traps compare to step in which i believe is now owned by danner
spk_3: and there are similarities are in the end goals of these two types of this particular flat for the company you're referring to is sethi it we do have technologies that are competitive arm our goal has always been to develop technologies and platforms that would be extremely cost efficient in drive margin improvement for clinical laughs as you may be aware pre it the reimbursement marketing market for clinical testing was under pressure extreme pressure clinical labs were losing margin many of the platform said are out there some similar to says he is required costly components costly supplies and we and quickly were saying march and erosion for labs in many different areas our systems have been designed to improve margins by reducing the cost structure due to the technological developments that we have been implementing over the last few years so there are some similarities but there are many that are not similar our goal here is to produce more a cost effective testing systems that will allow companies to print have higher margins and longer sustainability in the marketplace
spk_16: thank you for that color i just wanted to more if i may wendy expect to make an announcement on doctor rabbi nannies replacement
spk_17: as i mentioned earlier
spk_3: the company has embarked on a program for strategic review and strategic optionality comp encompassed with that is succession planning and as i commented just before that will be addressed at a point in time when it is effective
spk_16: okay now he is to give me to been mentioned in prior public documents but with respect to the strategic review that that's ongoing is being done only by internal people at the company or is there and outside i'd consultant or investment bank that's aiding the company in new strategic review process
spk_3: it was publicly announced last quarter that came brothers was retained to assist in their teacher preview of corporate options
spk_16: okay and and they're still involved with that with you
spk_18: that is correct
spk_16: great thank you for taking all my questions
spk_0: and another a quick reminder if anyone asks questions the makers star one doing so ensure your your spine the question in a secure and it looks like they are no more questions which and hour question and answer session and out and to fall back on very wonderful remarks
spk_3: thank you very much for joining us today while we're very proud of our revenue growth in our profitability the splutter and your day we remain committed to our transformation into an integrated into a diagnostic products and solutions company we look forward to discussing further progress with you on our crew for report which will take place in mid october thank you for joining us
spk_0: this includes a news conference in he made his connection line at this time thank you for
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