Enzo Biochem, Inc.

Greetings and welcome to the Enzo Biochem second quarter 2022 financial results and business update conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Holmes, Investor Relations. Thank you, David. You may begin.

Thank you, operator, and good afternoon. Joining us today from the company are Hamid Irfanian, Chief Executive Officer, and David Bench, Chief Financial Officer. Enzo issued a press release detailing its financial results for the second quarter of the fiscal year this afternoon and is now available on the investor relations section of the Enzo website. Before we begin, I would like to read the company's 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 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, revenue, and expenses, which are dependent on a number of factors outside the control of the company, including the markets for the company's products and services, cost of goods and services, other expenses, government regulations, litigation, and general business conditions. We see risk factors in the company's Form 10-K for the fiscal year ended July 31, 2021. 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 obligation to update any forward-looking statements as a result of developments occurring after the date of this conference call. During this conference call, the company may refer to EBITDA, a non-GAAP measure. EBITDA is not and should not be considered an alternative to net income or loss, income or loss from operations, or any other measure of determining operating performance. The company has provided a reconciliation of the difference to GAAP on its website, www.enzo.com, and its press release issued this afternoon. I would now like to turn the call over to Hamid Irfanian, Chief Executive Officer of Enzo Biochem. Hamid, please go ahead.

Hamid Irfanian Thank you, David. Good afternoon and thank you for joining us on our second quarter business and financial update call today. This afternoon, we issued our second quarter 2022 financial and operating results. Second quarter revenue was $34 million, up a strong 28% sequentially and a solid 8% year over year compared to fiscal year 2021. I am proud to say that on behalf of the entire ENSO team, this is the highest quarterly revenue in history of the company. ENSO life science revenue reached $10.4 million, an increase of 39% year over year, and its product margin increased to 49%. ENSO clinical services revenue reached $23.7 million, an increase of 20% from the first quarter of fiscal 2022 and in line with the $24 million in the year-ago period. I will begin today's conference call with a summary of companies' strategic vision highlighting notable achievements and then provide some perspective on the current testing landscape and life sciences market. I joined ENSO in November to affect change, namely to lead the commercialization of ENSO's core assets and to build a management structure and operational focus. As I mentioned on last quarter's call, we are building off a strong foundation and setting a vision and establishing strategies in the following areas. Market expansion of the current product portfolio in our life sciences division. Commercialization of the diagnostics platforms. Growing and optimizing the clinical services segments. Our approach is one of focused return, prioritizing those segments that will provide the best short-term and long-term returns on investment. During the past four months since I joined Enzo, the management team and I have been focused around execution and transition planning, which I'm really excited to discuss today. Afterwards, I'll pass the call over to David Bench, our CFO, to review the financials in greater detail, and then we will open the call for question and answer session. The evolution of Enzo over the last few months has been extraordinary in several ways. After a few positive months at the company, I have completed the initial dive into the operations and business segments. Based on this interaction with our team, I'm confident that the senior leadership team, staff, and employees are aligned. It quickly became apparent that I was surrounded by like-minded colleagues that understood the underappreciated portfolio of assets that Enzo possesses. They have a collective desire to drive our growth and operational excellence across our businesses. I am impressed in the day in and day out by the unwavering dedication and work exhibited across the company from our cohesive team. We are also augmenting our C-suite and management team to strengthen our capabilities in our highest growth product areas and advance some of our commercial and operational initiatives. We anticipate making some announcements shortly regarding internal changes, and the company is planning to selectively expand our executive leadership team, including adding head of commercialization, director of research and development, and a general counsel. Aside from building the full team, we are laser focused on operations. On the clinical lab side, we are leveraging our success during the pandemic to expand our higher margin testing business and new customer groups while building our product menu. Remember, our success during COVID-19 was primarily due to our ability to manufacture our own reagents and run PCR testing on our own platform. We are expanding this molecular capability to other modalities, including women's health and sexually transmitted infection testing. In this regard, we are excited to announce that we have recently received New York State Department of Health approval for the use of Enzo's chlamydia gonorrhea trichomonas test on our GenFlex proprietary platform. This test is a real-time PCR-based method for CT, NG, TB detection in multiple transport media. These internal capabilities are crucial to the long-term profitability of the laboratory while the company anticipates continued COVID-19 testing throughout the second half of fiscal year 2022 and potentially beyond, we expect that COVID-19 vaccinations and therapeutics will result in a continued decline in demand for COVID-19 PCR testing. To counter this COVID decline, we are expanding our menu of clinical lab tests being offered, as well as the customer types to whom we offer our services. We've already identified and are working on several compelling opportunities to service urgent care facilities and offer lab-to-lab services to other laboratories. We also continue to expect our routine testing business to recover as in-person physician visits increase back to pre-pandemic levels. Our direct-to-consumer offering that Enzo launched in fiscal year 2021 year is more than an exciting proof of concept. Go Test Me Now is an important platform and it provides access to patients to help them take control of their own healthcare. Our COVID-19 testing through our direct-to-consumer offering was strong during the quarter with approximately $150,000 in test billing. The recent launch of sexually transmitted infection or STI testing using the same platform expand that offering and we anticipate additional growth in that space. We have received inbound interest from customers outside our typical customer base and expect to leverage existing relationships and partnerships to grow this offering. In coming quarters, we anticipate focusing on internalizing many of the tasks that we are currently sending out. This will enable our laboratory to run more efficiently, improve turnaround time, increase access to reimbursement, and better service our current customers. Along with this initiative, we intend to roll out specialty laboratory testing menus to expand our already comprehensive menu of offering as well as access to physician networks focused on those specialties. Enzo Clinical Labs is located in one of the most desirable demographic areas in the country. It's access to many world-class institutions that already enjoy our services. We plan to further expand those services with the ambition of becoming the leading reference laboratory in this region. My background and relationships are deeply rooted in diagnostics arena. I'm confident this will aid us in making the connections necessary to build and grow our service operations into a more comprehensive and exceptional clinical laboratory operations. On the ENSO life sciences side, we exhibited solid growth in the second quarter. and our average order size remains strong at approximately $1,600 or over $1,150 per order when adjusting for large orders. This is a favorable trend from the sub $1,000 per order levels only a couple of years ago. Q2 average order size has increased by more than 2,500 basis points compared to fiscal year 2019, excluding these large orders. We service a variety of markets and our longer term priority is to align ENSO life sciences business with the markets that offer greater revenue potential with more consistent and larger orders. We are excited to announce that we successfully transitioned the entire Ann Arbor manufacturing to Farmingdale in under six months. The expansion of our footprint in Farmingdale, which allowed for consolidation of operations onto one campus, is driving operating efficiencies while also accommodating our ability to grow both today and into the future. We will continue to invest in physical plant and operating facilities in Farmingdale, and we'll update you on our progress as development milestones are reached. From a commercialization perspective, we are developing and commercializing point-of-care platforms directing to emerging trends of bringing testing closer to the patient, and our loop RNA technology, which is significant advancement in drug development technology. We believe commercializing these technologies will offer a strong long-term return on investment. It is important to highlight continued development of other life sciences and diagnostics platforms, including immunohistochemistry, cytology, immunodiagnostics, as well as Enzo's unique structure. Enzo is one of only a few companies in the world that is able to leverage combined assets from biotechnology, life sciences, and clinical services. We employ each of our segments to the benefit of the other and ensure they're working together in a well-coordinated strategy. We are dedicated to prioritizing our resources and technology to address the most attractive business segments and growth areas that will drive both near-term and long-term growth for shareholders. Investing in our technologies. From a commercialization standpoint, we are investing in technology that enables our business. This includes our website and our customer facing assets. We have a plan in place to launch a global state of the art website in under one year from now. This new website is specifically designed to optimize our transactional capabilities and rival other e-commerce sites in life sciences area while strengthening Enso's brand awareness. Facilitating customer integration on an easy to use portal to review product details and providing a frictionless reordering platform. These capabilities will further differentiate the Enso customer experience. We're highly confident of our services and products, but this refreshed website will improve our ability to attract new customers and facilitate product investigation and ordering for all of our customers. We will be investing in other technologies including and update to our ENSO Direct patient and physician portal in the near future. As mentioned earlier, our approach is one of focused return. We are further leveraging the strength, capability, and proximity of our clinical lab services and life sciences divisions, all within four buildings located at our Farmingdale campus. A crucial focus for our management team is realigning and modernizing the organizational structure of the company to optimize execution, efficiency, and accountability. This must be accomplished while minimizing redundancies and legacy offerings which do not currently resonate with our customers or the evolving needs of the industry. We are prioritizing a few key areas which we believe have the most bang for our buck that is the best return on investment. We will continue to drive cost efficiencies across the business and position the company well for key partnership discussions or strategic opportunities that will complement our integrated model. To this end, We're also launching new initiatives that will expand upon the $10 million of savings recently achieved. The corporate goal is to achieve an additional $10 million in cost savings with $5 million of it targeted for this calendar year. With that review of our operations and redirection, I want to welcome our newest member of the board of directors, Mr. Brad Radoff. Brad joined in January at the same time that I joined the board, and we are fortunate to have him as a director. I believe that board's dialogue will benefit from his experience in the areas of corporate governance, capital allocation, operational turnarounds, and strategic reviews. The company also announced that Dr. Mary Tagliaferri became the chair of the board of directors this quarter, and we welcome her leadership. In summary, I'm very encouraged with the outlook of ENSO's business, new commercial opportunities in our core business, the potential expansion of our senior management team, and a business development effort to search for and selectively add new products and services while driving greater operating efficiencies within our business. In my previous roles, what has made me successful has been under promising and over delivering. During the next few quarters, I expect to provide our investors with updates regarding our progress towards delivery of what we promised during our quarterly calls, as well as providing more information about our strategy and the opportunities on a go-forward basis. With these insights, I would like to turn the call over to our CFO, Mr. David Bench, for a detailed review of our second quarter financials. David?