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spk00: Greetings. Welcome to Enzo Biochem's fourth quarter and year-end 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, I'll now turn the conference over to Brendan Payne, Managing Director at Lifestyle Advisors. Brendan, you may now begin.
spk02: Thank you, Rob, and good morning, everyone. Joining us today from the company are Hamid Efremian, Chief Executive Officer, and David Bench, Chief Financial Officer of Enzo Biochem. Enzo issued a press release detailing our financial results for the fourth quarter and year-end fiscal 2022 this morning, which is now available on the investor relations sections 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, revenues, and expenses, which are dependent on a number of factors outside of 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. Please see risk factors in the company's Form 10-K for the fiscal year ended July 31, 2022. 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 conference call. During the 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 loss, net income loss from operations, or any other measure for determining operating performance. The company has provided a reconciliation of the difference to GAAP on its website, www.enzo.com, and in its press release this morning. I'd now like to turn the call over to Hamid Eframian, Chief Executive Officer of Enzo Biochem. Hamid, please go ahead.
spk01: Good morning. Thank you, Brendan. I'd like to thank you for joining us for fourth quarter business and financial update call today. As Brendan mentioned, this morning we issued our fourth quarter and year-end 22 financials and operating results, and we hope you've had some time to review. We will begin the call discussing our corporate strategy, operational focus, and vision while summarizing some key achievements of this last year and 12 months. We will also provide perspectives on the current laboratory testing landscape and life sciences market. After that, I will pass the call over to David Bench, our CFO, to review the financials in greater detail. But first, let me quickly run through some top line financials. Despite lower clinical lab revenue, Due to lower COVID testing, it is worth noting that fiscal year 22 was the second highest historical annual revenue for ENZO from its operating divisions. In fact, ENZO Life Sciences fiscal 22 revenues amounted to $32.6 million, up 6% from fiscal year 21, or 8% on an FX adjusted basis. Our average product order increased 5.6% year over year, the highest average achieved over the past four years due to our focused strategy on moving across the drug development pipeline as we discussed in previous quarters. Next month is my one-year anniversary at Enso. In my short time here, I believe we have the building blocks regarding assets, resources, and employees to overcome past challenges and bring this company to the next level. As mentioned in our press release earlier today, the industry as a whole and Enso have weathered strong macroeconomic and geopolitical headwinds well. And we are encouraged by trends we are seeing in the first quarter fiscal year 23 and beyond at our company. We have made great progress in regards to strengthening the foundation of all three segments of our business and charting a very focused strategic path for Enzo going forward. Before handing the call off to David, I would like to go over our financials, and I would just like to reiterate the importance and our commitment to our go-forward focused return strategy described last quarter, whereby we invest solely in areas where we will recognize the best return on our investments and to highlight a few important recent milestones we've achieved in executing on that strategy. The focus is on the future, but we as management must ensure that there's a short-term and long-term return on capital being invested. We succeed based on our high-touch approach an elevated level of personalized service at our lab's commercial efforts. Physicians prefer ENZO as their clinical lab of choice because we provide the service that they need with the customer and technical support they desire. This service need is not only a local issue, but resonates throughout the country. Therefore, we are prepared to expand the geographic footprint of ENSO and also strengthen lab through additions to our test menu and lab-to-lab partnerships. All of this must be accomplished while ensuring that these activities are accomplished in a profitable manner. Our ENZO Life Sciences Division has the brightest future with a robust portfolio backed by our intellectual property. Our efforts are directed at enhancing our commercialization efforts through an Amazon-like website experience with deep content and transactional capabilities. that will be launched in early 2023, as well as a new sales team structure, which is currently being rolled out. We already have achieved revenue growth in a business that has historically been flat, and we are building 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 MPVU RNA probes that are designed with ENZO's loop RNA-ish technology that hybridize to a specific RNA-DNA or RNA-DNA target of interest. With first products targeting detection of HPV, and SARS-CoV-2 amphibious, this significantly expands ENSO'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. ENSO's management team shared a philosophy of identifying and developing local talent augmented by experienced, mid-level, and senior hires. ENSO 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 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. This approach is poised to yield long-term success for Enzo. 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 offer future innovations. To this end, ENSO Biochem is preparing to launch its ENSO Diagnostics Division, which will focus specifically on clinical diagnostics platforms for laboratories and physician offices. The success of ENSO's diagnostics platforms can be measured by milestones. It must meet timelines and regulatory hurdles necessary to launch these platforms. We're confident then we have the assets and resources in-house but must continue to execute. For example, we demonstrated steady advancement along the regulatory path with GenFlex, our flexible and fully automated molecular testing platform, with pending submission for monkeypox EUA approval and other regulatory filings. Earlier this year, we received New York State approval for the use of ENZO's chlamydia, gonorrhea, trichomonas tests on GenFlex, building out our portfolio of laboratory-developed tests using GenFlex platform. More recently, we received another New York State Department of Health approval for our HPV molecular diagnostics test on the GenFlex platform. These milestones provide confidence to us at ENSO and to market. Gaining regulatory approval from New York State, a state with one of the toughest reputations, provides us with confidence that we will be successful on the federal front. 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. The 100,000-foot facility will support plans for continued growth in clinical laboratory services, drug development services, and product innovation. A recent launch event featured updates on ENSO's plans for business growth and perspective on our prospects for the Long Island business community from community leaders. 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. We as 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. However, the past is behind us, and we are focused on the future. This team can manage any storm. I'd be remiss if I would not acknowledge that we had a challenging quarter. Economic headwinds and reduction in COVID testing were a huge contributor in what has impacted us and our sector. We have a talented team and we remain steadfast in our strategic efforts as well as maximizing the potentials that we have within our company. Our commercial team at the lab is focused on optimizing the lab's potential and life sciences has a bright future for us. We are enthused regarding the opportunities that lie ahead and prepare for a year of revenue growth in fiscal year 23, particularly in our ENSO Life Sciences Division. 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. I would like to turn the call over to our CFO, Mr. David Bench, for a detailed review of our fourth quarter financials. David?
spk03: Thanks, Hamid. I'll now provide a review of the financials for the fiscal fourth quarter and year end, July 31st, 2022. Total fourth quarter 2022 revenues were $20.3 million compared to $24.8 million in the fourth quarter of 2021. The decline reflects a continued slowdown in COVID-19 testing. We anticipate the rate of decline to taper in the months ahead as COVID-19 testing becomes a regular part of influenza panel testing. From a revenue mix perspective, Q4 2022 revenue include a more balanced mix of products and services, 61% ECL and 39% ELS in the quarter versus 68% and 32% respectively in Q4 2021. Full fiscal year revenues were $107.1 million compared to revenue of $117.7 million for the same period in 2021. The slight decrease is again primarily related to reduction in COVID-19 testing volumes and lower reimbursement rates. However, it's worth noting that fiscal year 2022 was the second highest historical annual revenue for ENZO from its operating divisions. 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. The decrease was predominantly attributable to the aforementioned reduced COVID-19 testing. 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. ENSA's accessions declined by approximately 42,500 compared to the fourth quarter of fiscal 2021. ECL fiscal 2022 total revenues were $74.4 million compared to $87 million in fiscal 2021, primarily due to reduction in COVID testing volume and reimbursement rates. ENSA's accessions declined by approximately $165,000 compared to fiscal year 2021. 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. 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. 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. 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. ELS fiscal 2022 revenue amounted to $32.6 million, up 6% from fiscal 2021, or 8% on a foreign exchange-adjusted basis. This increase of $1.9 million represents growth in most segments, with the largest increase driven by GMP bulk sales. Operating loss for 2022 was $0.2 million, compared to operating income of $1.2 million in 2021. 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. ECL gross margin for fiscal 2022 was 38% compared to 45% in the year-ago period, primarily due to the lower COVID-19 testing mix. ELS gross margin was reduced to 41% as compared to 48% in 2021, primarily due to investments to support future growth and inflation impact. 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. This increase was primarily related to investments made in translation, lab-developed testing, and GenFlex systems. 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. 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. However, as a percentage of revenues, SG&A for the fourth quarter of 2022 equaled 54.5% compared to 47.5% a year ago. Selling general and administrative expenses expenses for the fiscal 2022 year were $48.0 million, or 44.8% of total revenue, compared to $45.0 million, or 38% of total revenue for fiscal 2021. Legal and other expenses amounted to $5.2 million, an increase from $4.7 million in the previous year. For the fourth quarter 2022, GAAP 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. 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. Adjusted EBITDA amounted to negative $5.2 million, compared to a year ago EBITDA of $5.5 million. Cash, cash equivalents, and short-term investments total $21.6 million at the end of the fiscal year, and working capital amounts to approximately $30 million. 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. the company's current ratio remains strong at 2.2 times. 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.
spk01: Thank you, David. Over the past month and year, we have made exceptional progress in advancing the fundamentals of the business, adapted to the challenging landscape, particularly around COVID-19, and positioned ourselves well for the future success through execution and innovation. Our focused return strategy remains firmly on track, and it boasts short-term and long-term shareholder values top level in mind. On behalf of 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. 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.enzel.com. 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. We look forward to discussing further progress with you on our Q1 fiscal 2023 call in December. Now I'll turn the call over to our operator.
spk00: Thank you. This will conclude today's conference. You may disconnect your lines this time. Thank you for your participation and have a wonderful day.
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