Enzo Biochem(US:ENZ)2019-12-10 21:36Revenue Performance - Revenues for the three months ended October 31, 2019, were $20.2 million, a decrease of $1.1 million or 5% compared to $21.3 million in the same period of 2018[110]. - Clinical services revenues decreased by $1.5 million or 11% to $12.8 million, primarily due to lower reimbursement rates and a decline in genetic testing volume[112]. - Product revenues increased by $0.5 million or 7% to $7.4 million, driven by higher product order volume in the U.S. market[113]. Profitability and Expenses - The gross profit margin on clinical services was 14% in the 2020 period, down from 23% in the 2019 period, attributed to increased volume of lower margin testing[114]. - Research and development expenses rose by $0.3 million or 45% to $1.0 million, entirely attributed to the Clinical Services division for lab-developed tests[116]. - Selling, general and administrative expenses increased by $0.2 million or 2% to approximately $11.1 million during the 2020 period[118]. - Legal and related expenses increased by $0.4 million to $1.7 million, influenced by disputes with third-party payers regarding reimbursements[119]. Cash Flow and Working Capital - As of October 31, 2019, the company had cash and cash equivalents of $57.6 million, a decrease from $60.9 million as of July 31, 2019[122]. - Working capital decreased to $54.3 million from $65.4 million, primarily due to the adoption of a new accounting standard for leases, which recognized $4.6 million in current operating lease liabilities[122]. - Net cash used in operating activities decreased to approximately $2.1 million in fiscal 2020 from $6.2 million in fiscal 2019, a reduction of approximately $4.1 million[123]. - The company expects cash reserves to decrease over the next four quarters as it implements its strategy for developing innovative diagnostic platforms and assays[126]. Accounts Receivable - The company's net accounts receivable totaled $9.877 million as of October 31, 2019, down from $10.738 million as of July 31, 2019[141]. - Approximately 64% of the company's net accounts receivable relates to its Clinical Laboratory Services business as of October 31, 2019[139]. - The contractual adjustment percentage for the three months ended October 31, 2019, was 88.3%, compared to 87.5% for the same period in 2018[134]. - A 1% point change in the contractual adjustment percentage could result in a change in clinical services revenues of approximately $1.1 million for the three months ended October 31, 2019[136]. Debt and Financing - The mortgage agreement has a balance of $4.4 million as of October 31, 2019, with a fixed interest rate of 5.09% per annum[125]. - The Company has fixed interest rate financing on a building mortgage and transportation and equipment finance leases as of October 31, 2019[157]. Assets and Goodwill - The Company values inventory at the lower of cost or net realizable value, with potential write downs based on estimated sales forecasts and demand changes[149]. - Goodwill represents the excess of acquisition costs over the fair value of net assets acquired, with amortization of finite-lived intangible assets ranging from 4 to 15 years[150]. - The Company tests goodwill and long-lived assets for impairment annually, with the option for a qualitative assessment to determine fair value[152]. - As of October 31, 2019, the Company had restricted cash of $750,000 related to a mortgage collateralized by a money market account[153]. Market Risk - The Company is exposed to market risk from foreign currency exchange rate changes, with a hypothetical 10% increase in the U.S. dollar potentially decreasing net sales by $0.8 million annually[155]. - Intercompany balances with subsidiaries in different currencies are at risk of foreign exchange losses, with a hypothetical 10% increase in the U.S. dollar impacting pre-tax earnings by approximately $1.6 million annually[156]. Patents and Intellectual Property - The company holds a substantial portfolio of 406 issued patents worldwide and over 75 pending patent applications, supporting its research and development efforts[102]. - The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K[129].