Enzo Biochem(US:ENZ)2022-03-13 16:00Revenue Performance - Revenues for the three months ended January 31, 2022, were $34.0 million, an increase of 8% compared to $31.5 million for the same period in 2021[138]. - Clinical services revenues decreased by $0.3 million or 1%, totaling $23.7 million in the 2022 period, with COVID-19 testing representing 56% of clinical revenues[144]. - Product revenues increased by $2.9 million or 39%, reaching $10.4 million in the 2022 period, driven by a bulk sale of a GMP reagent worth $2.8 million[146]. - Revenues for Clinical Services decreased by 4% to $43.4 million in the 2022 period from $45.2 million in 2021, with COVID-19 testing representing 52% of Clinical revenues[159]. Operating Costs and Profitability - Total operating costs and expenses for the three months ended January 31, 2022, were $36.0 million, an increase of 21% from $29.8 million in the prior year[138]. - Operating loss for the three months ended January 31, 2022, was $1.9 million, compared to an operating income of $1.7 million in the same period of 2021, reflecting a decline of $3.6 million[138]. - The company expects improved profitability with increased service volume from the introduction of new molecular and esoteric tests[133]. - Clinical Services costs increased to $12.6 million in the 2022 period, up 7% from $11.7 million in 2021, with a gross profit margin of approximately 47% compared to 51% in 2021 due to higher reagent and personnel costs[147]. - Product revenues rose to $17.2 million in the 2022 period, a 15% increase from $14.9 million in 2021, with a gross profit margin of 49% in 2022 compared to 47% in 2021[148]. - Selling, general and administrative expenses increased by 32% to $14.5 million in the 2022 period from $11.0 million in 2021, driven by higher compensation and facility costs[150]. - Legal and related expenses rose to $2.8 million in the 2022 period, a 24% increase from $2.3 million in 2021, due to higher legal activities associated with strategic initiatives[151]. Financial Position and Cash Flow - The company reported a net loss of $4.97 million in the 2022 period compared to a net income of $2.6 million in 2021, reflecting a significant unfavorable variance[157]. - Cash and cash equivalents and marketable securities totaled $33.6 million as of January 31, 2022, down from $43.5 million at July 31, 2021[172]. - Net cash used in operating activities was approximately $6.7 million in the 2022 period, an unfavorable variance of $4.6 million compared to $2.1 million in 2021[174]. - The foreign currency revaluation loss was $0.5 million in the 2022 period, compared to a gain of $0.6 million in 2021, resulting in an unfavorable variance of $1.1 million[154]. Intellectual Property and Technology - The company holds approximately 472 issued patents worldwide and over 64 pending patent applications, indicating a strong intellectual property portfolio[131]. - Enzo's proprietary technology platforms aim to reduce overall healthcare costs and improve diagnostic testing efficiency[129]. Market and Demand Outlook - The company anticipates a significant decline in demand for COVID-19 testing in fiscal year 2022 compared to 2021 levels due to increased vaccination rates and new therapeutics[128]. - Diagnostic testing volume decreased approximately 8% period over period, contributing to the revenue decline in the clinical services segment[144]. Accounts Receivable and Risk Management - As of January 31, 2022, approximately 60% of the Company's net accounts receivable related to Clinical Laboratory Services[190]. - The accounts receivable balance for Life Science products included foreign receivables of $1.2 million, representing 19% of total receivables as of January 31, 2022[191]. - Total net accounts receivable was $15.316 million as of January 31, 2022, compared to $10.198 million as of July 31, 2021[193]. - Approximately 27% of Clinical Labs receivables are from one provider, indicating a concentration risk[194]. - The Company does not engage in any hedging or market risk management tools, exposing it to market risk from foreign currency exchange rates[205]. Financial Covenants and Interest Rates - The liquidity covenant was reduced to approximately $6 million from $25 million as of January 31, 2022, and the collateral requirement increased to $1.0 million[178]. - As of January 31, 2022, the mortgage principal balance was $4.1 million with a fixed interest rate of 5.09% per annum, requiring monthly payments of $30[176]. - The Company is in compliance with financial and liquidity covenants related to its mortgage as of January 31, 2022[178]. Foreign Exchange Impact - A hypothetical 10% increase in the value of the U.S. dollar would decrease assets by $0.4 million and net revenues by $0.9 million annually[207]. - A hypothetical 10% increase in the value of the U.S. dollar would decrease liabilities by $0.1 million and net income by $0.3 million annually[207]. - Pre-tax earnings would be unfavorably impacted by approximately $1.9 million annually due to foreign exchange losses from intercompany balances and loans[208]. - As of January 31, 2022, the company has fixed interest rate financing on a building mortgage and equipment finance leases[209].