ProPhase Labs(US:PRPH)2022-11-10 21:31Financial Performance - For the three months ended September 30, 2022, net revenue was $24.2 million, a significant increase from $9.5 million for the same period in 2021, driven by a $13.4 million increase in diagnostic services revenue [225]. - For the nine months ended September 30, 2022, net revenue reached $100.8 million, up from $33.9 million in the same period in 2021, primarily due to a $64.2 million increase in diagnostic services revenue [235]. - Net income for the three months ended September 30, 2022, was $1.0 million, or $0.06 per share, compared to a net loss of $4.0 million, or ($0.26) per share, in Q3 2021 [234]. - Net income for the nine months ended September 30, 2022, was $20.9 million, or $1.33 per share, compared to a net loss of $4.3 million, or ($0.29) per share, in 2021 [243]. - Adjusted EBITDA for the nine months ended September 30, 2022, was $35.5 million, compared to $1.6 million in 2021 [248]. Revenue and Testing Volume - Overall diagnostic testing volume increased from 62,000 tests in Q3 2021 to 113,000 tests in Q3 2022, with 49.4% of tests reimbursed by the HRSA uninsured program [225]. - Approximately 31.5% of diagnostic services revenue for the nine months ended September 30, 2022, was generated from the HRSA program for uninsured individuals, down from 64.7% in 2021 [256]. Cost and Expenses - Cost of revenues for the nine months ended September 30, 2022, was $41.5 million, compared to $16.5 million for the same period in 2021, with diagnostic services accounting for $33.6 million of the total [236]. - General and administration expenses for Q3 2022 were $7.5 million, an increase from $5.9 million in Q3 2021, primarily due to higher personnel expenses and professional fees [230]. - General and administration expenses rose to $21.6 million in 2022 from $14.7 million in 2021, primarily due to higher personnel expenses and professional fees [239]. - Research and development costs decreased to $110,000 in Q3 2022 from $208,000 in Q3 2021, reflecting reduced personnel expenses [231]. - Research and development costs decreased to $0.2 million in 2022 from $0.4 million in 2021, mainly due to reduced personnel expenses [240]. - Interest expense decreased to $0.6 million in 2022 from $0.9 million in 2021, attributed to the repayment of convertible notes [242]. Profitability and Margins - Gross profit for the three months ended September 30, 2022, was $12.0 million, compared to $4.0 million in Q3 2021, resulting in a gross margin of 49.5% versus 42.0% in the prior year [228]. - Gross profit for the nine months ended September 30, 2022, was $59.4 million, up from $17.4 million in the same period of 2021, reflecting a gross margin increase from 51.2% to 58.9% [237]. - Diagnostic services gross margin improved to 63.4% in 2022 from 56.8% in 2021, driven by increased efficiencies and reduced costs [237]. Cash and Liquidity - Cash, cash equivalents, and restricted cash increased to $22.8 million as of September 30, 2022, from $8.7 million at December 31, 2021, with working capital rising to $53.6 million [251]. - The company estimates sufficient cash and liquidity to finance operations for at least 12 months, despite uncertainties in the diagnostic testing business beyond COVID-19 [252]. Accounting and Risk Management - The company evaluates accounts receivable and establishes an allowance for doubtful accounts based on past write-offs and current credit conditions [267]. - Goodwill and long-lived assets are reviewed annually for impairment, with fair value determined by market prices or projected future cash flows [269]. - The Tax Cuts and Jobs Act reduced the federal tax rate from 35% to 21%, effective January 1, 2018, impacting deferred tax assets and liabilities [270]. - Inventory is valued at the lower of cost or net realizable value, with provisions for excess and obsolete inventory based on customer demand [272]. - The adoption of ASU 2020-06 did not have a material impact on the company's financial statements or disclosures [273]. - The company is assessing the impact of ASU 2016-13, which introduces a current expected credit loss model effective for fiscal years beginning after December 15, 2022 [275]. - Current economic conditions may lead to a decline in business and consumer spending, adversely affecting accounts receivables and asset recoverability [279]. - There have been no material changes to market risk exposures since December 31, 2021, except for the effects of COVID-19 on the global economy [280]. Strategic Initiatives - The company continues to pursue acquisition opportunities for technologies and products within and outside the consumer products industry [223].