Greetings. And welcome to the Enzo Biochem Second Quarter 2022 Financial Results and Business Update Conference CAll. [Operator Instructions] As a reminder, this conference is being recorded. It is now 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 Erfanian, 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 available now on the investor relation 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, 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, 2020. 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 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 net loss, income or 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 issued this afternoon.

I would now like to turn the call over to Hamid Erfanian, Chief Executive Officer of Enzo Biochem. Hamid, please go ahead..

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 Enzo team, this is the highest quarterly revenue in history of the company. Enzo Life Science revenue reached $10.4 million, an increase of 39% year-over-year, and its product margin increased to 49%.

Enzo Clinical Services revenue reached $23.7 million, an increase of 20% from the first quarter of fiscal 2022 and in line with that $24 million in the year ago period.

I will begin today's conference call with a summary of company's strategic vision, highlighting notable achievements and then provide some perspective on the current testing landscape in life sciences market.

I joined Enzo in November to effect change, namely to lead the commercialization of Enzo’s ore assets and to build a management structure and operational focus. As I mentioned, a 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 segment. 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 their 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 likeminded 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.

And 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 and GTB 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 have 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 2021 year is more than an exciting proof-of-concept. GoTestMeNow 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 tests. That we are currently sending out.

This will enable our laboratory to run more efficiently, improve turnaround times, 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 one of the most desirable demographic areas in the country.

Its 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 Enzo Life Sciences side, we exhibited solid growth in the second quarter, and our average order size remained 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 Enzo Life Sciences business with the markets that's offered 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 planned place, that 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 ecommerce sites in the life sciences area while strengthening Enzo’s brand awareness, facilitating customer integration on an easy to use portal to review product details and providing a friction less reordering platform.

These capabilities will further differentiate Enzo customer experience. We are 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 an update to our Enzo 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 re-aligning and modernizing the organizational structure of the company to optimize execution, efficiency and accountability.

This must be accomplished while minimizing redundancy 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 welcomed her leadership.

In summary, I'm very encouraged with the outlook of Enzo’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 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?.

Thanks Hamid. To reiterate Hamid's comments earlier, we are pleased with our second quarter performance. As we achieved a significant revenue milestone, which demonstrates our approach and strategy is bearing fruit across the different business segments.

I am proud to report second quarter at Enzo Clinical Labs, our team was able to add over 50 new customers key to building upon our base and expanding our customer reach. Here's a review of the financials for the quarter.

Total revenue reached $34 million for the second quarter, an increase of 8% compared to $31.5 million in the second quarter last year, and a robust 28% increase sequentially compared to the first quarter of fiscal year 2022.

On the divisional basis, clinical services revenue for the second quarter was $23.7 million, an increase of 20% sequentially, compared to $19.7 million in the first quarter of fiscal year 2022 and a slight decrease from the $24 million in the second quarter of 2021.

The sequential improvement was driven by increased services accession counts, rebounding off of the summer lows. Enzo generated over 100,000 accessions in each month of the quarter. Enzo Life Science revenue for the second quarter was $10.4 million, an increase of 39% from $7.5 million in the year ago period.

As mentioned earlier, we have completed that transition from the Ann Arbor Michigan facility and are benefiting from our upgraded GMP facility on our Farmingdale New York Campus. The Blended gross margin for the quarter declined two percentage points from the year ago period to 48% on a consolidated basis.

Enzo Clinical Lab Services margin of 47% climb more than 400 basis points from the preceding quarter, but with a slightly lower than 51% gross margin and the year ago comparable period. The sequential increase was due to the testing mix, and specifically high levels of academic institution testing.

Enzo Life Sciences gross margin improved by 940 basis points to more than 49% over the 40% margin in the first quarter, and an increase of 200 basis points as compared to the 47.4% in Q2 2021. Research and Development expenses remain flat at $0.8 million or 2% of total revenue consistent with a year ago period.

Selling, general and administrative expenses, excluding one-time compensation expenses increased to $14.5 million from $11 million in the year ago period.

The higher SG&A expenses primarily due to investment sales, marketing and IT to support growth, including the SG&A expense this quarter was compensation expense on a net basis of $1.7 million due to severance and other discrete matters, legal and other expenses increased primarily due to strategic projects and other legal matters.

Adjusted EBITDA on the quarter total $2.5 million versus adjusted EBITDA of $4.3 million in second quarter of 2021. GAAP net loss was $2.7 million, or negative $0.05 per share versus net income of $2.3 million or $0.05 per share in the year ago period.

Cash and cash equivalents, restricted cash and marketable securities totaled $34.6 million at the end of the second quarter, a decline from $44.2 million at the end of fiscal year 2021. Due to strategic initiatives, broader corporate matters, investment in inventory, and greater investment and working capital.

Day sales outstanding in the Enzo Clinical Lab continues to trend at approximately 30 days. As of January 31, 2022, the company has 48.5 million shares outstanding. As Hamid indicated earlier, Enzo continues to explore cost savings opportunities.

And we have expanded our initial goal of an additional $10 million in savings with $5 million targeted for calendar year 2022. The company remains committed to investing in key technologies and infrastructure to minimize friction and transaction costs where possible.

We anticipate the launch of updated web presence in the first quarter of calendar year 2023, which will enable increased brand awareness, deep tech research and seamless transactional capabilities. To conclude I want to highlight the improvement in our current ratio to 2.6x from 2.3x during the second quarter 2021.

This is indicative of our clean and improving balance sheet. Lastly, we showed an improvement to $3.4 million in shareholders equity on a year-over-year basis. I'll turn the call back over to Hamid for closing remarks..

Thank you, David. While we will seek to organically grow our Clinical Lab and Life Sciences segments, as well as commercialize our proprietary diagnostic platforms, we believed that team at Enzo should seek to advantageously consummate tuck-in acquisitions, work with strategic partners and add complementary product opportunities.

This is a strategy that I successfully accomplished at my previous company. And I believe we have the right group of people and assets to achieve M&A, and partnership success here at Enzo.

We are confident in our strategic vision and our ability to execute on it in the year ahead to a growing as well as positioned company, thereby building both short term and long-term shareholder value through our focused return approach.

On behalf of the management team, I would like to take a moment to thank the entire Enzo team for their tremendous commitments and focus that allowed the company to set a record for quarterly revenues. At this time, operator, please open the floor to questions..

[Operator Instructions] Our first question comes from Paul Nouri of Noble Equity Fund..

Hey, just wondering if any of the strength in the products life sciences, part of the business was from COVID? Or if it was strictly your traditional customers?.

So, Paul, again, thank you for your question.

I'm sorry, the question was, if any of the life sciences products contributed to COVID testing and our success, did I understand that question correctly?.

Yes, just if any of the revenues in that segment were from COVID testing..

On the life sciences side, no, it wasn't. Our life sciences side contributed products that be brought into the laboratory and be used. However, the revenue that you see was not contributed from COVID..

Our next question comes from Gainesville, private investor..

Good afternoon. Great revenue figure, disappointing on some of the other expense items. But I just keep a couple of things being you haven't addressed 10-Q yet, but where we can get some insights into the pipeline for the GENFLEX sales pipeline or orders or more into that strategy and investment behind that. That’s first question.

I do have a couple of others..

Perfect, thank you, Mr. Wolf. Great to hear from you on the GENFLEX pipeline. I mean, first of all, it was an exciting quarter for us because we'd received our approval from New York State for the use of, again, gonorrhea, chlamydia, as well as trichomonas, to be able to use it within the laboratory.

This is at the first phase of our regulatory, as we continue to expand and augment our regulatory approach to be able to take those, what we're using in the lab, and place them in other laboratories. As you know, in order to be able to place it in various labs outside of our lab, we require expanded regulatory approvals.

And this was, again, along the path, a step that we identified, and we were able to execute it this quarter. And we continue to leverage it. It's been a very useful platform for ours. Within our facility, we've been able to generate many millions of dollars as a result of the COVID testing.

And we anticipate a tremendous savings around these markers that we just recently got FDA approved. And this is very much along the path with expanded regulatory approved for us to be able to place them in other laboratories and commercialize it.

Does that answer your question?.

It does but I was in the impression all the regulatory approvals had been achieved to place them outside our labs.

Or if not, are there any additional licenses required? And is that once those are approved, if there are any, will that open up some of the sales channels into closer to signing or I didn't know if there's a backlog or waiting certain things on that side of things?.

Absolutely. So, very good question. So, currently, the regulatory approvals that were achieved is for LDT, which is Lab Developed Test, which gives you the ability to market the platform for research use only.

The expanded regulatory approvals in Europe would be IVDR registration, which we are working on, in United States, it would be either, it would be a 510-K achievement, and in Asia market and specific in Asia would be CFDA or Chinese FDA approval, again in -- again these are some of the milestone was for us to achieve the LDT approval to be able to use it within our organization.

And from there we could expand it to be able to gain additional regulatory approval to be able to market it and grow it outside of there.

So we are on the path, but we are -- I would say a few quarters away from being able to get the expanded regulatory approval to commercialize it within the European market and inside the United States as other customer basis. For research use only, we are free to market those.

But then again, the commercial leg of research use only products is not as broad as you would have it with regulatory clear products.

Does that answer your question?.

Yes. I thought we had those approvals. I even thought we had the approvals, and maybe is under the emergency act. Because we -- maybe question today will be how many GENFLEX machines, do we have an operation within our lab? And then how many do we have in inventory for sale at the end of the quarter versus the beginning of the quarter..

So we have somewhere around 20 GENFLEX is roughly around 20 GENFLEX in the laboratory in in use, and we obtain number of GENFLEX in order to be able to utilize them as our volumes continue to grow..

Our next question comes from Christian Schwab with Craig-Hallum..

Hey, guys, I just have a few questions. Actually representing myself as an individual investor in the company at Craig-Hallum at this time.

But congratulations, first of all, to the company, restructuring of getting management and the board finally potentially aligned with shareholder best interests, which from watching from 30,000 feet has been no small task over the years.

With that being said, I know previously, the company had hired investment banks to take a look at potentially monetizing the company or portions of the company. I was just wondering are those individuals still involved in that process.

Is that process ended? Are you looking at potentially hiring somebody else to help with potential strategic alternatives? Or do we just see a path of was better alignment and focus at the top and with board support to grow a bigger, more substantial company over time?.

Sure. Hi, this is Dave Bench. Yes, so we announced a couple quarters ago that we hired Cain Brothers, to look at strategic alternatives for the company. We continue that process as we speak. And that process is a binary event. So if we have anything to talk about, we would announce that publicly. Thank you..

And also, from my side, there's very much support from the board in all the initiatives to make sure that again, we are executing on all the plans that we laid forward, in order to expand augments whatever is necessary for the company to gain efficiencies, and grow the company internally to support our goals that I laid out in the previous quarter and again, reiterated on this quarter..

Fabulous, just one quick follow up, in part of the strategic alternative work that was done obviously not going to make an announcement here today.

But is there been any work done on the substantial patent portfolio? And what its worth and if there are other ways to potentially monetize that just besides, is that part of the strategic alternatives as well, I guess that just wasn't clear when those announcements previously came out..

So absolutely, thanks for that question. So as the numerous times again, I mentioned the previous quarter, and I'm sure the team, previous to me have mentioned that we have a very rich portfolio of products.

As my first initiative, some of the things that we did, we sat here with a team, we have had an attorney on board and we divided it into swords, shields, as well as a combination of both.

What we look at on from a scientific perspective, we have an educational segment that people in terms of our R&D team come and educate the marketing team, then we scoured the market for whether we are protecting which would be shields, whether we are again, ensuring that we are not, the patents are not being infringed, which would be swords.

And to that end we continue to protect the entire portfolio, as part of our ongoing plans are absolutely be continued to protect the patents that we have. And if there are opportunistic events that would enable us to take advantage of those, we would absolutely look after it, we have a treasure chest of patents, and we look at it and we care for it.

And we make sure that again, it's protected. And we are protecting the company to that end..

Yes, remember, we have over 475 patents in the 40 year history of the company. We've succeeded in getting over a $1 billion worth support of licensing from that. So yes, is obviously germane and important to our company. Thank you..

And again, just as an additional comments, and I think this is good for folks on the phone to hear again, you hear from my various in last couple quarters, that company has a lot of assets. And it's -- I've mentioned it before, it's the best kept secret company in the diagnostics arena, because there are this treasure chests that we look into.

And we are going systematically as the management team, looking at all aspects of it. And as you could imagine, the company has various sides to it in terms of life sciences, there's a patent portfolio, there is diagnostics, there's clinical labs.

So systematically, we're going through ensuring that we are leveraging all the assets of the company as best as we can. So again, that was a great question. Thank you.

Our next question comes from Kenan Lucas with Harbert Management Corporation..

Thank you. Hey, Hamid.

Can you talk a little bit about your kind of trajectory for the life sciences, both in terms of given the significant growth you saw this quarter where you want that to grow, kind of pre-commercialization of GENFLEX in terms of revenue and margins?.

Yes, so our -- so again, the life sciences products, as I mentioned, the idea of would be expanding our geographical footprint in the areas that we don't have very good coverage, such as Asia PAC, we hardly have sales in Latin America, we do have distributors, we are thinking about again, ensuring that we are appropriately positioned in those segments and markets.

Some of the areas that we have a full portfolio of products is, for example, in immunohistochemistry-ish products. I did mention a product during my talk today, which is loop RNA.

These are again some areas that has very much a potential and a competitive advantage over our competitors that we could significantly expand and position ourselves in the market as a leading life science products provider. Another area is leveraging our life sciences in point-of-care solution. This is bringing testing closer to the patient.

But again, Kenan, the idea is to stay focused, what gets us over the goal line and making sure that we are continuing on the trajectory of growth is a focused growth.

I mentioned this a number of times during our -- during my talk that although there are many treasure troves and treasure chests within the company, you have to stay focused, we've identified two areas within that aside from geographical expansion, which is immunohistochemistry, as well as point-of-care, which we're going to leverage and grow.

I expect revenues and margins, margins are going to continue stay healthy in the range that they have been. We are optimizing as far as that's concerned, our number of RPO dollars are continuing to grow and revenue steadily growth.

Again, without making too much forward statements, steady growth wins the game and I believe we could deliver quarter after quarter behind that. Thank you, Kenan for the question..

Thanks Hamid. On the GoTestMeNow and kind of expanding that to STD and I guess potentially other offerings.

I mean, are there any sort of other areas, to other ways to kind of grow your reach there on the partnership front or anything? It's kind of similar to that GoTestMeNow offering?.

Absolutely. GoTestMeNow, again, if you look at the market right now, without mentioning many names of institutions that are focused in that area, as you could see, getting closer to the patient, and patients being able to take care of their own healthcare and laboratory testing is the trend moving forward.

We've reached out to a couple of institutions, that this is their wheelhouse in terms of being able to grow this platform, we want to focus in an area that is our strength, which is laboratory testing.

However, we have this platform that in partnership with others that can do excellent marketing, and excellent expansion of this area, we could leverage their strengths in what we do to continue to grow.

Additionally, again, Enzo sits in a unique position where we have, we are in a very desirable demographic market, to be able to really expand this direct-to-consumer platform.

This is phase one of what we plan to continue to execute, which enables folks to do testing at their own home, this is very much is within our plan, we plan to execute on what we do best, which is laboratory testing, and providing services and partner in expanding this channel..

Our next question comes from Dan Weston with WestCap Management..

Yes, hi, good afternoon, everyone. And congratulations on the quarter. The Life Sciences revenue was surprisingly good. You mentioned in the press release some language around a large bulk order during the quarter.

Can you quantify that or provide any context around that place?.

Yes, our 10-Q is coming out later tonight. And you'll have all that information within the 10-Q. We don't give an actual customer information.

But what I can do to give you a little bit of color is based on having a GMP facility, we're able to take larger orders in and certain customers who might not have previously worked with us will work with us based on that GMP capabilities..

Thanks Dave.

Yes, I mean, just looking out without providing any real guidance, just generally speaking, would you consider this large bulk order to be a one off? Or would that be a kind of a normal type of business going forward?.

Yes, so those orders take a little bit more time to generate, and I'm not, they're absolutely not one offs. But they do take a while, and they are lumpy at the beginning. But as we generate more and more of those larger orders, and you'll see, based on our average product order value size, we've already done some good work on that side.

And we shall continue to do that over the coming quarters and years. But again, I wouldn't see a repeat necessarily next quarter in a big order like that, but you will see it going forward. Now that we've established that. Thank you..

No, I appreciate it, Dave. And lastly, just in your wheelhouse, again, getting a little clarity on the cost savings initiatives you outlined today.

Looking at this calendar year ’22 and the $5 million that you're projecting, should we should we view the $5 million reduction off of a base of your Q2 quarter on a non-GAAP basis and expenses?.

No, because this is an annualized number that we're going to have by the end of the year. So you can't use that number and say, okay, based on what we just had, what should it be annualized, it will be reflected by the end of the year and that should help us. Remember, of course, we are positioned for growth.

So there's going to be other areas that we're going to grow in while we're cutting costs in certain areas that we know we can cut those costs. So it's kind of like a given take a little bit..

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Hamid Erfanian for any closing comments..

Thank you so much for joining with us -- joining us today, we are extremely proud of the team's achievements, growth and profitability achieved in this year. We remain committed to generating value for our shareholder and look forward to discussing further progress with you on our Q3 report and call in mid-June.

Overall, again, this was a very dynamic. And from my perspective, this is not part of my prepared statement. But I want to share this with you that I very much welcome the opportunity to have this dialogue with our shareholders. As does David, we have very much confidence in the growth of the company and what we're trying to accomplish here.

So by all means, again, we appreciate your support, and we work hard for you and thank you for this opportunity.

Operator?.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..