Greetings and welcome to the Enzo Biochem Third Quarter 2022 Financial Results and Business Update. At this all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Chris Calabrese, LifeSci Advisors, Investor Relations for Enzo Biochem. Thank you. You may begin..

Thank you, Melissa and good afternoon everyone. Joining us today from the company are Hamid Erfanian, Chief Executive Officer and David Bench, Chief Financial Officer.

Enzo issued a press release detailing our financial results for the third quarter of the fiscal year this afternoon and is available now on the investor [Technical Difficulty] 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 31st, 2021. 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 loss, 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 issued this afternoon.

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

Thank you, Chris. Good morning and thank you for joining us on our third quarter business and financial update call today. Yesterday, we issued our third quarter 2022 financial and operating results and we hope you've had some time to review.

We will begin the call discussing our corporate strategy, operational focus, vision, while summarizing some key achievements of this quarter. We will also provide perspectives on the current laboratory testing landscape and life sciences market. I will then pass the call over to Mr. David Bench, our CFO, after my opening remarks.

To review the financials in greater detail and then we will open the call for a question-and-answer session. But first, let me quickly run through some top line financials.

Total revenue for the third quarter ending April 30th was $26.2 million lower sequentially and year-over-year, due to anticipated waning of COVID-19 testing volumes and the economic shutdowns in Asia.

Enzo Life Sciences revenue was $7.6 million in Q3 consistent year-over-year and an increase of 9% on a year-to-date basis, demonstrating stability in the ELS customer base. Despite shortfalls in COVID revenue, Enzo clinical lab routine revenue increased 10% and overall non-COVID revenue increased 3% on year-over-year basis.

We have made great progress with regards to operations, strategy and positioning of Enzo. I want to highlight a few important recent milestones as we build the future Enzo. Number one, Enzo's corporate structure and our focused return. Number two, building the future management team. Number three, our corporate governance.

Number four, adding strategic partnerships and growth revenue initiatives. As for number one, Enzo structure and focused return we mentioned on the past earnings call that we are taking a renewed focused approach to Enzo's portfolio of assets. The maturation of our corporate structure is important to support this approach.

Enzo's corporate structure is supported by three separate businesses that make the entire organization stronger. Work independently, but also leverage one another. We often use the analogy of a string or rope when we discuss it internally to help visualize the three aspects of the business.

Enzo Life Science is our global product division, Enzo clinical labs, our services division and Enzo diagnostics our emerging diagnostic platforms for clinical labs at point of care settings. This structure allows Enzo to generate synergies across a multitude of assets and resources.

As we implement our integrated end-to-end solutions, we are able to pass on significant cost savings to our clients and inherently understand their pain points and provide tailored solutions. After all, we are eating our own home cooking, whereas others in our industry are simply selling to others.

We successfully compete by offering our products and services to a range of end user segments from academic institutions and industrial clients to clinical laboratories and urgent care facilities, all supported by a deep portfolio of IP and assets.

While revenue declined this quarter largely due to COVID-19 testing volume, we remain on plan for both operational and revenue budget perspective.

Our team remains proactive in positioning the company around core competencies to generate recurring revenue opportunities that are profitable and invest in growth segments where there are higher returns on investment.

Now turning to point number two, building the future management team, as promised in previous quarters, Enzo has focused considerable time and resources during the last quarter to bring together an executive team to lead a global workforce poised for success and with the ability to drive our initiative of focused return.

We are rounding off the management team by adding commercial leaders to our team. In March, we announced the appointment of David Bench and Kara Cannon to new expanded executive management position.

Kara was named Chief Operating Officer from her previous role as Chief Commercial Officer and David Bench, our current Chief Financial Officer, was named to additional roles of Senior Vice President, Treasure and Corporate Secretary. These two executives are instrumental in leading Enzo along with me into the future.

In yesterday's earnings release, we announced the addition of several new key employees, including a head of clinical laboratory sales, a regional sales leader for our Enzo Life Sciences division and a head of quality assurance and regulatory affairs.

Our new Head of Laboratory Sales brings two decades of experience in the clinical laboratory market that will be extremely valuable as the lab expands its operations.

This senior regional sales leader brings over 25-years of experience in Life Sciences business, development and strategic partnerships and a lead efforts in our geographical expansion and market penetration.

Our new Head of Quality Assurance and Regulatory Affairs comes to Enzo with 25-plus years of regulatory, expertise, product development and commercialization and compliance experience that will be instrumental towards FDA submissions of our proprietary GENFLEX Molecular platform, as well as our path forward in completion of ISO 9000 certification of our manufacturing facilities.

We continue to deliver on our commitment to strengthen the leadership team and expect more announcements in regard -- in that regard in Q4 2022. Regarding point number three corporate governance, we have made significant progress in this quarter.

We recently came to terms with our one of Enzo's largest shareholder, Harbert Discovery Fund, which enables the board and management to focus on operational issues.

As we prioritize transparency it is important to highlight that Enzo management team has been refreshed and four of five current Enzo Board members have been appointed in the past 24-months, each of them brings a wealth of experience to the company to guide it in this critical time of growth.

More notably, in April 2022, the company announced the approval of all four proposals presented at the 2022 annual meeting of shareholders, these modifications improve the company's corporate governance and allowed a newly formed leadership team to further prioritize shareholder friendly initiatives.

It is important to note that this approval required the vote of 80% of the outstanding shares of Enzo Biochem, certainly not an easy fee to achieve, but together you were able to accomplish that goal. Regarding point number four, strategic partnerships and growth initiatives.

We continue to make careful investments intended to further accelerate growth of our core life sciences and clinical lab business, as well as invest in our third pillar diagnostic platforms.

We remain committed to investing in technology that enables our business, including launching a refreshed quality management system, rolling out multi-factor authentication and investing in a global website, which will be completed in early calendar year 2023.

This new website is specifically designed to optimize our transactional capabilities and rival other e-commerce sites in Life Sciences area, while strengthening Enzo's brand awareness, facilitating customer integration and an easy to use portal to review product details and providing a frictionless, reordering platform, we will continue to invest in technology initiatives where there is ability to save costs, enhance our products and service or accelerate revenues.

Enzo Life Sciences achieved growth in United States, despite channel issues in Europe and economic shutdowns in various segments of Asia. We added two new distributors in Asia, a target area that we believe is poised for growth.

Additionally, our GMP facilities in Farmingdale enables the company to continue to expand from basic research to more industrial clients. In fact, our average ordered -- our average product order remained above $1,000 per order for seventh straight quarter, despite not having any bulk orders in this quarter.

Our enhanced product offering expanded personnel, refreshed sales and the upcoming website launch will most certainly contribute to our growth in ELS division in the very near-term.

We had a productive quarter in our clinical laboratory, which we believe will provide us with significant momentum as we move into the fourth fiscal quarter of 2022 and prepare for fiscal year 2023. We delivered on our commitment to expand the product menu adding over 43 net new tests in the quarter and 92 net new tests on a year-to-year date basis.

This growth in high margin markets will drive greater revenue per test in both the near and future term and over long-term. We are also targeting new customer groups adding new patient service centers and using our COVID-19 success as a model for higher margin testing.

Enzo Diagnostics platforms including our molecular platforms and point-of-care initiatives are positioned for success. At the beginning of pandemic, Enzo pivoted GENFLEX molecular platform, which was being developed for women's health to process COVID-19 test samples.

The success of processing over 1 million COVID-19 tests on the platform and meaning the FDA stringent policy standards has led management to revert back to developing other molecular tests on the platform.

We are leveraging our higher margin testing model demonstrated during COVID-19 to other market segments such as the women's health, sexually transmitted diseases and other molecular testing needs based on the applications and versatility of the GENFLEX platform.

As you may recall in January, we received New York State approval for the use of Enzo's chlamydia, gonorrhea and trichomonas test on GENFLEX. Building out our portfolio of laboratory developed tests using the GENFLEX platform.

Furthermore, we are extremely excited to report this quarter that Enzo received another New York State Department of Health approval for its HPV molecular diagnostics test on the GENFLEX platform.

We received approval for these PCR-based tests that are designed to detect 14 high risk HBV variants, HBV testing is part of Enzo's focus on women's health, sexually transmitted infections and oncology and leverages its long history in HPV detection.

Enzo is on pace to have the entire menu of tests submitted to New York State approval this fiscal year and begin submissions to the FDA for 510-K approval in 2023.

Continuing on the diagnostic platform side, we are preparing the launch of an In situ hybridization ISH loop RNA probes in the late summer, which will give us access to 50 million gene expression and spatial biology market.

AMPIVIEW RNA ISH probes uniquely combine the precision of targeted sequence specific RNA probes with the superior sensitivity of Enzo's patented LoopRNA technology. NPPBU RNA ISH probes enable scientists to visualize the expression and spatially localized nucleic acid targets in tissue and cells, while preserving the morphology of the sample.

The novel technology of NPPBU RNA ISH probes will be great addition to Enzo’s Life Science at drug development and discovery and Enzo's clinical and atomic pathology portfolios. We believe this product will leverage Enzo's core competency and be able to further lift our Life Sciences division growth in fiscal year 2023.

We continue to achieve milestones with regards to development of a clear wave point-of-care device for clinical testing. I will provide additional details on this platform on future calls. Last but not least, as you may have read in our press release, we have engaged an investment banking firm to explore strategic alternatives.

David will further elaborate to that end. We are very excited for the opportunities that lie ahead finishing 2022 strong and prepare for a year of revenue growth in fiscal year 2023, particularly regarding Life Sciences and Diagnostic platforms.

During the next few quarters, I 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 and 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 third quarter financials.

David?.

Thanks, Hamid. I'll now provide a review of the financials for the fiscal third quarter ending April 30th, 2022. Total revenue reached $26.2 million for the third quarter, a decrease of 20% from $32.8 million in the third quarter last year.

The decline on the sequential as well as year-over-year basis was due to the previously anticipated waning of COVID-19 volumes on the lab side and the economic shutdowns in Asia on the product side.

On divisional basis, Enzo Clinical Lab Service revenue for the third quarter was $18.6 million, a decrease of 26% from $25 million in the third quarter of fiscal year 2021.

This decline was driven by service accession count declining into the spring season, while the decline in COVID-19 revenue is certainly a factor, our routine testing revenue increased 10% and our overall non-COVID revenue increased 3% on a year-over-year basis. Thereby, demonstrating core testing recovery.

Enzo added 43 new tests in the third quarter, reaching a total of 126 new tests added year-to-date on a gross basis. We are targeting specialty testing and have hired a sales leader that focused on catering to these specialists.

On the Life Sciences side of the business, revenue for the third quarter was $7.6 million, a slight decrease year-over-year and revenue increased 9% on a year-to-date basis, demonstrating stability in the ELS customer base. The economic shutdown in Asia affected sales as did the supply chain issues in Europe.

Thus, assuming return to a normal market environment, we remain confident that overall annual growth should reach 10% for the year ending fiscal year 2022. We have added new talent that comes with pre-existing relationships and connections globally.

The blended gross margin for the quarter declined to 39% from the year ago period gross margin of 49% on a consolidated basis. This was negatively impacted by both Enzo Clinical Lab, as well as Enzo Life Sciences in the quarter.

In the clinical lab, margin decreased from 49% to 40% on a year-over-year basis, due to the reduction of higher margin COVID test. Enzo maintains clinical services margin of at least 40%, which is considered healthy for a laboratory and demonstrates the initial success of our cost savings initiatives.

Enso Life Science gross margin declined to 36%, when compared to the year ago period. While there were several factors, including increased manufacturing headcount and higher cost of materials. We expect margins to return to historical levels in the coming quarters.

Research and development expenses increased modestly to $1.1 million or 4% of total revenue consistent with the year ago period. Selling, general and administrative expenses decreased to $11.4 million from $12.1 million in the year ago period.

The lower SG&A expense was primarily due to lower commission, compensation and non-services revenue, legal and other expenses decreased as well, primarily due to litigation and other legal matters. GAAP net loss totaled $4.9 million or negative $0.10 per share, compared with net income of $2.0 million or $0.04 per share in the year ago quarter.

Adjusted EBITDA loss in the quarter totaled $1.8 million versus adjusted EBITDA of $2.7 million in the third quarter of 2021.

Cash and cash equivalents, restricted cash and marketable securities totaled $32.1 million as of April 30th 2022, compared to $44.3 million at the end of fiscal year 2021, due to strategic initiatives, board and corporate matters, investments in inventory, higher AR, lower accounts payable and greater investments in capital assets.

We expect corporate expenses to decline due to reduced legal expenses and the restructuring of the corporate management team. Day sales outstanding in Enzo Clinical Labs continued to trend at approximately 30-days. Life Sciences' day sales outstanding increased by seven days over the past year, due to larger order sizes and longer required lead times.

As of April 30th 2022, the company had 48.7 million shares outstanding. The company continues to explore cost savings opportunities and we have maintained our previously announced goal of an additional $10 million of savings with $5 million of which targeted for calendar year 2022.

As you may have noted in the press release, we are pleased to engage with one of the premier healthcare banking firms to assist with strategic initiatives.

To this end, we recently engaged Jefferies LLC to provide advisory services, including the evaluation of strategic alternatives for the company, its Enzo Clinical Lab and Enzo Life Sciences division, as well as its various assets.

Jefferies is an American Multinational Independent Investment Bank and Financial Services Company that is headquartered in New York City. I will now turn the call back over to Hamid for closing remarks..

Thank you, David. Over the past months we took key steps designed to increase our efficiency, enlarge our revenue base and position ourselves for new levels of growth. We are well positioned as we work to execute on key elements of our focused return strategy.

We remain confident in our strategic vision and our ability to execute on it in the year ahead to a growing and well 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 dedication and determination as we move into a new era at Enzo Biochem. At this time, operator, please open the floor for questions..

Thank you. At this time we’ll conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of J. P. Sullivan with Potomac Capital. Please proceed with your question..

Hi, good morning.

Could you just clarify regarding the Jefferies process, what the difference is versus the prior process? And I guess related to that, since you aren't starting from scratch on this process, is it too optimistic to think that this can be a faster process than if you were starting from day one?.

So at this stage, we're not going to make some -- any public comments in regards to that. But we are picking up where we left off, let's just leave it at that. Thank you for the question..

Thank you. [Operator Instructions] Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Erfanian for any final comments..

Thank you very much for joining us today. We are extremely proud of the team's achievements and growth this last quarter. We remain committed to generating value for our shareholder and look forward to discussing further progress with you on our fiscal fourth quarter earnings call this fall..

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