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EB

ENZO BIOCHEM INC (ENZ)·Q3 2021 Earnings Summary

Executive Summary

  • Q3 FY2021 delivered record revenue of $32.8M, up 94% YoY, with consolidated gross margin at 48.9% and GAAP EPS of $0.04, marking the third consecutive profitable quarter .
  • Clinical Labs revenue rose to $25.0M (+139% YoY) with gross margin at 49.1%; Life Sciences revenue increased to $7.8M with gross margin at 48.4% (53% before intercompany) .
  • Management emphasized a post-COVID strategy to extend higher-margin, vertically integrated testing (GENFLEX) into women’s health and STDs; received FDA EUA for AMPICOLLECT and was designated a diagnostic provider by UnitedHealthcare, expanding commercial opportunities .
  • No formal Wall Street consensus estimates were available via S&P Global for Q3 FY2021; therefore, beats/misses versus consensus cannot be assessed (consensus unavailable via S&P Global).
  • Stock-relevant catalysts: strategic review (Cain Brothers retained), CEO succession process underway, continued margin expansion and product menu commercialization on GENFLEX .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly revenue ($32.8M) and third straight positive EPS ($0.04); operating income swung to $2.1M from a $(9.7)M loss YoY, reflecting the vertically integrated model’s margin leverage .
  • Clinical Labs mix shift and in-house platforms drove gross margin improvement to 49.1%; total accessions exceeded 340,000, evidencing robust volume recovery and new account wins .
  • Strategic advances: FDA EUA for AMPICOLLECT, UnitedHealthcare designated provider, and commercialization track for GENFLEX panels; “our open system approach allows for the highest levels of flexibility and adaptability” (Barry Weiner) .

What Went Wrong

  • Sequential profitability moderated: adjusted EBITDA fell to $2.7M in Q3 from $4.3M in Q2 alongside expected normalization in COVID volumes and mix, pressuring margins vs Q2’s 50.3% consolidated gross margin .
  • Life Sciences gross margin slipped vs Q2 (48.4% vs 47.4% Q2; still below pre-intercompany 53%), reflecting product mix and ongoing supply constraints in industry ordering patterns .
  • Management cautioned COVID testing volumes will decline as vaccinations rise; staffing and supply chain stresses persisted though improving, creating operational risk during the transition to post-COVID testing .

Financial Results

Consolidated Results vs Prior Quarters

MetricQ1 2021Q2 2021Q3 2021
Revenue ($USD Millions)$28.7 $31.5 $32.8
Gross Margin (%)42.0% 50.3% 48.9%
GAAP EPS ($USD)$0.01 $0.05 $0.04
Adjusted EBITDA ($USD Millions)$1.0 $4.3 $2.7

Notes:

  • Q3 revenue grew 94% YoY and increased $1.3M sequentially; consolidated gross margin was 49% (48.9% per table) .

Segment Breakdown

MetricQ1 2021Q2 2021Q3 2021
Clinical Labs Revenue ($USD Millions)$21.2 $24.0 $25.0
Clinical Labs Gross Margin (%)39.0% 51.2% 49.1%
Life Sciences Revenue ($USD Millions)$7.4 $7.5 $7.8
Life Sciences Gross Margin (%)49.0% 47.4% 48.4% (53% pre-intercompany)

KPIs and Balance Sheet

KPI/Balance SheetQ1 2021Q2 2021Q3 2021
Total Accessions (units)~300,000 >330,000 >340,000
Cash & Equivalents incl. restricted cash/marketable securities ($USD Millions)$46.0 $45.3 $45.0–45.1 (table shows $45.021)
Working Capital ($USD Millions)$36.7 $39.9 $42.1
Shares Outstanding (Diluted, Millions)47.9–47.905 48.053 48.788

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Full-year profitability targetFY2021Not previously stated in Q1–Q2“Targeting full year profitability” (management) Initiated
COVID testing volume outlookH2 FY2021Not formal numeric guidanceManagement expects volumes to decline as vaccination rates increase; transition to broader test menu on GENFLEX Narrative update

Note: No formal numeric guidance (revenue, margin, OpEx, tax) was issued in Q3 FY2021 PR/call; commentary focused on trajectory and strategic positioning .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
GENFLEX commercialization & marginsOpen system architecture; blended gross margins 50%+, proprietary platform margins >70%; expanding menu incl. women’s health and STDs Installing ~20 GENFLEX platforms; validating chlamydia, gonorrhea, trichomonas, HPV; extending to cytology/IHC/immunology Broadening menu and deployment
Supply chain & staffingManufacturing own reagents mitigated shortages; operational expansion at Farmingdale; ongoing shortages of consumables; staffing challenges Staffing conditions improving; organization operating leaner; continued vigilance Improving but still a watch item
Post-COVID strategyShift sales from academia to industry; expand lab-to-lab and DTC (GoTestMeNow); launch products post-COVID Leverage COVID-era higher-margin model to women’s health/STDs; commercial outreach; UnitedHealthcare designation Execution underway
Regulatory/legalEUA expansion for pooling; patent on sclerostin antibodies FDA EUA for AMPICOLLECT kit; loop RNA probe publication highlighting sensitivity Continued regulatory/product progress
Strategic review & successionKorn Ferry CEO search; Gary Huff as consultant; Cain Brothers for strategic initiatives Cain Brothers actively retained; succession planning proceeding Ongoing; potential corporate actions
DTC platform (GoTestMeNow)Launched and expanding to STDs; 30+ locations in NY/NJ/CT Expected to extend to other types of testing in weeks; supports post-COVID strategy Scaling

Management Commentary

  • “Our open system approach allows for the highest levels of flexibility and adaptability in the post COVID-19 environment… laboratories to use Enzo’s lower cost reagents or other third-party reagents with ease and flexibility.” — Barry Weiner .
  • “We are proud to announce that Enzo’s financial situation has improved considerably from an operating loss of $9.7 million in Q3 2020 to an operating profit of $2.0 million in Q3 2021.” — Elazar Rabbani .
  • “Within a month, our clinical lab will have installed approximately 20 GENFLEX diagnostic platforms, each capable of generating multimillion dollars of annual molecular testing.” — Barry Weiner .
  • “Enzo received approval from UnitedHealthcare… as a designated diagnostic provider… which should expand the amount of products and services we already deliver.” — Barry Weiner .
  • “We finished the third quarter… and are targeting full year profitability for our fiscal year ending in July.” — Barry Weiner .

Q&A Highlights

  • Expansion beyond COVID into STDs/women’s health for academic channels; pursuing FDA pathways for key platforms alongside LDTs (GENFLEX and others) .
  • Competitive positioning vs. Cepheid/Danaher: focus on cost-efficient, margin-enhancing open systems to counter reimbursement pressure; differentiation via lower-cost components and reagents .
  • Staffing: market improving; company credits operational resilience during COVID and is now operating leaner with targeted hiring .
  • Strategic review: Cain Brothers retained; process ongoing; succession planning for CEO progressing (prior disclosure) .
  • Margin insights: proprietary platforms can achieve >70% margins; sustainability depends on reimbursement levels as mix transitions post-COVID .

Estimates Context

  • Wall Street consensus EPS and revenue for Q3 FY2021 were unavailable via S&P Global for ENZ; as a result, beat/miss analysis versus consensus could not be performed (consensus unavailable via S&P Global).
  • Implication: sell-side models may need to incorporate GENFLEX-driven segment mix, normalized COVID volumes, and margin resiliency from vertical integration as post-COVID mix evolves .

Key Takeaways for Investors

  • Margin durability: vertical integration (own reagents/platforms) is sustaining high consolidated gross margins (48.9% in Q3) and segment margins; watch mix as COVID declines .
  • Volume strength: accessions now >340k per quarter versus ~200k pre-COVID; retention and cross-sell into STDs/women’s health and lab-to-lab channels are central to sustaining revenue .
  • Product/regulatory pipeline: FDA EUA AMPICOLLECT, Loop RNA probe tech, and expanding GENFLEX menus provide multi-pronged growth drivers in FY2022 .
  • Corporate actions optionality: strategic review and CEO transition could catalyze portfolio optimization or partnerships; monitor disclosures for M&A or asset commercialization .
  • Near-term trading lens: absence of consensus complicates beat/miss trading; focus on sequential margin trends, segment mix, and update cadence on GENFLEX deployments and payer wins (e.g., UnitedHealthcare) .
  • Medium-term thesis: execution on menu expansion and commercialization, maintaining margin advantage in a lower COVID environment, and converting COVID-era accounts to broader testing underpin earnings power .
  • Risk watch: reimbursement normalization, supply chain constraints, and staffing remain key variables during the post-COVID transition; management acknowledges COVID volumes will decline .