Enzymotec Reports Fourth Quarter And Full Year 2014 Unaudited Financial Results
MIGDAL HA'EMEQ, Israel, Feb. 18, 2015 (GLOBE NEWSWIRE) -- Enzymotec Ltd. (Nasdaq:ENZY), a developer, manufacturer and marketer of innovative bio-active lipid ingredients and medical foods, today reported its financial results for the fourth quarter and full year ended December 31, 2014.
Fourth Quarter 2014 Financial Highlights:
- Company continues to see recovery as revenues increased significantly for the second consecutive quarter on a sequential basis;
- Fourth quarter net revenues (equity method) decreased 41.8% to $10.8 million, compared to the fourth quarter of 2013, but increased 13.4% compared to the third quarter of 2014;
- Fourth quarter net revenues (proportionate consolidation method) decreased 41.0% to $14.2 million, compared to the fourth quarter of 2013, but increased 17.9% compared to the third quarter of 2014;
- Fourth quarter gross margin (equity method) increased 10 basis points to 58.5% from 58.4% in the fourth quarter of 2013;
- Fourth quarter adjusted EBITDA decreased 67.7% to $2.0 million, compared to the fourth quarter of 2013, but increased 15.4% compared to the third quarter of 2014*;
- Fourth quarter net income decreased 67.2% to $1.1 million, or $0.05 per diluted share, compared to the fourth quarter of 2013, and decreased 7.1% compared to the third quarter of 2014;
- Fourth quarter non-GAAP net income decreased 74.2% to $1.4 million, or $0.06 per diluted share, compared to the fourth quarter of 2013, and decreased 2.0%, compared to the third quarter of 2014*.
* A reconciliation of Non-GAAP financial measures to GAAP financial measures is set forth below.
2014 Business Highlights:
- Increased gross margins by 1,050 basis points year-over-year, primarily driven by the new krill extraction facility, improvements in production efficiency and product mix;
- VAYA Pharma revenues increased 27% year-over-year, while IMS data indicated sales-out in the US increased more than 50% year-over-year;
- InFat®, the innovative ingredient marketed by Advanced Lipids, our joint venture with AAK , was launched in 16 new branded infant formula products;
- Our proprietary bio-active ingredient Sharp-PS was launched in a clinical nutrition product;
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VAYA Pharma achieved the following clinical study milestones for the development of new indications:
- Initiated a clinical study for Autism Spectrum Disorder;
- Initiated a multi-center clinical study of Vayarin in adults with ADHD in the US;
- Initiated a multi-center long-term clinical study of Vayacog in patients with Mild Cognitive Impairment in Israel and the US; and
- Finalized the clinical phase of a clinical study of Vayarol for reducing triglyceride levels in patients with hypertriglyceridemia.
- Established VAYA Pharma Singapore for the sales and marketing of VAYA Pharma branded products in Singapore;
- Granted patents related to InFat® in the US, Canada, New Zealand, Korea, Australia, Israel and Hong Kong, patents related to Vayarol® in the US, Europe and Hong Kong and patents related to Vayarin® and Vayacog® in Israel and Canada; and
- Resolved IP litigation with Neptune in a final settlement and license agreement with a one-time payment and worldwide non-exclusive license for all of the Company's relevant current products and future anticipated products. No royalties will be paid by the Company unless proceeding outcomes with the US Patent and Trademark Office or Australian patent office are unfavourable to the Company.
"Despite encountering strong headwinds throughout the year, I am pleased that we remained profitable and cash flow positive, which is a testament to the strong market position we have across our businesses as well as our conservative cost structure," commented Dr. Ariel Katz, Enzymotec's President and Chief Executive Officer. "During 2014, we continued to make strategic investments in our businesses which make us confident we will emerge a stronger company and more valuable partner to our customers. We have identified multiple opportunities from which to drive additional growth in the future."
"We continue to innovate and provide our partners with pioneering ingredients from our best in class lipids technology, which has become extremely important in an increasingly competitive market. As the Chinese infant formula market continues its shift to an ecommerce platform, we believe there is a significant opportunity to further penetrate the market as brands search for innovation to distinguish them in a crowded space. Turning to the krill oil markets, although we have seen additional capacity come on to the market, I am confident Enzymotec is well positioned to gain market share and emerge as a leader with our higher quality krill oil products. And finally, VAYA Pharma remains a growth driver for Enzymotec as we look to add sales representatives and territories as well as launch our online pharmacy and call center," stated Dr. Katz.
"We are focused on accelerating our growth and steering the Company toward more value-added businesses. We have consolidated our strategy across segments to leverage our core capabilities to fuel the growth opportunities. As we look ahead, we expect to invest further in VAYA Pharma's operations and infrastructure, introduce new ingredients for infant nutrition and advance our ingredients for clinical nutrition applications," concluded Dr. Katz.
Fourth Quarter 2014 Results
For the fourth quarter of 2014, based on the proportionate consolidation method, net revenues decreased 41.0% to $14.2 million from $24.1 million for the fourth quarter of 2013.For the fourth quarter of 2014, based on the equity method of accounting, net revenues decreased 41.8% to $10.8 million from $18.5 million for the fourth quarter of 2013. The decrease was mainly due to a decrease of $5.3 million in krill sales volume (driven primarily by decreased sales volume in the United States and in Australia, specifically as a result of a decrease in sales of premium omega-3 products in those markets) and a decrease of $5.0 million in InFat sales (proportionate consolidation method), partially offset by increased sales of our PS products.
Gross margin (equity method) for the fourth quarter of 2014 increased 10 basis points to 58.5% from 58.4% for the fourth quarter of 2013. Gross margin for the fourth quarter of 2014 was impacted by a one-time disruption to production of approximately $0.2 million related to damage to raw materials caused during production.
General and administrative expenses decreased to $2.0 million from $3.8 million in the fourth quarter of 2013, primarily due to a decrease in patent-related legal expenses and to the non-recurrence of bonuses granted to certain Company employees in connection with Enzymotec's initial public offering (IPO) in October 2013 that were recorded in the fourth quarter of 2013, as well as a decrease in share-based compensation expenses as a result of the acceleration of vesting of options in the fourth quarter of 2013 related to the IPO. This was partially offset by an increase in allowance for doubtful accounts.
Financial income increased to $0.1 million from a financial expense of $0.4 million in the fourth quarter of 2013, primarily due to a decrease in financial expenses related to the long-term loans that were repaid in January 2014, changes in the fair value of currency forward transactions which did not qualify as hedge transactions and interest income on the Company's bank deposits and marketable securities.
Net income for the fourth quarter of 2014 decreased to $1.1 million, or $0.05 per diluted share from $3.4 million, or $0.15 per diluted share for the fourth quarter last year.
Non-GAAP net income decreased 74.2% to $1.4 million, or $0.06 per diluted share, from $5.6 million, or $0.24 per diluted share for the fourth quarter of 2013.
Adjusted EBITDA for the fourth quarter of 2014 decreased 67.7% to $2.0 million from $6.3 million for the fourth quarter of 2013, but increased 15.4% compared to the third quarter of 2014. A reconciliation of adjusted EBITDA to net income is set forth below.
Below is segment information for the three months ended December 31, 2014 and 2013: