Revenues and Adjusted EBITDA Increased for Fourth Consecutive Quarter
Q2 Net Revenues Increased 49.5% Year-Over-Year; Q2 Net Income of $0.10 Per Diluted Share
MIGDAL HA’EMEQ, Israel, Aug. 12, 2015 (GLOBE NEWSWIRE) -- Enzymotec Ltd. (Nasdaq:ENZY), a developer, manufacturer and marketer of innovative bio-active lipid ingredients, today reported financial results for the second quarter ended June 30, 2015.
Second Quarter Financial Highlights
- Second quarter net revenues (equity method) increased 49.5% to $13.4 million, compared to the same quarter last year and 18.6%, compared to the first quarter of 2015.
- Second quarter net revenues (proportionate consolidation method) increased 43.6% to $16.5 million, compared to the same quarter last year and 15.1%, compared to the first quarter of 2015.
- Second quarter adjusted EBITDA increased 147.5% to $2.9 million*, compared to the second quarter of 2014 and 7.5%, compared to the first quarter of 2015.
- Second quarter net income increased 494.2% to $2.3 million, or $0.10 per diluted share, compared to the second quarter of 2014 and 30.2%, compared to the first quarter of 2015.
- Second quarter non-GAAP net income increased 417.2% to $2.7 million, or $0.11 per diluted share*, compared to the second quarter 2014 and 25.7%, compared to the first quarter of 2015.
- The Company provides updated guidance for the full fiscal year ended December 31, 2015.
* A reconciliation of Non-GAAP financial measures to GAAP financial measures is set forth below.
Recent Business Highlights:
- Commenced an investigator initiated clinical trial of Vayarin® in managing ADHD in children with Epilepsy.
- Received GRAS status from the FDA for Sharp PS® GREEN the Company’s novel non-GMO and soy-allergens free Phosphatidylserine ingredient which promotes brain health. This status allows the marketing and use of Sharp PS® GREEN in a wide selection of foods and beverages in the USA.Received Novel Food approval from the European Commission (“EC”) for the Company’s high potency K·Real® krill oil. Enzymotec is currently the only krill oil manufacturer that offers EC-approved high grades of krill oil solutions and the approval allows the Company’s customers that purchase high grades of K·REAL® krill oil to label their products with additional health claims in Europe, beyond the standard heart health-related claim of other krill oils.
- Granted new patent related to InFat® in Singapore for inducing a beneficial effect on the immune system of a subject by promoting development of beneficial gut flora and for reducing the frequency and duration of infant crying.
- The U.S. Patent and Trademark Office (“USPTO”) determined that 26 of 28 challenged claims in Neptune’s U.S. Patent No. 8,278,351 are unpatentable. The Company intends to appeal the USPTO decision regarding the two remaining challenged claims during the third quarter. Neptune is not entitled to royalty payments in North America unless the final outcome, following the appeal and subject to the settlement agreement terms, is unfavorable to Enzymotec. The final outcome of the appeal is not expected before the second half of 2016.
- Re-examination on Neptune’s patent in Australia is still ongoing. Neptune is not entitled to royalty payments in Australia unless the final outcome is unfavorable to Enzymotec.
- The hearing as part of the Company’s arbitration with AAK was held during June 2015, and a decision is expected by no later than December 31, 2015.
“As evidenced by our second quarter results, Enzymotec continues to experience a recovery in infant nutrition as well as in krill oil. The Chinese infant formula market remains in transition; whereas multinational players consider this challenging, we view this as an opportunity. We believe that the gradual shift to an e-commerce platform in China in particular, and Asia in general, will drive innovation into the market as competition heightens and brands need to differentiate themselves. I believe that Enzymotec’s technology will become even more important to the infant formula market as the brand players accelerate their search for innovation and distinction,” commented Dr. Ariel Katz, Enzymotec’s President and Chief Executive Officer. “Furthermore, we continue to maintain our strong position in the krill oil segment despite external market challenges. Our higher quality krill oil, paired with a superior cost structure, garnered new customers as well as increased market share during the quarter.”
“We are excited about VAYA Pharma and believe that the investments we are making in this division today will contribute to Enzymotec’s future growth. We have a strong product portfolio that is gaining awareness and acceptance beyond the southeast United States. The expanded sales force continues to ramp and we expect their contribution to become more apparent in the second half of this year. We remain focused on our clinical research activities as well as the recently launched online pharmacy and call center. Although it will have a short-term negative impact on orders from VAYA’s wholesalers, our online pharmacy is showing signs of early success as we see more sales move in that direction,” stated Dr. Katz.
“Enzymotec’s financial strength remains solid. Notwithstanding the investments we are making to support our strategic growth initiatives, we were able to generate $5.1 million in operating cash flow during the first half of 2015. Our strong cash position will help enable us to take advantage of opportunities where we can leverage our leading lipids technology to fuel the Company’s growth trajectory and drive shareholder value,” concluded Dr. Katz.
Second Quarter 2015 Results
For the second quarter of 2015, based on the proportionate consolidation method, net revenues increased 43.6% to $16.5 million from $11.5 million for the second quarter of 2014. Based on the equity method of accounting, net revenues increased 49.5% to $13.4 million from $9.0 million for the second quarter last year. The increase was primarily due to an increase of $2.3 million in krill oil sales, an increase of $2.0 million in InFat sales (proportionate consolidation method), an increase of $0.4 million in sales of VAYA products, and an increase of $0.3 million in sales of PS products.
Gross margin (equity method) for the second quarter of 2015 decreased 100 basis points to 61.0% from 62.0% for the second quarter of 2014 primarily due to change in product mix.
Selling and marketing expenses for the second quarter of 2015 increased 39.2% to $2.7 million from $1.9 million in the second quarter of 2014, and from $2.4 million in the first quarter of 2015, primarily as a result of expanding VAYA Pharma’s operations and infrastructure.
General and administrative expenses for the second quarter of 2015 increased to $2.2 million from $1.8 million in the second quarter of 2014, and from $1.5 million in the first quarter of 2015, primarily due to an increase in litigation costs related to the arbitration with AAK, our partner in the joint venture in Sweden, Advanced Lipids AB.
Adjusted EBITDA for the second quarter of 2015 increased 147.5% to $2.9 million from $1.2 million for the second quarter of 2014, and 7.5%, compared to the first quarter of 2015. A reconciliation of adjusted EBITDA to GAAP net income is set forth below.
Net income for the second quarter of 2015 increased to $2.3 million, or $0.10 per diluted share, from $0.4 million, or $0.02 per diluted share, for the second quarter last year.
Non-GAAP net income increased to $2.7 million, or $0.11 per diluted share, from $0.5 million, or $0.02 per diluted share for the second quarter of 2014. A reconciliation of non-GAAP net income to GAAP net income is set forth below.
Below is segment information for the three months ended June 30, 2015 and 2014 (unaudited):
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