ProPhase Labs Announces Financial Results for the Three Months Ended March 31, 2023
As revenue mix transitions, Company still achieves positive net income and significant adjusted EBITDA while acquiring and developing biotech, genomics and diagnostic assets with multi-billion-dollar potential
Company highlights key strategic initiatives to grow underlying value in 2023 and beyond
Company to hold a conference call Thursday, May 11, 2023, at 11:00 AM ET
Garden City, NY, May 11, 2023 (GLOBE NEWSWIRE) -- ProPhase Labs, Inc. (NASDAQ: PRPH), a next generation biotech, genomics and diagnostics company, today reported its financial and operational results for the three months ended March 31, 2023.
Corporate highlights for the three months ended March 31, 2023, include the following:
- Advancing key initiatives associated with Linebacker-1 cancer compound at the world-renowned Dana Farber Cancer Institute with Harvard University professors/scientists.
- Conducting vital pre-clinical analysis of Linebacker-1 at Eurofins and Reprocell.
- Developing the BE-Smart Esophageal Cancer Test with world-renowned Key Opinion Leaders at Mayo Institute, Kansas University Medical Center (KUMC) and Baylor University.
- Continuing sample acquisition and testing of BE-Smart Test at the cutting-edge facility at Mprobe.
- Developing Nebula Genomics with Dr. George Church and Russ B. Altman, MD, PhD.
- Growing Nebula Genomics with over
100% revenue growth year-over-year. - Growing Pharmaloz Manufacturing with almost
100% year-over-year growth. - Implemented new
$6 million stock repurchase program.
Financial highlights for the three months ended March 31, 2023, include the following:
- Net revenue of
$19.3 million for the three months ended March 31, 2023, as compared to$47.5 million for the three months ended March 31, 2022. - Net Income of
$0.6 million , or$0.03 per diluted share, for the three months ended March 31, 2023, as compared to net income of$12.5 million , or$0.68 per diluted share, for the three months ended March 31, 2022. - Adjusted EBITDA of
$3.1 million for the three months ended March 31, 2023, as compared to adjusted EBITDA of$14.6 million for the three months ended March 31, 2022. - Cash, cash equivalents and marketable equity securities of
$15.6 million and working capital of$42.8 million as of March 31, 2023.
Ted Karkus, ProPhase Lab’s Chief Executive Officer, commented, “I could not be more pleased with our progress to date. It is a testament to our entire management team that we generated positive net income and significant adjusted EBITDA even as our revenue mix transitions away from COVID-19 to whole genome sequencing and manufacturing and while developing cancer therapeutic and diagnostic assets each with multi-billion-dollar potential.
In years past, we turned around and sold the Cold-EEZE Cold Remedy brand for
We feel strongly that personalized precision medicine is the future of medicine. Despite its rapid growth over the past five years, it is still in its infancy, similar to where the internet was 20 to 25 years ago. At the heart of this research is whole genome sequencing. We are working with world-class advisors and have developed strong relationships with the global leaders in whole genome sequencing equipment and consumables. We believe that we are well situated to potentially be the low-cost provider of whole genome sequencing in the United States and globally. Our current growth rate at Nebula Genomics does not reflect the potential distribution in retail stores in late 2024 and the anticipated launch of our B2B whole genome sequencing once our lab validations are complete in the next couple of months. We intend to be the go-to leading edge genomic processing lab in North America.
We are also developing our Linebacker-1 cancer compound and achieving impressive pre-clinical results. We recently shared some of these results from our work with Eurofins and look forward to updating our shareholders in the near future with additional results from our pre-clinical studies at Dana Farber Cancer Institute.
In parallel, we are developing our BE-Smart Esophageal Cancer Test with world-class organizations. We anticipate that we will achieve CPT codes and initiate commercialization and distribution in the U.S. by early 2024. We feel that the ultimate potential for this much needed, and potentially life-saving test, is in the billions of dollars.
And while the U.S. is certainly a multi-billion-dollar market on its own, we believe that Nebula Genomics, Linebacker and BE-Smart all have massive global potential as well.
We have successfully completed the build out of our diversified CLIA lab in New York to provide state-of-the-art genomics testing as well as a full clinical laboratory services. We expect all validations for our clinical lab and genomics testing to be completed within the next couple of months. We will then leverage our existing infrastructure to launch our B2B channel for Nebula Genomics and continue to build our traditional clinical lab business.
Finally, our Pharmaloz Manufacturing business is operating at full capacity with significant demand to potentially support
Furthermore, our infrastructure will also allow us to leverage our relationships with over 40,000 Food, Drug and Mass (FDM) retail stores in the U.S. as we develop and commercialize our Equivir broad based anti-viral as a dietary supplement and introduce our Nebula whole genome sequencing (WGS) tests in these same stores.
We are all looking forward to a bright future and plan to provide further updates to our loyal shareholders in the near term,” concluded Mr. Karkus.
Financial Results
Three Months Ended March 31, 2023 as compared to the Three Months Ended March 31, 2022.
For the three months ended March 31, 2023, net revenue was
Cost of revenues for the three months ended March 31, 2023 were
We realized a gross profit of
Diagnostic services costs for the three months ended March 31, 2023 were
General and administration expenses for the three months ended March 31, 2023 were
Research and development costs for the three months ended March 31, 2023 were
Our aggregate cash and cash equivalents as of March 31, 2023 were
Conference Call and Webcast Details
Management will host a conference call at 11:00 AM ET, Thursday, May 11, 2023, to provide an update on corporate developments and review financial results. Following management’s formal remarks, there will be a question-and-answer session.
Participants can register for the conference call by navigating to:
https://dpregister.com/sreg/10178710/f95cce1458
Please note that registered participants will receive their dial-in number upon registration and may dial directly into the call without delay. Those without internet access or unable to pre-register may dial in by calling: 1-866-777-2509 (domestic), or 1-412-317-5413 (international). All callers should dial-in approximately 10 minutes prior to the scheduled start time and ask to be joined into ProPhase Lab’s call.
The conference call will be broadcast live and available for replay at
https://event.choruscall.com/mediaframe/webcast.html?webcastid=bQyqnuoI and via the investor relations section of the Company’s website at www.ProPhaseLabs.com.
A webcast replay of the call will be available approximately two hours after the end of the call at the above links. A telephonic replay of the call will be available and may be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and using access code 9261373.
About ProPhase Labs
ProPhase Labs, Inc. (Nasdaq: PRPH) (“ProPhase”) is a next-generation biotech, genomics and diagnostics company. Our goal is to create a healthier world with bold action and the power of insight. We’re revolutionizing healthcare with industry-leading Whole Genome Sequencing solutions, while developing potential game changer diagnostics and therapeutics in the fight against cancer. This includes a potentially life-saving cancer test focused on early detection of esophageal cancer and potential breakthrough cancer therapeutics with novel mechanisms of action. Our world-class CLIA labs and cutting-edge diagnostic technology provide wellness solutions for healthcare providers and consumers. We develop, manufacture, and commercialize health and wellness solutions to enable people to live their best lives. We are committed to executional excellence, smart diversification, and a synergistic, omni-channel approach. ProPhase Labs’ valuable subsidiaries, their synergies, and significant growth underscores our multi-billion dollar potential.
Forward Looking Statements
Except for the historical information contained herein, this document contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our strategy, plans, objectives and initiatives, including our plans to grow our subsidiaries and build a multi-billion dollar company, our expectations regarding the future revenue growth potential of each of our subsidiaries, our plans to sell our products in food, drug and mass (FDM) stores, our expected timeline for commercializing our BE-Smart Test and its market potential, and the market potential of Equivir (dietary supplement) and Linebacker-1, , as well as our plans to become the low-cost provider of and leader in whole genomic sequencing and to expand our New York lab to include both traditional clinical testing and genomic sequencing. Management believes that these forward-looking statements are reasonable as and when made. However, such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties include but are not limited to our ability to obtain and maintain necessary regulatory approvals, general economic conditions, consumer demand for our products and services, challenges relating to entering into and growing new business lines, the competitive environment, and the risk factors listed from time to time in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any other SEC filings. The Company undertakes no obligation to update forward-looking statements except as required by applicable securities laws. Readers are cautioned that forward-looking statements are not guarantees of future performance and are cautioned not to place undue reliance on any forward-looking statements.
For more information, visit www.ProPhaseLabs.com.
ProPhase Media Relations and Institutional Investor Contact:
ProPhase Labs, Inc.
267-880-1111
investorrelations@prophaselabs.com
ProPhase Retail Investor Relations Contact:
Renmark Financial Communications
John Boidman
514-939-3989
Jboidman@renmarkfinancial.com
Source: ProPhase Labs, Inc.
ProPhase Labs, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
| March 31, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 9,613 | $ | 9,109 | ||||
| Marketable debt securities, available for sale | 5,946 | 8,328 | ||||||
| Accounts receivable, net | 37,836 | 37,054 | ||||||
| Inventory, net | 4,311 | 3,976 | ||||||
| Prepaid expenses and other current assets | 3,573 | 2,366 | ||||||
| Total current assets | 61,279 | 60,833 | ||||||
| Property, plant and equipment, net | 8,891 | 7,288 | ||||||
| Prepaid expenses, net of current portion | 121 | 121 | ||||||
| Operating lease right-of-use asset, net | 3,974 | 4,059 | ||||||
| Intangible assets, net | 14,524 | 8,475 | ||||||
| Goodwill | 5,231 | 5,709 | ||||||
| Deferred tax asset | 191 | — | ||||||
| Other assets | 1,163 | 1,163 | ||||||
| TOTAL ASSETS | $ | 95,374 | $ | 87,648 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 4,866 | $ | 5,905 | ||||
| Accrued diagnostic services | 353 | 1,009 | ||||||
| Accrued advertising and other allowances | 151 | 99 | ||||||
| Operating lease liabilities | 298 | 301 | ||||||
| Deferred revenue | 2,841 | 2,499 | ||||||
| Income tax payable | 3,849 | 4,190 | ||||||
| Other current liabilities | 6,109 | 2,072 | ||||||
| Total current liabilities | 18,467 | 16,075 | ||||||
| Non-current liabilities: | ||||||||
| Deferred revenue, net of current portion | 1,160 | 1,059 | ||||||
| Deferred tax liability, net | — | 224 | ||||||
| Unsecured promissory notes, net of discount of | 7,224 | — | ||||||
| Unsecured convertible promissory notes, net | 2,400 | 2,400 | ||||||
| Operating lease liabilities, net of current portion | 4,182 | 4,259 | ||||||
| Due to sellers (see Note 3) | 2,000 | — | ||||||
| Total non-current liabilities | 16,966 | 7,942 | ||||||
| Total liabilities | 35,433 | 24,017 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock authorized 1,000,000, | — | — | ||||||
| Common stock authorized 50,000,000, | 17 | 16 | ||||||
| Additional paid-in capital | 111,482 | 109,138 | ||||||
| Retained earnings | 12,303 | 11,753 | ||||||
| Treasury stock, at cost, 18,934,955 and 18,126,970 shares, respectively | (63,953 | ) | (58,033 | ) | ||||
| Accumulated other comprehensive loss | 92 | 757 | ||||||
| Total stockholders’ equity | 59,941 | 63,631 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 95,374 | $ | 87,648 | ||||
See accompanying notes to these condensed consolidated financial statements
ProPhase Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share amounts)
(unaudited)
| For the three months ended | ||||||||
| March 31, 2023 | March 31, 2022 | |||||||
| Revenues, net | $ | 19,303 | $ | 47,531 | ||||
| Cost of revenues | 8,783 | 18,854 | ||||||
| Gross profit | 10,520 | 28,677 | ||||||
| Operating expenses: | ||||||||
| Diagnostic expenses | 1,203 | 4,672 | ||||||
| General and administration | 8,298 | 7,824 | ||||||
| Research and development | 144 | 35 | ||||||
| Total operating expenses | 9,645 | 12,531 | ||||||
| Income from operations | 875 | 16,146 | ||||||
| Interest income, net | 11 | 73 | ||||||
| Interest expense | (215 | ) | (233 | ) | ||||
| Other income (loss) | (107 | ) | (76 | ) | ||||
| Income from operations before income taxes | 564 | 15,910 | ||||||
| Income tax expense (benefit) | 14 | (3,416 | ) | |||||
| Income from operations after income taxes | 550 | 12,494 | ||||||
| Net income | $ | 550 | $ | 12,494 | ||||
| Other comprehensive (loss) income: | ||||||||
| Unrealized loss on marketable debt securities | (665 | ) | 37 | |||||
| Total comprehensive (loss) income | $ | (115 | ) | $ | 12,531 | |||
| Earnings per share: | ||||||||
| Basic | $ | 0.03 | $ | 0.81 | ||||
| Diluted | $ | 0.03 | $ | 0.68 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 16,748 | 15,486 | ||||||
| Diluted | 18,061 | 18,740 | ||||||
See accompanying notes to these condensed consolidated financial statements
ProPhase Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| For the three months ended | ||||||||
| March 31, 2023 | March 31, 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 550 | $ | 12,494 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Realized loss on marketable debt securities | 107 | 179 | ||||||
| Depreciation and amortization | 1,292 | 1,249 | ||||||
| Accretion of debt discount | 20 | 1 | ||||||
| Amortization on operating lease right-of-use assets | 85 | 83 | ||||||
| Gain on sale of assets | — | (23 | ) | |||||
| Stock-based compensation expense | 947 | 482 | ||||||
| Change in fair value of investment securities | — | 76 | ||||||
| Accounts receivable allowances | (147 | ) | (924 | ) | ||||
| Inventory valuation reserve | — | 25 | ||||||
| Bad debt expenses | 230 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (864 | ) | 1,938 | |||||
| Inventory | (335 | ) | (105 | ) | ||||
| Prepaid expenses and other current assets | (2,107 | ) | (126 | ) | ||||
| Deferred tax asset | (96 | ) | — | |||||
| Other assets | — | 360 | ||||||
| Accounts payable and accrued expenses | (2,661 | ) | 1,178 | |||||
| Accrued diagnostic services | (656 | ) | (878 | ) | ||||
| Accrued advertising and other allowances | 52 | — | ||||||
| Deferred revenue | 443 | 165 | ||||||
| Deferred tax liability | — | 443 | ||||||
| Operating lease liabilities | (80 | ) | (73 | ) | ||||
| Income tax payable | (341 | ) | 2,973 | |||||
| Other current liabilities | 4,037 | 770 | ||||||
| Net cash provided by operating activities | 476 | 20,287 | ||||||
| Cash flows from investing activities | ||||||||
| Business acquisitions, escrow received | 478 | — | ||||||
| Asset acquisition, net of cash acquired | (2,904 | ) | — | |||||
| Purchase of marketable securities | — | (206 | ) | |||||
| Proceeds from sale of marketable debt securities | 1,291 | 5,300 | ||||||
| Proceeds from dispositions of property and other assets, net | — | 85 | ||||||
| Capital expenditures | (517 | ) | (1,095 | ) | ||||
| Net cash (used in) provided by investing activities | (1,652 | ) | 4,084 | |||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of secured note payable | 7,600 | — | ||||||
| Repurchase of common stock for payment of statutory taxes due on cashless exercise of stock option | (5,379 | ) | — | |||||
| Repurchases of common shares | (541 | ) | (1,150 | ) | ||||
| Repayment of note payable | — | (1,426 | ) | |||||
| Payment of dividends | — | (4,646 | ) | |||||
| Net cash provided by (used in) financing activities | 1,680 | (7,222 | ) | |||||
| Increase in cash, cash equivalents and restricted cash | 504 | 17,149 | ||||||
| Cash and cash equivalents, at the beginning of the period | 9,109 | 8,658 | ||||||
| Cash and cash equivalents, at the end of the period | $ | 9,613 | $ | 25,807 | ||||
| Supplemental disclosures: | ||||||||
| Cash paid for income taxes | $ | 1,500 | $ | — | ||||
| Interest payment on the promissory notes | $ | 203 | $ | 241 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Financed capital expenditures | $ | 1,623 | $ | — | ||||
| Common stock issued in Asset Acquisition | $ | 1,000 | $ | — | ||||
| Issuance of common shares for debt conversion | $ | — | $ | 600 | ||||
| Net unrealized loss, investments in marketable debt securities | $ | — | $ | 37 | ||||
See accompanying notes to these condensed consolidated financial statements
Non-GAAP Financial Measure and Reconciliation
(unaudited)
In an effort to provide investors with additional information regarding our results of operations as determined by accounting principles generally accepted in the United States of America (“GAAP”), we disclose certain non-GAAP financial measures. The primary non-GAAP financial measures we disclose are EBITDA and Adjusted EBITDA.
We define EBITDA as net income (loss) before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding acquisition costs, other non-cash items, and other unusual or non-recurring charges (as described in the table below).
Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same names and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. We compute non-GAAP financial measures using the same consistent method from quarter to quarter and year to year. We may consider whether other significant items that arise in the future should be excluded from the non-GAAP financial measures.
We use EBITDA and Adjusted EBITDA internally to evaluate and manage the Company’s operations because we believe they provide useful supplemental information regarding the Company’s ongoing economic performance. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our operating results primarily because they exclude amounts that are not considered part of ongoing operating results when planning and forecasting and when assessing the performance of the organization. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and create a misplaced perception that our results have underperformed or exceeded expectations.
The following table sets forth the reconciliations of EBITDA and Adjusted EBITDA excluding other costs to the most comparable GAAP financial measures (in thousands):
| For the three months ended | ||||||||
| March 31, 2023 | March 31, 2022 | |||||||
| GAAP net income (1) | $ | 550 | $ | 12,494 | ||||
| Interest, net | 204 | 160 | ||||||
| Income tax expense | 14 | — | ||||||
| Depreciation and amortization | 1,292 | 1,250 | ||||||
| EBITDA | 2,060 | 13,904 | ||||||
| Share-based compensation expense | 947 | 482 | ||||||
| Non-cash rent expense (2) | 6 | 10 | ||||||
| Bad debt expense | 74 | 250 | ||||||
| Adjusted EBITDA | $ | 3,087 | $ | 14,646 | ||||
(1) We believe that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA measure the Company’s operating performance without regard to certain expenses. EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and the Company’s computation of EBITDA and Adjusted EBITDA may vary from others in the industry. EBITDA and Adjusted EBITDA have important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under GAAP.
(2) The non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeds (or is less than) our cash rent payments. For newer leases, our rent expense recognized typically exceeds our cash rent payments, while for more mature leases, rent expense recognized is typically less than our cash rent payments.
