VAYA Pharma Generated Record Net Revenues of $3.4 Million
GAAP Diluted EPS Impacted by Decline in the Krill Oil Revenues
Two U.S. Based Multinationals and Other Large Manufacturers Launched Infant Formula Containing INFAT® at CBME China
MIGDAL HA'EMEQ, Israel, Aug. 09, 2016 (GLOBE NEWSWIRE) -- Enzymotec Ltd. ENZY, a developer, manufacturer and marketer of innovative bio-active lipid ingredients and medical foods, today reported financial results for the second quarter ended June 30, 2016.
Second Quarter 2016 Financial Highlights
- Net revenues decreased 12.4% and 16.0% to $11.7 million, compared to the second quarter of 2015 and the first quarter of 2016, respectively.
- Net revenues (utilizing the proportionate consolidation method that is used for segment reporting) decreased 9.4% and 12.7% to $15.0 million, compared to the second quarter of 2015 and the first quarter of 2016, respectively.
- Gross margin increased 930 basis points and 320 basis points to 70.0%, up from 60.7% and 66.8% in the second quarter of 2015 and the first quarter of 2016, respectively.
- Selling and marketing expenses increased 81.4% and 13.0% to $4.9 million, compared to the second quarter of 2015 and the first quarter of 2016, respectively.
- Adjusted EBITDA* decreased 44.6% and 41.7% to $1.6 million, compared to the second quarter of 2015 and the first quarter of 2016, respectively.
- Net income decreased 92.4% and 88.1% to $0.2 million, or $0.01 per diluted share, compared to the second quarter of 2015 and the first quarter of 2016, respectively.
- Non-GAAP net income* decreased 69.3% and 60.8% to $0.8 million, or $0.04 per diluted share, compared to the second quarter of 2015 and the first quarter of 2016, respectively.
- The Company provides updated revenue guidance for the full fiscal year ended December 31, 2016.
* A reconciliation of non-GAAP financial measures to GAAP financial measures is set forth below.
Recent Business Highlights:
Nutrition Segment
- Two U.S.-based multinational companies and other large manufacturers launched infant formula containing INFAT® at CBME China in July 2016.
- Received preliminary results regarding a pre-clinical study that introduced one of our novel infant nutrition products with reduced phytosterol levels in piglets. Preliminary results demonstrated that piglets who received infant formula containing the new product exhibited significantly improved cholesterol absorption, reduced cholesterol synthesis and lower plasma phytosterol levels, compared to those who received a standard infant formula. This optimal lipid profile, at a period of rapid development, is suggested to promote proper early programming supporting health in later life.
- Granted new patent by the U.S. Patent and Trademark Office for processes related to the preparation of substitute human milk fat composition.
- Granted new patent by the Korean patent office for a wide variety of phospholipid-based compositions that include long chain poly-unsaturated fatty acids, and are pertinent to a number of our products, such as the K•REAL® krill oil products and additional advanced phospholipid products.
- Exploring strategic alternatives for krill oil business.
VAYA Pharma Segment
- Generated record VAYA Pharma revenues of $3.4 million in the second quarter of 2016, an increase of 83.5% and 8.2% from the second quarter of 2015 and the first quarter of 2016, respectively.
- Increased productivity from VAYA Pharma's sales representatives.
- Demonstrated continued progress in three clinical trials in Autism and ADHD with anticipated completion of recruitment by year end and expected to result in decreased R&D expenses in 2017.
- Established two new Investigator Initiated clinical trials in Autism and ADHD in Singapore, with anticipated completion of recruitment by year end.
"Notwithstanding the significant developments in infant nutrition and an 83.5% year over year revenue growth in VAYA Pharma, Enzymotec experienced a significant decline in krill oil sales during the second quarter of 2016 that, while remaining profitable, equated to $0.05 less in GAAP diluted earnings per share, compared to the second quarter of 2015. The krill oil industry remains plagued with overcapacity and heightened pricing pressures. We have faced the challenges in the krill oil market over the last two years and have been advancing our focus and expansion initiatives in infant nutrition and VAYA Pharma as the key drivers to the Company's future growth. Infant nutrition and VAYA Pharma remains in line with our expectations and the update to our revenue guidance is primarily due to the krill oil business," commented Dr. Ariel Katz, Enzymotec's President and Chief Executive Officer.
"During the quarter, Enzymotec had a number of positive developments in infant nutrition and we have had a strong start to the third quarter with additional customers adopting INFAT®. As previously announced, we have been working closely with two U.S.-based multinational companies and were very pleased to see their participation among the infant formula launches incorporating OPO at the CBME China in July 2016. During the CBME, we saw a number of new launches and pre-launches of infant formula incorporating OPO by brands and companies, including Abbott S-Gold (by Abbott), Melzel (produced by Perrigo), Red Star (by Zhien), and IDM (by Ireland Dairy Milk). These launches reinforce the immense value that we can offer the brands to remain at the forefront of innovation and we estimate that they are starting to view the exclusion of OPO from their infant nutrition products as a competitive disadvantage in China. Furthermore, we have also progressed with our strategy to advance up the value chain with the brands, with new innovations ready and discussions with potential infant formula partners in various stages including term sheets in hand. Our goal is to turn these term sheets into signed agreements in the near future. We look forward to expanding our geographic reach and penetration as these developments come to fruition," stated Dr. Katz.
"We are also very excited to report another quarter of record revenue in VAYA Pharma, which continues to demonstrate that our investments in the business are beginning to bear fruit. The number of sales representatives has remained unchanged from the first quarter of 2016, while productivity has continued to rise, taking advantage of the support of a targeted marketing campaign and business infrastructure. We are growing VAYA Pharma carefully, with a goal of driving the business to profitability by late 2017. We are focused on further penetrating the medical nutrition industry and this will be reflected in how we will strategically leverage our balance sheet and our existing infrastructure in complementary businesses," concluded Dr. Katz.
Second Quarter 2016 Results
For the second quarter of 2016, net revenues decreased 12.4% to $11.7 million from $13.4 million for the second quarter of 2015. For the second quarter of 2016, based on the proportionate consolidation method that we use for segment reporting, net revenues decreased 9.4% to $15.0 million from $16.5 million for the second quarter of 2015. The decrease was primarily due a decrease of $3.1 million in sales of krill products, partially offset by an increase of $1.5 million in sales of VAYA Pharma products.
Gross margin for the second quarter of 2016 increased 930 basis points to 70.0% from 60.7% for the second quarter of 2015 primarily due to improved product mix.
Research and development expenses for the second quarter of 2016 increased 22.2% to $1.8 million from $1.5 million in the second quarter of 2015, primarily due to an increase of $0.3 million in expenses in respect of VAYA Pharma clinical trials. Research and development expenses are expected to decrease in 2017 as the recruitment process for three clinical trials in Autism and ADHD are near completion.
Selling and marketing expenses for the second quarter of 2016 increased 81.4% and 13.0% to $4.9 million from $2.7 million in the second quarter of 2015, and from $4.3 million in the first quarter of 2016, respectively, primarily as a result of an expansion in VAYA Pharma's sales force, infrastructure and related marketing activities in the U.S. Selling and marketing expenses are not expected to increase through the second half of the year.
General and administrative expenses for the second quarter of 2016 decreased 36.9% to $1.4 million from $2.2 million in the second quarter of 2015, primarily due to a decrease in litigation costs related to the arbitration with AAK, our partner in the joint venture in Sweden, Advanced Lipids AB.
Net income for the second quarter of 2016 decreased to $0.2 million, or $0.01 per diluted share, from $2.3 million, or $0.10 per diluted share, for the second quarter last year.
Non-GAAP net income for the second quarter of 2016 decreased to $0.8 million, or $0.04 per diluted share, from $2.7 million, or $0.11 per diluted share, for the second quarter of 2015.
Adjusted EBITDA for the second quarter of 2016 decreased 44.6% to $1.6 million from $2.9 million for the second quarter of 2015. The decrease was driven by a decrease of $0.4 million in the Adjusted EBITDA of the Nutrition segment (as a result of decreased revenues, partially offset by increased gross profit margin and decreased operational expenses) and by a decrease of $0.9 million in the Adjusted EBITDA of the VAYA Pharma segment (as a result of increased operating expenses, partially offset by increased revenues).
Set forth below is segment information for the three months ended June 30, 2016 and 2015 (unaudited):
| Three Months Ended June 30, 2016 | |||||||||||||||||||||||||||
| Nutrition Segment | VAYA Pharma Segment | Total Segment Results of Operations | Elimination(1) | Consolidated Results of Operations | |||||||||||||||||||||||
| U.S. dollars in thousands | |||||||||||||||||||||||||||
| Net revenues | $ | 11,591 | $ | 3,379 | $ | 14,970 | $ | (3,236 | ) | $ | 11,734 | ||||||||||||||||
| Cost of revenues(2) | 5,959 | 629 | 6,588 | (3,107 | ) | 3,481 | |||||||||||||||||||||
| Gross profit(2) | 5,632 | 2,750 | 8,382 | (129 | ) | 8,253 | |||||||||||||||||||||
| Operating expenses(2) | 2,753 | 4,694 | 7,447 | — | 7,447 | ||||||||||||||||||||||
| Depreciation and amortization | 555 | 107 | 662 | ||||||||||||||||||||||||
| Adjusted EBITDA(3) | $ | 3,434 | $ | (1,837 | ) | $ | 1,597 | ||||||||||||||||||||
| Three Months Ended June 30, 2015 | |||||||||||||||||||||||||||
| Nutrition Segment | VAYA Pharma Segment | Total Segment Results of Operations | Elimination(1) | Consolidated Results of Operations | |||||||||||||||||||||||
| U.S. dollars in thousands | |||||||||||||||||||||||||||
| Net revenues | $ | 14,683 | $ | 1,841 | $ | 16,524 | $ | (3,129 | ) | $ | 13,395 | ||||||||||||||||
| Cost of revenues(2) | 7,850 | 371 | 8,221 | (2,991 | ) | 5,230 | |||||||||||||||||||||
| Gross profit(2) | 6,833 | 1,470 | 8,303 | (138 | ) | 8,165 | |||||||||||||||||||||
| Operating expenses(2) | 3,516 | 2,449 | 5,965 | (3 | ) | 5,962 | |||||||||||||||||||||
| Depreciation and amortization | 505 | 40 | 545 | ||||||||||||||||||||||||
| Adjusted EBITDA(3) | $ | 3,822 | $ | (939 | ) | $ | 2,883 | ||||||||||||||||||||
____________________
(1) Represents the change from proportionate consolidation to the equity method of accounting.
(2) Includes depreciation and amortization, but excludes share-based compensation expense.
(3) Adjusted EBITDA is a non-GAAP financial measure. For a definition and a reconciliation of Adjusted EBITDA to our net income, see "Non-GAAP Financial Measures" below.
Six Months Results
For the six months ended June 30, 2016, net revenues increased 4.1% to $25.7 million from $24.7 million for the same period a year ago. For the six months ended June 30, 2016, based on the proportionate consolidation method that we use for segment reporting, net revenues increased 4.0% to $32.1 million from $30.9 million for the same period a year ago. The increase was primarily due to an increase of $1.0 million in sales of INFAT® products (proportionate consolidation method), an increase of $2.6 million in sales of VAYA Pharma products and increase of $1.0 million in sales of PS products, partially offset by a decrease of $3.4 million in sales of krill products.
For the six months ended June 30, 2016, gross margin increased 700 basis points to 68.3% from 61.3% for the same period a year ago primarily due to improved product mix.
For the six months ended June 30, 2016, research and development expenses increased 28.1% to $3.7 million from $2.9 million for the same period a year ago, primarily due to an increase of $0.7 million in expenses in respect of VAYA Pharma clinical trials.
For the six months ended June 30, 2016, selling and marketing expenses increased 79.9% to $9.2 million, from $5.1 million for the same period a year ago, primarily as a result of expanding VAYA Pharma's operations and infrastructure.
For the six months ended June 30, 2016, general and administrative expenses decreased 15.0% to $3.1 million, from $3.7 million for the same period a year ago, primarily due to a decrease in litigation costs related to the arbitration with AAK, our partner in the joint venture in Sweden, Advanced Lipids AB.
For the six months ended June 30, 2016, net income decreased 59.5% to $1.6 million, or $0.07 per diluted share, from $4.0 million, or $0.17 per diluted share, for the same period a year ago.
For the six months ended June 30, 2016, non-GAAP net income decreased 39.3% to $2.9 million, or $0.12 per diluted share, from $4.8 million, or $0.21 per diluted share for the same period a year ago. A reconciliation of non-GAAP net income to GAAP net income is set forth below.
For the six months ended June 30, 2016, Adjusted EBITDA decreased 22.1% to $4.3 million, from $5.6 million for the same period in the prior year. The reconciliation of adjusted EBITDA to GAAP net income is set forth below.
Set forth below is segment information for the six months ended June 30, 2016 and 2015 (unaudited):
| Six Months Ended June 30, 2016 | |||||||||||||||||||||||||
| Nutrition Segment | VAYA Pharma Segment | Total Segment Results of Operations | Elimination(1) | Consolidated Results of Operations | |||||||||||||||||||||
| U.S. dollars in thousands | |||||||||||||||||||||||||
| Net revenues | $ | 25,613 | $ | 6,503 | $ | 32,116 | $ | (6,416 | ) | $ | 25,700 | ||||||||||||||
| Cost of revenues(2) | 13,097 | 1,170 | 14,267 | (6,190 | ) | 8,077 | |||||||||||||||||||
| Gross profit(2) | 12,516 | 5,333 | 17,849 | (226 | ) | 17,623 | |||||||||||||||||||
| Operating expenses(2) | 6,045 | 8,776 | 14,821 | 14,821 | |||||||||||||||||||||
| Depreciation and amortization | 1,122 | 188 | 1,310 | ||||||||||||||||||||||
| Adjusted EBITDA(3) | $ | 7,593 | $ | (3,255 | ) | $ | 4,338 | ||||||||||||||||||
| Six Months Ended June 30, 2015 | |||||||||||||||||||||||||||||||
| Nutrition Segment | VAYA Pharma Segment | Total Segment Results of Operations | Elimination(1) | Consolidated Results of Operations | |||||||||||||||||||||||||||
| U.S. dollars in thousands | |||||||||||||||||||||||||||||||
| Net revenues | $ | 26,929 | $ | 3,948 | $ | 30,877 | $ | (6,183 | ) | $ | 24,694 | ||||||||||||||||||||
| Cost of revenues(2 | 14,648 | 785 | 15,433 | (5,936 | ) | 9,497 | |||||||||||||||||||||||||
| Gross profit(2) | 12,281 | 3,163 | 15,444 | (247 | ) | 15,197 | |||||||||||||||||||||||||
| Operating expenses(2) | 6,444 | 4,514 | 10,958 | (3 | ) | 10,955 | |||||||||||||||||||||||||
| Depreciation and amortization | 992 | 88 | 1,080 | ||||||||||||||||||||||||||||
| Adjusted EBITDA(3) | $ | 6,829 | $ | (1,263 | ) | $ | 5,566 | | |||||||||||||||||||||||
____________________
(1) Represents the change from proportionate consolidation to the equity method of accounting.
(2) Includes depreciation and amortization, but excludes share-based compensation expense.
(3) Adjusted EBITDA is a non-GAAP financial measure. For a definition and a reconciliation of adjusted EBITDA to our net income, see "Non-GAAP Financial Measures" below.
Joint Venture Accounting
The Company accounts for the results of operation of Advanced Lipids AB (Advanced Lipids), the Company's 50%-owned joint venture, utilizing the equity method of accounting as required by U.S. GAAP. We recognize two sources of income from the JV arrangement. First, we recognize revenue for the enzymes sold by us to AAK upon the sale of the final INFAT® product by AL to its customers. Accordingly, the revenues recognized from the arrangement are the amounts the Company charges to its joint venture partner, or the Company's direct costs of production plus an agreed-upon margin defined in the joint venture agreement. For the three-month periods ended June 30, 2016 and 2015, sales of enzymes to the joint venture partner amounted to $3.3 million and $3.8 million, respectively. For the six-month periods ended June 30, 2016 and 2015, sales of enzymes to the joint venture partner amounted to $7.5 million and $6.7 million, respectively. Second, we also record our share of Advanced Lipids profits under the equity method of accounting. The Advanced Lipids profits that are shared between us and AAK are the profits that Advanced Lipids earns for its distribution activity.
For purposes of segment reporting, we account for the arrangement with AAK and the results of operations of Advanced Lipids using the proportionate consolidation method. Under the proportionate consolidation method, we recognize our proportionate share (50%) of the revenues of Advanced Lipids and record our proportionate share (50%) of the overall joint venture's costs of production and other operating expenses in our income statement. The financial information included in the tables above under the heading "Nutrition segment" includes, inter alia, the results of operations of Advanced Lipids, using the proportionate consolidation method.
Balance Sheet and Liquidity Data
As of June 30, 2016, we had $77.7 million in cash and cash equivalents, short-term bank deposits and short-term and long-term marketable securities (compared to $76.4 million as of December 31, 2015), $30.4 million in other working capital items (compared to $28.2 million as of December 31, 2015) and no debt.
Guidance for 2016
For the full fiscal year 2016, the Company provides the following updates to guidance:
- Net revenues of between $52 million and $56 million
- Net revenues, based on the proportionate consolidation method that is used for segment reporting, of between $65 million and $70 million
- Non-GAAP net income* of between $6 million and $7 million
- Non-GAAP diluted earnings per share (EPS)* of between $0.25 and $0.30
* Non-GAAP net income represents net income excluding (i) share-based compensation expense and (ii) other unusual income or expenses. Non-GAAP diluted EPS is diluted EPS, based on Non-GAAP net income. For a reconciliation of non-GAAP financial measures to GAAP financial measures, see "Non-GAAP Financial Measures" below.
Conference Call Details
Enzymotec will host a conference call today at 8:30 a.m. ET to discuss the financial results for the second quarter of 2016. Listeners in North America may dial +1-877-359-9508 and international listeners may dial +1-224-357-2393 along with confirmation code 56299910 to access the live call. The call will also be broadcast live over the Internet, hosted in the Investors section of Enzymotec's website at http://edge.media-server.com/m/p/j58zacv2 and will be archived online within one hour of its completion.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "anticipates," "believes," "could," "seeks," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" or similar expressions that convey uncertainty of future events or outcomes and the negatives of those terms. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, potential market opportunities and the effects of competition. Such statements involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Some of the important factors that could cause or contribute to such differences include the following: a high proportion of the sales of the INFAT® product is to our customers who then use it in their infant formula products sold to end users in China and therefore our revenues are subject to the effects of Chinese market trends and competition from locally produced products that are not subject to import taxes; growth in the Chinese economy has moderated and this slowdown and related volatility could adversely impact demand for our products in China; we are subject to a degree of customer concentration and our customers do not enter into long-term purchase commitments with us; the demand for products based on omega-3, and, in particular, premium products such as krill oil, has declined in the past and may continue to decline, which, together with a significant increase in capacity by competing manufacturers, may continue to cause intense competition and price pressures; Chinese regulations relating to infant formula are under re-examination, and any regulatory changes affecting the ability of our customers to market infant nutrition products containing INFAT® could adversely affect our business; we rely on our Swedish joint venture partner to manufacture INFAT®; a significant portion of the sales of our INFAT® product is to a single company and if this company were to suffer financially or reduce its use of INFAT® our business could be materially adversely affected; our offering of products as "medical foods" in the United States may be challenged by regulatory authorities; our product development cycle is lengthy and uncertain, and our development or commercialization efforts for our products may be unsuccessful; our inventories include sensitive compounds which may face spoilage or obsolescence; potential future acquisitions of companies or technologies may require management's time and attention, disrupt our business and not yield the returns expected; variations in the cost of raw materials for the production of INFAT® may have a material adverse effect on our business; we are dependent on a single facility that houses the majority of our operations; we anticipate that the markets in which we operate will become more competitive and we may be unable to compete effectively; we may have to pay royalties with respect to sales of our krill oil products in the United States or Australia and any infringement of intellectual property of others could also require us to pay royalties; unfavorable publicity or consumer perception of our products, the supplements that contain them as ingredients and any similar products distributed by other companies could have a material adverse effect on our reputation, the demand for our products and our business; we depend on third parties to obtain raw materials, in particular krill, necessary for the production of our products; we are generally reliant upon third parties for the distribution or commercialization of our products; we may not be able to maintain or increase market acceptance for our products; we are subject to risks relating to the operation and expansion of our production or processing facilities and capabilities; disruption to our IT system could adversely affect our reputation and have a material adverse impact on our business and results of operations; we are not able to predict the results of clinical trials, which may prove unsuccessful or be delayed by certain factors; our ability to obtain krill may be affected by conservation regulation or initiatives; we could be subject to product liability lawsuits, which could result in costly and time-consuming litigation and significant liabilities; and other factors discussed under the heading "Risk Factors" in our annual report on Form 20-F for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 3, 2016.
You should not put undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
About Enzymotec Ltd.
Enzymotec is a leading global supplier of specialty lipid-based products and solutions. The Company develops, manufactures and markets innovative bio-active lipid ingredients, as well as final products, based on sophisticated processes and technologies.
Non-GAAP Financial Measures
Adjusted EBITDA and non-GAAP net income are metrics used by management to measure operating performance. Adjusted EBITDA represents net income excluding (i) financial expenses, net, (ii) taxes on income, (ii) depreciation and amortization, (iv) share-based compensation expense, and (v) other unusual income or expenses, and after giving effect to the change from the equity method of accounting for our joint venture to the proportionate consolidation method. Non-GAAP net income represents net income, excluding (i) share-based compensation expense, and (ii) other unusual income or expenses.
The Company presents Adjusted EBITDA as a supplemental performance measure because it believes it facilitates operating performance comparisons from period to period and company to company by excluding potential differences caused by variations in capital structures (affecting interest expenses, net), changes in foreign exchange rates that impact financial asset and liabilities denominated in currencies other than our functional currency (affecting financial expenses, net), tax positions (such as the impact on periods or companies of changes in effective tax rates) and the age and book depreciation of fixed assets (affecting relative depreciation expense). In addition, both Adjusted EBITDA and non-GAAP net income exclude the non-cash impact of share-based compensation and a number of unusual items that the Company does not believe reflect the underlying performance of our business. Because Adjusted EBITDA and Non-GAAP net income facilitate internal comparisons of operating performance on a more consistent basis, the Company also uses Adjusted EBITDA and non-GAAP net income in measuring our performance relative to that of our competitors. Adjusted EBITDA and non-GAAP net income are not measures of our financial performance under GAAP and should not be considered as substitutes for, but rather as supplements to, net income, operating income or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as measures of the Company's profitability or liquidity.
Adjusted EBITDA and non-GAAP net income have limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the company's results as reported under U.S. GAAP as the excluded items may have significant effects on the Company's operating results and financial condition. When evaluating the Company's performance, you should consider Adjusted EBITDA alongside other financial performance measures, including cash flow metrics, operating income, net income, and the Company's other U.S. GAAP results.
The following table presents a reconciliation of Adjusted EBITDA to net income for each of the periods indicated (unaudited):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Reconciliation of Adjusted EBITDA to net income: | ||||||||||||||||
| Adjusted EBITDA | $ | 1,597 | $ | 2,883 | $ | 4,338 | $ | 5,566 | ||||||||
| Accounting for joint venture | (129 | ) | (135 | ) | (226 | ) | (244 | ) | ||||||||
| Depreciation and amortization | (662 | ) | (545 | ) | (1,310 | ) | (1,080 | ) | ||||||||
| Share-based compensation expenses | (648 | ) | (410 | ) | (1,295 | ) | (798 | ) | ||||||||
| Operating income | 158 | 1,793 | 1,507 | 3,444 | ||||||||||||
| Financial income - net | (64 | ) | (427 | ) | (218 | ) | (526 | ) | ||||||||
| Income before taxes on income | 222 | 2,220 | 1,725 | 3,970 | ||||||||||||
| Taxes on income | (127 | ) | (70 | ) | (253 | ) | (164 | ) | ||||||||
| Share in profits of equity investee | 78 | 114 | 149 | 197 | ||||||||||||
| GAAP net income | $ | 173 | $ | 2,264 | $ | 1,621 | $ | 4,003 | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Reconciliation of Non-GAAP net income to GAAP net income: | ||||||||||||||||
| Non-GAAP net income | $ | 821 | $ | 2,674 | $ | 2,916 | $ | 4,801 | ||||||||
| Share-based compensation expenses | (648 | ) | (410 | ) | (1,295 | ) | (798 | ) | ||||||||
| GAAP net income | $ | 173 | $ | 2,264 | $ | 1,621 | $ | 4,003 | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| U.S. dollars | ||||||||||||||||
| Reconciliation of Non-GAAP diluted EPS to GAAP diluted EPS: | ||||||||||||||||
| Non-GAAP diluted EPS | $ | 0.04 | $ | 0.11 | $ | 0.12 | $ | 0.21 | ||||||||
| Share-based compensation expenses | (0.03 | ) | (0.01 | ) | (0.05 | ) | (0.04 | ) | ||||||||
| GAAP diluted EPS | $ | 0.01 | $ | 0.10 | $ | 0.07 | $ | 0.17 | ||||||||
| ENZYMOTEC LTD. | ||||||||||||||||||
| CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| U.S. dollars in thousands (except per share data) | ||||||||||||||||||
| NET REVENUES | $ | 11,734 | $ | 13,395 | $ | 25,700 | $ | 24,694 | ||||||||||
| COST OF REVENUES * | 3,521 | 5,259 | 8,157 | 9,556 | ||||||||||||||
| GROSS PROFIT | 8,213 | 8,136 | 17,543 | 15,138 | ||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||
| Research and development – net * | 1,803 | 1,475 | 3,702 | 2,889 | ||||||||||||||
| Selling and marketing * | 4,877 | 2,688 | 9,194 | 5,111 | ||||||||||||||
| General and administrative * | 1,375 | 2,180 | 3,140 | 3,694 | ||||||||||||||
| Total operating expenses | 8,055 | 6,343 | 16,036 | 11,694 | ||||||||||||||
| OPERATING INCOME | 158 | 1,793 | 1,507 | 3,444 | ||||||||||||||
| FINANCIAL INCOME – net | 64 | 427 | 218 | 526 | ||||||||||||||
| INCOME BEFORE TAXES ON INCOME | 222 | 2,220 | 1,725 | 3,970 | ||||||||||||||
| TAXES ON INCOME | (127 | ) | (70 | ) | (253 | ) | (164 | ) | ||||||||||
| SHARE IN PROFITS OF EQUITY INVESTEE | 78 | 114 | 149 | 197 | ||||||||||||||
| NET INCOME | $ | 173 | $ | 2,264 | $ | 1,621 | $ | 4,003 | ||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS): | ||||||||||||||||||
| Currency translation adjustments | $ | (56 | ) | $ | 58 | $ | 11 | $ | (70 | ) | ||||||||
| Unrealized gain (loss) on marketable securities | 81 | (104 | ) | 237 | 14 | |||||||||||||
| Cash flow hedge | 8 | (427 | ) | (59 | ) | 207 | ||||||||||||
| Total comprehensive income | $ | 206 | $ | 1,791 | $ | 1,810 | $ | 4,154 | ||||||||||
| EARNINGS PER SHARE: | ||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.10 | $ | 0.07 | $ | 0.18 | ||||||||||
| Diluted | $ | 0.01 | $ | 0.10 | $ | 0.07 | $ | 0.17 | ||||||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES: | ||||||||||||||||||
| Basic | 22,719,323 | 22,462,249 | 22,695,313 | 22,421,345 | ||||||||||||||
| Diluted | 23,370,631 | 23,294,718 | 23,371,992 | 23,209,179 | ||||||||||||||
| * The above items are inclusive of the following share-based compensation expense: | ||||||||||||||||||
| $ | 40 | $ | 29 | $ | 80 | $ | 59 | |||||||||||
| Cost of revenues | 99 | 68 | 198 | 124 | ||||||||||||||
| Research and development - net | 214 | 87 | 427 | 184 | ||||||||||||||
| Selling and marketing | 295 | 226 | 590 | 431 | ||||||||||||||
| General and administrative | $ | 648 | $ | 410 | $ | 1,295 | $ | 798 | ||||||||||
| ENZYMOTEC LTD. | |||||||
| CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS | |||||||
| June 30 | December 31 | ||||||
| 2016 | 2015 | ||||||
| U.S. dollars in thousands | |||||||
| A s s e t s | |||||||
| CURRENT ASSETS: | |||||||
| Cash and cash equivalents | $ | 10,405 | $ | 21,987 | |||
| Short-term bank deposits and marketable securities | 36,181 | 23,051 | |||||
| Accounts receivable: | |||||||
| Trade | 13,029 | 14,956 | |||||
| Other | 2,499 | 2,358 | |||||
| Inventories | 26,518 | 21,815 | |||||
| Total current assets | 88,632 | 84,167 | |||||
| NON-CURRENT ASSETS: | |||||||
| Investment in equity investee | 1,593 | 1,499 | |||||
| Marketable securities | 31,070 | 31,360 | |||||
| Intangibles, long-term deposits and other | 1,041 | 1,116 | |||||
| Funds in respect of retirement benefits obligation | 1,150 | 1,076 | |||||
| Total non-current assets | 34,854 | 35,051 | |||||
| PROPERTY, PLANT AND EQUIPMENT: | |||||||
| Cost | 41,737 | 40,796 | |||||
| L e s s - accumulated depreciation and amortization | 12,342 | 11,088 | |||||
| 29,395 | 29,708 | ||||||
| Total assets | $ | 152,881 | $ | 148,926 | |||
| Liabilities and shareholders' equity | |||||||
| CURRENT LIABILITIES: | |||||||
| Accounts payable and accruals: | |||||||
| Trade | $ | 6,770 | $ | 5,529 | |||
| Other | 4,834 | 5,427 | |||||
| Total current liabilities | 11,604 | 10,956 | |||||
| LONG-TERM LIABILITY - | |||||||
| Retirement benefits obligation | 1,423 | 1,253 | |||||
| Total liabilities | 13,027 | 12,209 | |||||
| SHAREHOLDERS' EQUITY: | |||||||
| Ordinary shares | 58 | 58 | |||||
| Additional paid-in capital | 125,570 | 124,243 | |||||
| Accumulated other comprehensive loss | (282 | ) | (471 | ) | |||
| Retained earnings | 14,508 | 12,887 | |||||
| Total shareholders' equity | 139,854 | 136,717 | |||||
| Total liabilities and shareholders' equity | $ | 152,881 | $ | 148,926 | |||
| ENZYMOTEC LTD. | |||||||
| CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS | |||||||
| Six Months Ended June 30 | |||||||
| 2016 | 2015 | ||||||
| U.S. dollars in thousands | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net Income | $ | 1,621 | $ | 4,003 | |||
| Adjustments required to reflect cash flows from operations: | |||||||
| Depreciation and amortization | 1,310 | 1,080 | |||||
| Share in profits of equity investee | (149 | ) | (197 | ) | |||
| Share-based compensation expense | 1,295 | 798 | |||||
| Loss from sale of property, plant and equipment | 12 | ||||||
| Change in inventories | (4,703 | ) | (538 | ) | |||
| Change in accounts receivable and other | 1,759 | (1,307 | ) | ||||
| Change in accounts payable and accruals | 631 | 1,362 | |||||
| Change in other non-current assets | (21 | ) | (171 | ) | |||
| Change in retirement benefits obligation | 153 | 81 | |||||
| Net cash provided by operating activities | 1,896 | 5,123 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Purchase of property, plant and equipment | (924 | ) | (1,608 | ) | |||
| Investment in bank deposits and marketable securities | (23,384 | ) | (4,545 | ) | |||
| Long-term deposits | 20 | (1 | ) | ||||
| Proceeds from sale of property, plant and equipment | 8 | ||||||
| Proceeds from sale of marketable securities | 10,771 | 4,489 | |||||
| Proceeds from disposal of an equity investee | 64 | ||||||
| Change in funds in respect of retirement benefits obligation | (57 | ) | (58 | ) | |||
| Net cash used in investing activities | (13,510 | ) | (1,715 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Exercise of options by employees | 32 | 214 | |||||
| Net cash provided by financing activities | 32 | 214 | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (11,582 | ) | 3,622 | ||||
| BALANCE OF CASH AND CASH EQUIVALENTS | |||||||
| AT BEGINNING OF PERIOD | 21,987 | 10,315 | |||||
| BALANCE OF CASH AND CASH EQUIVALENTS | |||||||
| AT END OF PERIOD | $ | 10,405 | $ | 13,937 | |||
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