EZZ is a rare biotech on the ASX turning a profit with its FY22 results showing it remains goal-focused and ‘disciplined’ in its recovery from tough covid-19 trading conditions.
Genomic-tech firm, EZZ Life Science Holdings (ASX:EZZ) has delivered solid preliminary FY22 results, including rapid revenue recovery in H2 and normalised EBITDA.
FY22 revenue totalled more than $15 million following rapid revenue recovery in H2 from H1 as global local and supply challenges caused by the covid-19 pandemic eased.
Strong upturn in normalised EBITDA in H2 led to total normalised EBITDA of more than $1.76 million in FY22.
EZZ has also reported substantial improvement in operating cash flow, which increased by 7.5 times from $253,533 in FY21 to more than $1.9 million in FY22, with significant optimisation of its cashflow conversion rate from 0.1 in FY21 to 1.4 in FY22.
EZZ currently holds zero external interest-bearing debt other than lease liabilities, and has a strong cash position of $10.5 million as of June 30, 2022, representing an 18% increase on pcp.
Revenues decrease but on the up
EZZ’s revenue dropped by 33% from ~$22 million in FY21 to $15 million in FY22 largely due to the continuing impacts of the pandemic.
However, the company said overall H2 saw a strong rebound in sales revenue, with a 24% increase for EZZ products compared to the previous corresponding period as well as a 96% increase when compared to H1 FY22.
In June EZZ launched a cross-border e-commerce store on Douyin, mainland China’s version of TikTok, as an alternate direct-to-customer channel to other major e-commerce platforms.
Revenue growth from Douyin exceeded management’s expectations in the first month of operation.
Douyin is expected to become another key e-commerce platform along with more traditional e-commerce platforms accessible in China and reduce the level of concentration on single e-commerce platforms in this market.
Product range successful
The company has expanded the EZZ branded product range with seven new products. L-Lysine Growth Capsule was introduced in July 2021, representing a successful high margin product which contributed 27% to the revenue from EZZ branded products.
Sales of EZZ’s Bone Growth Capsules reached $400,000 during China’s mid-year e-commerce shopping festival, known as “618”.
Bone Growth Capsules has become a leader in children’s nutritional supplement in sales, reviews, and re-purchase on Tmall Global.
Geographical performance
Revenue from Australia and New Zealand represented 63% of the total revenue in FY22 as compared to 54% in FY21.
The revenue from international markets represented 37% of the total revenue in FY22 as compared to 46% in FY21.
Revenue from international markets was primarily attributable to sales from China.
Gross margin decreases
Gross margin decreased from 56% in FY21 to 50% in FY22. Average gross margin for EZZ branded products was 67% in FY22, compared to 82% in FY21, with the decrease resulting from a change in the revenue mix towards lower margin products.
The increase in sales of lower margin products was part of EZZ’s strategy to boost penetration into the grocery retailer market and create brand awareness. During that period, advertising expenses were reduced significantly.
Average gross margin on the EAORON branded products increased from 29% to 30% due to Australian United Pharmaceuticals’s promotional pricing on selected products and the focus on distributing higher margin products of the EAORON brand.
Discipline key to growth
Despite the significant market uncertainties brought on by the pandemic related lockdowns in H1 FY22, EZZ said it “remained disciplined”, continuing to “work towards long-run growth objectives” to deliver a successful end to FY22.
EZZ said establishment of diversified distribution channels led to a substantial improvement in revenue and cash flow from operations in H2 FY22 and put the company in a robust financial position for future growth.
This article was developed in collaboration with EZZ Life Science Holdings, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.