ENZY

Enzymotec Ltd. (ENZY)

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Industry: Consumer Durables
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Enzymotec Ltd. (ENZY)

Q4 2013 Earnings Conference Call

February 13, 2014 08:30 AM ET

Executives

Dr. Ariel Katz - President and CEO

Oren Bryan - VP and CFO

Analysts

Scott Van Winkle - Canaccord Genuity

David Lee - Bank of America Merrill Lynch

Laurence Alexander - Jefferies & Co.

Presentation

Operator

Good morning everyone and thank you for joining us today to review Enzymotec’s Financial Results for the Fourth Quarter and Fiscal Year Ended December 31, 2013. On the call today representing Enzymotec are Dr. Ariel Katz President and Chief Executive Officer; and Oren Bryan, Vice President and Chief Financial Officer. Dr. Katz will start the call with a review of key operating and financial achievements for the quarter and provide and update an update on their growth strategy. Then Mr. Bryan will discuss fourth quarter and fiscal year 2013 financial performance as well as our outlook for 2014.

Finally the Company will open the call for your questions.

Before we begin, we’d like to remind you that on today’s call management may make forward-looking statements. These may include management’s beliefs and expectations about the Company’s management future results. Please be aware they are based on the best available information from management and assumptions that management believed are reasonable as of today’s date.

Such statements are intended to be a representation of future results and are subject to risks and uncertainties. Future results may differ materially from management’s current expectations. We refer you all to Enzymotec’s final perspective from our detailed information on our risks and uncertainties that have a direct bearing on the Company’s operating results performance and financial condition.

On the call today management will also disclose their non-GAAP financial measures which are used as a supplemental measure of performance the Company believes these measures provide useful information for investors in evaluating their operations period-over-period. For each non-GAAP financial measure referenced this call, we have included a reconciliation table of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the Company’s press release.

Please note that non-GAAP financial measures have limitations of analytical tools and should not be considered an isolation or the substitute for Enzymotec’s final results prepared in accordance with GAAP.

With that said I’d now like to turn the call over to Dr. Ariel Katz.

Dr. Ariel Katz

Thanks. Thank you for Flower and welcome everyone to our fourth quarter and fiscal 2013 end conference call. We are very pleased with our fourth quarter results which enabled us to report record net revenues profitability and cash flow from fiscal year 2013. Our team continued to execute on our growth opportunities within the global nutrition market specifically for the year we generated solid gross margin expansion of 290 basis point to 50.6 percentage revenue by robust revenues increase of 71.6 percentage of our Nutrition segment and 142.6% of our VAYA Pharma segment.

Net income was up 138.3% to 11.4 million and adjusted EBITDA grew 121.3% to $16.1 million. Oren Bryan our CFO will review our financial result in greater detail shortly.

We continue to see tremendous growth opportunities for our products in both new and existing markets. Consumers globally are increasingly using products containing our innovative proprietary lipid-based product to address their health and wellness needs. Focusing on our two reportable business segments for enrolment our nutrition segment and VAYA Pharma segment both offer a variety of products that leverage our lipid-related expertise.

The nutrition develop and manufacturing premium INFAT formula ingredients and bioactive value added ingredients. The VAYA Pharma segment focus on lipid-based branded medical good for dietary management of cardiovascular and neurological medical condition; available only under physician’s provision the United States which is currently the principle market for this segment.

For the fiscal year ended December 31, 2013 nutrition and VAYA Pharma segment represented 94.5% and 5.5% of our net revenues respectively. Throughout fiscal 2013 in particular in the fourth quarter our team executed our growth strategy to further strength our position as a global inventor of lipid-based technologies in either of our addressable markets.

One of the key growth strategies is to further focus on leveraging our current strengths in the areas of infant nutrition and consumers health and wellness help the consumers delivering end markets rapidly increase we believe that we have a positive momentum based on our business accomplished at the end of fiscal 2013 and the beginning of fiscal 2014 including the following; Enzymotec was granted patent by Canadian patent trademarks office and by U.S. patent trademark for us of INFAT which is a market and sold by advanced lipid our joint venture with AAK, the Canadian patent cover the use of lipid composition for promoting [intestine] development, maturation, adoption and depreciation.

The U.S. patent cover the [indiscernible] increasing bone strengths to the infant who is in risk of impaired bone strengths, we believe that this patent in Canada and U.S validated our growing recognition of international market and provide our infant nutrition product with the potential to outpace industry growth. Our scientific team remains committed to expanding our intellectual property and delivering value to customers around the world.

At the end of fiscal year 2013 we completed our Migdal Ha'Emeq manufacturing facility expansion and a successful operating run of our new cream extraction process which was in line with our expected the timeline. This manufacturing expansion enables as to turn krill meal into crude krill oil in-house and expand our capacity to capture future sales growth opportunities. We also believe that having this process in-house will be more efficient due to the use of the new technologies and the sale of multiple byproduct of krill oil extraction process from which we did in benefit in the past, thereby also increasing our nutrition segment revenues and gross profit margins long-term.

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