Zomedica Corp. (ZOM) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed results: while revenue has grown, operating expenses have increased significantly, and the company continues to report a net loss. The lack of a shareholder return plan and the CFO search add uncertainties. The Q&A section shows management's reluctance to provide clear guidance, further increasing investor concerns. Despite some positive signs like increased gross margins and cash position, the overall sentiment leans negative due to financial pressure and lack of concrete future guidance.
Key Financial Performance
Total Revenue $7 million, an increase of 10.2% year-over-year, driven by growth in both Diagnostics and Therapeutic Devices segments.
Capital Revenue $2.2 million, an increase of over 21% year-over-year, primarily due to continued execution of the PulseVet commercial strategy.
Consumable Revenue $4.8 million, an increase of approximately 6% year-over-year, despite a significant distributor initial stocking order for Assisi in the prior year.
Consumable Revenue (excluding Assisi) Increased by 27% year-over-year.
Therapeutic Devices Segment Revenue $6.5 million, up 8.5% year-over-year, primarily driven by the strength of PulseVet, which was up 24.5% or $1.1 million.
Diagnostic Segment Revenue Approximately $500,000, an increase of 38% year-over-year, driven primarily by growth within the TRUFORMA product platform.
Gross Margin 72.3%, slightly better than the high end of the target range of 65% to 70%, and higher than last year’s 69%.
Total Operating Expenses $12.5 million, an increase of 21% year-over-year, but $900,000 or 7% lower compared to the second quarter of 2024.
Net Loss $6.7 million or $0.007 per share, compared to a net loss of $491,000 or $0.0005 per share in the prior year.
Non-GAAP EBITDA Loss $4.8 million, compared to a loss of $0.3 million for the same period last year.
Cash Position $77.8 million in cash, cash equivalents, and available for sale securities.
Cash Used in the Quarter Approximately $5.1 million, including $1.1 million of non-recurring items.
Total Use of Cash by Quarter (2024) $9.6 million, $7.9 million, and $5.1 million, reflecting positive trends in operating efficiency and revenue growth.
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Operating Highlights
TRUFORMA platform: Revenue grew 38% year-over-year, driven by 80% growth from the TRUFORMA platform.
PulseVet system: Total therapeutic device revenue increased 8.5% year-over-year, with PulseVet performance increasing 24%.
Assisi Loop products: Assisi Loop products received a renewal of its fear-free status, important for pet parents.
TRUVIEW digital microscope: AI interpretations are being added to the TRUVIEW system, with field testing currently underway.
VetGuardian platform: Launched advanced audio capabilities, enhancing monitoring data for veterinarians.
New assays: Preparing to launch several new assays including equine insulin and canine progesterone.
International market expansion: Expanded global reach through partnerships with distributors in the Middle East, Costa Rica, and Europe.
CE Marking: All Zomedica products now have CE Marking, allowing sales in the EU and other countries.
Japan market entry: Acquiring necessary approvals to launch TRUFORMA, TRUVIEW, and VETGuardian products in Japan in 2025.
Automated manufacturing line: Installed a new automated robotic manufacturing line to improve production efficiency.
Operating expenses reduction: Reduced operating expenses by over $900,000 compared to the previous quarter.
Sales force expansion: Plans to increase sales presence with new positions focusing on corporate accounts and capital sales.
Focus on profitability: Aiming for cash flow breakeven at $50 million in annualized revenue, with a target for 2026.
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Risk or Challenges
Sales Force Disruption: The company experienced disruptions in the sales force due to multiple representatives being unexpectedly on medical leave, which impacted capital sales in the second quarter. Although the sales force returned to full strength in the third quarter, the potential for future disruptions remains a risk.
Interest Rate Concerns: Macroeconomic factors, particularly interest rate concerns, were noted as potentially impacting new system purchases. Although rates have stabilized, the company deployed additional pricing models to mitigate this risk.
Delisting Risk: There is a risk of delisting from the exchange due to the stock price falling below $0.20 on the 30-day moving average. The company has communicated its growth plans to the exchange to maintain its listing.
Cash Flow Breakeven: The company expects to achieve cash flow breakeven at an annualized revenue of $50 million. However, the timeline for reaching this target has been adjusted to 2026, reflecting a more conservative outlook.
Regulatory Approvals: Entering new international markets requires navigating complex regulatory approvals, which can delay revenue generation despite having distribution agreements in place.
Operating Expenses: While operating expenses have been reduced, there is a risk that they may increase again due to non-recurring professional fees or other unforeseen costs.
Market Penetration: The company currently has only 1% penetration of its total available market, indicating significant growth potential but also highlighting the challenges of scaling operations effectively.
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Guidance & Outlook
Revenue Growth: Zomedica reported a record revenue of $7 million for Q3 2024, reflecting over 10% growth year-over-year, marking the 14th consecutive quarter of revenue growth.
International Expansion: Zomedica has expanded its global reach through strategic partnerships with distributors in international markets, including the Middle East, Costa Rica, and Europe, and aims to launch products in Japan in 2025.
Product Development: The company is focused on enhancing its product lines, including the TRUVIEW digital microscope and TRUFORMA platform, with new assays and AI capabilities.
Cost Efficiency: Zomedica has implemented a new automated manufacturing line to improve production efficiency and reduce operating expenses.
Sales Force Expansion: Plans to increase sales presence in 2025 with new positions focusing on corporate accounts and capital sales.
Future Revenue Expectations: Zomedica expects to continue revenue growth across all product segments and anticipates substantial growth in international markets in 2025.
Profitability Timeline: The company aims to achieve cash flow breakeven at an annualized revenue of $50 million, targeting this milestone by 2026.
Gross Margin Projections: Zomedica expects to maintain gross margins around 70%, with a target range of 65% to 70%.
Operating Expenses: The company aims to reduce operating expenses as a percentage of revenue while continuing to grow revenue.
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Shareholder Return Plan
Shareholder Return Plan: Zomedica's management indicated that they do not currently plan to initiate a stock buyback program, as they believe using available capital for organic growth and potential acquisitions is more beneficial for shareholders. They emphasized that a buyback might provide short-term gains but would result in a permanent loss of capital.
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Key Q&A
Q:How does the remaining quarter of the year look and what is the outlook for growth in 2025?
A:We expect growth to accelerate in 2025 beyond what we saw in 2024, with plans to increase our sales presence and fill new positions.
Q:Can you provide any ballpark figures for revenue growth or expectations pending the arrival of the new CFO?
A:We are confident in increasing revenues across all product segments, but prefer to wait until we can provide credible guidance in the New Year.
Q:Are the trends in low cost of goods sold and lower operating expenses expected to continue?
A:We expect gross margins to remain around 70% and operating expenses as a percentage of revenue to continue to decline.
Q:When do you expect to reach cash flow breakeven?
A:We expect to be cash flow positive once we hit $50 million in annualized revenue, aiming for that level by 2026.
Q:Is there any consideration for a stock buyback?
A:We believe a stock buyback would not be in the best interest of shareholders; we prefer to use capital for organic growth and acquisitions.
Q:What are the potential sources of funding if cash runs low?
A:We have $78 million in liquidity and do not anticipate needing to raise money for operations.
Q:What is the risk of being delisted at the current stock price?
A:There is a risk of delisting if the stock falls below $0.20 on the 30-day moving average, but we do not anticipate that happening.
Q:Why is it taking so long to hire a new CFO?
A:We are taking our time to find the right candidate and are confident in our interim CFO's performance.
Q:Will you be profitable by late 2025?
A:We previously aimed for profitability by late 2025, but now believe that timeline is aggressive and are targeting 2026 instead.
Q:What are the margins headed toward with new technology products?
A:We expect margins to remain in the 65% to 70% range, with a focus on maintaining high gross margins.
Q:Review of Unclear Management Responses
A:Management avoided providing specific revenue growth figures for 2025 and did not give a clear timeline for reaching cash flow breakeven, instead opting for vague language about being 'confident' and 'aiming' for certain targets.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Association
China
Corporate
Hong Kong
President
PulseVet capital
PulseVet system
TRUVIEW system
Vice
Zuehlke
adoption
capital sale
condition
couple
customer
election
equine PulseVet
facility
factor
functionality
infrastructure
installation
insulin
interest rate
job
member
microscope
penetration
portfolio
progesterone
question delisting
rep
respect
revenue
sale force
situation
strength
trade show
trend
use cash
variety
ZOM Transcript
Zomedica Corp. (ZOM) Q3 2024 Earnings Call Transcript
Unknown11-8
The earnings call reveals mixed results: while revenue has grown, operating expenses have increased significantly, and the company continues to report a net loss. The lack of a shareholder return plan and the CFO search add uncertainties. The Q&A section shows management's reluctance to provide clear guidance, further increasing investor concerns. Despite some positive signs like increased gross margins and cash position, the overall sentiment leans negative due to financial pressure and lack of concrete future guidance.
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Frequently Asked Questions
Where does this earnings call transcript come from?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
