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APPLIED DNA SCIENCES INC (APDN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 revenue grew 6% year over year to $0.98M but fell 18% sequentially; operating loss improved modestly year over year to $(3.46)M, and net loss improved to $(3.34)M; Adjusted EBITDA was $(3.32)M, flat vs prior year .
  • LineaRx (Therapeutic DNA Production Services) segment revenues rose 44% YoY on large DNA shipments; MDx Testing Services declined 33% YoY on reduced COVID surveillance testing .
  • Versus S&P Global consensus for Q2: revenue missed ($1.19M* vs $0.98M actual), and Primary EPS was below consensus (−45* vs −230.89* actual Primary EPS, largely driven by warrant-related deemed dividends and the March reverse split). Coverage remains thin (1 estimate) so model revisions are likely* .
  • Strategic resets completed; management expects quarterly cash burn to start declining from Q3 FY25 and highlighted catalysts: Site 1 GMP capacity online, proprietary enzyme/buffer scaling beginning June 2025, LineaPCR launch targeted for Q4 FY25, and NYSDOH review of H5N1 LDT .

What Went Well and What Went Wrong

What Went Well

  • LineaRx momentum: “Therapeutic DNA Production Services segment revenues increased 44% YoY,” aided by large-scale DNA manufacturing shipments; Site 1 was validated and can support $10–$30M annual revenue capacity depending on mix .
  • Margin mix improvement: Gross profit rose to $370.8k and gross margin expanded to 38% vs 32% a year ago on product mix and scale absorption .
  • Strategic focus: “We concluded a strategic reset and have emerged more focused, leaner… positioned as what we believe to be North America’s largest, PCR-based producer of cell-free DNA,” with an execution priority on LineaRx and ADCL to drive recurring revenue and higher gross margins .

What Went Wrong

  • MDx headwinds: MDx Testing Services revenues fell 33% YoY due to reduced COVID surveillance testing; overall revenue declined sequentially from Q1 .
  • Capital/controls overhang: 10-Q disclosed a material weakness in fair value inputs for warrant modifications; going concern doubt persists with six-month operating cash use of $6.51M .
  • Estimate miss and EPS noise: Q2 revenue missed consensus and Primary EPS was far below consensus, driven by large deemed dividends from warrant modifications (−$23.9M) and share count changes from a 1:50 reverse split, complicating comparability and likely forcing estimate resets .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD)$813,106 $1,196,617 $983,374
Gross Profit ($USD)$244,899 (= $813,106 − $568,207) $684,107 $370,847
Gross Margin (%)30.1% (= $244,899 / $813,106) 57.1% (= $684,107 / $1,196,617) 37.7% (= $370,847 / $983,374)
Operating Loss ($USD)$(3,271,256) $(2,964,001) $(3,461,795)
Net Loss ($USD)$(3,313,744) $(2,668,713) $(3,336,120)
GAAP EPS to common ($)$(0.32) $(0.56) $(15.35)
Adjusted EBITDA ($USD)$(3,152,804) $(2,888,877) $(3,322,004)
Cash & Equivalents (period-end, $USD)$6,431,095 $9,294,365 $6,823,260

Segment revenue breakdown (YoY comparison):

SegmentQ2 2024Q2 2025
Therapeutic DNA Production Services$323,352 $467,209
MDx Testing Services$331,020 $220,552
DNA Tagging & Security Products$275,259 $295,613

KPI highlights:

KPIQ4 2024Q1 2025Q2 2025
Accounts Receivable ($USD)$362,013 $911,502 $689,887
Total Operating Expenses ($USD)$3,516,155 $3,648,108 $3,832,642
Cash from Operations (6M) ($USD)——$(6,511,109)

Estimates vs actual (Q2 2025):

MetricConsensusActualSurprise
Revenue ($USD)$1,185,000*$983,374 −$201,626 (−17.0%)*
Primary EPS ($)−45.00*−230.89*−185.89*

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly cash burnQ3 FY25 onwardNot providedExpects quarterly cash burn to begin declining starting Q3 FY25 Lower cash burn
Enzyme/buffer manufacturing (LineaRNAP system)June 2025Not providedLarge-scale manufacturing by U.S. CDMO expected to begin in June 2025 New milestone
LineaPCR launchQ4 FY25Not providedExpected launch in Q4 FY25 New product
H5N1 LDT (AIH5 Dx)Under NYSDOH reviewNot providedValidation submitted; approval timing unknown Regulatory pending
Formal financial guidance (revenue, margins, tax)FY25Not providedNone providedMaintained (no formal guidance)

Earnings Call Themes & Trends

TopicQ4 2024 (prior)Q1 2025 (prior)Q2 2025 (current)Trend
AI/technology initiativesInitiated next-gen high-fidelity polymerase program for long/complex DNA; IVT platform being evaluated in Japan Modular, low-CAPEX GMP model; scaling Linea RNAP; product expansion (Linea donor DNA for CRISPR HDR) “AI drug design is shortening genetic medicine timelines,” creating demand for enzymatic DNA Building capabilities; narrative strengthening
GMP capacity & executionGMP facility completion targeted (Jan 9, 2025) Site 1 certified operational; blueprint for expanding modular capacity Site 1 validated; capacity supports $10–$30M annual revenue depending on mix Execution milestones
Supply chain/IVD$500k follow-on IVD order (cancer diagnostic) Retained certain tagging contracts; manufacturable with Linea workflows Continued large-scale LineaDNA deliveries under IVD supply agreements Stable IVD demand
Regulatory/legalLeadership changes; restructuring focus TR8 PGx certifications to test samples from all 50 states H5N1 LDT submitted; under NYSDOH review Regulatory pipeline expanding
R&D executionNext-gen polymerase program started New Linea donor DNA product; GMP upgrades plan and copy/paste modular approach Proprietary enzyme/buffer near completion; large-scale mfg to begin June 2025 R&D to productization
Macro/tariffs——“Challenging macro environment with regulatory headwinds and volatile equity markets” Macro headwinds acknowledged

Management Commentary

  • “We concluded a strategic reset and have emerged more focused, leaner, and positioned to meet biopharma’s emergent demand for enzymatic DNA… [LineaRx] positioned as what we believe to be North America’s largest, PCR-based producer of cell-free DNA.” — Dr. James A. Hayward, CEO .
  • “Site 1 can support an annual revenue capacity between $10 million and $30 million, contingent on product mix and pricing.” — Management commentary .
  • “We believe industry tailwinds are accelerating… AI drug design is shortening genetic medicine development timelines… limitations of competing enzymatic DNA technologies… offer market opportunities.” — CEO .

Q&A Highlights

  • Product expansion: Launch of Linea donor DNA for CRISPR HDR applications; management sees a large emerging market in cell and gene therapy as CAR‑T workflows move toward gene editing modalities .
  • Revenue drivers: Q1 growth driven by shipment of DNA taggant to cotton customer and increased isotopic testing volumes; tagging contract retained post‑restructuring due to workflow compatibility .
  • Clinical validation: First‑in‑human CAR‑T trial in Prague using LineaDNA; chosen over plasmid due to speed and regulatory ease; revenue impact is limited near‑term given hospital-led trial design, but validation is strategic .

Estimates Context

  • Consensus coverage is limited (1 estimate each) and likely stale given reverse split and warrant-related deemed dividends in Q2 that materially impacted Primary EPS*.
  • Q2 revenue missed consensus ($1.19M* vs $0.98M), while S&P’s Primary EPS actual (−230.89*) was far below the −45* consensus; management-reported GAAP EPS to common was −$15.35 due to a −$23.9M deemed dividend from warrant modifications .
  • Near-term estimate revisions likely as Street incorporates segment mix (MDx decline, LineaRx growth), the June enzyme scale-up, and the LineaPCR Q4’25 launch*.
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • LineaRx is the core growth engine: 44% YoY segment revenue growth and validated GMP capacity position APDN to convert evaluations/pilots into recurring orders; watch for CDMO/therapeutic developer GMP wins over the next 1–2 quarters .
  • Margin trajectory depends on product mix and scale: Q2 gross margin improved YoY on large DNA shipments; further mix shift toward Linea IVT templates and RNAP could lift margins .
  • Cash discipline and runway: Management expects cash burn to decline starting Q3; monitor operating cash flow, working capital, and progress on reducing SG&A while scaling Site 1 .
  • Regulatory catalysts: NYSDOH decision on H5N1 LDT and continued PGx commercialization efforts at ADCL could provide incremental revenue visibility, albeit with uncertain timing .
  • Estimate reset risk: Sparse coverage and structural EPS noise (reverse split/warrants) suggest near‑term consensus volatility; anchor on revenue/Adjusted EBITDA for operating performance and segment growth signals* .
  • Strategic product launches: LineaPCR in Q4’25 and enzyme/buffer scale-up in June aim to broaden offering, reduce COGS, and enable longer/complex sequences (sa‑mRNA), supporting pricing power and adoption .
  • Trading implications: June 3 investor call and any announced GMP contracts are potential upside catalysts; conversely, MDx demand softness and control/going‑concern disclosures are overhangs to monitor .