Executive Summary

Q1 2024 showed continued ASP-driven revenue improvement but lower volumes: total revenue $3.85M (+11% YoY) on test revenue $3.68M (+7% YoY) as billable samples fell 14% to ~15,360; test gross margin improved to 16% from -11% YoY on lower employee-related costs .
The quarter missed third‑party consensus: EPS (-$0.58) vs (-$0.57) and revenue $3.85M vs $3.99M; S&P Global consensus was unavailable in our system this quarter .
Strategic risk escalated: on April 18, DermTech began a strategic alternatives process, cut ~56% of its workforce, and cancelled the Q1 call; the 10‑Q cited substantial doubt about going concern and suspended cash runway disclosure amid the review .
Balance sheet/liquidity tightened: cash, cash equivalents, restricted cash and short-term marketable securities fell to $42.4M as of March 31, 2024, and a May 7 landlord default notice underscored liquidity pressure .

What Went Well and What Went Wrong

What Went Well

ASP-driven revenue execution: Test revenue grew 7% YoY to $3.68M on a 24% ASP increase, lifting total revenue 11% YoY to $3.85M despite lower volumes .
Cost control improved unit economics: Cost of test revenue fell 19% YoY to $3.09M; test gross margin improved to 16% vs -11% a year ago, primarily from lower employee-related costs .
OpEx reduction progress: Sales & marketing (-49% YoY to $7.8M), R&D (-26% YoY to $3.3M), and G&A (-15% YoY to $10.1M) declined; G&A included ~$1.3M non-recurring restructuring cost .

Management quote (prior quarter context on strategy): “We’ve aligned our commercial effort with the aim to maximize revenue by focusing on existing customers and reimbursed tests… We expanded our Medicare proportion of billable samples… and delivered on… operating efficiencies” – CEO Bret Christensen (Q4’23 press release) .

What Went Wrong

Volume contraction: Billable samples declined 14% YoY to ~15,360 as DermTech prioritized reimbursed tests, reduced sales coverage, and ended certain patient segments (e.g., pediatrics) .
Miss vs estimates and no call: Q1 revenue and EPS were slightly below third‑party consensus; company did not host an earnings call due to strategic review, limiting guidance and disclosure .
Liquidity/going concern: The 10‑Q cited substantial doubt about going concern within 12 months, and a post‑quarter landlord default notice highlighted near‑term cash constraints .

Financial Results

Metric	Q3 2023	Q4 2023	Q1 2024
Total Revenue ($M)	$3.92	$3.92	$3.85
Test Revenue ($M)	$3.69	$3.70	$3.68
Contract Revenue ($M)	$0.22	$0.22	$0.17
Gross Profit ($M)	$0.17	$0.44	$0.71
Test Gross Margin %	1%	7%	16%
Total Operating Expenses ($M)	$19.98	$20.19	$21.22
Net Loss ($M)	$(19.16)	$(19.09)	$(20.01)
Diluted EPS ($)	$(0.57)	$(0.56)	$(0.58)
Cash, CE, Restricted & ST Investments ($M)	$71.7	$59.3	$42.4

Segment revenue mix ($M)

Revenue	Q3 2023	Q4 2023	Q1 2024
Test Revenue	$3.69	$3.70	$3.68
Contract Revenue	$0.22	$0.22	$0.17
Total Revenue	$3.92	$3.92	$3.85

KPIs and cost metrics

KPI / Cost	Q3 2023	Q4 2023	Q1 2024
Billable Samples (approx.)	~15,710	~15,580	~15,360
ASP YoY Change	+24%	+55%	+24%
Cost of Test Revenue ($M)	$3.66	$3.43	$3.09
Sales & Marketing ($M)	$8.12	$8.42	$7.82
R&D ($M)	$3.60	$3.35	$3.27
G&A ($M)	$8.26	$8.42	$10.14 (includes ~$1.3M restructuring)

Vs. estimates (Q1 2024)

Metric	Actual	Consensus	Surprise
EPS	-$0.58	-$0.57 (third‑party)	Miss
Revenue	$3.85M	$3.99M (third‑party)	-3.6%

Note: S&P Global consensus was unavailable via our system for this quarter; third‑party sources are cited instead.

Guidance Changes

Metric	Period	Previous Guidance/Commentary	Current (Q1 2024)	Change
Cash runway	As of Q4 2023	“Estimated cash runway into the first quarter of 2025”	Company is not providing a cash runway estimate amid strategic review; substantial doubt about going concern noted in 10‑Q	Withdrawn/suspended
Earnings call cadence	Q1 2024	Calls held previously (e.g., Q4 2023)	No Q1 2024 call due to strategic alternatives process	Call cancelled
Workforce	2024	Prior actions in 2023/Jan 2024	Additional ~56% reduction announced Apr 18, 2024	Lowered cost base materially
Sales coverage	2024	~60 territories → ~55 (Jan 2024)	Plan to reduce to ~5 territories by end Q2 2024	Material reduction
Product offering	Effective Mar 1, 2024	DMT with optional TERT add‑on available historically	TERT add‑on assay discontinued; foundational DMT continues	Streamlined offering

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4 2023)	Current Period (Q1 2024)	Trend
Commercial focus on reimbursed tests / ASP	CEO emphasized prioritizing reimbursed tests, ASP, and operating efficiencies	ASP +24% YoY; test revenue +7% YoY; billable samples -14% as mix/prioritization and sales coverage cuts weighed on volumes	Continuing shift to revenue quality over volume
Sales force footprint	Reductions and territory changes underway	~60 → ~55 (Jan) → plan ~5 by end Q2 2024	Aggressive downsizing
Payer coverage/Medicare mix	Growing covered lives and Medicare mix	Mix and ASP supported revenue despite volume declines	Focus sustained
Supply chain/inflation	Noted inflationary environment risk ; broadly referenced	Cites supply chain/inflationary headwinds in MD&A	Ongoing macro risk
Regulatory/legal (LDT framework)	N/A	FDA LDT final rule overview and potential implications; evaluation ongoing	Regulatory uncertainty rising
Lab accreditation	N/A	CAP accreditation not renewed; JCO designated as primary accreditor	Accreditation regime change
Strategic alternatives/going concern	N/A	Strategic review initiated; going concern substantial doubt; no cash runway guidance	Elevated strategic/liquidity risk
Product performance/assay mix	N/A	Discontinued TERT add‑on after TRUST2 showed no significant NPV gain and slight specificity decrease	Streamlining portfolio

Management Commentary

“We’ve aligned our commercial effort with the aim to maximize revenue by focusing on existing customers and reimbursed tests… We expanded our Medicare proportion of billable samples… We’ve also delivered on our commitment to find additional operating efficiencies” – Bret Christensen, CEO (Q4’23 press release) .
“We’re… prioritizing reimbursed billable samples to grow revenue… [and] modified incentive compensation for our sales team to prioritize revenue over volume” – Bret Christensen, CEO (Q2’23 press release, providing context to the strategy that continued through Q1’24) .

Additional context (company communications):

Strategic alternatives and restructuring: special committee engaged TD Cowen; workforce reduction ~56%; no Q1 call .
Liquidity and going concern: “substantial doubt exists” about ability to continue as a going concern; company suspended runway disclosure during the review .

Q&A Highlights

No Q1 2024 earnings call was held as a result of the strategic alternatives process .

Estimates Context

S&P Global consensus was not available via our system for DMTK this quarter. Third‑party sources indicated Q1 2024 EPS (-$0.58) vs est. (-$0.57) and revenue $3.85M vs est. $3.99M (miss) .
Estimate revisions are likely to converge on: lower volumes from reduced sales coverage, offset by higher ASP/test margin improvements; near‑term liquidity and strategic path will dominate estimate risk premia .

Key Takeaways for Investors

The ASP‑first strategy is working to lift revenue/margins, but aggressive downsizing and mix prioritization are suppressing volumes; margin gains are contingent on sustaining payer mix and operational efficiencies .
Liquidity/going concern risk is elevated; the strategic alternatives outcome (sale, merger, asset transaction) will be the primary stock catalyst near term; the company is not giving runway guidance during the process .
Operational simplification (TERT add‑on discontinued) focuses resources on the foundational DMT while early signs of better test gross margin are encouraging (16% vs -11% YoY) .
Accreditation transition (CAP non‑renewal; JCO as primary) and potential FDA LDT regulation add regulatory complexity to the medium‑term thesis .
Without a Q1 call, transparency is reduced; investors should monitor subsequent 8‑Ks (lease/credit developments), payer coverage updates, and any indications of bidder interest or transaction structure .
Near‑term trading likely hinges on strategic headlines and liquidity milestones; medium‑term value depends on achieving a stable, reimbursed volume base with improving unit economics .

Appendix: Year-over-Year Detail (Q1 2024 vs Q1 2023)

Metric	Q1 2023	Q1 2024	YoY
Total Revenue ($M)	$3.48	$3.85	+11%
Test Revenue ($M)	$3.43	$3.68	+7%
Billable Samples	~17,800	~15,360	-14%
Test Gross Margin %	-11%	16%	+27 pts
Net Loss ($M)	$(31.27)	$(20.01)	Better by $11.26
Diluted EPS ($)	$(1.02)	$(0.58)	Improved $0.44

All figures sourced from company filings and press releases as cited. Where third‑party estimate data are used, sources are explicitly linked and S&P Global consensus unavailability is noted.

DermTech, Inc. (DMTK)·Q1 2024 Earnings Summary