Executive Summary

Q2 2023 printed a return to profitability: revenue $5.00M (+7% YoY), gross margin 69% (+1,200 bps YoY), and net income $0.31M vs. a $0.32M loss in Q2 2022, driven by higher price per case and mix shift toward Fuse-branded/private-label products that lowered cost of revenues .
Sequential momentum vs. Q1 2023: revenue rose from $3.98M to $5.00M and operating loss flipped to a $0.37M operating profit as gross margin held at elevated levels (71% in Q1 vs. 69% in Q2) .
No quantitative guidance was issued; management reiterated focus on designing and commercializing new devices, increasing Fuse-branded mix, and expanding distribution—key levers for margin and growth durability .
Near-term catalysts center on sustaining gross margin gains via Fuse-branded mix and price-per-case, while monitoring liquidity reliance on the eCapital revolver (borrowing base reached as of 6/30) and rising interest expense headwinds .

What Went Well and What Went Wrong

What Went Well

Gross margin expansion: 69% in Q2 2023 vs. 57% in Q2 2022 on increased Fuse-branded/private label mix; cost of revenues down 13 pts as % of revenue YoY .
Return to profitability and EBITDA improvement: net income $0.31M vs. $(0.32)M YoY; EBITDA $0.40M vs. $(0.27)M YoY; CEO cited “31% increase in gross profit” and “$648k increase in EBITDA” YoY .
Pricing/mix supports unit economics: revenues per case rose to $4,866 (from $4,335), while average cost of revenues per case fell to $916 (from $1,355) .
Quote: “We are pleased with our second quarter performance… Our implementation and achievement of strategic initiatives, which includes increasing our portfolio of Fuse branded and manufactured products, is reflected in our second quarter results.” — CEO Christopher C. Reeg .

What Went Wrong

Operating expense pressure: SG&A rose to $1.62M (+$195k YoY), lifting SG&A as % of revenue by ~200 bps to 32% as bad debt and admin costs increased .
Higher interest expense: $54k vs. $37k YoY (+48%) due to higher market rates, a headwind as the company relies on its revolver .
Liquidity and leverage sensitivities: at 6/30, cash was ~$0.25M; management disclosed the revolver borrowing base was fully utilized and available liquidity constrained (available cash of ~$359k; borrowing limit reached) .

Financial Results

Metric	Q2 2022 (oldest)	Q1 2023	Q2 2023 (newest)
Revenue ($)	$4,668,290	$3,984,455	$4,997,212
Cost of Revenues ($)	$2,028,497	$1,168,402	$1,528,321
Gross Profit ($)	$2,639,793	$2,816,053	$3,468,891
Gross Margin (%)	57%	71%	69%
SG&A ($)	$1,422,768	$1,706,327	$1,618,160
Commissions ($)	$1,463,859	$1,241,877	$1,449,157
Operating Income (Loss) ($)	$(281,238)	$(165,576)	$368,859
Interest Expense ($)	$36,527	$57,193	$54,024
Net Income (Loss) ($)	$(322,936)	$(228,361)	$307,588
Diluted EPS ($)	(0.00)	(0.00)	0.00
Diluted Shares (Wtd Avg)	78,027,782	70,321,566	78,027,782

Notes:

Press release shows diluted shares of 75,976,582 for Q2 2023 vs. 78,027,782 in the 10-Q; we rely on the 10-Q for EPS/share data consistency .

Segment/Channel Mix (Revenue)

Channel	Q2 2022	Q2 2023
Retail ($)	$4,500,975	$3,958,067
Wholesale ($)	$167,315	$1,039,145
Total ($)	$4,668,290	$4,997,212

KPIs and Operating Ratios

KPI	Q2 2022	Q2 2023
Revenue per Case ($)	$4,335	$4,866
Avg Cost of Revenues per Case ($)	$1,355	$916
Commissions as % of Revenue	31%	29%
Gross Margin (%)	57%	69%

Guidance Changes

No quantitative guidance was provided for revenue, margins, OpEx, or other financial items in the Q2 2023 press release or 10-Q. Management reiterated strategic priorities but did not issue numerical targets .

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2023	N/A	None issued	N/A
Gross Margin	FY 2023	N/A	None issued	N/A
OpEx	FY 2023	N/A	None issued	N/A
Other (Tax, OI&E, Segments)	FY 2023	N/A	None issued	N/A

Earnings Call Themes & Trends

Note: No Q2 2023 earnings call transcript was available in our sources; themes below reflect management’s written commentary (Q2 10-Q, press release) and prior filings.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q2 2023)	Trend
Pricing pressure and reimbursement	Ongoing in industry; addressed via mix and volume (FY22 10-K liquidity/strategy context)	Explicit: pricing pressure offset by higher Fuse-branded/private-label mix and focus on case volume	Improving mix supports margin resilience
Seasonality/elective procedures	Seasonal strength in 2H noted historically	Reiterated: stronger back half guides planning	Consistent
Supply chain/logistics	Pandemic-related delays, pricing pressures previously noted (macro context)	Continuing mitigation via alternate suppliers	Stabilizing with mitigation
Product strategy (Fuse-branded)	Emphasis on internal development and acquisitions (FY22, ongoing)	Continued design/development, new launches, distribution expansion	Positive execution signaled
Liquidity/credit facility	Revolver central to working capital; covenants adjusted Mar-2023	Borrowing base reached at 6/30; cash/availability tight	Watch for constraints
Interest rate exposure	Notable YoY increase in interest expense	Higher rates continue to lift interest expense	Headwind persists

Management Commentary

Strategic focus: “Our growth for the remainder of 2023, and into 2024 is focused on continued design and development of unique medical devices for commercialization, new product launches in the orthopedics and spine marketplace, and expansion of our national distribution footprint.” — CEO Christopher C. Reeg .
Execution reflected in results: “7% increase in revenue, a 31% increase in gross profit, and a $648,408 increase in EBITDA over the prior-year period.” — CEO Christopher C. Reeg .

Q&A Highlights

No Q2 2023 earnings call transcript was found in our sources; therefore, no Q&A highlights or clarifications were available [ListDocuments showed no transcript; targeted searches returned none].

Estimates Context

Wall Street consensus (S&P Global) for Q2 2023 EPS and revenue was unavailable at time of retrieval due to data access limits; as a result, we cannot quantify beats/misses vs. consensus for this quarter [S&P Global data unavailable via tool].
Implication: sell-side models may need to reflect sustained gross margin lift and lower commissions rate alongside interest expense drift higher; watch for updates post-print in microcap coverage .

Key Takeaways for Investors

Margin story is working: mix shift toward Fuse-branded/private-label and pricing per case are materially improving gross margins (69% vs. 57% YoY) and unit economics .
Profitability inflection achieved: operating profit and net income turned positive; focus shifts to durability through 2H seasonality and execution on product pipeline .
Liquidity is tight: revolver borrowing base reached and cash modest; maintain vigilance on working capital and covenant headroom while growth investments continue .
Interest expense is a controllable headwind only via balance sheet: rising rates have increased quarterly interest; better cash conversion could mitigate .
Channel mix dynamics: retail revenue declined YoY in Q2, offset by strong wholesale; sustaining growth will require re-acceleration of retail cases while preserving margin gains .
Non-GAAP reconciliation details merit attention: select figures in the press release (e.g., diluted shares; Q2 2022 D&A in EBITDA table) differ from the 10-Q; rely on 10-Q where discrepancies arise .
No formal guidance: trading will likely key off ongoing gross margin performance, working capital/liquidity updates, and cadence of new product introductions and distribution expansion .

Appendix: Liquidity and Capital Structure Snapshot

Cash and equivalents: $253,378 at 6/30/23 .
Revolver balance: $1,870,912 outstanding at 6/30/23; borrowing base fully utilized as of quarter-end .
Working capital: current assets exceeded current liabilities by $754,339 at 6/30/23 .
Earn-out liability: $7,485,698; no change YTD 2023; thresholds not met to date .

Fuse Medical, Inc. (FZMD)·Q2 2023 Earnings Summary