Cue Health Inc. (HLTH)·Q2 2023 Earnings Summary

Executive Summary

• Revenue of $9.9M came in at the top end of guidance ($8–$10M prior), while diluted EPS was a loss of $0.55; GAAP product gross margin was sharply negative due to lower manufacturing volumes and an $11.7M inventory write-down .
• Sequential trajectory improved via operating cost reductions: GAAP OpEx (ex-COGS) fell to $65.9M, with adjusted OpEx at $59.3M; management achieved its $150M annualized run-rate cost savings target ahead of plan .
• Guidance implies a sequential revenue uptick: Q3 2023 revenue guided to $11–$13M, above Q2 guidance ($8–$10M), suggesting seasonal recovery into respiratory season; management expects growth in 2H .
• Strategic catalysts: FDA De Novo authorization for OTC COVID-19 molecular test and a ~$28M BARDA multiplex contract (Flu A/B + RSV + COVID-19) bolster menu expansion and regulatory momentum .
• Cash and cash equivalents declined to $128.6M, with no debt; liquidity remains adequate but trending down as the company invests in menu expansion and platform initiatives .

What Went Well and What Went Wrong

What Went Well

• FDA De Novo authorization for OTC COVID-19 Molecular Test—the first De Novo for any home use respiratory test; strengthens consumer-channel and platform narrative .
• Awarded ~$28.3M BARDA contract to accelerate Flu A/B + RSV + COVID-19 multiplex development; expands pipeline and government support .
• Operating discipline: Achieved the $150M cost-reduction annualized run-rate ahead of plan; adjusted OpEx fell 19% sequentially, supporting margin recovery potential as volumes normalize .
• CEO confidence on 2H recovery and menu expansion: “expect to return to growth in the second half… industry-first FDA De Novo authorization… positive signal for our menu expansion” .

What Went Wrong

• Material gross margin compression: GAAP product gross profit was a loss of $21.8M and product gross margin was -287%, driven by lower manufacturing volumes and an $11.7M excess inventory write-down .
• Revenue reliance and seasonality: Revenues fell to $9.9M with public sector at $2.3M; private sector demand remains concentrated, and COVID testing volumes shifted to a seasonal pattern .
• Cash burn trend: Cash decreased from $241.5M (FY22 YE) to $178.2M (Q1) and $128.6M (Q2); continued losses (Adjusted EBITDA loss $53.1M) heighten runway scrutiny despite no debt .

Financial Results

P&L and Profitability Trends

Notes: Q4 2022 revenue includes $92.4M deferred revenue recognition from DoD; adjusted figures remove certain one-time items as disclosed .

Revenue Composition

Balance Sheet and Liquidity KPIs

Non-GAAP Reconciliations (Selected)

Guidance Changes

Earnings Call Themes & Trends

Note: Q2 2023 earnings call transcript content was not retrievable due to a document database inconsistency; themes below reflect management disclosures in the Q2 press release and related 8-Ks.

Management Commentary

• Ayub Khattak, CEO (Q2 2023): “We achieved the top-end of our guidance in the quarter, and expect to return to growth in the second half of the year… industry-first FDA De Novo authorization… positive signal for our menu expansion objectives… BARDA… chlamydia & gonorrhea molecular test… optimism and confidence in the future of the Cue Health platform.”
• Ayub Khattak, CEO (Q4 2022): “Our full year 2022 results reflect the success we’ve seen with our first product and the investments we’ve made… position us well to become the category leader in diagnostic testing…”
• Ayub Khattak, CEO (Q1 2023): “We reached several significant milestones including launching Cue Pharmacy, Cue Lab, and receiving authorization for the Cue Mpox test… We have cut our annualized costs by an expected $150 million…”

Q&A Highlights

• The Q2 2023 earnings call transcript could not be accessed due to a document database inconsistency; Q&A details and any guidance clarifications are unavailable from the transcript source. Management’s prepared disclosures are reflected in press releases and 8-Ks .

Estimates Context

• Wall Street consensus via S&P Global for HLTH (Q2 2023 and forward) was unavailable due to a mapping error in the CIQ system; as a result, we compare actuals to company guidance and prior periods. Values from S&P Global could not be retrieved for this ticker at this time.

Key Takeaways for Investors

• Revenue stabilized at $9.9M and met the high end of guidance; sequential guidance for Q3 ($11–$13M) suggests a seasonal uptick into respiratory season—watch for execution against RSV and Flu+COVID milestones .
• Gross margin headwinds were acute (GAAP product margin -287%) due to lower manufacturing volumes and an $11.7M inventory write-down; margin recovery depends on volume normalization and mix shift to new menu tests .
• Operating discipline is a bright spot: $150M annualized cost savings achieved and adjusted OpEx down 19% QoQ; monitor sustainability of savings versus growth investments .
• Regulatory pipeline is a catalyst: FDA De Novo COVID authorization and BARDA multiplex contract enhance menu breadth and credibility; upcoming CG and RSV decisions add optionality .
• Liquidity remains adequate with $128.6M cash and no debt, but the cash trend is declining; runway hinges on revenue recovery and optimizing manufacturing throughput .
• Public sector variability remains a swing factor; private sector concentration requires ongoing customer expansion and platform adoption via Cue Care, Cue Lab, and Cue Pharmacy .
• Near-term trading lens: stock likely reacts to regulatory and contract headlines; medium-term thesis rests on diversified test menu approvals and scaling integrated care to drive recurring cartridge revenue .

Additional Documents Reviewed (Q2 2023 Context)

• Q2 2023 8-K 2.02 earnings press release and exhibits .
• BARDA contract press release (8/3/23) .
• FDA De Novo authorization press release (6/6/23) .
• Prior earnings press releases: Q1 2023 (5/10/23) and Q4 2022 (3/15/23) .
• Nasdaq minimum bid price deficiency notice (6/9/23) .