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Cue Health Inc. (HLTH)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 revenue of $17.5M exceeded guidance (midpoint $12M) by ~50%; private sector was 82% of revenue and disposable cartridges were $13.2M, indicating stronger-than-expected COVID-led demand and a sequential rebound from Q2 . GAAP diluted EPS improved to $(0.31), versus $(0.55) in Q2 and $(0.45) in Q3’22 .
  • Cost reduction program reached $165M annualized run-rate savings (above the $150M target), with operating expenses of ~$60M ex-COGS, flat sequentially; net cash outflow was $17.1M and cash ended at $111.5M with no debt .
  • Management guided Q4 revenue to $16–18M, and reiterated regulatory progress: Flu + COVID multiplex, Flu De Novo, and RSV De Novo are “deep in review” at FDA; multiplex targeting 2024–2025 respiratory season .
  • On the call, management highlighted excluding non-cash items gross profit would be slightly positive, is evaluating options to bolster cash, and expects several molecular tests in 2024 supporting a path to positive adjusted EBITDA by early 2025 .
  • Stock reaction catalysts: Q4 seasonal revenue cadence versus guide, timing/clearance outcomes for Flu/RSV/multiplex filings, and evidence of cartridge pull-through and margin recovery .

What Went Well and What Went Wrong

What Went Well

  • Revenue outperformed: “Reported third quarter total revenue of $17.5 million, approximately 50% above the midpoint of our guidance range of $11 to $13 million.”
  • Regulatory pipeline momentum: “We have our Flu + COVID Multiplex … Flu De Novo, and RSV De Novo all deep in review with the FDA… plans for an EUA submission and an initial objective of having this multiplex available for the 2024-2025 respiratory season.”
  • Cost discipline: “Annualized run rate cost savings of approximately $165 million, overachieving our previously stated cost reduction goal of $150 million.”

What Went Wrong

  • Gross margin still negative: Product gross profit was a loss of $7.4M with product gross margin of (50)%, reflecting low volumes and under-absorption .
  • Revenue base far below prior year: Total revenue fell to $17.5M from $69.6M in Q3’22 due to the COVID downcycle and softer public sector demand .
  • Continuing losses and cash burn: GAAP net loss was $(47.0)M; net cash decreased $17.1M in the quarter to $111.5M, emphasizing the need for further scale/mix improvement and/or financing options .

Financial Results

Income statement snapshot (GAAP and non-GAAP)

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Revenue ($M)$69.589 $24.765 $9.896 $17.477
GAAP Diluted EPS ($)$(0.45) $(0.62) $(0.55) $(0.31)
Product Gross Profit ($M)$16.065 $(15.329) $(21.755) $(7.423)
Product Gross Margin (%)24% (63)% (287)% (50)%
Operating Expenses ex-COGS ($M)$86.4 (S&M+R&D+G&A+Restr.) $80.8 (reported) $65.9 (reported) $60.0 (reported)
GAAP Net Loss ($M)$(66.303) $(94.198) $(83.864) $(46.970)
Adjusted EBITDA ($M)$(37.163) $(47.634) $(53.070) $(36.613)

Q3 2023 actuals vs guidance and third-party consensus

MetricGuidance / ConsensusActualSurprise
Revenue ($M)$11–$13 (Q3 guide given on Q2 call) $17.5 +$4.5–$6.5 vs range; +$5.5 vs midpoint
EPS ($)Non-SPGI third-party: $(0.45) (estimate) $(0.42) (non-GAAP diluted adj per third party); GAAP diluted EPS $(0.31) Beat by ~$0.03 vs third-party estimate

Note: S&P Global consensus estimates were unavailable for HLTH in our tool mapping at this time.

Revenue mix and KPIs

MetricQ2 2023Q3 2023
Private Sector Revenue ($M)$7.6 $14.4
Public Sector Revenue ($M)$2.3 $3.1
Disposable Test Cartridge Revenue ($M)$7.3 $13.2
Operating Expenses ex-COGS ($M)$65.9 $60.0
Adjusted Net Loss ($M)$(77.219) $(63.584)
Adjusted Diluted EPS ($)$(0.51) $(0.42)
Adjusted EBITDA ($M)$(53.070) $(36.613)
Cash & Cash Equivalents (End of Qtr, $M)$128.551 $111.454
Net Change in Cash ($M)—$(17.1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2023Not previously provided$16–$18 Introduced
Annualized Cost Savings Run-Rate ($M)Ongoing≥$150 (achieved by Q2) ~$165 Raised
Multiplex Flu/RSV/COVID availability2024–2025 season (objective)n/aTargeting multiplex availability 2024–2025 respiratory season (subject to EUA) New objective

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2023, Q2 2023)Current Period (Q3 2023)Trend
Test menu expansion & FDAQ1: RSV De Novo filing planned; Flu+COVID combo submitted; Mpox EUA . Q2: FDA De Novo OTC authorization for COVID; RSV De Novo submitted; Flu+COVID under review .Three tests “deep in review” (Flu+COVID multiplex EUA, Flu De Novo, RSV De Novo); multiplex targeted for 2024–2025 season .Steady progress; regulatory path clarifying
Revenue mix & seasonalityQ1: $24.8M revenue, 98% private . Q2: $9.9M revenue, 76% private; guided Q3 to $11–13M .$17.5M revenue; 82% private; cartridges $13.2M .Sequential rebound; private-led
Cost actions & OpExQ1: $150M cost-savings goal set; OpEx ex-COGS $80.8M . Q2: Achieved $150M; OpEx $65.9M .Run-rate savings $165M; OpEx ~$60M .Better-than-plan savings
Margins & profitability pathQ1: Adj EBITDA $(47.6)M . Q2: Adj EBITDA $(53.1)M .Adj EBITDA $(36.6)M; management noted gross profit would be slightly positive excluding non-cash items .Improving sequentially
Cash runway & financingQ1 cash $178.2M . Q2 $128.6M .$111.5M cash; evaluating options to bolster cash position .Cash declining; exploring options

Management Commentary

  • CEO perspective: “In the third quarter our revenue exceeded our expectations, and we continued to execute on our strategic priorities with strong financial discipline… We have our Flu + COVID Multiplex Molecular Test, Flu De Novo, and RSV De Novo all deep in review with the FDA.”
  • Cost discipline: “Our cost lowering program has now achieved $165 million in annualized savings, above our $150 million target.”
  • Profitability path and product cadence: Management stated they “expect to have several molecular tests on the market in 2024… strengthening our expectations of a positive adjusted EBITDA by early 2025.”
  • Margin commentary: “Excluding depreciation, amortization and stock-based compensation, our gross profit would be slightly positive… Total operating expenses were $60 million… down 37% from Q4 2022.”

Q&A Highlights

  • Regulatory timing and data sufficiency: Management reiterated substantial additional clinical data submitted (including Southern Hemisphere data for Flu B) for Flu + COVID multiplex under active FDA review .
  • Profitability bridge: Commentary emphasized non-cash charges depressing gross profit and ongoing OpEx control, implying leverage as volumes scale .
  • Liquidity: Management is “evaluating options and opportunities to bolster our cash position,” signaling openness to financing or strategic actions if needed .
  • 2024 product cadence: Expectation of “several molecular tests on the market in 2024” to support revenue diversification beyond COVID .

Estimates Context

  • S&P Global consensus unavailable for HLTH via our tool mapping at this time.
  • Third-party trackers indicate Q3 EPS beat vs their consensus: estimated $(0.45) vs actual $(0.42) (non-GAAP diluted adj per third party); GAAP diluted EPS was $(0.31). Treat non-SPGI estimates with caution .
  • Revenue outperformed internal guidance ($11–$13M) with $17.5M actual, suggesting upward revisions to near-term revenue trajectories are plausible if regulatory and seasonal trends hold .

Other Relevant Press Releases (around Q3 2023)

  • Cue announced it would release Q3 2023 results on Nov 8, 2023 (call logistics) .
  • Q2 2023 press release (Aug 9) noted FDA De Novo OTC authorization for its COVID-19 molecular test and a $28.3M BARDA contract to accelerate Flu A/B + RSV + COVID-19 multiplex development (context for 2H trajectory) .

Key Takeaways for Investors

  • Execution beat: Revenue materially exceeded guidance driven by stronger cartridge demand; sequential improvement across revenue, EPS, and adjusted EBITDA indicates progress on stabilization .
  • Cost actions are working: Run-rate savings of $165M and OpEx discipline underpin the path to margin improvement as volumes recover .
  • 2024 regulatory catalysts: Multiple tests (Flu, RSV, multiplex) under review with potential 2024 launches; clearance timing is the swing factor for revenue diversification beyond COVID .
  • Liquidity watch: Cash declined to $111.5M with a $(17.1)M quarterly draw; management exploring options to bolster liquidity—stock could be sensitive to financing headlines .
  • Q4 setup: Guidance of $16–18M implies continued seasonal strength; delivery vs guide and any FDA updates are near-term trading catalysts .
  • Margin inflection requires scale: Management noted gross profit would be near breakeven ex non-cash items—volume recovery and mix shift to non-COVID tests are key to sustained gross margin normalization .
  • Estimate framework: SPGI consensus not available; use internal guidance and third-party trackers directionally, but anchor decisions on company-reported milestones and cash trajectory .