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Cue Health Inc. (HLTH)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 revenue was $18.8M, up sequentially from $17.5M in Q3 but down sharply YoY versus $146.8M as COVID testing demand normalized; adjusted diluted EPS improved to -$0.32 from -$0.42 in Q3, while GAAP EPS was -$0.96 due to an $83.6M non-cash impairment on manufacturing lines .
  • Mix skewed 91% to private sector ($17.0M); disposable test cartridge revenue was $15.5M. Adjusted product gross margin improved to -15% from -50% in Q3 on lower one-time charges, though GAAP gross margin remained deeply negative due to inventory and scale effects .
  • 2024 outlook: guided Q1 revenue to $9–$11M as the company navigates post-COVID baseline demand while advancing its test menu (RSV and Flu de novo submissions, Herpes+Mpox EUA planned 2Q24) and operating with $80.9M of cash and no debt at year end .
  • EPS vs estimates: external consensus indicated -$0.44 to -$0.45; Cue reported -$0.32 adjusted EPS, constituting a beat on EPS; SPGI consensus via our tool was unavailable for HLTH mapping .
  • Stock reaction catalysts: sequential revenue growth, cost reduction progress (adjusted OpEx down to $48.3M), and pipeline/regulatory milestones, offset by non-cash impairments and still-negative gross margins .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential revenue growth to $18.8M (vs $17.5M in Q3) and exceeded prior Q4 revenue guidance of $16–$18M from November, driven by private sector demand and cartridge sales .
    • Adjusted product gross margin improved to -15% from -50% in Q3 as inventory charges moderated; adjusted diluted EPS improved to -$0.32 from -$0.42 .
    • Management executed significant cost reductions, with adjusted OpEx at $48.3M (down 49% YoY) and management highlighting a streamlined cost structure; “We believe that these successes have positioned us well for 2024.” — Ayub Khattak, CEO .

  • What Went Wrong

    • YoY revenue declined sharply (Q4 2023: $18.8M vs Q4 2022: $146.8M) reflecting COVID test normalization; GAAP product gross profit remained negative (-$18.4M) .
    • A large non-cash impairment of long-lived assets ($83.6M) drove GAAP EPS to -$0.96; CFO cited low current volumes and non-cash nature of charges .
    • Cash balance declined to $80.9M from $111.5M in Q3 and $128.6M in Q2, underscoring the urgency of scaling newer assays and platform services to support the runway .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$9.896 $17.477 $18.798
GAAP Diluted EPS ($)-$0.55 -$0.31 -$0.96
Adjusted Diluted EPS ($)-$0.51 -$0.42 -$0.32
Product Gross Margin (%)(287)% (50)% (106)%
Adjusted Product Gross Margin (%)(287)% (50)% (15)%
Adjusted Operating Expenses ($USD Millions)$59.3 $60.0 $48.3
Cash and Equivalents ($USD Millions)$128.6 $111.5 $80.9

Revenue mix and operational KPIs:

MetricQ2 2023Q3 2023Q4 2023
Private Sector Revenue ($M)$7.6 $14.4 $17.0
Public Sector Revenue ($M)$2.3 $3.1 $1.8
Disposable Test Cartridge Revenue ($M)$7.3 $13.2 $15.5
Adjusted EBITDA ($M)-$53.070 -$36.613 -$24.429

Notes:

  • Q4 GAAP product gross profit was a loss of $18.4M; adjusted product gross profit was a loss of $2.7M excluding $15.7M inventory charges .
  • Q4 GAAP OpEx excluding cost of product revenue was $132.0M including $83.6M impairment; adjusted OpEx was $48.3M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ReportedChange
Revenue ($M)Q4 2023$16–$18 (guided on Nov 8, 2023) $18.8 (actual) Beat high end
Revenue ($M)Q1 2024N/A$9–$11 Initial

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Cost reduction / OpEx disciplineAchieved $150M annualized cost savings; adjusted OpEx $59.3M Annualized savings at ~$165M; OpEx excl. COGS $60.0M Adjusted OpEx $48.3M; 49% YoY reduction Improving cost base
FDA / pipelineCOVID OTC de novo cleared; RSV de novo submitted; Flu+COVID under review; BARDA multiplex grant Three tests in FDA review (Flu+COVID, Flu de novo, RSV de novo) RSV/Flu de novo additional data; late-stage Herpes+Mpox multiplex, EUA planned 2Q24 Advancing menu
Mix / demandPrivate 76%, public 23% Private 82%, public 18% Private 91%, public 9% More private
Gross margin dynamicsNegative due to low volumes and write-downs GAAP product gross profit loss; negative margins GAAP margin deeply negative; adjusted margin -15%; CFO notes non-cash factors and ex-D&A/SBC would be positive Sequential improvement (adjusted)
Cash runway$128.6M cash; no debt $111.5M cash; no debt $80.9M cash; no debt Declining cash

Management Commentary

  • CEO prepared remarks (press release): “We made progress executing on our strategic priorities in 2023... We believe that these successes have positioned us well for 2024.” — Ayub Khattak, Chairman and CEO .
  • CFO commentary (call): “Cue's fourth quarter total revenue was $18.8 million... Q4 product gross profit was a loss of $18.4 million. Adjusted for one-time inventory charges, product gross profit was a loss of $2.7 million... Total operating expenses in the quarter were $48.3 million, excluding cost of revenue and the noncash impairment of long-lived assets... In the quarter, we recognized a noncash impairment charge of $83.6 million for some of our manufacturing lines due to low current volumes... As a result, GAAP net loss in the fourth quarter was $148.4 million or $0.96 per share.” — Aasim Javed, CFO .

Q&A Highlights

  • Focus on gross margin drivers: management emphasized low-volume manufacturing, inventory charges, and non-cash items; excluding D&A and SBC, adjusted product gross profit would be positive, indicating operating leverage as volumes scale .
  • Clarification on impairment: manufacturing lines remain usable when volume returns, framing the $83.6M impairment as non-cash and volume-driven .
  • Outlook and pipeline timing: reiterated Q1 revenue guide and near-term regulatory milestones (RSV/Flu de novo, Herpes+Mpox EUA planned 2Q24) to expand beyond COVID .

Estimates Context

  • EPS: External consensus for Q4 2023 was approximately -$0.44 to -$0.45; actual adjusted diluted EPS was -$0.32, a clear beat on EPS .
  • Revenue: No reliable S&P Global revenue consensus was retrievable via our tool for HLTH this quarter; however, the company exceeded its own prior Q4 revenue guidance ($18.8M vs $16–$18M guided) .
  • Note: S&P Global consensus via our GetEstimates tool was unavailable due to missing mapping for HLTH; therefore, estimate comparisons rely on external sources as cited .

Key Takeaways for Investors

  • Sequential improvement with Q4 revenue up to $18.8M and adjusted EPS narrowing to -$0.32; EPS beat relative to external consensus highlights expense control progress despite scale headwinds .
  • Adjusted product gross margin improved to -15% from -50% in Q3, and management suggested ex-D&A/SBC adjusted gross profit would be positive at current volumes—an important signal for leverage as volumes ramp with new assays .
  • Cash declined to $80.9M by year-end 2023; with Q1 revenue guided at $9–$11M, commercialization of RSV/Flu and new multiplex tests in 2024 is critical to support runway and reduce burn .
  • Private sector mix (91%) and cartridge revenue ($15.5M) underscore traction with enterprise/healthcare customers; sustaining reorder cadence and expanding into additional indications are near-term priorities .
  • Non-cash $83.6M impairment depresses GAAP EPS but preserves capacity for future volume; investors should focus on adjusted OpEx ($48.3M) and adjusted EBITDA trajectory (-$24.4M) as operating KPIs .
  • Watch regulatory catalysts (RSV, Flu de novo; Herpes+Mpox EUA 2Q24) and potential BARDA-supported multiplex progress as the primary 2024 stock drivers .
  • Risk: Continued negative gross margins at low volumes and shrinking cash balance increase execution risk if regulatory timelines or uptake slip .

Appendix: Additional Data Points

  • Full-year 2023: Revenue $70.9M; GAAP net loss $373.5M (EPS -$2.44); adjusted net loss $267.2M (adj. EPS -$1.75); adjusted EBITDA -$163.8M; cash $80.9M; no debt .
  • Q3 2023: Revenue $17.5M; GAAP net loss $47.0M (EPS -$0.31); adjusted EPS -$0.42; adjusted EBITDA -$36.6M; cash $111.5M .
  • Q2 2023: Revenue $9.9M; GAAP net loss $83.9M (EPS -$0.55); adjusted EPS -$0.51; adjusted EBITDA -$53.1M; cash $128.6M .