Executive Summary

Record Q3 revenue of $7.07M (+41.5% YoY), marking the 7th consecutive quarter of sequential growth; momentum driven by higher unit volumes and mix shift to EVO products .
Gross margin was 49%, down sequentially from 54% in Q2 2023 as overhead from the new, larger facility was absorbed into product costs; management expects leverage as volumes increase, but the sequential compression is a notable negative surprise .
Operating expenses declined 19% sequentially in Q3 (G&A -24%), reflecting early execution on cost discipline; however, financing-related charges (debt extinguishment and other costs) drove a large net loss in the quarter .
Completed a $10.4M financing in Q3 to fund operations while targeting cash flow breakeven; quarter-end cash was $12.0M, supporting near-term liquidity priorities .

What Went Well and What Went Wrong

What Went Well
- Record quarterly revenue and sustained adoption: “record revenues of $7.1 million … increase of 41.5% year-over-year” driven by increased unit volume and EVO product mix; U.S. and Europe adoption and expanded sales force cited as drivers .
- Cost discipline: sequential operating expenses down 19% in Q3 (G&A -24%), indicating early progress on operational efficiency .
- Strategic/clinical momentum: continued advancement of SOS enrollment and multiple FLOSAT presentations; achieved ISO 13485:2016 certification .
- Management tone: “another record setting quarter … we will continue to fine tune our operations with the goal of achieving cash flow breakeven” (CEO) .
What Went Wrong
- Profitability: net loss of $(11.24)M in Q3, driven by a $(9.74)M loss on extinguishment of debt and other financing-related costs; financing and fair value items continue to add P&L volatility .
- Gross margin compression: 49% in Q3 vs 54% in Q2 as new facility overhead was absorbed; management expects improvement with scale, but near-term pressure persisted .
- Balance sheet leverage and fair value liabilities: senior and subordinated convertible notes at fair value totaled ~$32.01M at 9/30, with additional earnout and warrant liabilities contributing to complexity .

Financial Results

Metric	Q3 2022	Q1 2023	Q2 2023	Q3 2023
Revenue ($USD Millions)	$5.00	$5.81	$6.93	$7.07
Diluted EPS ($)	$(0.14)	$(0.43)	$(0.01)	$(0.70)
Gross Margin %	49%	53%	54%	49%

Notes:

Q3 revenue +41.5% YoY (management disclosure) .
Sequential revenue growth continued for the seventh consecutive quarter (management disclosure) .
Q3 diluted EPS reflects significant financing-related charges (loss on extinguishment and other items) .

KPIs and Operating Metrics

Metric	Q3 2022	Q1 2023	Q2 2023	Q3 2023
Gross Profit ($USD Millions)	$2.46	$3.05	$3.76	$3.49
Sales & Marketing Expense ($USD Millions)	$2.32	$2.82	$3.64	$3.24
R&D Expense ($USD Millions)	$0.69	$1.02	$1.38	$1.04
G&A Expense ($USD Millions)	$1.58	$3.35	$4.48	$3.43
Loss from Operations ($USD Millions)	$(2.13)	$(4.14)	$(5.74)	$(4.22)
Cash & Equivalents (period-end) ($USD Millions)	n/a	$11.56	$6.18	$12.02

Segment breakdown: Not applicable (company reports as a single business) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company financial guidance	Remainder of 2023	Not disclosed in prior PRs	Management indicated they would “provide financial guidance for the remainder of 2023” on the conference call; quantitative figures not included in the press release	n/a (call transcript unavailable for extraction)

Note: The Q3 2023 press release did not include numeric guidance; it referenced guidance to be discussed on the call. The Q3 call transcript could not be retrieved due to a document retrieval error, so we could not extract quantitative guidance changes .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2023)	Trend
Clinical studies (SOS, FLOSAT)	Q1: Commenced SOS enrollment; FLOSAT execution and data generation emphasized . Q2: FLOSAT updated preliminary data presented at three conferences; SOS initial readout expected H1’24 .	Advanced SOS enrollment; FLOSAT data presented at five medical meetings; additional efficacy data presented at IBEDDSSMA and World Sleep congresses .	Continued momentum in clinical evidence generation
Next-gen device with remote monitoring	Q1: Advanced next-gen device with RPM toward late 2023 commercial intro . Q2: Completing development; first commercial use expected Q4 2023 .	Continued technology progress referenced via broader product adoption and data, but no new timing details in the press release .	On track per prior commentary
Manufacturing capacity and gross margin	Q1: New facility quintupled capacity; GM 53% . Q2: GM 54% with expectation to leverage facility costs as volumes grow .	GM 49%; overhead absorption in new facility pressure margins; expects improvement as volumes increase .	Short-term GM compression; longer-term leverage expected
Commercial expansion	Q1: U.S./Europe direct sales expansion . Q2: Expanded field sales team cited as growth driver .	Revenue growth attributed to sales, marketing, medical affairs execution and more physicians prescribing ProSomnus .	Continued positive demand/adoption
Cost discipline	Q1: Elevated G&A as company transitioned to public company . Q2: G&A expected to decrease in H2’23 from atypically high H1’23 level .	Opex -19% q/q in Q3, including G&A -24% .	Execution on cost reduction underway
Financing/liquidity	Q1: Cash $11.6M at 3/31 . Q2: Cash $6.2M at 6/30 .	Completed $10.4M financing; cash $12.0M at 9/30 .	Improved liquidity in Q3

Management Commentary

“ProSomnus delivered another record setting quarter further establishing ProSomnus as the leading non-CPAP therapy for Obstructive Sleep Apnea… We believe our record revenue performance reflects our sales, marketing and medical affairs execution and the growing number of physicians prescribing ProSomnus.” — Len Liptak, CEO .
“Looking ahead … we will continue to fine tune our operations with the goal of achieving cash flow breakeven, while continuing to deliver strong top line growth and the best possible therapy for providers and patients.” — Len Liptak, CEO .

Q&A Highlights

The Q3 2023 earnings call transcript could not be retrieved due to a document retrieval error in the source database. As a result, Q&A details, any guidance clarifications, and tone inflections from the call are unavailable for inclusion at this time .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2023 EPS/revenue was unavailable for OSA in our S&P Global mapping at the time of analysis; therefore, we cannot provide beat/miss comparisons to consensus for this quarter. Values retrieved from S&P Global were unavailable due to a missing mapping error for OSA.

Key Takeaways for Investors

Strong top-line trajectory continues: Q3 revenue reached $7.07M (+41.5% YoY), with seven straight quarters of sequential growth, underscoring continued clinical and commercial adoption .
Near-term margin pressure: Gross margin declined to 49% in Q3 from 54% in Q2 due to overhead absorption at the new facility; management expects scale benefits as volumes increase .
Cost actions gaining traction: Sequential operating expense reduction of 19% (G&A -24%) supports the path toward cash flow breakeven .
Financing reduces liquidity risk: $10.4M financing and $12.0M cash at quarter-end provide runway to execute growth and efficiency plans .
P&L volatility tied to financing/fair value items persists: Q3 loss included a $(9.74)M loss on extinguishment of debt; monitoring of capital structure and non-cash mark-to-market items remains important .
Clinical catalysts: Ongoing SOS enrollment and broad FLOSAT data presentations support efficacy and adoption narratives; potential for label expansion remains a medium-term upside lever .
Guidance visibility limited in PR: Quantitative guidance was referenced for the call but not included in the press release; absent the transcript, explicit forward targets are not available for comparison .

Sources:

Q3 2023 8-K and press release, including financial statements and commentary
Q2 2023 8-K and press release, including financial statements and commentary
Q1 2023 8-K and press release, including financial statements and commentary
FY22/Q4 2022 8-K (for historical context)

ProSomnus, Inc. (OSA)·Q3 2023 Earnings Summary