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PSYCHEMEDICS CORP (PMD)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue was $4.73M, down 15% year over year and down sequentially from $5.36M in Q1; net loss was $0.83M and diluted EPS was -$0.14, slightly worse than Q2 2023 (-$0.13) .
  • Management cited continued lower client hiring as the primary driver of the decline and ongoing cost adjustments to protect service and pursue new markets .
  • The Board approved a reverse/forward split and plan to deregister/delist; the company anticipates >$0.90M annual cost savings and will cash out fractional shares at $2.35 per share, funded via up to $3.75M share issuance and cash on hand .
  • Liquidity: cash was $1.43M at quarter-end; operating cash flow was -$0.35M in 1H24, and the company received a waiver for a debt covenant non-compliance; lease termination actions are expected to save ~$0.25M versus the original lease term .
  • No Wall Street consensus estimates were available from S&P Global; comparisons to estimates are not possible (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Cost actions lowered cost of revenues (-9% YoY) and reduced marketing & selling (-10% YoY) and R&D (-34% YoY) in Q2 .
  • Structural actions: plan to deregister/delist with expected >$0.90M annual savings, and financing to support the transaction (up to $3.75M at $2.35 per share) .
  • Management tone: “we continue to adjust operating costs with no adverse client impact while actively pursuing new markets and applications” — Brian Hullinger (CEO) .

What Went Wrong

  • Revenue down 15% YoY on lower volumes tied to client hiring softness; gross profit down 25% YoY in Q2 .
  • Net loss increased YoY to $0.83M and EPS to -$0.14; operating loss widened to -$0.90M vs -$0.42M in Q2 2023 .
  • Increased general & administrative expenses (+10% YoY in Q2) due to business taxes and higher legal/accounting/consulting costs .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$5.54 $5.36 $4.73
Gross Profit ($USD Millions)$2.06 $2.12 $1.55
Gross Margin (%)37.2% 39.6% 32.8%
Operating Loss ($USD Millions)$(0.42) $(0.57) $(0.90)
Net Loss ($USD Millions)$(0.73) $(0.69) $(0.83)
Diluted EPS ($)$(0.13) $(0.12) $(0.14)
Total Operating Expenses ($USD Millions)$2.48 $2.69 $2.45
Revenue Breakdown ($USD Millions)Q2 2023Q1 2024Q2 2024
Testing$4.61 $4.54 $3.94
Shipping/Collection (hair)$0.90 $0.79 $0.76
Other$0.03 $0.03 $0.03
Total$5.54 $5.36 $4.73
KPIs and Balance Sheet ($USD Millions unless noted)Q2 2023Q1 2024Q2 2024
Cash and Cash Equivalents$2.45 $1.42 $1.43
Accounts Receivable (net)$—$3.88 $3.06
Operating Cash Flow (YTD)$(1.18) $(0.47) $(0.35) (1H24)
Operating Lease Liabilities (current)$—$1.04 $0.46
Weighted Avg Shares (basic & diluted)5.71M 5.81M 5.82M

Note: Dashes indicate data not disclosed for the specific prior period in the referenced filing.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Annual public company cost savingsOngoingN/A>$0.90M per year expected from deregistration/delistingRaised clarity (cost savings initiative)
Reverse/Forward Split Cash-Out PriceTransactionN/A$2.35 per share for fractional sharesNew action
Estimated Transaction CostsTransactionN/A~$2.8M cash-out + ~$0.7M expenses (mid-point ratio)New action
Financing to fund transactionTransactionN/AUp to 1,595,744 shares at $2.35 for up to $3.75M proceedsNew action
Dividend policyFY 2024Dividends paid in 2023 (e.g., Q2’23 $0.07/share)No dividends in 1H 2024Maintained suspension

Earnings Call Themes & Trends

Note: No Q2 2024 earnings call transcript for PMD was found; themes reflect press releases and 10-Q MD&A.

TopicPrevious Mentions (Q4 2023 and Q1 2024)Current Period (Q2 2024)Trend
Client hiring and volume“Labor shortage continues…adverse impact on our clients” (FY2023 PR) ; Q1 revenue down 9% YoY on lower volumes Management cites continued lower client hiring driving revenue decline Persistent headwind
Cost controls“Cost reductions from Q4 continue to materialize” (CEO) ; Q1 gross margin improved to 39.6% Lower cost of revenues (-9% YoY); continued operating cost adjustments Ongoing execution
Regulatory/Corporate actions—Board-approved reverse/forward split; deregistration/delisting; anticipated >$0.90M savings Strategic shift
Facilities footprint—Lease termination in Culver City to save ~$0.25M vs original term Streamlining
Audit/change in accountants—Dismissal of BDO; engagement of Whitley Penn LLP Transition
Legal/settlementsPrior shipping carrier settlement balance outstanding Remaining $167k due by 12/31/24 Manageable
R&D execution$0.30M in Q1; focus on cost reduction $0.19M in Q2; -34% YoY Reduced spend

Management Commentary

  • “Despite the decline in revenue due to continued lower hiring by our clients, we continue to adjust operating costs with no adverse client impact while actively pursuing new markets and applications.” — Brian Hullinger, President & CEO .
  • “Although we experienced a decrease in revenues and earnings for the quarter, we remain optimistic…With a renewed focus on client acquisition, we are confident we are positioning the Company first for revenue stabilization and then for growth.” — Brian Hullinger (Q1 2024) .
  • “As cost reductions from Q4 continue to materialize, we will start our pursuit of new markets and new applications for our hair testing science…” — Brian Hullinger (FY2023) .

Q&A Highlights

No Q2 2024 earnings call transcript was available for PMD; Q&A highlights and any clarifications from a call could not be assessed due to lack of a published transcript.

Estimates Context

  • S&P Global consensus estimates for PMD were unavailable this quarter; we could not compare actuals to Wall Street expectations (S&P Global data unavailable).
  • Given the absence of estimates, the primary evaluation framework is YoY and sequential performance and corporate actions .

Key Takeaways for Investors

  • Revenue softness tied to client hiring persists; watch volume indicators and any inflection from new market initiatives highlighted by management .
  • Cost actions are evident (COGS, sales, R&D) but gross margin compressed in Q2; focus on mix, pricing, and further operational efficiencies to stabilize margins .
  • The deregistration/delisting plan is a major near-term catalyst: expected >$0.90M annual cost savings, $2.35 cash-out for fractional shares, and financing up to $3.75M — anticipate structural changes in trading/liquidity post-transaction .
  • Liquidity remains tight (cash $1.43M; OCF -$0.35M in 1H24); monitor covenant compliance (waiver received), working capital, and timing of transaction cash flows .
  • Reduced R&D and marketing spend support near-term cash preservation; track impact on growth pipeline and client acquisition velocity .
  • No dividend in 1H24 vs prior year payouts; policy consistent with cash preservation while executing corporate restructuring .
  • Absent Street estimates, trading may be driven by transaction milestones (proxy, shareholder vote, split execution, deregistration) and evidence of demand stabilization among clients .