PSYCHEMEDICS CORP (PMD)·Q3 2024 Earnings Summary

Executive Summary

• Q3 revenue declined 9% year over year to $5.2M, but improved 9% sequentially; net loss narrowed to $0.5M (–$0.09 EPS) from –$0.8M (–$0.14) in Q2 as cost actions reduced OpEx and improved gross margin versus Q2 .
• Management reiterated demand headwinds from lower client hiring; YoY revenue pressure reflected base-business volume declines, while QoQ improvement benefited from cost controls and seasonality .
• Strategic catalyst: going‑private transaction (reverse/forward split at $2.35 per share for cashed-out holders), delisting/deregistration targeted “as soon as practicable” after the Nov 25, 2024 annual meeting; expected annual public-company cost savings updated to ~$845K (from >$900K discussed in Q2) and financing up to $3.75M via 3K and affiliates .
• No Wall Street consensus from S&P Global was available for PMD this quarter (limited coverage); estimate-based beat/miss analysis not possible (see Estimates Context) [GetEstimates tool error noted].

What Went Well and What Went Wrong

• What Went Well

  • Sequential improvement: Revenue rose to $5.175M (from $4.728M in Q2) and EPS improved to –$0.09 (from –$0.14), supported by lower OpEx and higher gross profit QoQ .
  • Cost discipline: G&A down 14% YoY in Q3; marketing and R&D down 20% and 37% YoY respectively, reflecting personnel and spending controls .
  • Management focus on efficiency and new markets remains consistent; prior-quarter CEO message: “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.” .

• What Went Wrong

  • Demand headwinds: YoY revenue fell 9% on lower base-business volumes tied to general economic conditions, hiring weakness, and shifting customer priorities .
  • Continued net losses: Q3 net loss of $0.5M; tax valuation allowance persists given cumulative losses (limits tax benefit recognition) .
  • Financing flexibility: No revolver/line of credit; equipment financing covenant breach required lender waiver; cash at quarter-end was $1.4M, highlighting a tight liquidity posture pre-transaction funding .

Financial Results

Quarterly trend with YoY reference (oldest → newest):

Revenue disaggregation (oldest → newest):

KPIs and balance sheet items (oldest → newest):

Notes:

• Q3 YoY revenue decline of 9% was cited in the Q3 press release and 10‑Q; QoQ improvement reflects seasonal and mix dynamics and cost control .
• Gross margin recovered to ~39% in Q3 from ~33% in Q2 as revenue improved and cost of revenues declined .

Guidance Changes

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was available in the document set; themes below reflect MD&A and related filings.

Management Commentary

• Strategic focus and cost management (prior remarks still applicable): “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, CEO (Q2 press release) .
• Transaction rationale: Company aims to avoid significant public-company costs, improve focus on operations, and provide liquidity to smaller holders; anticipated annual savings now ~$845K, with delisting/deregistration targeted promptly after the annual meeting if approved .

Q&A Highlights

• No Q3 2024 earnings call transcript was located; no Q&A disclosures were available in filings or press materials [ListDocuments returned none].

Estimates Context

• S&P Global consensus estimates for PMD (EPS and revenue) were unavailable in our data pull this quarter (missing CIQ mapping). As a result, we cannot provide a vs‑consensus beat/miss assessment for Q3 2024. If coverage resumes, estimate comparisons should be refreshed from S&P Global for future periods.

Key Takeaways for Investors

• Sequential stabilization with improving gross margin: revenue rebounded to $5.175M and gross margin recovered to ~39% from ~33% in Q2, while EPS loss narrowed to –$0.09 .
• Demand remains fragile YoY, driven by macro and hiring-driven volume softness in core customers; visibility into a sustained base‑business volume recovery remains limited per MD&A .
• Expense control is working: double‑digit YoY declines in G&A, marketing, and R&D demonstrate operating flexibility and supported better sequential results .
• Liquidity hinges on the transaction: cash was $1.405M at Q3‑end; Company has no revolver and received covenant waivers; closing of the Stock Sale (up to $3.75M) is a key near‑term funding catalyst .
• Going‑private vote is the primary stock catalyst: shareholder approval could unlock ~$845K annual savings and end SEC reporting/Nasdaq listing; timing “as soon as practicable” after the Nov 25, 2024 meeting if approved .
• Governance will shift post‑transaction (two 3K nominees; board ≤5), aligning ownership/influence with capital contributors; monitor post‑closing strategic priorities and capital allocation .
• With no published Street coverage this quarter, positioning will likely trade on transaction outcomes and incremental demand signals from key customers rather than estimate revisions [GetEstimates tool error].

References:

• Q3 2024 press release and 8‑K items .
• Q3 2024 10‑Q financials and MD&A .
• Q2 2024 8‑K press release and 10‑Q .
• Q1 2024 8‑K press release and 10‑Q .
• Going‑private 8‑K and Stock Purchase Agreement .