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PSYCHEMEDICS CORP (PMD)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $5.00M, down sequentially from $5.704M in Q3 and $5.537M in Q2; the company reported full-year 2023 revenue of $22.1M (-12% YoY) and diluted EPS of -$0.72, with cost reductions initiated in Q4 intended to materialize in 2024 .
  • Full-year net loss widened to $4.2M (vs. $1.1M in 2022), while cash and equivalents ended 2023 at ~$2.0M; operating expenses rose to $11.3M in 2023 from $10.4M in 2022 .
  • Management emphasized cost actions, a renewed client acquisition focus, and pursuing new markets/applications for its hair testing science; the dividend was eliminated in Q2 to maximize capital for growth initiatives .
  • Consensus estimates from S&P Global were unavailable for Q4 2023; third-party sources show no consensus and conflicting EPS figures, limiting beat/miss analysis versus Street expectations .

What Went Well and What Went Wrong

What Went Well

  • Gross margin held at 37% in Q2 and Q3 despite revenue declines, reflecting early cost reduction benefits (Q2: 37%; Q3: 37%) .
  • Strategic reset underway: management launched restructuring in Q3 to align costs with revenue trends, with benefits expected starting Q4 and into FY24 .
  • Clear commercial focus: “Leveraging our expertise and reputation for accuracy combined with a renewed focus on client acquisition, we expect that our innovative approach will not only drive sustainable growth but also solidify our position as the leader in the industry” — Chief Revenue Officer Shannon Shoemaker .

What Went Wrong

  • Macroeconomic headwinds: “The labor shortage continues and remains unprecedented... having an adverse impact on our clients,” pressuring volumes and revenues .
  • Profitability deterioration: FY2023 net loss widened to ~$4.2M (vs. ~$1.1M in 2022); OpEx rose to ~$11.3M (vs. ~$10.4M), driven partly by legal/settlement fees and CEO transition costs in Q3 .
  • Legal/one-time hits: Q2 included a lawsuit settlement expense; Q3 reflected legal and settlement fees and a non-cash tax charge of $0.7M, weighing on quarterly results .

Financial Results

Quarterly P&L Snapshot

MetricQ2 2023Q3 2023Q4 2023
Revenues ($USD Millions)$5.537 $5.704 $5.00
Diluted EPS ($USD)-$0.13 -$0.36 -$0.16
Gross Margin (%)37% 37% N/A
Total Operating Expenses ($USD Millions)$2.476 $3.198 N/A

Notes:

  • Q4 EPS is shown from MarketBeat; the company’s FY press release did not disclose quarter-specific EPS. Third-party sources show conflicting EPS figures; MarketBeat lists -$0.16 while InvestorPlace cites -$0.86 .
  • No company-provided Q4 gross margin or OpEx detail was disclosed in the Q4/FY press release .

Full-Year Context

MetricFY 2022FY 2023
Revenues ($USD Millions)$25.2 $22.1
Net Income - (IS) ($USD Millions)-$1.1 -$4.2
Diluted EPS - Continuing Operations ($USD)-$0.19 -$0.72
Total Operating Expenses ($USD Millions)$10.4 $11.3

Liquidity and Cash Trend

MetricJun 30 2023Sep 30 2023Dec 31 2023
Cash And Equivalents ($USD Millions)$2.445 $1.370 ~$2.0

Segment Breakdown and KPIs

  • Segment breakdown: not applicable; PMD operates a single testing services platform .
  • Product/KPI commentary: Q2 highlighted growth in add-on tests for fentanyl and benzodiazepines; no quantitative unit metrics provided .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividends per shareQ2 2023 onwardQuarterly $0.07 (declared in Q2) Eliminated to maximize capital for growth Lowered
Restructuring benefitsQ4 2023 → FY 2024None providedCost alignment actions initiated; benefits expected starting Q4 and into FY24 Introduced
Revenue/Earnings guidanceQ4 2023/FY 2024NoneNone provided Maintained “no formal guidance”
Operating focusQ4 2023/FY 2024N/APursuit of new markets/applications; renewed client acquisition Strategic shift highlighted

Earnings Call Themes & Trends

Note: A Q4 2023 conference call was scheduled (Mar 28, 2024) but no transcript appears publicly available; themes below derive from company press releases .

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Labor market/macroLabor shortage adversely impacted clients’ hiring/testing Continued macro pressure; restructuring to align costs “Labor shortage… unprecedented… adverse impact on clients” Persistent headwind; pivot to cost control and growth
Product performance (add-ons)Growth in fentanyl/benzodiazepine add-on tests Not emphasizedNot emphasizedPositive offsets but not enough to overcome demand softness
Leadership/Commercial focusCEO transition announced; CRO leadership on go-to-market New CEO impacts (costs) disclosed CRO: renewed client acquisition to drive sustainable growth Transition complete; intensified commercial push
Legal/regulatoryLawsuit settlement expense (non-recurring) Legal/settlement fees; non-cash tax charge $0.7M Cautionary note re regulatory risks (FDA etc.) One-time legal drag; regulatory risk acknowledged
Capital allocationDividend eliminated to fund growth Q3 nine-month dividends shown historically No dividend; focus on growth/cost actions Shift from payouts to reinvestment

Management Commentary

  • CEO tone on strategic pivot: “As cost reductions from Q4 continue to materialize, we will start our pursuit of new markets and new applications for our hair testing science to create value for clients and shareholders” — Brian Hullinger, CEO .
  • Commercial execution emphasis: “Leveraging our expertise and reputation for accuracy combined with a renewed focus on client acquisition… drive sustainable growth and solidify our position as the leader in the industry” — Shannon Shoemaker, CRO .
  • Cost discipline and non-recurring items: Q3 noted legal/settlement fees and costs related to the CEO appointment, “mostly non-recurring in nature and not expected to continue into fiscal year 2024” .

Q&A Highlights

  • No earnings call transcript is available; a conference call was scheduled for Mar 28, 2024 at 7:00AM ET, but no published transcript or Q&A has been found .
  • As a result, no additional guidance clarifications or tone changes can be assessed beyond press release commentary for Q4 2023 .

Estimates Context

  • S&P Global Wall Street consensus estimates were unavailable for PMD Q4 2023 (no CIQ mapping; MarketBeat shows N/A for consensus) .
  • Actuals vs. consensus: Not determinable given lack of consensus; third-party reports list revenue of $5.00M and EPS of -$0.16, but conflicting EPS figures exist across sources .

Estimates Table

MetricQ4 2023 ConsensusQ4 2023 Actual
Primary EPS Consensus Mean ($USD)N/A -$0.16
Revenue Consensus Mean ($USD Millions)N/A $5.00

Key Takeaways for Investors

  • Revenue softness persisted into Q4 (sequential decline to $5.00M), confirming macro hiring headwinds; watch Q1–Q2 2024 for tangible impact from cost actions and client acquisition push .
  • FY 2023 loss widened and OpEx increased; legal/transition costs in Q3 were characterized as largely non-recurring, suggesting potential OpEx normalization in 2024 .
  • Liquidity remains tight but stable into year-end; cash ticked up from Sep 30 to Dec 31, 2023 (~$1.37M to ~$2.0M) — monitor collections and working capital given lower revenues .
  • Dividend elimination reorients capital toward growth initiatives; success hinges on execution in new verticals and uptake of add-on tests (e.g., fentanyl, benzodiazepines) .
  • Limited analyst coverage and unavailable S&P Global consensus reduce near-term “beat/miss” catalysts; stock narrative likely driven by operational updates (cost realizations, sales momentum) rather than Street revisions .
  • Leadership changes and renewed go-to-market strategy are central; track CRO-led acquisition metrics and any disclosed pipeline/vertical wins in subsequent releases .
  • Risk factors remain: macro labor dynamics affecting client testing volumes and regulatory backdrop (FDA and others) noted in forward-looking statements — position sizing should reflect execution and macro uncertainties .