Executive Summary

Q3 revenue was $2,194,000, up approximately $100,000 year over year on stronger AXP disposable sales, but down sequentially from Q2’s $2,273,000; gross margin was 18%, and EPS was $(1.44) . Key catalyst: the 35,500+ sq ft Sacramento CDMO facility with 12 ISO Class-7 ReadyStart cGMP cleanroom suites officially launched in October; initial customers are moving in, CDMO revenues begin in Q4, and management expects margin uplift in 2024 as mix shifts to services .
Operating expense discipline continued (SG&A down 15% YoY to $1,686,000; R&D down 43% YoY to $266,000), but interest expense increased to $2,118,000 YoY due to higher non-cash amortization; net loss attributable to common was $(3,615,000) .
Management reiterated CDMO strategy leveraging proprietary CAR-TXpress to potentially reduce cell therapy manufacturing costs and accelerate customers’ development timelines .
S&P Global consensus estimates were unavailable for THMO this quarter; comparisons vs Street were not possible (no estimates found via S&P Global for Q1–Q3 2023).

What Went Well and What Went Wrong

What Went Well

CDMO launch achieved: “we completed and officially launched our 35,500 square feet CGMP cleanroom suite in Sacramento… twelve ReadyStart cGMP cleanroom suites… designed to meet the highest… requirements” .
Early commercial traction: initial move-ins are underway; several customers are engaged with contracts finalized and first CDMO revenues expected in Q4, with larger contributions in 2024 .
Product resilience: AXP disposable sales were up approximately $400,000 YoY, supporting modest total revenue growth despite the transition .

What Went Wrong

Margin compression: gross profit fell to $395,000 (18% of net revenue) vs $437,000 (21%) YoY due to excess manufacturing charges during the CDMO facility completion .
Sequential revenue decline: Q3 revenue of $2,194,000 decreased from Q2’s $2,273,000 as the company reallocates resources and transitions toward services .
Elevated interest burden: interest expense rose to $2,118,000 vs $1,391,000 YoY, contributing to net loss attributable to common of $(3,615,000) .

Financial Results

Metric	Q1 2023	Q2 2023	Q3 2023
Revenue ($)	$2,572,000	$2,273,000	$2,194,000
Gross Profit ($)	$1,105,000	$469,000	$395,000
Gross Margin (%)	43%	21%	18%
SG&A ($)	$1,844,000	$1,816,000	$1,686,000
R&D ($)	$306,000	$383,000	$266,000
Operating Loss ($)	$(1,045,000)	$(1,730,000)	$(1,557,000)
Interest Expense ($)	$3,903,000	$668,000	$2,118,000
Net Loss Attributable to Common ($)	$(5,086,000)	$(2,260,000)	$(3,615,000)
Diluted EPS ($)	$(4.07)	$(0.91)	$(1.44)
Cash & Equivalents ($)	$5,852,000	$4,450,000	$4,018,000

Notes: Q3 YoY revenue increase driven by AXP disposables; Q4 expected to include initial CDMO revenue .

Segment breakdown: Not disclosed as formal segments; revenue commentary highlights AXP disposables strength in Q3 .

Key KPIs and Balance Sheet Highlights:

Weighted average shares: 2,503,631 in Q3 .
Total current assets: $6,925,000 at 9/30/23; total assets: $15,921,000 .
Total current liabilities: $8,890,000; total equity: $3,263,000 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
CDMO revenue initiation	Q4 2023	Suites available “later this year” (pre-opening; customer tours ongoing)	“Will begin recording revenues from CDMO services in the fourth quarter”	Initiated
Gross margin outlook	2024	Not previously quantified	“We expect to see increases in our gross margin in 2024 as a higher percentage of our revenue is derived from CDMO services.”	Introduced
Facility readiness	October 2023	Near completion; ISO certification pending (Q2)	“Completed and officially launched… 35,500+ sq ft… twelve ISO Class-7 ReadyStart cGMP cleanroom suites”	Achieved milestone

No numeric ranges provided for revenue, margins, OpEx, OI&E, or tax rate.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2023)	Current Period (Q3 2023)	Trend
CDMO transition and launch	Building 12 ReadyStart cGMP suites; availability expected Q2/Q3; strategy to become integrated CDMO leveraging CAR-TXpress	Facility completed and launched; initial customers moving in; contracts in process; CDMO revenues begin Q4	Accelerating execution
Demand and capacity	Significant industry demand; long wait times; designed for personalized therapies; “beehive” suite model	Nationwide shortage of CDMO capacity; brokers marketing suites; early tenants engaged	Robust demand persists
Revenue timing	Suites “later this year”; potential move-ins late Q3/early Q4	Initial CDMO revenue in Q4; larger revenue contribution expected in 2024	Visibility improving
Gross margin outlook	Q1 margin 43% (mix, lower reserves); no forward margin guide	2024 gross margin expected to increase with CDMO mix	Mix-driven expansion expected
Technology differentiation	CAR-TXpress can reduce cell therapy manufacturing costs up to 50%	Reiterated as cornerstone to deliver cost, recovery, and compliance benefits	Consistent strategic emphasis

Management Commentary

“We completed and officially launched our 35,500 square feet CGMP cleanroom suite in Sacramento... Our 12 ReadyStart CGMP cleanroom suites are designed to meet the highest scientific quality and regulatory requirement for cell and gene therapy” – Dr. Xiaochun (Chris) Xu, CEO .
“We do have several… customers… on contracts that are in process. We have a couple that are finalized… we anticipate seeing some revenues this quarter, [and] larger revenues begin to hit in 2024.” – Jeff Cauble, CFO .
“Gross profit… was $400,000 or 18% of net revenue… We expect to see increases in our gross margin in 2024 as a higher percentage of our revenue is derived from CDMO services.” – Jeff Cauble, CFO .
“A crucial aspect of our plan is to leverage our proprietary… CAR-TXpress platform… potentially lower the manufacturing cost… by up to 50%.” – Dr. Xu .

Q&A Highlights

Commercial traction and marketing: Management engaged brokers/agents in life sciences, cited nationwide CDMO shortages, confirmed initial client move-ins and contracts, and guided to first CDMO revenue in Q4 with larger ramp in 2024 .
Capacity and scalability: 12 suites in place with potential to expand; suites built to high standards and ready for advanced manufacturing; long-term plan is to provide full CDMO services leveraging CAR-TXpress rather than pure leasing .
Timing/visibility: While some Q4 revenue expected from move-ins, management signaled more material revenue contribution in 2024 .

Estimates Context

S&P Global consensus estimates for revenue and EPS for Q1–Q3 2023 were unavailable for THMO at the time of this analysis; therefore, we cannot provide a comparison of actuals versus consensus. Company filings did not include Street comparisons .
Implication: As the CDMO revenue stream initiates in Q4 and scales into 2024, sell-side coverage and estimate visibility may improve; near-term modeling hinges on suite utilization and the cadence of customer onboarding .

Key Takeaways for Investors

The core CDMO catalyst is live: facility launched, early customers moving in, and first CDMO revenue in Q4; the 2024 ramp and mix shift should be the primary driver of gross margin expansion and the stock narrative .
Legacy product revenue (AXP disposables) provided modest YoY growth support in Q3, but sequential revenue slipped; focus shifts to execution on CDMO utilization rate and contract wins .
Interest expense and overall leverage remain headwinds to net income and EPS near-term; operating expense control helped, but cash generation depends on CDMO scale .
Differentiation via CAR-TXpress (potential 50% manufacturing cost savings) is a strategic moat to attract cell and gene therapy clients; validate through customer adoption and case studies in 2024 .
Watch for Q4 print to confirm initial CDMO revenue, 2024 bookings trajectory, and early margin mix effects; these will likely drive estimate formation and sentiment.
No explicit numeric guidance was provided; management offered directional commentary (Q4 CDMO start; 2024 margin lift). Investors should monitor updates on suite utilization, contract count/size, and conversion from tours to signed agreements .
Liquidity: Cash was $4,018,000 at quarter-end; watch working capital trends and potential financing needs as CDMO scales .

Appendix: Prior-Year and Prior-Quarter References

Q3 2023 vs Q3 2022: Revenue $2,194,000 vs $2,115,000; gross profit $395,000 (18%) vs $437,000 (21%); SG&A $1,686,000 vs $1,982,000; R&D $266,000 vs $470,000; interest expense $2,118,000 vs $1,391,000; EPS $(1.44) vs $(4.66) .
Q2 2023 snapshot: Revenue $2,273,000; gross profit $469,000 (21%); EPS $(0.91) .
Q1 2023 snapshot: Revenue $2,572,000; gross profit $1,105,000 (43%); EPS $(4.07) .

ThermoGenesis Holdings, Inc. (THMO)·Q3 2023 Earnings Summary