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TOMI Environmental Solutions, Inc. (TOMZ)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered second consecutive profitability: revenue $2.542M (+73% YoY), gross margin 61.4%, operating income $0.149M, and net income $0.059M ($0.00 EPS). Sequential revenue declined vs Q2 due to mix, but net income improved on cost controls .
  • Record iHP Corporate Service revenue (~$0.650M), and strong international momentum (+82% YoY in Q3; India entry; South Africa expansion) supported results and backlog ($0.5M) .
  • Cost reductions implemented in Q2 were fully realized in Q3, lowering operating expenses by ~10% YoY and contributing to cash flow positivity and improved receivables turnover .
  • Management highlighted informal FY 2024 outlook: “hoping to do over $10 million for the year,” with pipeline visibility in services (> $1M) and 2025 installations (CES/hybrid scheduled for Q2–Q4) .
  • Consensus estimates (S&P Global) were unavailable today; beat/miss vs Street could not be assessed. Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • “Our positive momentum continued into the third quarter, marking our second consecutive profitable quarter in 2024… increased revenue, improved margins, and strategic cost reductions” .
  • Record iHP Corporate Service revenue (~$0.650M) as a “key revenue driver” amid competitor exits, expanding life sciences customer base (Pfizer-related EMAQ partnership, MD Anderson, LFB USA) .
  • International growth: +82% YoY in Q3; India market entry; additional deployment in South Africa (Fresenius Kabi locations now four) .

What Went Wrong

  • Sequential revenue fell from $3.013M in Q2 to $2.542M in Q3 (-15.6%), reflecting quarter-to-quarter lumpiness despite YoY strength .
  • Adjusted EBITDA margin eased to 9% from 11% in Q2 as mix shifted and interest expense remained a headwind ($93.6k in Q3) .
  • Street consensus unavailable; lack of formal guidance continues to constrain external visibility, with management acknowledging “it’s hard to tell” on Q4 sequential trajectory .

Financial Results

Quarterly Trajectory (oldest → newest)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$1.114 $3.013 $2.542
Gross Margin %60.2% 61.5% 61.4%
Operating Income ($USD Millions)($1.226) $0.122 $0.149
Net Income ($USD Millions)($1.310) $0.030 $0.059
EPS ($USD)($0.07) $0.00 $0.00
Adjusted EBITDA ($USD Millions)N/A$0.343 $0.219
Adjusted EBITDA Margin %N/A11% 9%

Q3 YoY vs Prior Year and vs Estimates

MetricQ3 2023Q3 2024YoY ChangeConsensus (S&P)Surprise
Revenue ($USD Millions)$1.470 $2.542 +73.0% Unavailable*N/A*
EPS ($USD)($0.05) $0.00 +$0.05Unavailable*N/A*
Gross Margin %55.0% 61.4% +640 bpsUnavailable*N/A*
Operating Income ($USD Millions)($0.901) $0.149 +$1.050Unavailable*N/A*
Net Income ($USD Millions)($0.901) $0.059 +$0.960Unavailable*N/A*

KPIs and Operating Metrics

KPIQ3 2024Prior PeriodNotes
iHP Corporate Service Revenue ($USD Millions)~$0.650 Historical avg ~$0.250/quarter Record quarter for services
International Revenue Growth YoY+82% Q2: +130% YoY Momentum across Canada, South Africa, India
BIT Solution Sales Growth (YTD)+13% —Supports razor/razor blade model
Mobile Equipment Sales Growth (YTD)+90% —Driver of mix strength in 2024
Sales Backlog ($USD Millions)$0.5 Q2 backlog $1.0 Orders pipeline visibility
Working Capital ($USD Millions)$6.9 $6.8 (Q2) Improved AR turnover
Cash & Equivalents ($USD Millions)$0.809 $0.709 (Q2) Positive cash flow in Q3
Adjusted EBITDA Margin %9% 11% (Q2) Mix shift and interest expense headwind

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY Revenue ($USD Millions)FY 2024None“Hoping to do over $10.0” Introduced (informal outlook)
Operating ExpensesQ3 2024 onwardCost actions initiated in Q2~10% YoY reduction realized in Q3; continue disciplined spend Maintained reductions
iHP Service Pipeline ($USD Millions)Q4 2024–Q1 2025NonePipeline exceeds $1.0; reoccurring contracts; separate CES solution use ~$0.6 starting 2025 Introduced
CES/Hybrid InstallationsFY 2025 (Q2–Q4)NoneAdditional CES/hybrid contracts scheduled for installations Q2–Q4 2025 Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Profitability trajectoryQ1: net loss, rev $1.114M; Q2: return to profitability with net income $0.030M Second consecutive profitable quarter; net income $0.059M Improving
iHP Corporate ServiceQ1 iHP service $0.371M (+21% QoQ) ; Q2 YTD services ~$1M Record ~$0.650M quarter; repeatable growth Accelerating
International expansionQ2: +130% YoY; new customers (Canada, Mexico, Philippines, UAE) +82% YoY; India entry; South Africa expansion Sustained growth
SIS/CES product suiteQ1: new CES ($0.6M) ; Q2: SIS launch and strong pipeline SIS-SA deployments; Malaysia government BSL-3 contract Scaling
Food safety initiativesQ2: studies with large FMCGs; belt spraying; spice EtO replacement Continued engagement; awareness of market challenges; short-cycle opportunities Increasing focus
Cost structure disciplineQ2: cost reduction actions (-3% YoY OpEx; -9% vs Q1) ~10% YoY OpEx reduction realized in Q3 Structural
Government relationshipsQ1: DHS budget allocation for 16 Environment Systems (~$2M) Malaysia IPFN SIS-SA contract; more bids expected Building pipeline

Management Commentary

  • “Our positive momentum continued into the third quarter, marking our second consecutive profitable quarter in 2024. This achievement was driven by increased revenue, improved margins, and strategic cost reductions.” — CEO Dr. Halden Shane .
  • “Our iHP Corporate Service has emerged as a key revenue driver… we have seen some competitors leave the space that provides additional opportunity for TOMI to continue to capture market share.” — COO E.J. Shane .
  • “We achieved positive cash flow this quarter, driven by stronger accounts receivable turnover and tighter control of our outgoing cash through disciplined management of expenditures.” — CEO Dr. Halden Shane .
  • “We remain focused on accelerating international growth, launching new products and programs and carefully managing expenses… delivering sustainable organic growth and profitability moving forward.” — CEO Dr. Halden Shane .

Q&A Highlights

  • Services repeatability: Management expects iHP service revenue (~$0.650M in Q3) to be repeatable and to grow with contracted twice‑yearly shutdowns; CES solution use projected ~$0.6M starting 2025 .
  • Near-term trajectory: Sequential Q4 is “hard to tell,” but management hopes FY revenue exceeds $10M, indicating confidence despite variability .
  • Working capital quality: Most customers net 30 on equipment orders; CES projects pay in milestones; AR turnover improvement aided cash flow .
  • Inventory composition: Mostly equipment and BIT solution; primarily finished goods to support immediate delivery .
  • Product updates: Transport product redesign underway; SIS-SA positioned to become a high‑demand offering across BSCs and enclosures .

Estimates Context

  • S&P Global consensus estimates for Q3 2024 revenue and EPS were unavailable today due to data access limits; therefore, we cannot determine beat/miss vs Street. Values retrieved from S&P Global.*
  • Given YoY outperformance (+73% revenue, +640 bps gross margin) and second consecutive profitability, sell-side models likely need to reflect higher services traction and sustained margins, with caution for quarter-to-quarter lumpiness .

Key Takeaways for Investors

  • Two consecutive profitable quarters with stable low‑60s gross margins signal operating leverage from mix and cost discipline despite sequential revenue variability .
  • Services inflection: Record iHP Corporate Service revenue (~$0.650M), a shorter‑cycle and repeatable driver; watch pipeline conversion and contract cadence into Q4/Q1 .
  • International expansion and government wins (India, South Africa, Malaysia BSL‑3) broaden demand and diversify revenue; these are potential catalysts for orders and backlog .
  • Product portfolio scaling (SIS‑SA, CES/hybrids) supports the razor/razor blade thesis with BIT solution growth (+13% YTD); monitor installed base utilization trends .
  • Near-term trading: Headline catalysts include additional SIS/CES orders, food safety study outcomes, and Q4 sequential performance vs informal >$10M FY revenue goal .
  • Medium-term thesis: Margin resilience, services mix, and recurring solution sales can underpin profitability; risks include small-cap demand lumpiness, interest expense, and execution on installations .
  • With Street estimates unavailable, price reaction may hinge on qualitative momentum and contract disclosures; seek confirmation of service pipeline conversion and FY revenue trajectory in near‑term updates.*

* S&P Global consensus estimates were unavailable at the time of writing due to data access limits. Values retrieved from S&P Global.