Zapata Computing Holdings Inc. (WNNR)·Q2 2024 Earnings Summary

Executive Summary

• Q2 revenue of $2.00M rose 40% year over year, with gross margin expanding to 36.0% (from 19.7%) on higher software license deliveries; operating loss widened to $7.37M on elevated public-company-related G&A and one-time costs .
• Net loss of $15.58M included an $8.23M non-cash loss from the change in fair value of a forward purchase agreement derivative liability, obscuring underlying operational trends .
• Commercial momentum strengthened: expanded D-Wave partnership, KPMG insurance project, DARPA Quantum Benchmarking progress, Tech Mahindra collaboration, and a CRADA with USSOCOM; qualified pipeline now exceeds $30M .
• Liquidity bolstered by $6.06M financing in Q2 (including $5.30M via ELOC), plus a subsequent agreement enabling up to $10M additional equity purchases by Lincoln Park, partially mitigating cash burn; quarter-end cash was $7.16M (excl. restricted) .

What Went Well and What Went Wrong

What Went Well

• Demand and delivery: Revenue rose to $2.00M (+$0.57M YoY) driven by increased software license deliveries; gross margin expanded to 36.0% (from 19.7%) as scale improved unit economics .
• Commercial traction and partnerships: Expanded D-Wave integration for quantum + generative AI; KPMG collaboration (1,000x faster compliance model runs while maintaining accuracy); DARPA Quantum Benchmarking Phase II findings; Tech Mahindra collaboration; new CRADA with USSOCOM .
• CEO framing of strategy: “ensembles of small, quantum-inspired, highly tailored AI models” as a differentiated approach to LLM limitations and compute cost/access constraints; pipeline above $30M across focus industries .

What Went Wrong

• Operating leverage: Operating loss widened to $7.37M (vs. $4.14M YoY) due to higher G&A (+$3.01M), largely one-time public listing and S-1/ELOC-related professional fees .
• Non-cash volatility: Net loss of $15.58M was inflated by an $8.23M non-cash derivative liability fair value loss, complicating visibility into underlying performance .
• Cash burn: Net cash used in operating activities increased to $6.11M (vs. $3.61M YoY), necessitating continued external financing to support operations and growth .

Financial Results

Headline P&L, Cash, and Operating Metrics

Notes:

• Q1 2024 gross margin not disclosed in the press release; management characterized Q1 gross margin as “flat” vs. Q1 2023 in narrative, without a precise percentage .
• Q2 2024 net loss included an $8.23M non-cash derivative liability fair value loss .

“Vs Estimates” (S&P Global)

• Consensus EPS and revenue for Q2 2024: Unavailable via S&P Global due to lack of CIQ mapping/coverage at the time of query. We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for “Q2 2024,” but the company lacked a Capital IQ mapping in S&P Global’s database at time of access; therefore estimate comparisons are unavailable (Values could not be retrieved from S&P Global).

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Zapata AI is solving AI’s biggest challenges… through our ensembles of small, quantum-inspired, highly tailored AI models… we made strong progress… building awareness… evolving our partnerships… and growing our qualified pipeline… more than $30 million…” — Christopher Savoie, CEO .
• On partnerships and use cases: expanded D-Wave collaboration to speed AI combining traditional and quantum computing; KPMG project reduced time to run complex models by >1,000x while maintaining accuracy; DARPA benchmarking findings; Tech Mahindra telecom ops optimization; deepening DOD engagement via USSOCOM CRADA .
• Call framing (external transcript): management contrasted costly LLM approaches with Zapata’s ensembles of smaller, specific models, emphasizing MDLC discipline on Orquestra for enterprise, numeric/time-series-heavy problems .

Q&A Highlights

• Pipeline conversion and timing: Management expressed optimism about converting a >$30M qualified pipeline through 2H 2024 and beyond, highlighting momentum in target verticals .
• Gross margin drivers: Emphasis on software license deliveries and scaling benefits supporting gross margin improvement (36% in Q2), with potential for further operating leverage as revenues expand .
• Operating expense clarity: Elevated Q2 G&A tied to one-time public company listing, S-1, and ELOC-related professional fees, expected to moderate in 2H .
• Liquidity and financing: Q2 financing inflows of $6.06M plus a post-quarter agreement with Lincoln Park enabling up to $10M additional equity purchases addressed near-term liquidity while the company invests in growth .

Note: A full internal transcript was not available in the document corpus; themes above are grounded in the company’s press release and external transcript sources .

Estimates Context

• S&P Global consensus (Revenue, EPS) for Q2 2024: Not available due to a current Capital IQ mapping/coverage gap; we attempted to retrieve “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and estimate counts for Q2 2024 but no data was returned (Values could not be retrieved from S&P Global).
• Implication: With no S&P Global consensus, we cannot characterize the quarter as a beat/miss versus Street. Sell-side estimate formation may lag until broader coverage initiates.

Key Takeaways for Investors

• Revenue acceleration with material gross margin expansion indicates early operating leverage as software deliveries scale; monitoring sustained bookings-to-revenue conversion into 2H 2024 is critical .
• One-time public listing/S-1/ELOC costs inflated G&A and operating loss; if these moderate as guided, sequential operating loss should narrow at constant revenue levels .
• Non-cash derivative liability valuation drove a large part of the net loss; cash metrics and operating cash flow are better indicators of underlying trend, though cash burn rose in Q2 .
• Commercial momentum across D-Wave, KPMG, Tech Mahindra, and defense (DARPA/USSOCOM) broadens optionality; conversion of the $30M+ pipeline is the near-term catalyst for the stock narrative .
• Liquidity actions (Q2 financing and LPC agreement) extend runway; continued access to capital and disciplined OpEx are prerequisites to scaling the go-to-market .
• Absence of quantitative guidance and unavailable Street estimates may increase volatility around prints; watch for incremental disclosures on deal sizes, ARR/retention metrics, and margin targets to anchor expectations .

Appendix: Additional KPIs and Highlights

Sources:

• Q2 2024 press release (8-K 2.02 Exhibit 99.1) and filing metadata .
• Q1 2024 press release (8-K 2.02 Exhibit 99.1) .
• External call transcript and coverage: Seeking Alpha transcript page ; Event timing PR ; PR syndication ; Quartr summary page .