Zomedica Corp. (ZOM)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 revenue was $6.1M (+2% YoY; -3% QoQ), with gross margin at 71% (above the high end of the 65–70% target), but capital sales were soft due to sales force disruptions and macro financing reluctance .
• Consumables revenue grew to $4.4M and represented 72% of total, reflecting healthy utilization trends; Diagnostics revenue rose 68% YoY on TRUFORMA and VetGuardian momentum .
• Management suspended FY24 revenue guidance (previously $31–$35M), citing CFO transition; they still expect full‑year gross margins to “approach and maybe exceed 70%,” and cash burn within the prior $12–$18M range, likely at the high end .
• Near‑term catalysts: international distributor stocking orders (Middle East, Costa Rica, Europe), the TRUVIEW AI feature launch, and recovery in PulseVet capital placements as the sales force returns to full strength .

What Went Well and What Went Wrong

What Went Well

• Diagnostics growth: Q2 Diagnostics segment revenue increased ~68% YoY (to ~$0.42M) as TRUFORMA assays expanded and VetGuardian adoption improved .
• Margin execution: Q2 gross margin reached 71%, above the high end of prior guidance (65–70%), aided by operational efficiencies and manufacturing progress .
• Strategic expansion: CE marks for TRUFORMA and VetGuardian and new distributor agreements (Leader Healthcare in Middle East/Egypt/India; SIRE Veterinario in Costa Rica) set up H2 international contributions; “we expect to fulfill these orders this quarter and next” .
  • Quote: “In June we received CE Mark approval for TRUFORMA… This is an important milestone… we expect to introduce it into Europe during the current quarter” .

What Went Wrong

• Capital sales shortfall: Q2 capital revenue fell 12% YoY to $1.7M (~3 fewer new PulseVet systems), driven by open territories and 14% of reps on medical leave; macro rates also dampened new purchases .
• Impairment charges: ~$16M non‑cash goodwill impairments tied to SMP, Revo Squared and Assisi, elevating reported OpEx to $29.4M (adjusted OpEx $13.4M) .
• Guidance suspended: Prior FY24 revenue guidance ($31–$35M) was withdrawn amid CFO resignation and transition, introducing uncertainty despite margin confidence .

Financial Results

Segment breakdown:

KPIs and balance sheet:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Revenue for the quarter was $6.1 million… driven by 68% growth within our Diagnostics segment… offset by only 1% growth in PulseVet… capital down 15%… attributable to… temporary headwinds within the PulseVet capital sales area” .
• “Gross profit margin for the second quarter was 71%… slightly better than the high end of our previously stated target range” .
• “With CE marks in hand, we expect additional announcements throughout the rest of the year… we expect our international business to be a material growth driver… in 2025 and beyond” .
• “With the transition to a new CFO… we are suspending our previously issued revenue guidance for 2024… we continue to expect gross margins to approach and maybe exceed 70%… adjusted cash burn… likely at the high end of that range” .

Q&A Highlights

• Sales force headwinds: 14% of territories were affected by medical leave; replacements and training caused lag; full team back in Q3 to drive capital rebound .
• PulseVet placement model: Offering higher‑priced Trodes without upfront capital to bridge financing reluctance; systems retrieved if repeat usage doesn’t occur .
• Impairment scope: Most goodwill balances tied to SMP, Revo, Assisi are now eliminated; “there’s not much left… most of it is associated with PulseVet” .
• Cash burn trajectory: Expect FY burn near the high end ($18M), with low‑water cash near $65M still intact if revenue rebounds .
• International contribution: Historically mid‑teens percent of revenue; H2 stocking orders and EU rollout expected to be incremental contributors .

Estimates Context

• S&P Global consensus estimates for Q2 2024 could not be retrieved due to a Capital IQ mapping issue for ZOM; as a result, estimate comparisons are unavailable at this time [GetEstimates error].
• Management noted seasonality and expects H2 revenue step‑up; revisions to Street models may focus on lowered capital placements in Q2, stronger consumables mix, and margin resilience .

Key Takeaways for Investors

• Mix resilience: Consumables at 72% of revenue and 71% gross margin underscore healthy utilization and pricing power despite capital softness .
• Temporary capital headwinds: Expect rebound as the sales force returns and alternative placement programs mitigate financing reluctance; watch Q3/Q4 PulseVet installs for confirmation .
• International catalysts: CE marks and new distributors should drive H2 stocking orders and broaden TRUFORMA/VetGuardian footprint; monitor update cadence and shipments .
• Guidance suspension risk: Revenue outlook removal and CFO transition are near‑term overhangs; margin confidence and zero debt help offset .
• Pipeline leverage: New equine and canine assays plus TRUVIEW AI can expand addressable market and recurring revenue streams; OTA updates reduce adoption friction .
• Cash runway: $83M cash and no debt provide flexibility to invest in growth while maintaining margin focus; burn likely at high end of prior range in FY24 .
• H2 setup: Seasonality plus international stocking and restored field capacity are key for meeting internal step‑up expectations; watch for sequential revenue growth and capital normalization .

Appendix: Source Documents Reviewed

• Q2 2024 earnings call transcript (full) .
• Q1 2024 8‑K press release and call (full) .
• Q4 2023 earnings call (for trend context) .
• Q2 2023 8‑K press release (for YoY comparisons) .

Note: We searched for the Q2 2024 8‑K press release and other Q2 press releases; the 8‑K filed Aug 14, 2024 references Exhibit 99.1, but available exhibit text in the document set contains April 1, 2024 (Q4 2023) content. No separate Q2‑dated press releases were found in the corpus for July–September 2024 [ListDocuments press-release 07–09/2024 returned none].