CleanCore Solutions, Inc. (ZONE)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY2025 revenue was $0.257M, down 0.4% YoY; gross margin compressed to 24.1% on higher demo costs and a decision to sell ~$46k of inventory at cost. Net loss widened to $1.005M; diluted EPS was -$0.12 .
• Management highlighted continued adoption and pilots across aviation, hotels, fitness, Montessori schools, and a major NY airport; noted temporary revenue dip due to a shift to direct sales and pilot scaling, with anticipated demand tailwinds from an EPA ban on carcinogenic chemicals .
• Liquidity tightened: cash fell to $0.56M at period-end; management disclosed going-concern uncertainty and active capital-raising via a unit offering launched in January 2025 .
• Strategic expansion: signed a definitive agreement to acquire Sanzonate Europe, targeting immediate margin accretion, ~$10M backlog, and a ~$20M+ pipeline; structured with $0.6M cash, $0.625M note, and earnout up to $1.25M .
• Wall Street consensus (S&P Global) was unavailable at query time; estimate comparisons are not provided due to an SPGI request limit error [GetEstimates errors; S&P Global].

What Went Well and What Went Wrong

• What Went Well

  • Customer traction expanded across education, aviation, hospitality, and fitness; pilots and deployments highlighted across Montessori schools, a major NY airport, and an international hotel chain .
  • Strategic reengineering to lower COGS underway; shift to direct recurring revenue model aimed at predictability and higher margins longer term .
  • International expansion catalyst: definitive agreement to acquire Sanzonate Europe, expected to enhance margins, eliminate intermediaries, add ~$500k inventory and ~$450k receivables, and unlock ~$20M+ pipeline .

• What Went Wrong

  • Gross margin fell sharply to 24.1% (from 49.0% YoY) due to demo equipment costs and selling ~$46k of inventory at cost; cost of sales rose to 75.9% of revenue .
  • Operating expenses elevated: G&A rose to $0.911M (up 184% YoY) from stock comp, professional fees, added employees, and higher D&O insurance; net loss increased to $1.005M .
  • Liquidity risk: cash dropped to $0.56M, and management disclosed substantial doubt about going concern absent additional financing; unit offering initiated to bridge capital needs .

Financial Results

Segment/Product Breakdown (Revenue)

KPIs and Balance Sheet Highlights

Actual vs. Estimates (S&P Global)

*Values retrieved from S&P Global were unavailable due to request limit; comparisons to consensus are not provided.

Guidance Changes

Earnings Call Themes & Trends

Note: No Q2 FY2025 earnings call transcript was found in the document set; themes reflect press releases and 10-Q commentary.

Management Commentary

• “We are experiencing strong market adoption… transitioned to a direct sales recurring revenue model… While this shift resulted in higher sales costs as pilots increased—leading to a temporary revenue dip and expense increase this quarter… we expect sustainable and predictable revenue growth in coming quarters.” — Clayton Adams, CEO .
• “We anticipate a significant increase in market demand following the EPA’s recent ban on two carcinogenic chemicals… Because our products meet these standards… we are well-positioned to help businesses transition.” — Clayton Adams, CEO .
• “This proposed acquisition [Sanzonate Europe]… is expected to accelerate our global expansion… deliver greater revenues, higher margins… without requiring an equity capital raise.” — Clayton Adams, CEO .

Q&A Highlights

• No earnings call transcript was available in the document set; therefore, Q&A highlights and any guidance clarifications from a call cannot be provided for Q2 FY2025 [ListDocuments showed no earnings-call-transcript for the period].

Estimates Context

• S&P Global consensus for Q2 FY2025 revenue and EPS was unavailable due to an SPGI daily request limit error; as a result, estimate comparisons and beat/miss determinations cannot be provided at this time [GetEstimates errors; S&P Global].

Key Takeaways for Investors

• Near-term margin pressure: gross margin fell to 24.1% on demo costs and selling inventory at cost; expect margin recovery as product reengineering and direct model mature .
• Expense intensity: G&A remains elevated from stock comp, professional/legal costs, D&O insurance; watch for OpEx normalization as scale improves .
• Liquidity/watch capital: cash at $0.56M with going-concern disclosure; unit offering initiated and Sanzonate note/earnout structure reduce upfront dilution risk .
• Strategic European expansion: Sanzonate acquisition potentially adds backlog, pipeline, margins, and assets with limited assumed liabilities; monitor closing milestones and integration .
• Demand catalysts: EPA regulatory developments and sustainability priorities could drive adoption; pipeline breadth (aviation, hospitality, education) supports medium-term growth narrative .
• Estimate visibility: Consensus data was unavailable; reassess post-availability to gauge revisions and potential beats/misses in subsequent quarters [GetEstimates errors; S&P Global].
• Trading lens: Near-term volatility likely around financing progress, margin trajectory, and deal closure; medium-term thesis hinges on recurring revenue scaling and international expansion accretion .