Enovix (ENVX), Weave (WEAV), TransMedics (TMDX) and Zeta (ZETA) Deliver
Enovix (ENVX) became a hot stock in May and June, putting pressure on management to deliver a knock-out Q2 update. I’m honestly not sure they did that for investors wondering if the company should be worth $2.5 billion (or higher, ideally) given what we know at this moment, so ENVX remains somewhat of a “believer, or non-believer” type story.
No surprise, I am in the “believer” camp, with the caveat that there are likely to be many more twists and turns on the road to (hopefully) eventual significant success. That success will come when the company has big deals with several electronics manufacturers (smartphones, IoT devices, etc.) and is generating enough consistent revenue to ramp up more production lines.
Back to the present ... revenue in Q2 of $3.8 million was mainly from Routejade but is seen rising into the end of the year (especially in Q4) as sampling and service-related revenue comes in. The shift in manufacturing from the U.S. to Malysia is saving money (around $35 million a year).
Site Acceptance Testing (SAT) for the Fab-2 Agility line is producing samples although SAT for the high-volume line is lagging behind the expected timeline but should be up and running in the current quarter (i.e., by September).
For new deals, a Fortune 200 customer was announced as signing a collaboration agreement for silicon batteries for an IoT product, and a non-binding Memorandum of Understanding (MOU) was signed with a global auto OEM to scale Enovix’s cell architecture for the EV market.
These press releases sound impressive at first, but truth be told, investors are at the point where they want named customers and purchase orders. Understandable. But to be fair, there is a testing and qualification process, and Enovix isn’t yet at the point where it can flip the switch on a production line to meet demand.
The company is still in that fuzzy time between testing and manufacturing and enjoying commercial success.
Management needs to keep focusing on execution and, if the batteries are as good as they are supposed to be, we’ll be in good shape. They are making a ton of progress. Keeping at buy, just expect a bumpy ride. BUY
Weave (WEAV) stock should come out of the blocks hot today after delivering a very solid Q2 result and raising full-year guidance. Second quarter revenue grew 21% to $51 million (4% beat) while adjusted EPS of $0.00 improved by $0.05 over Q2 last year and beat by a penny. Full-year revenue guidance of $201 - $203 million was increased from $197 - $200 million. The company collected deferred payments from March.
While a lot of areas in software have struggled, Weave’s pure-play focus on medical practices appears to be working. New customers are coming to the company, especially in the medical sector, with physical therapy, spa and plastics also areas of focus for sales teams. Current customers are expanding their relationships (the new Weave Experience platform for multi-location management is a plus here) and the newly announced Patterson Dental partnership (100,000 locations) is a significant deal.
Weave’s efforts to expand integrations to allow for data exchange and payments is one of those things that’s hard to put a number on but greases the wheels for potential customers that are using XYZ product and now see that Weave integrates seamlessly, so they realize they can jump in with the company’s products.
Bottom line, Weave continues to go deeper and wider in this focused area of the medical software market and is delivering high-teens revenue growth and about to flip to positive adjusted EPS. It’s not a well-known story and the market cap is still under $800 million. I like it. BUY
TransMedics (TMDX) is set to pop back to overhead resistance near last week’s all-time high (155.7) this morning following another solid beat going into a report where investors were already expecting the world.
Revenue grew 118% to $114 million (beat by 16%) while adjusted EPS of $0.35 (beat by $0.12) improved from a loss of -$0.03 in Q2 of last year. Both Heart and Liver outperformed, with some potential for Heart to keep growing market share given a negative data read from a competitor’s cold perfusion device in April.
Full-year revenue guidance was raised from $390 - $400 million to $425 - $445 million (+76% to 84%).
The aviation business is going very well, though managing fleet and pilots can mean some lumpiness. The company owned 15 aircraft at the end of June, bought two more in July, expects to keep acquiring planes to get to 20 this year and will be hiring more pilots in order to double-shift planes for 24-hour-a-day operations.
International expansion in Europe is starting with a revenue ramp in 2025, expected to become meaningful going into 2026.
The company is advancing new clinical programs to grow OCS Lung and Heart programs, with three clinical programs expected to start next year given pre-clinical testing that shows successful maintenance of donor lungs and hearts on OCS perfusion for over 24 hours. Development of a cold perfusion heart program is also underway. Ultimately, these programs should expand supply and drive more lung and heart transplant volumes over time.
Despite all the investments in aviation and clinical programs, management still sees margin expansion potential, and full-year guidance is likely conservative (certainly is relative to analyst expectations). Another fantastic quarter from one of the most exciting stories in MedTech.
We’ll see how the stock settles before considering moving back to buy. HOLD A QUARTER
Zeta (ZETA) stock should have a good day today (up pre-market) after the company’s Q2 results sailed past expectations and guidance for the full year was increased. Revenue grew 33% to $228 million (beating by 7.2%) while adjusted EPS grew 80% to $0.12 (beating by $0.02). Full-year revenue guidance was raised 3%, from $895 - $905 million to $920 - $930 million (+27%).
On the conference call management said work with agencies is ramping nicely. These relationships allow Zeta to reach around 20 brands via each of the five agencies it works with now (i.e., about 100 brands total), but each agency represents hundreds of brands so there’s a lot more growth potential here.
The mobile product (in beta testing now, launching in late September) is expected to scale quickly, hopefully faster than Zeta’s connected TV (CTV) product, which hit $100 million in revenue in three years. No mobile product revenue is factored into guidance, so it’s all potential upside.
Zeta says the vast majority of its customers are now actively using its Generative AI product (Intelligent Agent Composer), and management believes that’s a big reason why average revenue per user (ARPU) among existing customers grew 22%. Gen AI is not something Zeta is charging specifically for just yet (expected within a few years when it gets more advanced), but since customers using it are scaling their relationship with Zeta faster than those that don’t, it’s a growth driver now.
Management also said that advocacy revenue is ramping each month in Q2 as interest in the upcoming election grows. The team thinks advocacy engagement will extend beyond the upcoming election. Politics-related revenue ($1.5 million in Q2) will absolutely ramp over the next two quarters, likely to around $13.5 million, but while nice to have, it’s a relatively small slice of the $228 million quarterly revenue pie.
I’ve had ZETA at hold for a little while now since the stock has performed so well since we jumped in (+70% from May 2). Today’s expected strong performance isn’t something I want to chase, but rather sit back and enjoy, so keeping at hold. HOLD
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