Should Nano-X Imaging Investors Be Concerned?
Should Nano-X Imaging Investors Be Concerned?
Taking a Look at Nano-X Imaging (NNOX) Earnings Results.
Today’s Newsletter is Powered by The Bear Report!
The Bear Report is a YouTube Channel dedicated to offering unbiased, bi-weekly analysis of companies with potentially bearish outlooks. Their mission is to equip both bears and bulls with comprehensive information, fostering an understanding of all facets of a business's investment thesis.
Embracing open-mindedness is crucial for any investor, whether bull or bear. Recognizing the importance of seeing both sides of an investment is what distinguishes the great investors from the merely good.
By subscribing, you'll gain access to bi-weekly, in-depth presentations on publicly traded companies, complemented by a variety of concise, short form videos.
You can subscribe below here:
If this has issues connecting to their channel, simply search @TheBearReport in the YouTube search bar.
Still No Transparency, But Deployment Has Begun
In my last update on Nano-X Imaging (NNOX) a couple months ago, I covered the company's Q3 2023 earnings results. At that time, NNOX had just announced its strategic move to accelerate its presence in the U.S. market. They outlined a dual strategy: directly selling their OEM systems and introducing a revolutionary "Scan-As-A-Service" (SaaS) model. This approach marked a pivotal moment for the company, signaling its transition from developmental stages to active deployment.
Despite the optimism, I cautioned that the forthcoming quarters would be a litmus test for NNOX. The company, now past the hurdles of regulatory delays, faced the challenge of proving its operational capabilities. Recent updates, including the fourth-quarter earnings for 2023, suggest that the company is making strides in executing its ambitious rollout plan. However, the Q4 earnings reveal a mixed picture: a slight revenue increase to $2.4M, which nonetheless fell short of expectations, and a continued loss, reflecting the company's ongoing struggle to reach profitability.
Notably, NNOX has begun to validate its innovative SaaS model in the U.S., deploying Nanox.ARC systems across several states and commencing patient scans. This development is crucial, considering the skepticism previously cast by short-sellers who questioned the company's ability to transition from promise to reality. With systems now operational in states like New Jersey, New York, Florida, Kansas, and Georgia, the company is demonstrating its potential to overcome these doubts. Given this news, however, management has still given no transparency on how many systems are in these select states. For all we know, it could five systems, one for each state, or 250 systems combined between all states. During the call, management once again refrained from providing specifics about the number of systems delivered, a detail crucial for forecasting the business's future projections. Consequently, shareholders find themselves awaiting updates with a hopeful outlook, yet remain without clear visibility on this pivotal aspect.
The company's international efforts have also seen progress, with installations in Africa and partnerships in Latin America. These advancements highlights NNOX's commitment to expanding its global footprint.
Despite these positive developments, financial challenges remain. With a modest global deployment and no clear plan for scaling production, NNOX's financial health is under scrutiny. The company's SaaS strategy, while innovative, requires significant upfront investment, and with limited financial resources, the path to commercial scalability and profitability is uncertain.
An intriguing aspect of the NNOX narrative is the revelation of NVIDIA Corporation's (NVDA) indirect stake in the company, a detail that sparked a brief surge in NNOX’s stock price. This connection, albeit indirect, hints at the underlying value and potential synergies within NNOX's technology and approach; although, this is a tiny stake.
In conclusion, NNOX's latest earnings update paints a picture of a company on the cusp of significant breakthroughs but still facing major challenges. The progress in system deployments both in the U.S. and internationally offers hope, dispelling some of the skepticism around its technology. However, the financials underscore the reality of the hurdles NNOX must overcome to achieve commercial success. While the company's direction is promising, and market sentiment appears to be shifting positively, potential investors should remain cautious, seeking more clarity on NNOX's path to profitability and scale.