Zapata Computing (ZPTA) Q2 2024 earnings summary

Executive summary

• Achieved strong momentum in Q2 2024, with revenue rising to $2.00 million, up from $1.43 million in Q2 2023, driven by expanded partnerships, a growing $30 million+ sales pipeline, and increased software license deliveries.

• Completed merger with Andretti Acquisition Corp., resulting in public listing on Nasdaq and significant changes to capital structure and reporting requirements.

• Focused on delivering differentiated Industrial Generative AI solutions using small, specialized models for enterprise customers, addressing high CapEx and compute challenges of large language models.

• Expanded relationships with key partners such as Andretti Global, DARPA, D-Wave, KPMG, Tech Mahindra, and U.S. Special Operations Command, supporting diversified growth.

• Operating losses increased significantly due to higher professional services, transaction costs, and non-cash charges related to financing and derivative liabilities.

Financial highlights

• Q2 2024 revenue reached $2.00 million, up 40% from $1.43 million in Q2 2023 and $1.22 million in Q1 2024, reflecting increased software license deliveries.

• Gross margin improved to 36% in Q2 2024, compared to 19.7% in Q2 2023 and 13.6% in Q1 2024.

• Operating costs rose to $8.09 million, mainly due to one-time professional fees related to the NASDAQ listing and equity line of credit.

• GAAP operating loss was $7.37 million; GAAP net loss was $15.58 million, including $8.23 million in non-cash expenses from a derivative liability.

• Ended Q2 with $7.16 million in cash and equivalents; net cash used by operations was $6.11 million, offset by $6.06 million raised through financing.

Outlook and guidance

• Management expects continued growth as the $30 million+ sales pipeline matures, with gross margins improving as customer projects advance through the Model Development Lifecycle.

• No specific forward guidance provided, but one-time charges are expected to moderate in the second half of 2024.

• Monetization of the $30 million pipeline is expected over a typical 12-month enterprise sales cycle.

• Substantial additional funding is needed to support ongoing operations and growth strategy; ability to continue as a going concern depends on raising new capital.

• Company is pursuing all available funding options, including public and private investments and further use of equity lines.