WORK Medical Technology Group LTD Reports Financial Results for Fiscal Year 2024

Rhea-AI Summary

WORK Medical Technology Group (Nasdaq: WOK) reported financial results for fiscal year 2024, showing a 15.2% decrease in net revenue to $11.5 million from $13.6 million in FY2023. The decline was primarily due to a 69.4% decrease in mask sales to $1.6 million. However, sales of medical devices excluding masks increased by 17.7% to $9.4 million, while commodity trading grew by 33.9%.

The company reported a net loss of $3.5 million in FY2024, compared to a net income of $0.06 million in FY2023. Operating expenses increased significantly to $6.9 million, with selling expenses up 31.0% and general administrative expenses rising 144.8%. The company's cash position strengthened to $6.6 million, up from $1.6 million, partly due to its IPO of 2,000,000 ordinary shares at $4.00 per share completed on August 26, 2024.

Positive

• Medical devices sales (excluding masks) increased 17.7% to $9.4 million
• Commodity trading revenue grew 33.9%
• Cash and cash equivalents increased to $6.6 million from $1.6 million
• Successfully completed IPO raising funds at $4.00 per share

Negative

• Net revenue decreased 15.2% to $11.5 million
• Mask sales declined 69.4% to $1.6 million
• Net loss of $3.5 million compared to net income of $0.06 million in FY2023
• Gross profit margin decreased to 24.9% from 30.5%
• Operating expenses increased significantly by $3.2 million to $6.9 million
• General and administrative expenses increased 144.8%

Insights

Financial Analyst

WORK Medical's FY2024 results expose significant operational and strategic challenges in their post-COVID business transformation. The company's pivot from mask production to broader medical devices presents a complex narrative of transition costs and uncertain returns.

The financial metrics reveal concerning trends: While medical device sales (excluding masks) grew 17.7% to $9.4 million, this growth came at a substantial cost. The 30.8% decline in gross profit, coupled with a sharp drop in gross margins from 30.5% to 24.9%, suggests the new product mix carries significantly lower profitability. This margin compression, combined with a 144.8% surge in administrative expenses and 31.0% higher marketing costs, has resulted in an unsustainable operating model.

The cash position analysis raises red flags: Despite having $6.6 million in cash reserves, the company burned through $2.2 million in operating activities during FY2024. At the current burn rate and considering the net loss of $3.5 million, the company's runway appears unless operational efficiency improves dramatically.

The timing of their August 2024 IPO at $4.00 per share, followed by significant share price decline, suggests the market is skeptical about the company's transformation strategy. The minimal increase in R&D spending (0.3%) during a critical transition period raises questions about the company's ability to innovate and compete effectively in the medical device market.

Looking ahead, WORK Medical faces three critical challenges: 1) Stabilizing margins in their medical device segment, 2) Controlling operating expenses while maintaining growth, and 3) Demonstrating a clear path to profitability before their cash reserves deplete. The success of their transformation will largely depend on their ability to address these challenges while building a sustainable competitive advantage in the medical device market.

HANGZHOU, China, Feb. 14, 2025 /PRNewswire/ -- WORK Medical Technology Group LTD ("WORK Medical" or the "Company") (Nasdaq: WOK), a supplier of medical devices in China, today reported its financial results for the fiscal year ended September 30, 2024.

Mr. Shuang Wu, Chairman and Chief Executive Officer of WORK Medical, remarked, "We are pleased to report our Company's performance for the fiscal year ended September 30, 2024. As the lingering effects of COVID-19 gradually subside and the global business environment returns to normal, our net revenue reflects a decline primarily due to a 69.4% decrease in mask sales. We have implemented a strategic transformation to drive growth in other key revenue streams over recent years. Specifically, our sales of medical devices, excluding masks, increased by 17.7% to $9.4 million for fiscal year 2024. This, coupled with a 33.9% growth in commodity trading, has partially mitigated the decline in mask sales. To support this transformation, we made investments in marketing and promoting medical devices other than masks, which is reflected in the 31.0% rise in selling and marketing expenses. These expenditures represent strategic investments aimed at long-term growth, which, we believe will position us on a more balanced foundation for future success. Despite the challenges mentioned, our R&D expenses increased by 0.3%. Looking ahead, we plan to leverage our cash reserves to support ongoing strategic transformations. Our focus will be on driving innovation, exploring overseas opportunities, accelerating internationalization, and securing additional global orders, so as to deliver greater value to our shareholders."

Fiscal Year 2024 Financial Results

Net Revenue

Net revenue was $11.5 million in fiscal year 2024, representing a decrease of 15.2% from $13.6 million in fiscal year 2023. The overall decrease in net revenue was mainly due to the decline in demand and unit price of masks and was offset by the increase of revenue of medical devices other than masks and commodity trading.

			For the Year Ended, September 30,
($ millions)
			2024		2023
Masks			$    1.6		$    5.1
Medical devices other than masks			9.4		8.0
Commodity trading			0.4		0.3
Others			0.1		0.2
Net revenue			$   11.5		$   13.6

• Revenue of sales of masks was $1.6 million in fiscal year 2024, representing a decrease of 69.4% from $5.1 million in fiscal year 2023. The decrease was mainly because (i) the demand for masks and the sales volume of masks decreased for the year ended September 30, 2024; and (ii) the Company shifted its marketing focus from masks to medical devices other than masks.
  
  
• Revenue of sales of medical devices other than masks was $9.4 million in fiscal year 2024, representing an increase of 17.7% from $8.0 million in fiscal year 2023. The increase was mainly attributable to the Company's decision to intensify marketing efforts for medical devices other than masks, which accordingly led to higher sales volumes.
  
  
• Revenue of commodity trading was $0.4 million in fiscal year 2024, representing an increase of 33.9% from $0.3 million in fiscal year 2023. The increase was mainly due to the increase of market demand and the Company's business expansion.
  
  
• Revenue of sales of others was $0.1 million in fiscal year 2024, representing a decrease from $0.2 million in fiscal year 2023.

Cost of Revenue

Cost of revenue was $8.6 million in fiscal year 2024, representing a decrease of 8.3% from $9.4 million in fiscal year 2023. The decrease in the cost of revenue was less than the decrease in net revenue, mainly because the unit cost of medical devices other than masks was relatively higher than the unit cost of masks; therefore, the increased sales of medical devices other than masks partially offset the decrease in the cost of revenue related to masks.

Gross Profit

Gross profit was $2.9 million in fiscal year 2024, representing a decrease of 30.8% from $4.1 million in fiscal year 2023.

Gross profit margin was 24.9% in fiscal year 2024, compared to 30.5% in fiscal year 2023. The decrease of gross profit margin was primarily due to the increased sales of medical devices other than masks with relatively lower profit margin and the decreased sales of masks with relatively higher profit margin for the year ended September 30, 2024.

Operating Expenses

Operating expenses were $6.9 million in fiscal year 2024, which increased $3.2 million from $3.7 million in fiscal year 2023.

• Selling expenses were $2.1 million in fiscal year 2024, representing an increase of 31.0% from $1.6 million in fiscal year 2023. The increase was primarily due to increased marketing and promotion expenses incurred for the sales of medical devices other than masks.
  
  
• General and administrative expenses were $4.6 million in fiscal year 2024, representing an increase of 144.8% from $1.9 million in fiscal year 2023, which was primarily due to the increase of professional consulting fees for consulting services regarding financial reporting requirements for a U.S. public company.
  
  
• Research and development expenses were $0.302 million in fiscal year of 2024, representing an increase of 0.3% from $0.301 million in fiscal year 2023, which remained relatively stable.

Net (Loss) Income

Net loss was $3.5 million in fiscal year 2024, compared to net income of $0.06 million in fiscal year 2023.

Basic and Diluted Earnings (Loss) per Share

Basic and diluted loss per share was $0.27 in fiscal year 2024, compared to basic and diluted earnings per share of $0.01 in fiscal year 2023.

Financial Condition

As of September 30, 2024, the Company had cash and cash equivalents of $6.6 million, which increased $5.0 million from $1.6 million as of September 30, 2023.

Net cash used in operating activities was $2.2 million in fiscal year 2024, compared to net cash provided by operating activities of $2.2 million in fiscal year 2023.

Net cash used in investing activities was $9.1 million in fiscal year 2024, compared to $0.6 million in fiscal year 2023.

Net cash provided by financing activities was $15.7 million in fiscal year 2024, compared to net cash used in financing activities of $0.7 million in fiscal year 2023.

Recent Development

On August 26, 2024, the Company completed its initial public offering of 2,000,000 ordinary shares at a public offering price of US$4.00 per ordinary share. The ordinary shares began trading on the Nasdaq Capital Market on August 23, 2024 under the ticker symbol "WOK."

About WORK Medical Technology Group LTD

WORK Medical Technology Group LTD is a supplier of medical devices that develops and manufactures Class I and II medical devices and sells Class I and II disposable medical devices through operating subsidiaries in China. The Company has a diverse product portfolio comprising 21 products, including customized and multifunctional masks and other medical consumables. All the products have been sold in 34 provincial-level administrative regions in China, with 15 of them sold in more than 30 countries worldwide. The Company has received a number of quality-related manufacturing designations and has registered 17 products with the U.S. Food and Drug Administration allowing their products to enter the U.S. market. For more information, please visit the Company's website: https://www.workmedtech.com/corporate.

Forward-Looking Statements

Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company's current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can find many (but not all) of these statements by the use of words such as "approximates," "believes," "hopes," "expects," "anticipates," "estimates," "projects," "intends," "plans," "will," "would," "should," "could," "may" or other similar expressions. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct. The Company cautions investors that actual results may differ materially from the anticipated results, and encourages investors to read the risk factors contained in the Company's registration statement and other reports it files with the U.S. Securities and Exchange Commission before making any investment decisions regarding the Company's securities. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law.

For investor and media inquiries, please contact:

WORK Medical Technology Group LTD
Investor Relations Department
Email: ir@workmedtech.com

Ascent Investor Relations LLC
Tina Xiao
Phone: +1-646-932-7242
Email: investors@ascent-ir.com

 

 

WORK MEDICAL TECHNOLOGY GROUP LTD CONSOLIDATED BALANCE SHEETS (In U.S. dollars, except for otherwise noted)
		As of September 30,
		2024				2023
Assets
Current assets:
Cash and cash equivalents		$	6,557,605			$	1,596,096
Restricted cash			-				41,187
Cash deposited in escrow account			400,000				-
Accounts receivable, net			1,648,797				3,332,322
Inventories, net			3,183,951				4,620,191
Amounts due from related parties			2,707,136				4,237,682
Advance to suppliers			4,697,029				3,469,819
Prepaid expenses and other current assets, net			1,632,702				4,855,381
Total current assets			20,827,220				22,152,678
Property, plant and equipment, net			11,372,485				6,626,774
Intangible assets, net			1,044,062				998,450
Right-of-use assets, net			-				114,127
Deferred tax assets, net			112,916				66,872
Advance to suppliers for equipment			2,893,880				-
Total non-current assets			15,423,343				7,806,223
TOTAL ASSETS		$	36,250,563			$	29,958,901
Liabilities
Current liabilities:
Short-term bank borrowings		$	13,323,643			$	8,840,461
Accounts payable			1,497,152				3,961,827
Deferred revenue			625,326				776,210
Amount due to related parties			1,217,442				159,612
Accrued expenses and other liabilities			3,007,901				4,398,596
Lease liabilities, current			-				49,560
Income tax payable			508,726				736,590
Total current liabilities			20,180,190				18,922,856
Lease liabilities, non-current			-				50,130
Total non-current liabilities			-				50,130
TOTAL LIABILITIES		$	20,180,190			$	18,972,986
Shareholders' equity
Ordinary Shares (par value of $0.0005 per share; 100,000,000 shares           authorized as of September 30, 2024 and 2023; 14,591,942 and           12,500,000 shares issued and outstanding as of September 30, 2024           and 2023, respectively)*		$	7,296			$	6,250
Subscription receivable			(6,250)				(6,250)
Additional paid-in capital			6,617,596				85,012
Statutory reserve			899,731				887,482
Retained earnings			6,076,018				9,580,585
Accumulated other comprehensive loss			(408,465)				(676,828)
Total shareholders' equity			13,185,926				9,876,251
Non-controlling interests			2,884,447				1,109,664
Total equity			16,070,373				10,985,915
TOTAL LIABILITIES AND EQUITY		$	36,250,563			$	29,958,901

 

*	The shares and per share information are presented on a retroactive basis to reflect the reorganization and share reorganization by way of a subdivision and surrender of shares.

 

 

WORK MEDICAL TECHNOLOGY GROUP LTD CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE LOSS (In U.S. dollars, except for otherwise noted)
		For the years ended September 30,
		2024				2023				2022
Net revenue from third parties		$	10,929,070			$	12,501,615			$	19,498,315
Net revenue from related party			577,370				1,064,336				212,975
Cost of revenues from third parties			(8,346,419)				(8,596,872)				(15,197,213)
Cost of revenue from related party			(291,635)				(826,095)				(95,285)
Gross profit			2,868,386				4,142,984				4,418,792
Operating expenses:
Selling expenses			(2,053,019)				(1,567,385)				(1,032,685)
General and administrative expenses			(4,558,041)				(1,861,728)				(2,563,879)
Research and development expenses			(302,511)				(301,644)				(183,900)
Total operating expenses			(6,913,571)				(3,730,757)				(3,780,464)
Other (loss) income:
Interest expense			(557,571)				(392,741)				(352,968)
Interest income			11,727				25,417				1,969
Government subsidies			346,571				74,232				1,186,641
Other income(expenses), net			578,758				(8,746)				(360,409)
Total other income(loss)			379,485				(301,838)				475,233
(Loss) income before income tax expense			(3,665,700)				110,389				1,113,561
Income tax benefit (expense)			125,291				(47,006)				(169,435)
Net (loss) income		$	(3,540,409)			$	63,383			$	944,126
Net (loss) income attributable to non-controlling interest			(48,091)				(48,647)				78,916
Net (loss) income attributable to ordinary shareholders		$	(3,492,318)			$	112,030			$	865,210
Other comprehensive loss:
Foreign currency translation adjustment			453,181				(268,068)				(1,147,710)
Total comprehensive loss			(3,087,228)				(204,685)				(203,584)
Total comprehensive income (loss) attributable to non- controlling interests			136,727				(80,165)				(164,329)
Total comprehensive loss attributable to shareholders		$	(3,223,955)			$	(124,520)			$	(39,255)
Weighted average number of Ordinary Shares
Basic and Diluted*			12,705,011				12,500,000				12,500,000
Basic and diluted (loss) earnings per ordinary share			(0.27)				0.01				0.07

 

*    The shares and per share information are presented on a retroactive basis to reflect the reorganization       and share reorganization by way of a subdivision and surrender of shares.

 

 

WORK MEDICAL TECHNOLOGY GROUP LTD CONSOLIDATED STATEMENTS OF CASH FLOWS (In U.S. dollars, except for share and per share data, or otherwise noted)
		For the years ended
		September 30,
		2024				2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(3,540,409)			$	63,383			$	944,126
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1,410,452				1,603,129				3,258,267
Inventories write-down			762				18,320				(117,327)
Gain (loss) on disposal of equipment			42,504				8,089				(10,871)
Allowance for credit loss			262,446				149,503				1,108,999
Deferred tax benefits			(46,044)				(94,533)				(314,008)
Changes in assets and liabilities:
Accounts receivable – third parties			1,815,361				(131,950)				(4,234,997)
Accounts receivable – related party			—				—				275,993
Advance to suppliers			(1,061,321)				977,318				(191,774)
Amount due (from) to related parties			1,775,923				(3,964,077)				743,490
Inventories			1,576,799				(400,544)				2,053,675
Operating lease liabilities			(2,029)				(51,755)				(5,212)
Prepaid expenses and other current assets			293,683				1,291,145				(194,118)
Accounts payable			(2,553,902)				864,585				(5,822,547)
Income taxes payable			(250,423)				136,508				81,428
Deferred revenue			(176,969)				52,245				(751,375)
Accrued expenses and other liabilities			(1,524,631)				1,688,370				917,303
Net cash (used in) provided by operating activities			(2,228,087)				2,209,736				(2,258,948)
CASH FLOWS FROM INVESTING  ACTIVITIES:
Purchase of intangible asset			(33,313)				(127,913)				—
Purchase of property and equipment			(9,225,094)				(455,391)				(2,012,546)
Proceed from disposal of property and equipment			194,328				—				601,760
Cash acquired from Shanghai Saitumofei			—				—				63,621
Net cash used in investing activities			(9,064,079)				(583,304)				(1,347,165)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering			7,373,839				—				—
Cash deposited in escrow account			(400,000)				—				—
Contributions from non-controlling interest			2,767,032				—				—
Proceeds from short-term borrowings			13,394,778				9,107,082				7,248,367
Repayments of short-term borrowings			(9,369,404)				(6,000,791)				(7,248,367)
Loans to related parties			(4,574,088)				(5,669,834)				(9,493,121)
Repayment from related parties			5,477,054				5,891,373				13,260,930
Loans to third parties			(1,133,656)				(2,723,935)				(1,030,628)
Repayment from loans to third parties			2,734,478				23,562				829,042
Payment of offering cost			(613,009)				(1,356,176)				—
Net cash provided by (used in) financing   activities			15,657,024				(728,719)				3,566,223
Effect of exchange rate changes			555,464				(33,852)				(59,819)
Net increase (decrease) in cash and restricted cash			4,920,322				863,861				(99,709)
Cash, cash equivalents, and restricted cash, at beginning of year			1,637,283				773,422				873,131
Cash, cash equivalents and restricted cash, at end of year		$	6,557,605			$	1,637,283			$	773,422
Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents			6,557,605				1,596,096				731,178
Restricted cash			-				41,187				42,244
Total cash, cash equivalents and restricted cash shown in the statement of cash flows			6,557,605				1,637,283				773,422
SUPPLEMENTAL DISCLOSURE OF CASH  FLOW INFORMATION:
Income taxes paid			9,973			$	160,162			$	340,024
Interest paid			543,753			$	312,035			$	312,282

 

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SOURCE WORK Medical Technology Group LTD

FAQ

What caused WOK's revenue decline in fiscal year 2024?

WOK's revenue declined 15.2% primarily due to a 69.4% decrease in mask sales, dropping from $5.1 million to $1.6 million as demand and unit prices decreased.

How much did WOK's medical device sales grow in FY2024?

WOK's medical device sales (excluding masks) grew by 17.7% to $9.4 million in fiscal year 2024, up from $8.0 million in FY2023.

What was WOK's net loss in fiscal year 2024?

WOK reported a net loss of $3.5 million in fiscal year 2024, compared to a net income of $0.06 million in fiscal year 2023.

When did WOK complete its IPO and at what price?

WOK completed its IPO on August 26, 2024, offering 2,000,000 ordinary shares at $4.00 per share on the Nasdaq Capital Market.

How much cash did WOK have as of September 30, 2024?

WOK had cash and cash equivalents of $6.6 million as of September 30, 2024, an increase from $1.6 million the previous year.