SANTA MONICA, Calif.--(BUSINESS WIRE)--Ontrak, Inc. (NASDAQ: OTRK) (“Ontrak” or the “Company”), a leading AI-powered and telehealth-enabled, virtualized healthcare company, today reported its financial results for the third quarter ended September 30, 2021.
Management Commentary
“During the third quarter we made important progress on building out our sales pipeline. We are now in active discussions with three of the larger national health plans in the country, and we are exchanging data and creating financial models for 4 employer organizations and multiple providers. Our confidence in our ability to fast track growth and convert our pipeline is strong, given the overall market dynamics and our new management team. With industry renowned CMO Dr. Robert Accordino engaging with senior clinical decision makers at customers and prospects, our new Chief Customer Officer Mary Lou Osborne from Aetna leading the conversion of our sales pipeline, and newly appointed CIO Arik Hill accelerating our AI-enabled identification, screening and monitoring capabilities, I feel confident that the company is well positioned to return to historical growth rates.”
Third Quarter 2021 Financial Results Highlights
- Revenue for the third quarter of 2021 was $18.6 million, representing a 23% decrease compared to the same period in 2020.
- Operating loss for the third quarter of 2021 was $(5.5) million, yielding an operating loss margin of (29)% compared to an operating loss of $(3.0) million for the same period in 2020, yielding an operating loss margin of (13)%.
- Adjusted EBITDA for the third quarter of 2021 was $(1.7) million compared to adjusted EBITDA of $(0.8) million for the same period in 2020.
- Net loss for the third quarter of 2021 was $(7.9) million, or a $(0.54) diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends), compared to net loss of $(5.7) million, or a $(0.36) diluted net loss per common share (after deduction for undeclared preferred stock dividends) for the same period in 2020.
- Non-GAAP net loss for the third quarter of 2021 was $(4.5) million, or a $(0.35) non-GAAP diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends), compared to non-GAAP net loss of $(2.9) million, or a $(0.20) non-GAAP diluted net loss per common share (after deduction for undeclared preferred stock dividends) for the same period in 2020.
Third Quarter 2021 and Recent Operating Highlights
- Total enrolled members numbered 9,395 at the end of Q3 2021, which includes 861 Ontrak-A members and 3,807 Ontrak-CI members (see discussion below regarding the termination notice received in August 2021) remaining in our program.
- On August 18, 2021, the Company received a termination notice from its second largest customer of their intent not to continue the Ontrak program past December 31, 2021. We believe the notification was for reasons specific to the customer's corporate shift in strategic direction, and is not reflective of the performance or value of the program generally. From inception of the contract in July 2020, we have billed this customer approximately $42 million of the previously expected 3-year $90 million contract and expect their members to graduate or disenroll before the end of 2021.
- On August 30, 2021, Mary Louise Osborne joined Ontrak as Chief Customer Officer. Ms. Osborne brings a proven track record of driving accelerated growth, expansion and operational performance in both commercial and government businesses.
- On August 30, 2021, Arik Hill joined Ontrak as Chief Information Officer. Mr. Hill brings a wealth of experience overseeing strategic direction for infrastructure development that supports exponential growth and integrated emerging technologies into innovative digital solutions, including development of digital platforms and applications that leverage AI and cutting-edge technologies.
- On September 27, 2021, Dr. Robert Accordino joined Ontrak as Chief Medical Officer. Dr. Accordino, an industry thought leader and faculty member of Harvard Medical School, brings a deep network of behavioral health industry relationships, a wealth of experience in measurement-based behavioral healthcare, and engagement in clinical research which has resulted in over 40 peer-reviewed publications, book chapters and articles.
Financial Outlook
The following outlook is based on information available as of the date of this press release and is subject to change in the future. This outlook solely represents existing and planned enrollment launches, and program expansions with current health plan partners.
For the year ending December 31, 2021, the Company provides the following outlook:
2021 revenue of $82-$86 million, reflecting current expectations with our existing health plan customers regarding outreach pool, budget considerations and timing of expansions.
Conference Call & Webcast Details
The Company will host a conference call/webcast today at 4:30 pm ET/1:30 pm PT. Investors, analysts, employees and the general public can access the call by dialing (833) 519-1269 for U.S. participants or (914) 800-3841 for international participants and referencing conference ID #5477522. A live and archived webcast of the event will be available at: https://ontrakhealth.com/investors/presentations-events.
About Ontrak, Inc.
Ontrak, Inc. (f/k/a Catasys, Inc.) is a leading AI and telehealth-enabled healthcare company, whose mission is to help improve the health and save the lives of as many people as possible. Ontrak identifies, engages, activates and provides care pathways to treatment for the most vulnerable members of the behavioral health population who would otherwise fall through the cracks of the healthcare system. We engage individuals with anxiety, depression, substance use disorder and chronic disease through personalized care coaching and customized care pathways that help them receive the treatment and advocacy they need, despite the socio-economic, medical and health system barriers that exacerbate the severity of their comorbid illnesses. The company’s integrated intervention platform uses AI, predictive analytics and digital interfaces combined with dozens of care coach engagements to deliver improved member health, better healthcare system utilization, and durable outcomes and savings to healthcare payors.
Learn more at www.ontrakhealth.com
Forward-Looking Statements
Except for statements of historical fact, the matters discussed in this press release are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements may include for example statements regarding: expectations regarding future revenue reflecting current expectations with our existing health plan customers regarding outreach pool, budget considerations and timing of expansions; the strength of our pipeline; our ability to fast track growth and convert our pipeline; acceleration of our AI-enabled identification, screening, and operational performance; and driving accelerated growth, expansion and performance. These forward-looking statements reflect numerous assumptions and involve a variety of risks and uncertainties, many of which are beyond our control, which may cause actual results to differ materially from stated expectations. These risk factors include, among others, dependence on key personnel and the ability to recruit, retain and develop a large and diverse workforce; high customer concentration and the ability of our customer to terminate our contracts for convenience; intense competition and substantial regulation in the health care industry; changes in regulations or issuance of new regulations or interpretations; limited operating history; our inability to execute our business plan; increase our revenue and achieve profitability; lower than anticipated eligible members under our contracts; our inability to recognize revenue; lack of outcomes and statistically significant formal research studies; difficulty enrolling new members and maintaining existing members in our programs; the risk that the treatment programs might not be effective; difficulty in developing, exploiting and protecting proprietary technologies; business disruption and related risks resulting from the outbreak of the novel coronavirus 2019; the risks associated with the adequacy of our existing cash resources and our ability to continue as a going concern; our ability to raise additional capital when needed and our liquidity; and risks related to our ability to realize the potential benefits of and to effectively integrate acquisitions. You are urged to consider statements that include the words “may,” “will,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plan,” “anticipates,” “intends,” “continues,” “forecast,” “designed,” “goal,” or the negative of those words or other comparable words to be uncertain and forward-looking For a further list and description of the risks and uncertainties we face, please refer to our most recent Securities and Exchange Commission filings which are available on its website at http://www.sec.gov. Such forward-looking statements are current only as of the date they are made, and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, the Company has provided in this press release and the quarterly conference call held on the date hereof certain non-GAAP financial measures. The non-GAAP financial measures presented include EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Non-GAAP net loss, and Non-GAAP net loss per common share, which are not U.S. GAAP financial measures, and clarifies and enhances an understanding of our past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.
EBITDA consists of net loss before interest, taxes, depreciation and amortization expenses. Adjusted EBITDA consists of net loss before interest, taxes, depreciation, amortization, stock-based compensation, reduction in workforce costs, acquisition related costs, and (gain) loss on change in fair value of warrant liability and contingent liability. We believe that making such adjustments provides investors meaningful information to understand our results of operations and the ability to analyze our financial and business trends on a period-to-period basis.
Non-GAAP net loss consists of net loss adjusted for stock-based compensation, acquisition related costs, (gain) loss on change in fair value of warrant liability and contingent liability, gain on forgiveness of PPP loan, and write-off of debt issuance costs. Non-GAAP net loss per common share consists of loss per share adjusted for non-GAAP net loss attributable to common stockholders. We believe that making such adjustments provides investors meaningful information to understand our results of operations and the ability to analyze our financial and business trends on a period-to-period basis.
We believe the above non-GAAP financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Non-GAAP net loss and Non-GAAP net loss per common share may vary from that of others in our industry. Neither EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Non-GAAP net loss nor Non-GAAP net loss per common share should be considered as an alternative to net loss before taxes, net loss, net loss per common share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.
ONTRAK, INC. Consolidated Statements of Operations (in thousands, except per share data) (unaudited) |
|||||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||||
Revenue |
$ |
18,594 |
|
|
|
$ |
24,022 |
|
|
|
$ |
73,801 |
|
|
|
$ |
53,586 |
|
|
Cost of revenue |
5,856 |
|
|
|
13,068 |
|
|
|
27,125 |
|
|
|
30,177 |
|
|
||||
Gross profit |
12,738 |
|
|
|
10,954 |
|
|
|
46,676 |
|
|
|
23,409 |
|
|
||||
|
|
|
|
|
|
|
|
||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
||||||||||||
Research and development |
4,563 |
|
|
|
3,697 |
|
|
|
13,531 |
|
|
|
8,015 |
|
|
||||
Sales and marketing |
2,269 |
|
|
|
1,165 |
|
|
|
7,839 |
|
|
|
3,102 |
|
|
||||
General and administrative |
11,374 |
|
|
|
9,100 |
|
|
|
35,305 |
|
|
|
25,391 |
|
|
||||
Total operating expenses |
18,206 |
|
|
|
13,962 |
|
|
|
56,675 |
|
|
|
36,508 |
|
|
||||
Operating loss |
(5,468 |
) |
|
|
(3,008 |
) |
|
|
(9,999 |
) |
|
|
(13,099 |
) |
|
||||
|
|
|
|
|
|
|
|
||||||||||||
Other expense, net |
(361 |
) |
|
|
(847 |
) |
|
|
(1,004 |
) |
|
|
(1,226 |
) |
|
||||
Interest expense, net |
(2,054 |
) |
|
|
(1,818 |
) |
|
|
(6,090 |
) |
|
|
(5,156 |
) |
|
||||
Net loss |
$ |
(7,883 |
) |
|
|
$ |
(5,673 |
) |
|
|
$ |
(17,093 |
) |
|
|
$ |
(19,481 |
) |
|
Dividends on preferred stock - declared and undeclared |
(2,239 |
) |
|
|
(464 |
) |
|
|
(6,716 |
) |
|
|
(464 |
) |
|
||||
Net loss attributable to common stockholders |
$ |
(10,122 |
) |
|
|
$ |
(6,137 |
) |
|
|
$ |
(23,809 |
) |
|
|
$ |
(19,945 |
) |
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss per common share, basic and diluted |
$ |
(0.54 |
) |
|
|
$ |
(0.36 |
) |
|
|
$ |
(1.31 |
) |
|
|
$ |
(1.17 |
) |
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted-average common shares outstanding, basic and diluted |
18,915 |
|
|
|
17,280 |
|
|
|
18,236 |
|
|
|
16,990 |
|
|
||||
ONTRAK, INC. Consolidated Balance Sheets (in thousands, except share and per share data) |
|||||||||
|
September 30, |
|
December 31, |
||||||
|
2021 |
|
|
2020 |
|
||||
Assets |
(unaudited) |
|
|
||||||
Current assets: |
|
|
|
||||||
Cash and cash equivalents |
$ |
75,303 |
|
|
|
$ |
86,907 |
|
|
Restricted cash - current |
8,954 |
|
|
|
9,127 |
|
|
||
Receivables, net |
5,203 |
|
|
|
16,682 |
|
|
||
Unbilled receivables |
5,260 |
|
|
|
4,426 |
|
|
||
Deferred costs - current |
1,207 |
|
|
|
2,352 |
|
|
||
Prepaid expenses and other current assets |
2,734 |
|
|
|
4,144 |
|
|
||
Total current assets |
98,661 |
|
|
|
123,638 |
|
|
||
Long-term assets: |
|
|
|
||||||
Property and equipment, net |
5,474 |
|
|
|
2,273 |
|
|
||
Restricted cash - long-term |
510 |
|
|
|
7,176 |
|
|
||
Goodwill |
5,713 |
|
|
|
5,727 |
|
|
||
Intangible assets, net |
2,651 |
|
|
|
3,561 |
|
|
||
Other assets |
1,120 |
|
|
|
367 |
|
|
||
Operating lease right-of-use assets |
1,692 |
|
|
|
1,959 |
|
|
||
Total assets |
$ |
115,821 |
|
|
|
$ |
144,701 |
|
|
|
|
|
|
||||||
Liabilities and stockholders' equity |
|
|
|
||||||
Current liabilities: |
|
|
|
||||||
Accounts payable |
$ |
1,135 |
|
|
|
$ |
1,287 |
|
|
Accrued compensation and benefits |
3,623 |
|
|
|
4,723 |
|
|
||
Deferred revenue |
5,321 |
|
|
|
20,954 |
|
|
||
Current portion of operating lease liabilities |
546 |
|
|
|
434 |
|
|
||
Other accrued liabilities |
5,270 |
|
|
|
9,012 |
|
|
||
Total current liabilities |
15,895 |
|
|
|
36,410 |
|
|
||
Long-term liabilities: |
|
|
|
||||||
Long-term debt, net |
46,353 |
|
|
|
45,719 |
|
|
||
Long-term operating lease liabilities |
1,082 |
|
|
|
1,403 |
|
|
||
Long-term finance lease liabilities |
192 |
|
|
|
418 |
|
|
||
Total liabilities |
63,522 |
|
|
|
83,950 |
|
|
||
Commitments and contingencies |
|
|
|
||||||
|
|
|
|
||||||
Stockholders' equity: |
|
|
|
||||||
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 3,770,265 shares issued and outstanding at each of September 30, 2021 and December 31, 2020 |
— |
|
|
|
— |
|
|
||
Common stock, $0.0001 par value, 500,000,000 shares authorized; 19,155,481 and 17,543,218 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively |
2 |
|
|
|
2 |
|
|
||
Additional paid-in capital |
423,414 |
|
|
|
414,773 |
|
|
||
Accumulated deficit |
(371,117 |
) |
|
|
(354,024 |
) |
|
||
Total stockholders' equity |
52,299 |
|
|
|
60,751 |
|
|
||
Total liabilities and stockholders' equity |
$ |
115,821 |
|
|
|
$ |
144,701 |
|
|
|
|
|
|
||||||
ONTRAK, INC. Consolidated Statements of Cash Flows (in thousands, unaudited) |
|||||||||
|
For the Nine Months Ended
|
||||||||
|
2021 |
|
|
2020 |
|
||||
Cash flows from operating activities |
|
|
|
||||||
Net loss |
$ |
(17,093 |
) |
|
|
$ |
(19,481 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
||||||
Stock-based compensation expense |
8,871 |
|
|
|
5,799 |
|
|
||
Paid-in-kind interest expense |
— |
|
|
|
3,500 |
|
|
||
Depreciation expense |
658 |
|
|
|
178 |
|
|
||
Amortization expense |
2,181 |
|
|
|
1,091 |
|
|
||
Gain on forgiveness of PPP loan |
(171 |
) |
|
|
— |
|
|
||
Change in fair value of warrants |
— |
|
|
|
1,217 |
|
|
||
Change in fair value of contingent consideration |
1,305 |
|
|
|
— |
|
|
||
401(k) employer match in common shares |
860 |
|
|
|
405 |
|
|
||
Changes in operating assets and liabilities: |
|
|
|
||||||
Receivables |
11,478 |
|
|
|
(597 |
) |
|
||
Unbilled receivables |
(834 |
) |
|
|
(2,238 |
) |
|
||
Prepaid expenses and other current assets |
1,674 |
|
|
|
(2,260 |
) |
|
||
Accounts payable |
(285 |
) |
|
|
55 |
|
|
||
Deferred revenue |
(15,633 |
) |
|
|
4,641 |
|
|
||
Leases liabilities |
(208 |
) |
|
|
(273 |
) |
|
||
Other accrued liabilities |
(3,914 |
) |
|
|
1,879 |
|
|
||
Net cash used in operating activities |
(11,111 |
) |
|
|
(6,084 |
) |
|
||
|
|
|
|
||||||
Cash flows from investing activities |
|
|
|
||||||
Purchase of property and equipment |
(3,865 |
) |
|
|
(1,131 |
) |
|
||
Net cash used in investing activities |
(3,865 |
) |
|
|
(1,131 |
) |
|
||
|
|
|
|
||||||
Cash flows from financing activities |
|
|
|
||||||
Proceeds from issuance of preferred stock |
— |
|
|
|
45,530 |
|
|
||
Preferred stock issuance costs |
— |
|
|
|
(426 |
) |
|
||
Dividends paid |
(6,712 |
) |
|
|
— |
|
|
||
Proceeds from 2024 Notes |
— |
|
|
|
10,000 |
|
|
||
Debt issuance costs |
— |
|
|
|
(128 |
) |
|
||
Proceeds from warrant exercise |
58 |
|
|
|
133 |
|
|
||
Proceeds from options exercise |
5,584 |
|
|
|
5,742 |
|
|
||
Finance lease obligations |
(243 |
) |
|
|
(126 |
) |
|
||
Financed insurance premium payments |
(2,154 |
) |
|
|
(131 |
) |
|
||
Net cash (used in) provided by financing activities |
(3,467 |
) |
|
|
60,594 |
|
|
||
Net change in cash and restricted cash |
(18,443 |
) |
|
|
53,379 |
|
|
||
Cash and restricted cash at beginning of period |
103,210 |
|
|
|
14,018 |
|
|
||
Cash and restricted cash at end of period |
$ |
84,767 |
|
|
|
$ |
67,397 |
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information: |
|
|
|
||||||
Interest paid |
$ |
5,483 |
|
|
|
$ |
1,108 |
|
|
Non cash financing and investing activities: |
|
|
|
||||||
Reclassification of warrant liability to equity upon exercise of warrant |
$ |
— |
|
|
|
$ |
1,337 |
|
|
Finance lease and accrued purchases of property and equipment |
230 |
|
|
|
517 |
|
|
||
Stock options exercise in transit |
— |
|
|
|
— |
|
|
||
Financed insurance premiums |
— |
|
|
|
318 |
|
|
||
ONTRAK, INC. Reconciliation of Non-GAAP Measures (in thousands, except per share data) |
||||||||||||||||||||
Reconciliation of Operating Loss to EBITDA and Adjusted EBITDA |
||||||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||||
Operating loss |
|
$ |
(5,468 |
) |
|
|
$ |
(3,008 |
) |
|
|
$ |
(9,999 |
) |
|
|
$ |
(13,099 |
) |
|
Depreciation expense |
|
276 |
|
|
|
96 |
|
|
|
658 |
|
|
|
178 |
|
|
||||
Amortization expense (1) |
|
525 |
|
|
|
178 |
|
|
|
1,547 |
|
|
|
482 |
|
|
||||
EBITDA |
|
(4,667 |
) |
|
|
(2,734 |
) |
|
|
(7,794 |
) |
|
|
(12,439 |
) |
|
||||
Stock-based compensation expense |
|
2,910 |
|
|
|
1,751 |
|
|
|
8,871 |
|
|
|
5,799 |
|
|
||||
Restructuring costs (2) |
|
49 |
|
|
|
— |
|
|
|
1,339 |
|
|
|
— |
|
|
||||
Acquisition related costs (3) |
|
— |
|
|
|
176 |
|
|
|
583 |
|
|
|
176 |
|
|
||||
Adjusted EBITDA |
|
$ |
(1,708 |
) |
|
|
$ |
(807 |
) |
|
|
$ |
2,999 |
|
|
|
$ |
(6,464 |
) |
|
Adjusted EBITDA Margin |
|
(9 |
)% |
|
(3 |
)% |
|
4 |
% |
|
(12 |
)% |
||||||||
Reconciliation of Net Loss to Non-GAAP Net Loss; and Net Loss per Common Share to Non-GAAP Net Loss per Common Share |
||||||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||||||
Net loss |
|
$ |
(7,883 |
) |
|
|
$ |
(5,673 |
) |
|
|
$ |
(17,093 |
) |
|
|
$ |
(19,481 |
) |
|
Stock-based compensation expense |
|
2,910 |
|
|
|
1,751 |
|
|
|
8,871 |
|
|
|
5,799 |
|
|
||||
Restructuring costs (2) |
|
49 |
|
|
|
— |
|
|
|
1,339 |
|
|
|
— |
|
|
||||
Loss (gain) on change in fair value of warrant liability |
|
— |
|
|
|
838 |
|
|
|
(29 |
) |
|
|
1,217 |
|
|
||||
Loss on change in fair value of contingent liability (4) |
|
470 |
|
|
|
— |
|
|
|
1,305 |
|
|
|
— |
|
|
||||
Acquisition related costs (3) |
|
— |
|
|
|
176 |
|
|
|
583 |
|
|
|
176 |
|
|
||||
Gain on forgiveness of PPP loan (5) |
|
— |
|
|
|
— |
|
|
|
(171 |
) |
|
|
— |
|
|
||||
Non-GAAP net loss |
|
(4,454 |
) |
|
|
(2,908 |
) |
|
|
(5,195 |
) |
|
|
(12,289 |
) |
|
||||
Dividends on preferred stock - declared and undeclared |
|
(2,239 |
) |
|
|
(464 |
) |
|
|
(6,716 |
) |
|
|
(464 |
) |
|
||||
Non-GAAP net loss attributable to common stockholders |
|
$ |
(6,693 |
) |
|
|
$ |
(3,372 |
) |
|
|
$ |
(11,911 |
) |
|
|
$ |
(12,753 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss per common share - basic and diluted |
|
$ |
(0.54 |
) |
|
|
$ |
(0.36 |
) |
|
|
$ |
(1.31 |
) |
|
|
$ |
(1.17 |
) |
|
Non-GAAP net loss per common share - basic and diluted |
|
(0.35 |
) |
|
|
(0.20 |
) |
|
|
(0.65 |
) |
|
|
(0.75 |
) |
|
||||
Weighted-average common shares outstanding - basic and diluted |
|
18,915 |
|
|
|
17,280 |
|
|
|
18,236 |
|
|
|
16,990 |
|
|
||||
_______________________
(1) |
Relates to operating and financing ROU assets and acquired intangible assets. |
(2) |
Includes one-time severance and related benefit costs. |
(3) |
Includes external legal, accounting, and advisory costs associated with acquisition activity. |
(4) |
Relates to loss resulting from change in fair value of contingent liability related to a stock price guarantee associated with an acquisition. |
(5) |
Relates to gain recognized upon forgiveness of LifeDojo's PPP loan in May 2021. |
