Cue Health Reports Third Quarter 2023 Financial Results

SAN DIEGO--()--Cue Health Inc. ("Cue") (Nasdaq: HLTH), a healthcare technology company, today reported financial results for the third quarter 2023.

Recent Highlights

  • Reported third quarter total revenue of $17.5 million, approximately 50% above the midpoint of our guidance range of $11 to $13 million.
  • Three tests in review with the FDA:
    • Cue® Flu A/B + COVID-19 Multiplex Molecular Test Emergency Use Authorization (EUA) for at-home and point-of-care use.
    • Cue Flu A/B Molecular Tests De Novo application for at-home and point-of-care use.
    • Cue RSV Molecular Test De Novo application for at-home and point-of-care use.
  • Flu A/B, RSV, and COVID Multiplex Molecular Test development program is progressing with plans for an EUA submission and an initial objective of having this multiplex available for the 2024-2025 respiratory season.
  • Announced the Herpes + Mpox Multiplex Molecular Test development program with initial plans to enter the market in 2024 with an EUA regulatory pathway.
  • Publication of an independent, peer-reviewed study in Microbiology Spectrum, which finds that Cue’s COVID-19 test demonstrates accuracy comparable to laboratory PCR, while being fast and easy-to-use in the point-of-care setting.
  • Annualized run rate cost savings of approximately $165 million, overachieving our previously stated cost reduction goal of $150 million.
  • Net change in cash for the quarter was $(17.1) million.
  • Ended the third quarter with cash and cash equivalents of $111.5 million.

“In the third quarter our revenue exceeded our expectations, and we continued to execute on our strategic priorities with strong financial discipline. Our cost lowering program has now achieved $165 million in annualized savings, above our $150 million target,” said Ayub Khattak, Chairman and CEO of Cue Health. “We have our Flu + COVID Multiplex Molecular Test, Flu De Novo, and RSV De Novo all deep in review with the FDA. I’m proud of the Cue team for the strong execution across all fronts.”

Third Quarter 2023 Financial Results

Revenue was $17.5 million for the third quarter of 2023. Private sector revenue was $14.4 million or 82% of total revenue with strong ordering from existing customers. Public sector revenue was $3.1 million and disposable test cartridge revenue was $13.2 million.

GAAP product gross profit was a loss of $7.4 million in the third quarter of 2023.

GAAP operating expenses in the third quarter of 2023 were $60.0 million, excluding cost of revenue, in line with second quarter spend and a 37% decrease from $94.6 million in the fourth quarter of 2022.

Received employee retention credit of $20.9 million during the third quarter and recognized in tax credits on the income statement.

GAAP net loss in the third quarter of 2023 was $47.0 million and earnings per diluted share was a loss of $0.31, an improvement of $0.24 from the second quarter of 2023. Cue's adjusted net loss was $63.6 million and adjusted earnings per diluted share was a loss of $0.42. Adjusted EBITDA was a loss of $36.6 million.

Cue ended the third quarter with cash of $111.5 million and the company continues to operate with no debt obligations.

Guidance

Cue Health expects fourth quarter 2023 revenues in the range of $16 million to $18 million.

About Cue Health 
Cue Health Inc. (Nasdaq: HLTH) is a healthcare technology company that uses diagnostic-enabled care to empower people to live their healthiest lives. The Cue Health platform offers individuals and healthcare providers convenient and personalized access to lab-quality diagnostic tests at home and at the point-of-care, as well as on-demand telehealth consultations and treatment options for a wide range of health and wellness needs. Cue’s customers include federal and state public sector agencies and the private sector, which includes healthcare providers, enterprises, and individual consumers. Cue received De Novo authorization from the U.S. Food and Drug Administration (FDA) for its COVID-19 test, which became the first home use respiratory test to receive this FDA approval. Cue also received Emergency Use Authorization from the FDA for its molecular Mpox test at the point-of-care. To further expand its test menu, Cue has made other submissions that are now under review by the FDA, including for the Cue® Flu A/B + COVID-19 Molecular Test and the Cue® RSV Molecular Test, both of which are designed for at-home and point-of-care use. Cue, founded in 2010, owns over 100 patents and is headquartered in San Diego. For more information, please visit www.cuehealth.com.

Forward-Looking Statements 
Statements in this press release about future expectations, plans and prospects, including statements related to the submission of any FDA applications and expectations around receiving clearance and authorization, growth in our customer base, expectations regarding production capacity, potential technology enhancements, expectations related to availability of our programs and testing volumes, the ability to achieve growth in the future, and future results of operations and performance and our guidance, including fourth quarter 2023 guidance, as well as any other statements regarding matters that are not historical facts, may constitute “forward-looking statements”. The words, without limitation, “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “would,” “develop,” “pave,” “seek,” “offer,” “grow”, “expand”, “look forward”, “believe,” “design” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these or similar identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those related to the expected capabilities of the flu A/B standalone, flu A/B + COVID multiplex, RSV test, Strep Throat test, Mpox test and Chlamydia + Gonorrhea multiplex test, the expansion of Cue Care, our ability to maintain customer growth rates, our ability to increase private sector revenue, our ability maintain or replace the revenue historically generated from our government contracts, our ability to effectively scale our manufacturing capacity to meet contractual obligations with our customers and market demand, our ability to realize operating expense annualized savings as a result of the previously announced cost reduction program, and the factors discussed in the "Risk Factors" section of Cue’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023 and of Cue’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 to be filed with the SEC. Any forward-looking statements contained in this press release are based on the current expectations of Cue’s management team and speak only as of the date hereof, and Cue specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

The Cue Mpox (Monkeypox) Molecular Test has not been FDA cleared or approved, but has been authorized for emergency use by FDA under an EUA. This product has been authorized only for the detection of nucleic acid from monkeypox virus, not for any other viruses or pathogens. The emergency use of this product is only authorized for the duration of the declaration that circumstances exist justifying the authorization of emergency use of in vitro diagnostics for detection and/or diagnosis of infection with the monkeypox virus, including in vitro diagnostics that detect and/or diagnose infection with non-variola Orthopoxvirus, under Section 564(b)(1) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 360bbb-3(b)(1), unless the declaration is terminated or authorization is revoked sooner.

Use of Non-GAAP Financial Measures 
To supplement our financial information presented in accordance with GAAP, we consider certain financial measures that are not prepared in accordance with GAAP, including Adjusted Product Gross Profit Margin, Adjusted Operating Expenses, Adjusted Net (loss) Income, Adjusted Diluted EPS and Adjusted EBITDA (loss). We use these financial measures in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our business and financial performance. We believe that these non-GAAP financial measures provide useful information to investors about our business and financial performance, enhance their overall understanding of our past performance and future prospects, and allow for greater transparency with respect to metrics used by our management in their financial and operational decision making. We are presenting these non-GAAP financial measures to assist investors in seeing our business and financial performance through the eyes of management, and because we believe that these non-GAAP financial measures provide an additional tool for investors to use in comparing results of operations of our business over multiple periods with other companies in our industry.

Adjusted EBITDA is defined as net loss before interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation, tax credits, restructuring expense, disputed vendor payment, inventory charges – inventory reserves / warranty reserves.

Adjusted product gross profit (loss) is defined as product gross profit (loss), before disputed vendor payment, inventory charges – inventory reserves / warranty reserves.

Adjusted operating expenses is defined as operating expenses before cost of revenue, restructuring expense.

Adjusted net loss is defined as Net loss, before tax credits, disputed vendor payment, restructuring expense and tax effects.

Adjusted diluted EPS is defined as Diluted EPS before tax credits, disputed vendor payment, restructuring expense and tax effects.

Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations. Thus, these non-GAAP metrics should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP. For reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures see the financial tables below.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue

 

 

 

 

 

 

 

Product revenue

$

14,757

 

 

$

66,660

 

 

$

46,842

 

 

$

328,465

 

Grant and other revenue

 

2,720

 

 

 

2,929

 

 

 

5,296

 

 

 

8,234

 

Total revenue

 

17,477

 

 

 

69,589

 

 

 

52,138

 

 

 

336,699

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of product revenue

 

22,180

 

 

 

50,595

 

 

 

91,349

 

 

 

239,190

 

Sales and marketing

 

7,051

 

 

 

18,129

 

 

 

26,358

 

 

 

69,268

 

Research and development

 

37,103

 

 

 

42,516

 

 

 

118,372

 

 

 

115,303

 

General and administrative

 

15,848

 

 

 

25,625

 

 

 

47,489

 

 

 

77,946

 

Restructuring expense

 

 

 

 

137

 

 

 

14,518

 

 

 

2,020

 

Total operating costs and expenses

 

82,182

 

 

 

137,002

 

 

 

298,086

 

 

 

503,727

 

Loss from operations

 

(64,705

)

 

 

(67,413

)

 

 

(245,948

)

 

 

(167,028

)

 

 

 

 

 

 

 

 

Interest expense

 

(304

)

 

 

(346

)

 

 

(815

)

 

 

(413

)

Tax credits

 

20,939

 

 

 

 

 

 

20,939

 

 

 

 

Other income, net

 

1,833

 

 

 

409

 

 

 

5,525

 

 

 

458

 

Net loss before income taxes

 

(42,237

)

 

 

(67,350

)

 

 

(220,299

)

 

 

(166,983

)

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

4,733

 

 

 

(1,047

)

 

 

4,733

 

 

 

(4,433

)

Net loss

$

(46,970

)

 

$

(66,303

)

 

$

(225,032

)

 

$

(162,550

)

Net loss per share – basic

$

(0.31

)

 

$

(0.45

)

 

$

(1.48

)

 

$

(1.10

)

Weighted-average number of shares used in computation of net loss per share – basic

 

153,699,408

 

 

 

148,285,721

 

 

 

152,226,999

 

 

 

147,443,196

 

Net loss per share – diluted

$

(0.31

)

 

$

(0.45

)

 

$

(1.48

)

 

$

(1.10

)

Weighted-average number of shares used in computation of net loss per share – diluted

 

153,699,408

 

 

 

148,285,721

 

 

 

152,226,999

 

 

 

147,443,196

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and share data)

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

111,454

 

 

$

241,530

 

Restricted cash

 

800

 

 

 

800

 

Accounts receivable, net

 

1,320

 

 

 

18,751

 

Inventories, net - current

 

63,555

 

 

 

82,210

 

Prepaid expenses

 

9,862

 

 

 

15,728

 

Other current assets

 

5,248

 

 

 

12,134

 

Total current assets

 

192,239

 

 

 

371,153

 

Non-current inventories, net

 

27,640

 

 

 

25,436

 

Property and equipment, net

 

166,311

 

 

 

189,275

 

Operating lease right-of-use assets

 

80,829

 

 

 

85,321

 

Intangible assets, net

 

21,539

 

 

 

16,867

 

Other non-current assets

 

3,735

 

 

 

6,528

 

Total assets

$

492,293

 

 

$

694,580

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

11,109

 

 

$

7,150

 

Accrued liabilities and other current liabilities

 

39,920

 

 

 

52,378

 

Deferred revenue, current

 

623

 

 

 

1,566

 

Operating lease liabilities, current

 

5,109

 

 

 

7,739

 

Finance lease liabilities, current

 

1,646

 

 

 

2,362

 

Total current liabilities

 

58,407

 

 

 

71,195

 

Operating leases liabilities, net of current portion

 

42,961

 

 

 

44,045

 

Finance lease liabilities, net of current portion

 

 

 

 

849

 

Other non-current liabilities

 

2,091

 

 

 

1,997

 

Total liabilities

 

103,459

 

 

 

118,086

 

Stockholders’ Equity

 

 

 

Common stock

 

2

 

 

 

1

 

Additional paid-in-capital

 

831,938

 

 

 

794,567

 

Accumulated deficit

 

(443,106

)

 

 

(218,074

)

Total stockholders’ equity

 

388,834

 

 

 

576,494

 

Total liabilities and stockholders’ equity

$

492,293

 

 

$

694,580

 

 

Non-GAAP Measures
(In thousands, except share data)

The following table presents the reconciliation of Net loss to Adjusted EBITDA, for the periods presented:

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net loss

$

(46,970

)

 

$

(66,303

)

 

$

(225,032

)

 

$

(162,550

)

Interest expense

 

304

 

 

 

346

 

 

 

815

 

 

 

413

 

Income tax expense (benefit)

 

4,733

 

 

 

(1,047

)

 

 

4,733

 

 

 

(4,433

)

Depreciation and amortization

 

13,572

 

 

 

11,404

 

 

 

37,992

 

 

 

32,989

 

Stock-based compensation

 

12,687

 

 

 

15,690

 

 

 

38,597

 

 

 

48,515

 

Tax credits

 

(20,939

)

 

 

 

 

 

(20,939

)

 

 

 

Restructuring expense

 

 

 

 

137

 

 

 

14,518

 

 

 

2,020

 

Disputed vendor payment

 

 

 

 

 

 

 

12,000

 

 

 

 

Inventory charges - inventory reserves / warranty reserves

 

 

 

 

2,610

 

 

 

 

 

 

45,454

 

Adjusted EBITDA

$

(36,613

)

 

$

(37,163

)

 

$

(137,316

)

 

$

(37,592

)

The following table presents the reconciliation of Product gross profit (loss) margin to Adjusted product gross profit (loss) margin, for the periods presented:

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Product revenue

$

14,757

 

 

$

66,660

 

 

$

46,842

 

 

$

328,465

 

Cost of product revenue

 

22,180

 

 

 

50,595

 

 

 

91,349

 

 

 

239,190

 

Product gross profit (loss)

 

(7,423

)

 

 

16,065

 

 

 

(44,507

)

 

 

89,275

 

Product gross profit (loss) margin

 

(50

)%

 

 

24

%

 

 

(95

)%

 

 

27

%

 

 

 

 

 

 

 

 

Disputed vendor payment

 

 

 

 

 

 

 

12,000

 

 

 

 

Inventory charges - inventory reserves / warranty reserves

 

 

 

 

2,610

 

 

 

 

 

 

45,454

 

Adjusted product gross profit (loss)

$

(7,423

)

 

$

18,675

 

 

$

(32,507

)

 

$

134,729

 

Adjusted product gross profit (loss) margin

 

(50

)%

 

 

28

%

 

 

(69

)%

 

 

41

%

The following table presents the reconciliation of Net loss / diluted EPS to Adjusted net loss / diluted EPS, for the periods presented:

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2023

 

2023

 

Dollar Amount

 

Per Diluted Share

 

Dollar Amount

 

Per Diluted Share

Net loss / diluted EPS

$

(46,970

)

 

$

(0.31

)

 

$

(225,032

)

 

$

(1.48

)

Tax credits

 

(20,939

)

 

 

(0.14

)

 

 

(20,939

)

 

 

(0.14

)

Disputed vendor payment

 

 

 

 

 

 

 

12,000

 

 

 

0.08

 

Restructuring expense

 

 

 

 

 

 

 

14,518

 

 

 

0.10

 

Tax effects

 

4,325

 

 

 

0.03

 

 

 

4,325

 

 

 

0.03

 

Adjusted net loss / diluted EPS

$

(63,584

)

 

$

(0.42

)

 

$

(215,128

)

 

$

(1.41

)

 

Contacts

Contact Us
Lorna Williams
ir@cuehealth.com

Cue Health
press@cuehealth.com

Contacts

Contact Us
Lorna Williams
ir@cuehealth.com

Cue Health
press@cuehealth.com