- Q3 Revenue of $2.8 million
- Company pays off in full its $7.5 million outstanding GS
loan balance; draws down a total of $11 million to date on the Keep
Well Agreement
- Company raises $3.3 million, net, in a registered direct
offering of shares of Company's common stock with institutional
investors
- Company notes progress in sales prospect pipeline, including
two plans in finalization of MSA and SOW phase
- Company to Host Conference Call at 4:30 pm ET Today
Ontrak, Inc. (NASDAQ: OTRK) (“Ontrak” or the
“Company”), a leading AI-powered and telehealth-enabled healthcare
company, today reported its financial results for the third quarter
ended September 30, 2022.
Management Commentary
“All of us at Ontrak Health are encouraged by the growing
momentum in our sales pipeline, enhancements to our clinical model,
and effectiveness of our AI-enhanced technology platform. It’s why
I believe we are close to new customer contracts that will position
us for a return to growth in 2023,” commented Founder, Executive
Chairman, and Chief Executive Officer Terren Peizer.
Third Quarter 2022 Financial Results Highlights
- Revenue for the third quarter of 2022 was $2.8 million,
representing an 85% decrease compared to the same period in
2021.
- Operating loss for the third quarter of 2022 was $(11.1)
million compared to an operating loss of $(5.5) million for the
same period in 2021.
- Adjusted EBITDA for the third quarter of 2022 was $(7.7)
million compared to adjusted EBITDA of $(1.7) million for the same
period in 2021.
- Net loss for the third quarter of 2022 was $(12.8) million, or
an $(0.62) diluted net loss per common share (after deduction for
undeclared preferred stock dividends), compared to net loss of
$(7.9) million, or a $(0.54) diluted net loss per common share
(after deduction for declared and undeclared preferred stock
dividends) for the same period in 2021.
- Non-GAAP net loss for the third quarter of 2022 was $(9.4)
million, or a $(0.48) non-GAAP diluted net loss per common share
(after deduction for undeclared preferred stock dividends),
compared to non-GAAP net loss of $(4.5) million, or a $(0.35)
non-GAAP diluted net loss per common share (after deduction for
declared and undeclared preferred stock dividends) for the same
period in 2021.
Third Quarter 2022 and Recent Operating Highlights
- Total enrolled members numbered 1,365 at the end of Q3
2022.
- On August 26, 2022, the Company's board of directors ("Board")
appointed James Messina to serve on the Board and on its Audit
Committee, Nominations and Governance Committee, and Compensation
Committee. This appointment follows the resignation of Robert Rebak
from the Board and each committee of the Board on which Mr. Rebak
served.
- On August 18, 2022, the Company's management approved a
restructuring plan as part of management's cost saving measures in
order to reduce its operating costs, optimize its business model
and help align with its previously stated strategic initiatives,
reducing approximately 34% of positions and $7.7 million of annual
compensation related costs, as well as approximately $3.0 million
of annual third-party costs. During Q3 2022, the Company incurred a
total of approximately $0.9 million of termination benefits to the
impacted employees, including severance payments and benefits.
- On August 2, 2022, the Company entered into a securities
purchase agreement with institutional investors for the purchase
and sale of five million shares of the Company’s common stock at an
at-the-market purchase price of $0.80 per share in a registered
direct offering. The offering closed on August 4, 2022 and the
Company received total net proceeds of approximately $3.3 million
(excluding $0.7 million of total offering related fees).
- On July 25, 2022, the Company appointed Dr. Judy Feld as Chief
Medical Officer ("CMO"), following Dr. Robert Accordino’s
resignation effective July 29, 2022 from his role as CMO.
- On July 15, 2022, the Company repaid $7.5 million of the
remaining GS loan balance, with $2.6 million of its cash on hand
and $5.0 million draw down on the Keep Well Agreement, which
represented full payoff of the GS loan agreement.
- The Company is finalizing an amendment to the Master Note
Purchase Agreement, pursuant to which it expects the maturity date
will be extended to 2024.
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, 2022, the Company confirms
its existing revenue outlook:
- 2022 revenue in the range of $14 - $16 million.
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 registering online for dial-in
information or via live audio webcast at:
https://ontrakhealth.com/investors/presentations-events.
Participants interested in dialing in to the conference call are
requested to register a day in advance or at a minimum 15 minutes
before the start of the call to obtain a unique pin for the
call.
A replay of the call will be available via webcast for on-demand
listening shortly after the completion of the call, at the same web
link, and will remain available for approximately 90 days.
About Ontrak, Inc.
Ontrak, 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: the strength of our pipeline and our ability
to convert pipeline opportunities to contracts in the fourth
quarter of 2022 and beyond; our ability to deliver durable
value-based outcomes for medically complex populations; the
benefits of expanding our augmented intelligence capabilities
throughout the member care journey; our ability to return to a
growth trajectory; our ability to achieve our intended path to
profitability; our ability to effectively align our resources,
manage our operating costs and address the change in staffing
needs; our ability to draw on the remaining available amount, as
well as extend the maturity date on the note purchase agreement
with Acuitas Capital LLC; 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 customers 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; the adequacy of our existing cash resources and
anticipated capital commitments to enable us to continue as a going
concern; our ability to raise additional capital when needed; 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; continued business disruption and related
risks resulting from the outbreak of the novel coronavirus 2019;
general economic conditions, nationally and globally, and their
effect on the market for our services, competitive pressures and
trends in our industry and our ability to successfully compete with
our competitors, changes in laws, regulations, or policies, our
receipt of a deficiency notification from the Nasdaq Stock Market
regarding the trading price of our common stock, 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 based on information available to us on the date hereof,
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. 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, restructuring, severance and related
costs, acquisition related costs, and loss (gain) 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, write-off of debt discount costs, restructuring,
severance and related costs, acquisition related costs and loss
(gain) on change in fair value of warrant liabilities and
contingent liability. 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 terms EBITDA, Adjusted EBITDA,
Non-GAAP net loss and Non-GAAP net loss per common share may vary
from that of others in our industry. None of either EBITDA,
Adjusted EBITDA, Non-GAAP net loss or 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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenue
$
2,843
$
18,594
$
12,004
$
73,801
Cost of revenue
1,436
5,856
6,488
27,125
Gross profit
1,407
12,738
5,516
46,676
Operating expenses:
Research and development
2,833
4,563
9,113
13,531
Sales and marketing
1,151
2,269
3,893
7,839
General and administrative
7,552
11,325
27,694
33,966
Restructuring, severance and related
costs
934
49
934
1,339
Total operating expenses
12,470
18,206
41,634
56,675
Operating loss
(11,063
)
(5,468
)
(36,118
)
(9,999
)
Other expense, net
(1,241
)
(361
)
(3,213
)
(1,004
)
Interest expense, net
(440
)
(2,054
)
(2,996
)
(6,090
)
Loss before income taxes
(12,744
)
(7,883
)
(42,327
)
(17,093
)
Income tax expense
(20
)
—
(140
)
—
Net loss
$
(12,764
)
$
(7,883
)
$
(42,467
)
$
(17,093
)
Dividends on preferred stock - declared
and undeclared
(2,239
)
(2,239
)
(6,716
)
(6,716
)
Net loss attributable to common
stockholders
$
(15,003
)
$
(10,122
)
$
(49,183
)
$
(23,809
)
Net loss per common share, basic and
diluted
$
(0.62
)
$
(0.54
)
$
(2.24
)
$
(1.31
)
Weighted-average common shares
outstanding, basic and diluted
24,339
18,915
21,995
18,236
ONTRAK, INC.
Consolidated Balance
Sheets
(in thousands, except share
and per share data)
September 30,
December 31,
2022
2021
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
7,253
$
58,824
Restricted cash - current
4,477
6,716
Receivables, net
4,590
5,938
Unbilled receivables
412
3,235
Deferred costs - current
145
600
Prepaid expenses and other current
assets
2,179
5,019
Total current assets
19,056
80,332
Long-term assets:
Property and equipment, net
2,505
3,785
Restricted cash - long-term
204
406
Goodwill
5,713
5,713
Intangible assets, net
1,430
2,346
Other assets
1,038
444
Operating lease right-of-use assets
712
656
Total assets
$
30,658
$
93,682
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
1,768
$
1,001
Accrued compensation and benefits
2,095
2,343
Deferred revenue
288
441
Current portion of operating lease
liabilities
655
595
Other accrued liabilities
2,710
5,953
Total current liabilities
7,516
10,333
Long-term liabilities:
Long-term debt, net
9,218
35,792
Long-term operating lease liabilities
711
932
Long-term finance lease liabilities
8
136
Other liabilities
—
934
Total liabilities
17,453
48,127
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, 2022 and December 31, 2021
—
—
Common stock, $0.0001 par value,
500,000,000 shares authorized; 26,914,155 and 20,680,186 shares
issued and outstanding at September 30, 2022 and December 31, 2021,
respectively
3
2
Additional paid-in capital
446,837
436,721
Accumulated deficit
(433,635
)
(391,168
)
Total stockholders' equity
13,205
45,555
Total liabilities and stockholders'
equity
$
30,658
$
93,682
ONTRAK, INC.
Consolidated Statements of
Cash Flows
(in thousands,
unaudited)
For the Nine Months
Ended
September 30,
2022
2021
Cash flows from operating
activities
Net loss
$
(42,467
)
$
(17,093
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation expense
6,282
8,871
Write-off of debt issuance costs
3,334
—
Depreciation expense
2,222
658
Amortization expense
1,946
2,181
Gain on forgiveness of PPP loan
—
(171
)
Change in fair value of warrants
(121
)
—
Change in fair value of contingent
consideration
—
1,305
401(k) employer match in common shares
528
860
Common stock issued for consulting
services
102
—
Changes in operating assets and
liabilities:
Receivables
1,348
11,478
Unbilled receivables
2,823
(834
)
Prepaid expenses and other current
assets
2,966
1,674
Accounts payable
758
(285
)
Deferred revenue
(153
)
(15,633
)
Leases liabilities
(160
)
(208
)
Other accrued liabilities
(1,928
)
(3,914
)
Net cash used in operating activities
(22,520
)
(11,111
)
Cash flows from investing
activities
Purchase of property and equipment
(1,004
)
(3,865
)
Net cash used in investing activities
(1,004
)
(3,865
)
Cash flows from financing
activities
Repayments of 2024 Notes
(39,194
)
—
Proceeds from Keep Well Notes
11,000
—
Proceeds from issuance of common stock
4,000
—
Common stock issuance costs
(706
)
—
Dividends paid
(2,239
)
(6,712
)
Debt issuance costs
(792
)
—
Proceeds from warrant exercise
—
58
Proceeds from options exercise
—
5,584
Finance lease obligations
(226
)
(243
)
Financed insurance premium payments
(2,325
)
(2,154
)
Payment of taxes related to net-settled
stock awards
(6
)
—
Net cash used in financing activities
(30,488
)
(3,467
)
Net change in cash and restricted cash
(54,012
)
(18,443
)
Cash and restricted cash at beginning of
period
65,946
103,210
Cash and restricted cash at end of
period
$
11,934
$
84,767
Supplemental disclosure of cash flow
information:
Interest paid
$
2,307
$
5,483
Income taxes paid
210
91
Non-cash financing and investing
activities:
Common stock issued in connection with
Keep Well Agreement
$
1,249
$
—
Warrants issued in connection with 2024
Notes
458
—
Financed insurance premium
352
—
Warrants issued in connection with Keep
Well Notes
322
—
Common stock issued to settle contingent
consideration
293
—
Accrued debt issuance costs
138
—
Finance lease and accrued purchases of
property and equipment
31
230
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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Operating loss
$
(11,063
)
$
(5,468
)
$
(36,118
)
$
(9,999
)
Depreciation expense
798
276
2,222
658
Amortization expense (1)
412
525
1,217
1,547
EBITDA
(9,853
)
(4,667
)
(32,679
)
(7,794
)
Stock-based compensation expense
1,219
2,910
6,282
8,871
Restructuring, severance and related costs
(2)
934
49
934
1,339
Acquisition related costs (3)
—
—
—
583
Adjusted EBITDA
$
(7,700
)
$
(1,708
)
$
(25,463
)
$
2,999
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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net loss
$
(12,764
)
$
(7,883
)
$
(42,467
)
$
(17,093
)
Stock-based compensation expense
1,219
2,910
6,282
8,871
Write-off of debt issuance costs (4)
1,311
—
3,334
—
Restructuring, severance and related costs
(2)
934
49
934
1,339
Gain on change in fair value of warrant
liabilities
(70
)
—
(121
)
(29
)
Loss on change in fair value of contingent
liability (5)
—
470
—
1,305
Acquisition related costs (3)
—
—
—
583
Gain on forgiveness of PPP loan (6)
—
—
—
(171
)
Non-GAAP net loss
(9,370
)
(4,454
)
(32,038
)
(5,195
)
Dividends on preferred stock - declared
and undeclared
(2,239
)
(2,239
)
(6,716
)
(6,716
)
Non-GAAP net loss attributable to common
stockholders
$
(11,609
)
$
(6,693
)
$
(38,754
)
$
(11,911
)
Net loss per common share - basic and
diluted
$
(0.62
)
$
(0.54
)
$
(2.24
)
$
(1.31
)
Non-GAAP net loss per common share - basic
and diluted
(0.48
)
(0.35
)
(1.76
)
(0.65
)
Weighted-average common shares outstanding
- basic and diluted
24,339
18,915
21,995
18,236
_______________________
(1)
Relates to operating and financing ROU
assets and acquired intangible assets.
(2)
Includes one-time severance and related
benefit costs related to reduction in workforce.
(3)
Includes external legal, accounting, and
advisory costs associated with acquisition activity.
(4)
Relates to write-off of debt issuance
costs on our 2024 Notes.
(5)
Relates to loss resulting from change in
fair value of contingent liability related to a stock price
guarantee associated with an acquisition.
(6)
Relates to gain recognized upon
forgiveness of LifeDojo's PPP loan in May 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221109005853/en/
For Investors: Ryan Halsted
Gilmartin Group investors@ontrakhealth.com
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