- Q2 Revenue of $3.0 million and Year to Date Revenue of $5.5
million
- Company announces signing of new customer agreement with a
regional Medicaid health plan
- Company completes reverse stock split of its common stock at
a ratio of 1:6
- Company announces achievement of certification as a
Credentials Verification Organization (CVO) by the National
Committee for Quality Assurance (NCQA)
Ontrak, Inc. (NASDAQ: OTRK) (“Ontrak” or the
“Company”), a leading AI-powered and telehealth-enabled healthcare
company, today reported its financial results for the second
quarter ended June 30, 2023.
Management Commentary
“We are encouraged by our new customer agreement and other
positive developments in our pipeline, which we believe validate
our go-to-market strategy that positions us for a return to
growth,” said Brandon LaVerne, the Company’s Chief Executive
Officer and Chief Operating Officer. “Our suite of customized
solutions provides our customers and prospects flexible options for
engaging their members in need of our support and furthers our
mission to help improve the health and save the lives of as many
people as possible. We remain focused on delivering innovative
behavioral health care solutions, improved clinical outcomes, and
tangible cost savings to our customers.”
Second Quarter 2023 Financial Results Highlights
All common share and per share amounts presented herein for all
periods have been retroactively adjusted to reflect the impact of
the reverse stock split (see below for more information).
- Revenue for the second quarter of 2023 was $3.0 million,
representing a 24% decrease compared to the same period in
2022.
- Operating loss for the second quarter of 2023 was $(4.6)
million compared to an operating loss of $(11.9) million for the
same period in 2022.
- Adjusted EBITDA for the second quarter of 2023 was $(3.1)
million compared to adjusted EBITDA of $(8.6) million for the same
period in 2022.
- Net loss for second quarter of 2023 was $(6.8) million, or a
$(1.84) diluted net loss per common share (after deduction for
undeclared preferred stock dividends), compared to net loss of
$(15.1) million, or a $(4.97) diluted net loss per common share
(after deduction for undeclared preferred stock dividends) for the
same period in 2022.
- Non-GAAP net loss for second quarter of 2023 was $(5.9)
million, or a $(1.66) non-GAAP diluted net loss per common share
(after deduction for undeclared preferred stock dividends),
compared to non-GAAP net loss of $(10.9) million, or a $(3.78)
non-GAAP diluted net loss per common share (after deduction for
undeclared preferred stock dividends) for the same period in
2022.
Adjusted EBITDA, non-GAAP net loss and non-GAAP diluted net loss
per common share are non-GAAP financial measures. See our
description and reconciliation of such non-GAAP measures at the end
of this release.
Second Quarter 2023 and Recent Operating Highlights
- In July 2023, the Company entered into an agreement with a
regional Medicaid health plan for our WholeHealth+ and Ontrak
Engage solutions. The agreement is pending state approval and is
expected to launch in the fourth quarter of 2023. Total enrolled
members in our WholeHealth+ program numbered 1,889 at the end of Q2
2023, compared to 1,526 at the end of Q1 2023 and 2,094 at the end
of Q2 2022. On June 23, 2023, the Company and Acuitas Capital, LLC
(“Acuitas”), an entity indirectly wholly owned and controlled by
Terren S. Peizer, the Company’s largest stockholder and former
Chief Executive Officer and Chairman, entered into a Fourth
Amendment to the Master Note Purchase Agreement entered into
between the Company and Acuitas in April 2022 (the "Fourth
Amendment," and as amended to date, the “Keep Well Agreement”),
pursuant to which, among other things: a) the Funding Structure was
changed to provide the terms for the remaining $6.0 million to be
funded thereunder as follows: $4.0 million was to be funded on June
1, 2023 and $2.0 million was to be funded on September 1, 2023.
Under the Fourth Amendment, in lieu of the $6.0 million being
funded as described above, Acuitas agreed to deliver to the Company
for deposit by the Company into a segregated account established by
the Company (the proceeds so deposited, the “Escrowed Funds” and
the account into which the proceeds are so deposited, the “Escrow
Account”): (i) $4.0 million on June 23, 2023 (deposit received by
Company on June 26, 2023); and (ii) $2.0 million on September 1,
2023; and b) the maturity date of the Keep Well Notes was extended
from June 30, 2024 to September 30, 2024.
- On July 27, 2023 (the “Effective Date”), the Company filed a
certificate of amendment to its amended and restated certificate of
incorporation with the Secretary of State of the State of Delaware
implementing a reverse split at ratio of 1:6. Any fractional share
of our common stock resulting from the reverse split was
automatically rounded up to the nearest whole share. The Company's
common stock began trading on the NASDAQ Capital Market on a
post-split basis at the open of trading on July 28, 2023, and
continues to trade under the symbol “OTRK,” but has been assigned a
new CUSIP number (683373302).
- The Company announced a breakthrough increase in behavioral
health diagnosis, with 42% of members diagnosed with Substance Use
Disorder, 27% of members diagnosed with Depression, 27% of members
diagnosed with Bipolar Disorder, 21% of members diagnosed with
Anxiety and 20% of members diagnosed with Schizophrenia did not
have their respective diagnosis prior to enrollment in Ontrak’s
WholeHealth+ program.
- The Company achieved certification as a CVO by the NCQA for the
element of license to practice. This certification further
validates Ontrak's commitment to maintaining the highest standards
of quality and compliance in its suite of health care solutions,
enabling its customers and prospects to effectively meet their
accreditation goals.
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.
For the year ending December 31, 2023, the Company reaffirms its
estimate of revenue in the range of $12 to $14 million. The
foregoing estimate is based on existing and currently planned
enrollment launches, currently anticipated program expansions with
current health plan partners, current expectations with the
Company’s existing 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 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
This press release contains “forward-looking” statements that
are based on the Company’s beliefs and assumptions and on
information currently available to the Company on the date of this
press release and are made pursuant to the Safe Harbor provisions
of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements that are not
historical facts and can be identified by terms such as “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. Forward-looking statements
may include, but are not limited to, the expectations around state
approval and timing of launch of the new customer contract, the
Company’s belief that its strategy will accelerate the Company’s
return to growth, maximize the Company’s differentiated platform,
and strengthen the Company’s position, the Company’s expectations
regarding reductions in costs resulting from its cost saving
measures, and the Company’s estimated revenue for 2023.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the Company’s actual
results, performance or achievements to be materially different
from those expressed or implied by forward-looking statements,
including, without limitation, risks related to: the Company’s
ability to successfully execute on its strategy and business plan;
the Company’s ability to increase its revenue and efficiently
manage expenses and achieve profitability; the Company’s high
customer concentration and the ability of its customers to
terminate their contracts for convenience; the adequacy of the
Company’s existing cash resources and anticipated capital
commitments and future cash requirements to enable the Company to
continue as a going concern; the Company’s ability to raise
additional capital when needed; difficulty enrolling new members
and maintaining existing members in the Company’s programs; the
effectiveness of the Company’s treatment programs; lower than
anticipated eligible members under the Company’s contracts; the
Company’s dependence on key personnel and the Company’s ability to
recruit and retain key personnel; the Company’s ability to maintain
the listing of its stock on Nasdaq; the outcomes of ongoing legal
proceedings brought by the U.S. Department of Justice and the
Securities and Exchange Commission against the Company’s largest
stockholder and former Chief Executive Officer and Chairman, and
whether governmental authorities will institute separate
investigations or proceedings against the Company and/or its
current or former executives and/or directors; substantial
regulation in the health care industry; changes in regulations or
issuance of new regulations or interpretations; the Company’s
limited operating history; difficulty in developing, exploiting and
protecting proprietary technologies; business disruption and
related risks resulting from the COVID-19; general economic
conditions, nationally and globally, and their effect on the market
for our service; intense competition and competitive pressures and
trends in the Company’s industry and the Company’s ability to
successfully compete; changes in laws, regulations, or policies;
and risks related to the Company’s ability to realize the potential
benefits of and to effectively integrate acquisitions. For a
further list and description of the risks and uncertainties the
Company faces, please refer to the Company’s most recent Securities
and Exchange Commission filings which are available on its website
at http://www.sec.gov. Forward-looking statements are current only
as of the date they are made and the Company assumes 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, 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, write-off of debt issuance costs, restructuring,
severance and related costs, gain on termination of operating
lease, and gain/loss on change in fair value of warrant 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 issuance costs, restructuring,
severance and related costs, gain on termination of operating lease
and gain/loss on change in fair value of warrant 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 term 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 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.
See the Reconciliation of Non-GAAP Measures table at the end of
this press release for a reconciliation of the Non-GAAP financial
measures to U.S. GAAP financial measures.
ONTRAK, INC.
Consolidated Statements of Operations (in thousands,
except per share data) (unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue
$
2,960
$
3,903
$
5,489
$
9,161
Cost of revenue
804
2,206
1,651
5,052
Gross profit
2,156
1,697
3,838
4,109
Operating expenses:
Research and development
1,537
2,852
3,181
6,280
Sales and marketing
837
1,306
1,827
2,742
General and administrative
4,410
9,449
10,228
20,142
Restructuring, severance and related
charges
—
—
457
—
Total operating expenses
6,784
13,607
15,693
29,164
Operating loss
(4,628
)
(11,910
)
(11,855
)
(25,055
)
Other (expense) income, net
(5
)
(1,972
)
286
(1,972
)
Interest expense, net
(2,223
)
(1,156
)
(3,617
)
(2,556
)
Loss before income taxes
(6,856
)
(15,038
)
(15,186
)
(29,583
)
Income tax benefit (expense)
100
(20
)
80
(120
)
Net loss
(6,756
)
(15,058
)
(15,106
)
(29,703
)
Dividends on preferred stock - declared
and undeclared
(2,238
)
(2,238
)
(4,477
)
(4,477
)
Net loss attributable to common
stockholders
$
(8,994
)
$
(17,296
)
$
(19,583
)
$
(34,180
)
Net loss per common share, basic and
diluted
$
(1.84
)
$
(4.97
)
$
(4.09
)
$
(9.86
)
Weighted-average common shares
outstanding, basic and diluted
4,887
3,481
4,787
3,467
ONTRAK, INC.
Consolidated Balance Sheets (in thousands, except share
and per share data)
June 30, 2023
December 31,
2022
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
6,094
$
5,032
Restricted cash - current
4,000
4,477
Receivables, net
282
973
Unbilled receivables
364
453
Deferred costs - current
188
156
Prepaid expenses and other current
assets
2,925
3,168
Total current assets
13,853
14,259
Long-term assets:
Property and equipment, net
2,003
2,498
Restricted cash - long-term
—
204
Goodwill
5,713
5,713
Intangible assets, net
515
1,125
Other assets
310
1,326
Operating lease right-of-use assets
216
632
Total assets
$
22,610
$
25,757
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
1,590
$
1,927
Accrued compensation and benefits
681
1,987
Deferred revenue
308
326
Current portion of operating lease
liabilities
50
653
Other accrued liabilities
7,116
4,576
Total current liabilities
9,745
9,469
Long-term liabilities:
Long-term debt, net
11,913
10,065
Long-term operating lease liabilities
196
546
Total liabilities
21,854
20,080
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 June 30, 2023 and December 31, 2022
—
—
Common stock, $0.0001 par value,
500,000,000 shares authorized; 4,887,874 and 4,527,913 shares
issued and outstanding at June 30, 2023 and December 31, 2022,
respectively
3
3
Additional paid-in capital
458,600
448,415
Accumulated deficit
(457,847
)
(442,741
)
Total stockholders' equity
756
5,677
Total liabilities and stockholders'
equity
$
22,610
$
25,757
ONTRAK, INC.
Consolidated Statements of Cash Flows (in thousands,
unaudited)
For the Six Months Ended
June 30,
2023
2022
Cash flows from operating
activities
Net loss
$
(15,106
)
$
(29,703
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation expense
1,543
5,063
Write-off of debt issuance costs
—
2,023
Paid-in-kind interest expense
1,936
—
Gain on termination of operating lease
(471
)
—
Depreciation expense
590
1,424
Amortization expense
2,382
1,310
Change in fair value of warrant
liability
12
(51
)
401(k) employer match in common shares
—
363
Common stock issued for consulting
services
—
102
Changes in operating assets and
liabilities:
Receivables
691
2,340
Unbilled receivables
89
2,484
Prepaid expenses and other current
assets
326
2,136
Accounts payable
(371
)
442
Deferred revenue
(18
)
(119
)
Leases liabilities
(142
)
(12
)
Other accrued liabilities
(1,529
)
(2,017
)
Net cash used in operating activities
(10,068
)
(14,215
)
Cash flows from investing
activities
Purchase of property and equipment
(123
)
(754
)
Net cash used in investing activities
(123
)
(754
)
Cash flows from financing
activities
Proceeds from Keep Well Notes
8,000
—
Proceeds from Keep Well Agreement held in
escrow
4,000
—
Dividends paid
—
(2,239
)
Repayments of 2024 Notes
—
(31,694
)
Debt issuance costs
(98
)
(440
)
Finance lease obligations
(100
)
(162
)
Financed insurance premium payments
(1,229
)
(1,505
)
Payment of taxes related to net-settled
stock awards
(1
)
(3
)
Net cash provided by (used in) financing
activities
10,572
(36,043
)
Net change in cash and restricted cash
381
(51,012
)
Cash and restricted cash at beginning of
period
9,713
65,946
Cash and restricted cash at end of
period
$
10,094
$
14,934
Supplemental disclosure of cash flow
information:
Interest paid
$
45
$
1,978
Income taxes (refunded) paid, net
(69
)
130
Non-cash financing and investing
activities:
Warrants issued in connection with Keep
Well Notes (in 2023)/2024 Notes (in 2022)
$
10,797
$
458
Finance lease and accrued purchases of
property and equipment
28
77
Common stock issued to settle contingent
consideration
—
293
Accrued debt issuance costs
85
190
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Operating loss
$
(4,628
)
$
(11,910
)
$
(11,855
)
$
(25,055
)
Depreciation expense
295
773
590
1,424
Amortization expense (1)
351
410
742
805
EBITDA
(3,982
)
(10,727
)
(10,523
)
(22,826
)
Stock-based compensation expense
892
2,152
1,543
5,063
Restructuring, severance and related costs
(2)
—
—
457
—
Adjusted EBITDA
$
(3,090
)
$
(8,575
)
$
(8,523
)
$
(17,763
)
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net loss
$
(6,756
)
$
(15,058
)
$
(15,106
)
$
(29,703
)
Stock-based compensation expense
892
2,152
1,543
5,063
Write-off of debt issuance costs
—
2,023
—
2,023
Restructuring, severance and related costs
(2)
—
—
457
—
Loss (gain) on change in fair value of
warrant liability
(7
)
(51
)
12
(51
)
Gain on termination of operating lease
(3)
—
—
(471
)
—
Non-GAAP net loss
(5,871
)
(10,934
)
(13,565
)
(22,668
)
Dividends on preferred stock - declared
and undeclared
(2,238
)
(2,238
)
(4,477
)
(4,477
)
Non-GAAP net loss attributable to common
stockholders
$
(8,109
)
$
(13,172
)
$
(18,042
)
$
(27,145
)
Net loss per common share - basic and
diluted
$
(1.84
)
$
(4.97
)
$
(4.09
)
$
(9.86
)
Non-GAAP net loss per common share - basic
and diluted
(1.66
)
(3.78
)
(3.77
)
(7.83
)
Weighted-average common shares outstanding
- basic and diluted
4,887
3,481
4,787
3,468
_______________________
(1)
Relates to operating and financing ROU
assets and acquired intangible assets.
(2)
Includes one-time severance and related
benefit costs related to a reduction in workforce announced in
March 2023 as part of Company's continued cost savings measure.
(3)
Represents gain realized on derecognition
of ROU operating asset and related lease liability due to early
termination of the lease of the office space located in Santa
Monica, CA in February 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809926366/en/
For Investors: Ryan Halsted
Gilmartin Group investors@ontrakhealth.com
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