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Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Ontrak Announces 2022 Second Quarter Financial Results


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, 2022.

Management Commentary

"During the second quarter, we made important progress on initiatives to expand our market, enhance our product offering, and support our path to profitability. Our AI-infused, evidence-based clinical model continues to differentiate us in our conversations with health plans, employers, and value-based care providers. We are seeing this demand reflected in our qualified pipeline, which includes 19 health plan prospects. These opportunities continue to represent revenue growth potential beginning in the first quarter of 2023," said Terren Peizer, Chief Executive Officer.

"As we look to the remainder of the year, I am confident in the team we have in place to deliver on our growth opportunities and commitment to whole-person care. Brandon LaVerne and Mary Lou Osborne, as Co-Presidents, will build on the excellent work they've been doing and run the day-to-day operations and growth activities of the company. I remain focused on capital formation process and other corporate initiatives. I continue to be excited about our unique value proposition and look forward to what's in store for 2023 and beyond."

Second Quarter 2022 Financial Results Highlights

Second Quarter 2022 and Recent Operating Highlights

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 provides the following outlook:

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 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 draw 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; business disruption and related risks resulting from the outbreak of the novel coronavirus 2019; 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, 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 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
June 30,

 

Six Months Ended
June 30,

 

2022

 

2021

 

2022

 

2021

Revenue

$

3,903

 

 

$

26,485

 

 

$

9,161

 

 

$

55,207

 

Cost of revenue

 

2,206

 

 

 

8,519

 

 

 

5,052

 

 

 

21,269

 

Gross profit

 

1,697

 

 

 

17,966

 

 

 

4,109

 

 

 

33,938

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

2,852

 

 

 

4,399

 

 

 

6,280

 

 

 

8,968

 

Sales and marketing

 

1,306

 

 

 

3,628

 

 

 

2,742

 

 

 

5,570

 

General and administrative

 

9,449

 

 

 

11,590

 

 

 

20,142

 

 

 

23,931

 

Total operating expenses

 

13,607

 

 

 

19,617

 

 

 

29,164

 

 

 

38,469

 

Operating loss

 

(11,910

)

 

 

(1,651

)

 

 

(25,055

)

 

 

(4,531

)

 

 

 

 

 

 

 

 

Other expense, net

 

(1,972

)

 

 

(37

)

 

 

(1,972

)

 

 

(643

)

Interest expense, net

 

(1,156

)

 

 

(2,029

)

 

 

(2,556

)

 

 

(4,036

)

Loss before income taxes

 

(15,038

)

 

 

(3,717

)

 

 

(29,583

)

 

 

(9,210

)

Income tax expense

 

(20

)

 

 

?

 

 

 

(120

)

 

 

?

 

Net loss

$

(15,058

)

 

$

(3,717

)

 

$

(29,703

)

 

$

(9,210

)

Dividends on preferred stock - declared and undeclared

 

(2,238

)

 

 

(2,238

)

 

 

(4,477

)

 

 

(4,477

)

Net loss attributable to common stockholders

$

(17,296

)

 

$

(5,955

)

 

$

(34,180

)

 

$

(13,687

)

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

$

(0.83

)

 

$

(0.33

)

 

$

(1.64

)

 

$

(0.77

)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

20,884

 

 

 

18,156

 

 

 

20,804

 

 

 

17,891

 

ONTRAK, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

June 30,

 

December 31,

 

2022

 

2021

Assets

(unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

10,051

 

 

$

58,824

 

Restricted cash - current

 

4,477

 

 

 

6,716

 

Receivables, net

 

3,598

 

 

 

5,938

 

Unbilled receivables

 

751

 

 

 

3,235

 

Deferred costs - current

 

224

 

 

 

600

 

Prepaid expenses and other current assets

 

2,999

 

 

 

5,019

 

Total current assets

 

22,100

 

 

 

80,332

 

Long-term assets:

 

 

 

Property and equipment, net

 

3,130

 

 

 

3,785

 

Restricted cash - long-term

 

406

 

 

 

406

 

Goodwill

 

5,713

 

 

 

5,713

 

Intangible assets, net

 

1,736

 

 

 

2,346

 

Other assets

 

1,070

 

 

 

444

 

Operating lease right-of-use assets

 

788

 

 

 

656

 

Total assets

$

34,943

 

 

$

93,682

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,676

 

 

$

1,001

 

Accrued compensation and benefits

 

1,657

 

 

 

2,343

 

Deferred revenue

 

322

 

 

 

441

 

Current portion of operating lease liabilities

 

644

 

 

 

595

 

Other accrued liabilities

 

3,838

 

 

 

5,953

 

Total current liabilities

 

8,137

 

 

 

10,333

 

Long-term liabilities:

 

 

 

Long-term debt, net

 

6,167

 

 

 

35,792

 

Long-term operating lease liabilities

 

871

 

 

 

932

 

Long-term finance lease liabilities

 

36

 

 

 

136

 

Other liabilities

 

?

 

 

 

934

 

Total liabilities

 

15,211

 

 

 

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 June 30, 2022 and December 31, 2021

 

?

 

 

 

?

 

Common stock, $0.0001 par value, 500,000,000 shares authorized; 20,947,850 and 20,680,186 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

2

 

 

 

2

 

Additional paid-in capital

 

440,601

 

 

 

436,721

 

Accumulated deficit

 

(420,871

)

 

 

(391,168

)

Total stockholders' equity

 

19,732

 

 

 

45,555

 

Total liabilities and stockholders' equity

$

34,943

 

 

$

93,682

 

ONTRAK, INC.

Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

 

For the Six Months Ended
June 30,

 

2022

 

2021

Cash flows from operating activities

 

 

 

Net loss

$

(29,703

)

 

$

(9,210

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

Stock-based compensation expense

 

5,063

 

 

 

5,961

 

Write-off of debt issuance costs

 

2,023

 

 

 

?

 

Depreciation expense

 

1,424

 

 

 

382

 

Amortization expense

 

1,310

 

 

 

1,433

 

Gain on forgiveness of PPP loan

 

?

 

 

 

(171

)

Change in fair value of warrants

 

(51

)

 

 

?

 

Change in fair value of contingent consideration

 

?

 

 

 

835

 

401(k) employer match in common shares

 

363

 

 

 

546

 

Common stock issued for consulting services

 

102

 

 

 

?

 

Changes in operating assets and liabilities:

 

 

 

Receivables

 

2,340

 

 

 

7,845

 

Unbilled receivables

 

2,484

 

 

 

2,887

 

Prepaid expenses and other current assets

 

2,136

 

 

 

1,912

 

Accounts payable

 

442

 

 

 

205

 

Deferred revenue

 

(119

)

 

 

(6,416

)

Leases liabilities

 

(12

)

 

 

(83

)

Other accrued liabilities

 

(2,017

)

 

 

(2,972

)

Net cash (used in) provided by operating activities

 

(14,215

)

 

 

3,154

 

Cash flows from investing activities

 

 

 

Purchase of property and equipment

 

(754

)

 

 

(2,514

)

Net cash used in investing activities

 

(754

)

 

 

(2,514

)

Cash flows from financing activities

 

 

 

Dividends paid

 

(2,239

)

 

 

(4,438

)

Repayments of 2024 Notes

 

(31,694

)

 

 

?

 

Debt issuance costs

 

(440

)

 

 

?

 

Proceeds from warrant exercise

 

?

 

 

 

58

 

Proceeds from options exercise

 

?

 

 

 

5,401

 

Finance lease obligations

 

(162

)

 

 

(162

)

Financed insurance premium payments

 

(1,505

)

 

 

(1,467

)

Payment of taxes related to net-settled stock awards

 

(3

)

 

 

?

 

Net cash used in financing activities

 

(36,043

)

 

 

(608

)

Net change in cash and restricted cash

 

(51,012

)

 

 

32

 

Cash and restricted cash at beginning of period

 

65,946

 

 

 

103,210

 

Cash and restricted cash at end of period

$

14,934

 

 

$

103,242

 

Supplemental disclosure of cash flow information:

 

 

 

Interest paid

$

1,978

 

 

$

3,647

 

Income taxes paid

 

130

 

 

 

89

 

Non-cash financing and investing activities:

 

 

 

Finance lease and accrued purchases of property and equipment

$

77

 

 

$

183

 

Common stock issued to settle contingent consideration

 

293

 

 

 

?

 

Warrants issued in connection with 2024 Notes

 

458

 

 

 

?

 

Accrued debt issuance costs

 

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,

 

 

2022

 

2021

 

2022

 

2021

Operating loss

 

$

(11,910

)

 

$

(1,651

)

 

$

(25,055

)

 

$

(4,531

)

Depreciation expense

 

 

773

 

 

 

220

 

 

 

1424

 

 

 

382

 

Amortization expense (1)

 

 

410

 

 

 

520

 

 

 

805

 

 

 

1,022

 

EBITDA

 

 

(10,727

)

 

 

(911

)

 

 

(22,826

)

 

 

(3,127

)

Stock-based compensation expense

 

 

2,152

 

 

 

3,387

 

 

 

5,063

 

 

 

5,961

 

Restructuring, severance and related costs (2)

 

 

?

 

 

 

286

 

 

 

?

 

 

 

1,290

 

Acquisition related costs (3)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

583

 

Adjusted EBITDA

 

$

(8,575

)

 

$

2,762

 

 

$

(17,763

)

 

$

4,707

 

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,

 

 

2022

 

2021

 

2022

 

2021

Net loss

 

$

(15,058

)

 

$

(3,717

)

 

$

(29,703

)

 

$

(9,210

)

Stock-based compensation expense

 

 

2,152

 

 

 

3,387

 

 

 

5,063

 

 

 

5,961

 

Write-off of debt issuance costs (4)

 

 

2,023

 

 

 

?

 

 

 

2,023

 

 

 

?

 

Restructuring, severance and related costs (2)

 

 

?

 

 

 

286

 

 

 

?

 

 

 

1,290

 

Gain on change in fair value of warrant liabilities

 

 

(51

)

 

 

?

 

 

 

(51

)

 

 

(29

)

Loss on change in fair value of contingent liability (5)

 

 

?

 

 

 

200

 

 

 

?

 

 

 

835

 

Acquisition related costs (3)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

583

 

Gain on forgiveness of PPP loan (6)

 

 

?

 

 

 

(171

)

 

 

 

 

(171

)

Non-GAAP net loss

 

 

(10,934

)

 

 

(15

)

 

 

(22,668

)

 

 

(741

)

Dividends on preferred stock - declared and undeclared

 

 

(2,238

)

 

 

(2,238

)

 

 

(4,477

)

 

 

(4,477

)

Non-GAAP net loss attributable to common stockholders

 

 

(13,172

)

 

 

(2,253

)

 

 

(27,145

)

 

$

(5,218

)

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$

(0.83

)

 

$

(0.33

)

 

$

(1.64

)

 

$

(0.77

)

Non-GAAP net loss per common share - basic and diluted

 

 

(0.63

)

 

 

(0.12

)

 

 

(1.30

)

 

 

(0.29

)

Weighted-average common shares outstanding - basic and diluted

 

 

20,884

 

 

 

18,156

 

 

 

20,804

 

 

 

17,891

 

_______________________

(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 announced in March 2021 as a result of the contract termination notice from our then largest customer.

(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.

 


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