Catasys Reports 2018 First Quarter Financial Results
- Q1 2018 Record Billings of
$3 Million , Up 33% Year over Year and Up 20% from Q4 Excluding Savings Share - Enrolled 933 New Members in Q1 2018, Up 65% from New Members Enrolled in Q4 2017
- Achieved
$2.3 Million in Billings inApril 2018 , Highest Monthly Billings in Company’s History - Company Reiterates 2018 Billings Guidance of
$20.0 Million - Outreach Pool Nearing Approximately 36,000, 44% Increase from End of 2017
- Company to Host Conference Call at
4:30 pm ET today
First Quarter 2018 and Recent Business Highlights
- Catasys’ enrollment for the quarter ended
March 31, 2018 increased 74% year over year - Catasys’ outreach pool of eligible members continued to rapidly increase due to new program launches with two large insurers and expansions with two existing health plan partners in early 2018. By
June 2018 , the Company expects its outreach pool to be at approximately 36,000, 44% higher than at the end of 2017. - New customer launches continue to take approximately 12 months to reach an annual 20% enrollment rate. One year after launch, the Company generally enrolls in excess of 20% of its outreach pool.
Catasys receives approximately$6,500 per enrolled member. -
January 2018 – Expanded OnTrak-HC toIllinois , representing the second state with this customer which is the fourth largest health insurance plan in the country -
February 2018 – Launched enrollment of OnTrak-Ci program inTennessee with another top 10 health insurer, representing the fourth national health plan to launch OnTrak -
March 2018 – Expanded OnTrak-HA with a leading regional health insurer inIllinois , making OnTrak-HA available to eligible commercial and Medicare members with anxiety and depression -
March 2018 – Launched enrollment of OnTrak-H solution with leading national health plan partner in 16 states - The OnTrak program is currently available through six health plans in 19 states.
2018 Guidance
-
Catasys reiterates its expectation to report annual billings (amount invoiced in a particular period pursuant to existing contracts based on enrolled members) of$20.0 million based solely on the current outreach pool of eligible members, finishing the year at an approximate$25.0 million billings annual run rate. - This guidance does not include any additional new contracts, subsequent launches, additional new expansions within existing contracts or increases in the Company’s outreach pool above the end of 2017 levels.
Management Commentary
Mr.
Outlook for 2018
Mr.
First Quarter 2018 Financial Review
Billings
- Catasys’ billings increased 33% to
$3.0 million for the first quarter of 2018, from$2.3 million in the prior-year period, driven by higher enrollment in new plans and expansions in existing plans. Billings increased approximately 7% sequentially from$2.8 million in the fourth quarter of 2017. Excluding a bi-annual savings share performance payment from one customer, billings were up 20% sequentially.Catasys contracts are generally designed to provide cash fees on a monthly basis based on enrolled members.
Revenues
- Revenue increased 5% to
$1.9 million for the first quarter of 2018, from$1.8 million during the same period in 2017. The increase was driven by the launch of enrollment with two new health plans and continued enrollment growth from existing plans, resulting in a net increase in the number of members enrolled in our OnTrak solution during the first quarter of 2018 compared with the same period in 2017. Enrolled members as ofMarch 31, 2018 , were 74% greater than atMarch 31, 2017 .
Deferred Revenue
- Deferred revenue was
$1.7 million atMarch 31, 2018 , a decrease of 42% from$2.9 million atDecember 31, 2017 . The decrease was driven by a$1.9 million one-time catch-up to retained earnings as the Company adopted the new revenue accounting standard for services delivered in prior years, partially offset by revenue recognized for services delivered and new billings for services to be delivered in future quarters. - When fees are received in advance, deferred revenue is recognized over the period the member is enrolled.
Catasys has historically been able to record its deferred revenue as actual revenue during the course of the business cycle, except for cases where members terminated from the program early.
Operating Expenses
- Operating expenses in the first quarter of 2018 were
$6.2 million , compared to$4.0 million in the prior-year period. This increase was mainly due to increased costs of healthcare services to support growth; incremental investments in data science, IT and software development to drive growth and efficiency; and approximately$0.3 million related to non-cash stock option expense compared to the prior-year period. - Cost of healthcare services consists primarily of salaries for Catasys’ care coaches and outreach specialists, healthcare provider claims payments to Catasys’ network of physicians and psychologists, and fees charged by third party administrators for processing these claims. In addition, the Company hires staff in preparation for anticipated future customer contracts and corresponding increases in members eligible for OnTrak. The costs for such staff are included in Cost of Healthcare Services during training and ramp-up periods.
Net Income (Loss)
- For the first quarter of 2018, net loss was
$4.2 million , or$0.27 per diluted share, compared to a net loss of$21.8 million , or$2.35 per diluted share, in the prior-year period. The improvement in net loss was a result of the prior-year period being impacted by$5.2 million in change in fair value of warrant liability as well as$10.6 million in change in fair value of derivative liability resulting from the issuance of convertible debentures inJuly 2015 , which converted into common stock inApril 2017 .
Conference Call –
The Company will host a conference call/webcast on
Conference Call: | 877-705-2969 (domestic) or 201-689-8868 (international) | ||||
Webcast: |
|||||
Those who are unable to attend the conference call live can use the following information to hear a replay version:
Conference ID#: | 13672721 | |||
Conference Call Replay: | 877-660-6853 (domestic) or 201-612-7415 (international) | |||
Expiration Date: | |
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About
OnTrak integrates evidence-based medical and psychosocial interventions along with care coaching in a 52-week outpatient solution. The program is currently improving member health and, at the same time, is demonstrating reduced inpatient and emergency room utilization, driving a more than 50 percent reduction in total health insurers' costs for enrolled members. OnTrak is available to members of several leading health plans in
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. 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, 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 treatment programs might not be effective, difficulty in developing, exploiting and protecting proprietary technologies, intense competition and substantial regulation in the health care industry, 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. You are urged to consider statements that include the words "may," "will," "would," "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
Non-GAAP Financial Measures
The Company makes reference in this press release to billings, a non-GAAP financial measure, as a supplemental measure to review and assess our operating performance. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. We define billings as the amount invoiced in a particular period pursuant to existing contracts based on enrolled members. We use billings as a measure of operating performance to assist in comparing performance from period to period on a consistent basis.
We believe that the use of this non-GAAP financial measures facilitates investors’ assessment of our operating performance from period to period and from company to company by backing out potential differences caused by variations in the applicable performance requirements contained in the relevant contracts, which may be different from other companies in our industry.
Billings is not defined under GAAP and is not presented in accordance with GAAP. This non-GAAP financial measure has limitations as an analytical tool, and when assessing our operating performance, investors should not consider it in isolation, or as a substitute for revenue prepared in accordance with GAAP. A reconciliation from this non-GAAP financial measure to the GAAP financial measure is included at the end of this release.
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||||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
(unaudited) | ||||||||||
Three Months Ended | ||||||||||
(In thousands, except per share amounts) | |
|||||||||
2018 | 2017 | |||||||||
Revenues | ||||||||||
Healthcare services revenues | $ | 1,911 | $ | 1,822 | ||||||
Operating expenses | ||||||||||
Cost of healthcare services | 2,287 | 1,365 | ||||||||
General and administrative | 3,786 | 2,629 | ||||||||
Depreciation and amortization | 85 | 39 | ||||||||
Total operating expenses | 6,158 | 4,033 | ||||||||
Loss from operations | (4,247 | ) | (2,211 | ) | ||||||
Other income | 40 | 14 | ||||||||
Interest expense | (1 | ) | (2,867 | ) | ||||||
Loss on conversion of note | - | (926 | ) | |||||||
Change in fair value of warrant liability | (10 | ) | (5,181 | ) | ||||||
Change in fair value of derivative liability | - | (10,596 | ) | |||||||
Loss from operations before provision for income taxes | (4,218 | ) | (21,767 | ) | ||||||
Provision for income taxes | - | 1 | ||||||||
Net Loss | $ | (4,218 | ) | $ | (21,768 | ) | ||||
Basic and diluted net loss from operations per share: | ( |
) | ( |
) | ||||||
Basic and diluted weighted number of shares outstanding | 15,898 | 9,246 | ||||||||
Note: The financial statements have been retroactively restated to reflect the 1-for-6 reverse-stock split that occurred on
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||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(unaudited) | ||||||||||
(In thousands, except for number of shares) | |
|
||||||||
2018 | 2017 | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 1,354 | $ | 4,779 | ||||||
Receivables, net of allowance for doubtful accounts of |
1,211 | 511 | ||||||||
Prepaids and other current assets | 354 | 366 | ||||||||
Total current assets | 2,919 | 5,656 | ||||||||
Long-term assets | ||||||||||
Property and equipment, net of accumulated depreciation of |
527 | 612 | ||||||||
Deposits and other assets | 336 | 336 | ||||||||
Total Assets | $ | 3,782 | $ | 6,604 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT) | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 734 | $ | 980 | ||||||
Accrued compensation and benefits | 1,036 | 1,177 | ||||||||
Deferred revenue | 1,689 | 2,914 | ||||||||
Other accrued liabilities | 1,200 | 578 | ||||||||
Total current liabilities | 4,659 | 5,649 | ||||||||
Long-term liabilities | ||||||||||
Deferred rent and other long-term liabilities | - | 25 | ||||||||
Capital leases | - | 2 | ||||||||
Warrant liabilities | 40 | 30 | ||||||||
Total Liabilities | 4,699 | 5,706 | ||||||||
Stockholders' equity/(deficit) | ||||||||||
Preferred stock, |
- | - | ||||||||
Common stock, |
2 | 2 | ||||||||
Additional paid-in-capital | 294,746 | 294,220 | ||||||||
Accumulated deficit | (295,665 | ) | (293,324 | ) | ||||||
Total Stockholders' Equity/(Deficit) | (917 | ) | 898 | |||||||
Total Liabilities and Stockholders' Equity/(Deficit) | $ | 3,782 | $ | 6,604 | ||||||
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||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
(unaudited) | ||||||||||
Three Months Ended | ||||||||||
(In thousands) | |
|||||||||
2018 | 2017 | |||||||||
Operating activities: | ||||||||||
Net loss | $ | (4,218 | ) | $ | (21,768 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
Depreciation and amortization | 85 | 39 | ||||||||
Issuance costs included in interest expense | - | 2,622 | ||||||||
Warrants issued for services | 86 | - | ||||||||
Provision for doubtful accounts | - | 149 | ||||||||
Deferred rent | (22 | ) | (20 | ) | ||||||
Share-based compensation expense | 328 | 127 | ||||||||
Fair value adjustment on derivative liability | - | 10,596 | ||||||||
Fair value adjustment on warrant liability | 10 | 5,181 | ||||||||
Shares issued for services | 112 | 117 | ||||||||
Loss on conversion of note | - | 926 | ||||||||
Changes in current assets and liabilities: | ||||||||||
Receivables | (700 | ) | (360 | ) | ||||||
Prepaids and other current assets | 12 | (176 | ) | |||||||
Deferred revenue | 652 | 418 | ||||||||
Accounts payable and other accrued liabilities | 239 | 534 | ||||||||
Net cash used in operating activities | $ | (3,416 | ) | $ | (1,615 | ) | ||||
Investing activities: | ||||||||||
Purchases of property and equipment | $ | - | $ | (49 | ) | |||||
Net cash used in investing activities | $ | - | $ | (49 | ) | |||||
Financing activities: | ||||||||||
Proceeds from bridge loan | $ | - | $ | 1,115 | ||||||
Capital lease obligations | (9 | ) | (11 | ) | ||||||
Net cash (used in)/provided by financing activities | $ | (9 | ) | $ | 1,104 | |||||
Net decrease in cash and cash equivalents | $ | (3,425 | ) | $ | (560 | ) | ||||
Cash and cash equivalents at beginning of period | 4,779 | 851 | ||||||||
Cash and cash equivalents at end of period | $ | 1,354 | $ | 291 | ||||||
Supplemental disclosure of cash paid | ||||||||||
Income taxes | $ | - | $ | 39 | ||||||
Supplemental disclosure of non-cash activity | ||||||||||
Common stock issued for investor relations services | $ | 112 | $ | 117 | ||||||
Warrants issued for investor relations services | $ | 85 | $ | - | ||||||
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||||||||||||||||||
Additional | |||||||||||||||||||||||||||
(Amounts in thousands, except for number of shares) | Common Stock | Paid-In | Accumulated | ||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||||
Balance at |
15,889,171 |
|
$ |
2 |
|
$ |
294,220 |
|
$ | (293,324 | ) | $ | 898 | ||||||||||||||
Adoption of accounting standard | - | $ | - | $ | - | $ | 1,877 | $ | 1,877 | ||||||||||||||||||
Balance at |
15,889,171 | 2 | 294,220 | (291,447 | ) | 2,775 | |||||||||||||||||||||
Common stock issued for outside services | 24,000 | - | 112 | - | 112 | ||||||||||||||||||||||
Warrants issued for services | - | - | 86 | - | 86 | ||||||||||||||||||||||
Share-based Compensation Expense | - | - | 328 | - | 328 | ||||||||||||||||||||||
Net loss | - | - | - | (4,218 | ) | (4,218 | ) | ||||||||||||||||||||
Balance at |
15,913,171 | 2 | 294,746 | (295,665 | ) | (917 | ) | ||||||||||||||||||||
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GAAP TO NON-GAAP RECONCILIATION | |||||||||||
(unaudited) | |||||||||||
For the Three Months Ended | |||||||||||
|
|||||||||||
(in thousands) |
2018 |
2017 |
|||||||||
Revenues | $ | 1,911 | $ | 1,822 | |||||||
Add: | |||||||||||
Estimate of Q1 Uncollectable Billings* | $ | 287 | $ | - | |||||||
Net Change in Deferred Revenue** | 794 | 432 | |||||||||
Billings, non-GAAP | $ | 2,992 | $ | 2,254 |
*Represents one customer who we bill over a limited number of provider visits
**Net change in deferred revenue associated with Q1 billings
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