Market Overview

NantHealth Reports 2018 Second-Quarter Financial Results

Share:
  • Liquid GPS® Successfully Launched in Q2
  • Total Revenue in Q2 was $22.0 Million
    • Revenue in 2017 Q2 included a large completed Connected Care
      device implementation of approximately $4 million, benefiting
      prior period revenue of $23.5 million
    • SaaS revenue of $16.2 million in Q2, up 9% from $14.9 million
      in prior year Q2
    • In June 2018, introduced two SaaS products on the NaviNet
      Platform
  • Molecular Analysis Q2 Revenue Grew 105% to $0.9 Million from $0.5
    Million in Prior Year
    • 908 total tests ordered in Q2, including 642 GPS Cancer and 266
      Liquid GPS Tests
    • Liquid molecular analyses initiated for 53 subjects enrolled in
      QUILT clinical studies sponsored by Nant affiliated entities under
      a pilot annual subscription program
  • Secured $100 Million Line of Credit from NantCapital, Providing
    Additional Strength and Flexibility to the NantHealth Balance Sheet

NantHealth, Inc. (NASDAQ-GS: NH), a next-generation, evidence-based,
personalized healthcare company, today reported financial results for
its second quarter ended June 30, 2018.

Molecular Analysis – Highlights

  • In Q2 2018, at AHIP, the company's Chief Medical Officer,
    Sandeep Reddy, M.D., and Vice President of Sales, Kristin Lee, presented
    "Demystifying the Convergence of Precision Medicine and Value-Based
    Care," which highlights the challenges and opportunities posed by
    precision medicine and value-based care and how health plans can
    navigate their convergence
  • In Q2 2018, at ASCO:
    • Launched Liquid GPS®, a powerful next-generation tool for
      blood-based tumor profiling and quantitative monitoring
    • Co-presented, with Shumei Kato, M.D., and Razelle Kurzrock, M.D.,
      both at the University of California San Diego, data on
      next-generation sequencing of paired DNA and RNA analysis in
      patients with rare cancers
    • Co-presented data on three-fold overestimation of tumor mutation
      burden (TMB) using a 248 gene list as a panel to impute TMB
    • Co-presented, with Sumanta Pal, M.D., at City of Hope, findings on
      how targeting immune checkpoints can improve clinical trial design
      across a variety of tumor types
    • Co-presented findings on how 17 percent of DNA next generation
      sequencing (NGS) 50 gene panel variants are not expressed in RNA
      sequencing
  • Commercially Launched the Precision Insights Portal: GPS and Eviti
    • Precision Insights Portal is a web-based application for molecular
      test ordering and results and the only solution available to blend
      guidelines-based regimen information powered by Eviti with
      personalized insights from GPS Cancer

"The newest generation of clinical trials in immune oncology focus on
novel checkpoint targets, T cells, and NK cells and NantHealth's liquid
tumor profiling service provides unparalleled data on quantitative
expression of these and other related targets," said Dr. Reddy.
"Circulating cell-free RNA is the newest frontier in the liquid biopsy
field and NantHealth is proud to lead the way in these clinical trials."

Software and Services Highlights:

  • Payer Engagement (NaviNet):
    • In Q2 2018, closed a SaaS contract with major east coast-based
      health plan -- expected to be a significant revenue contributor to
      the Payer Engagement business
    • In June 2018, launched Provider Initiated Document Exchange, which
      streamlines and automates the delivery of information between
      providers and payers; and, Authorizations Appeals, a product for
      automating the authorizations appeals process
  • Clinical Decision Support (Eviti):
    • Developed and deployed the Precision Insights Portal, the only
      solution available to blend guidelines-based regimen information
      powered by Eviti, with personalized insights from GPS Cancer, as
      mentioned above
    • Software release 7.0 successfully launched in May, with expanded
      policy guidance information for radiation oncology and drug
      management of high cost/abuse drugs, differentiating Eviti from
      the competition on standard of care policy guidance
  • Connected Care:
    • In Q2 2018, showcased medical device integration (MDI) product
      portfolio (including DeviceConX™, VitalsConX and HBox®) at
      Vitalis, the largest e-health event in Scandinavia

"Our Software as a Service business continued to generate solid year
over year revenue growth," said Paul Holt, Chief Financial Officer of
NantHealth. "Looking ahead, we are optimistic about several significant
opportunities in our SaaS and software sales pipelines and the potential
of our recently launched products."

Business and Financial Highlights

The company adopted a new revenue recognition standard on January 1,
2018. Please note that the financial results presented below include
both amounts "as presented," which reflect implementation of the new
revenue recognition standard, as well as amounts prior to the impact of
the new revenue recognition standard to allow for comparability against
historical results. Starting in fiscal year 2019, the company will no
longer present its GAAP and Non-GAAP financial results under the
previous revenue recognition standard. For additional information and
reconciliations of our financial results between the new and previous
revenue recognition standard, see the additional tables included in this
press release and in the company's Form 10-Q to be filed with the
Securities and Exchange Commission.

For the 2018 second quarter, total net revenue as presented was $22.0
million. Total 2018 second quarter net revenue prior to the impact of
the new revenue recognition standard decreased 10% to $21.2 million from
$23.5 million in 2017 second quarter. The prior year quarter included
approximately $4.0 million in revenue recognized from the completion of
a large implementation. Gross profit as presented was $11.5 million, or
52% of total net revenue. Gross profit prior to the impact of the new
revenue recognition standard was $10.7 million, or 50% of total net
revenue, compared with $13.9 million, or 59% of total net revenue, for
the prior-year second quarter. Selling, general and administrative
(SG&A) expenses as presented were $18.4 million. SG&A prior to the
impact of the new revenue recognition standard was $18.4 million
compared with $19.2 million in 2017 second quarter. Research and
development (R&D) expenses as presented decreased to $5.9 million from
$8.4 million; the new revenue recognition standard did not impact R&D
expenses.

Net loss from continuing operations, net of tax, as presented was $21.8
million, or $0.20 per share. Net loss from continuing operations, net of
tax, prior to the impact of the new revenue recognition standard
narrowed to $22.5 million, or $0.21 per share, from $57.7 million, or
$0.48 per share for the 2017 second quarter. Loss from discontinued
operations, net of tax, as presented was $1.6 million, or $0.01 per
share, compared with $12.4 million, or $0.10 per share; the new revenue
recognition standard did not impact loss from discontinued operations.
Net loss as presented was $23.4 million, or $0.21 per share. Net loss
prior to the impact of the new revenue recognition standard was $24.1
million, or $0.22 per share, compared with $70.1 million, or $0.58 per
share, for 2017 second quarter.

For the 2018 second quarter, on a non-GAAP basis, adjusted net loss from
continuing operations as presented was $11.1 million, or $0.10 per
share, for the 2018 second quarter. On a non-GAAP basis, adjusted net
loss from continuing operations prior to the impact of the new revenue
recognition standard was $11.8 million, or $0.11 per share, compared
with $13.1 million, or $0.11 per share, for the 2017 second quarter.

In August 2017, NantHealth sold its provider/patient engagement assets
to Allscripts to focus on core competencies and accelerate the plan to
achieve profitability. As a result, the company has classified the
current and prior period operating results of its provider/patient
engagement business as discontinued operations. All results presented
below represent the company's continuing operations.

Conference Call Information and Forward-Looking Statements

Later today, the company will host a conference call at 1:30 p.m. PT
(4:30 p.m. ET) to review its results of operations for the second
quarter ended June 30, 2018. The conference call will be available to
interested parties by dialing 844-309-3709 from the U.S. or Canada, or
281-962-4864 from international locations, passcode 3132409. The call
will be broadcast via the Internet at www.nanthealth.com.
Listeners are encouraged to visit the website at least 10 minutes prior
to the start of the scheduled presentation to register, download and
install any necessary audio software. A playback of the call will be
archived and accessible on the same website for at least three months.

Discussion during the conference call may include forward-looking
statements regarding topics such as the company's financial status and
performance, regulatory and operational developments, and other comments
the company may make about its future plans or prospects in response to
questions from participants on the conference call.

Use of Non-GAAP Financial Measures

This news release contains references to Non-GAAP financial measures,
including adjusted net loss and adjusted net loss per share, which are
financial measures that are not prepared in conformity with United
States generally accepted accounting principles (U.S. GAAP). The
Company's management believes that the presentation of Non-GAAP
financial measures provides useful supplementary information regarding
operational performance, because it enhances an investor's overall
understanding of the financial results for the Company's core business.
Additionally, it provides a basis for the comparison of the financial
results for the Company's core business between current, past and future
periods. Other companies may define these measures in different ways.
Non-GAAP financial measures should be considered only as a supplement
to, and not as a substitute for or as a superior measure to, financial
measures prepared in accordance with U.S. GAAP. Non-GAAP per share
numbers are calculated based on one class of common stock and do not
incorporate the effects, if any, of using the two-class method.

About NantHealth, Inc.

NantHealth, Inc., a member of the NantWorks ecosystem of companies, is a
next-generation, evidence-based, personalized healthcare company
enabling improved patient outcomes and more effective treatment
decisions for critical illnesses. NantHealth's unique systems-based
approach to personalized healthcare applies novel diagnostics tailored
to the specific molecular profiles of patient tissue and integrates this
molecular data in a clinical setting with large-scale, real-time
biometric signal and phenotypic data to track patient outcomes and
deliver precision medicine. For nearly a decade, NantHealth has
developed an adaptive learning system that integrates our unique
molecular profiling solution, software and hardware. Our system
infrastructure collects, indexes, analyzes and interprets billions of
molecular, clinical, operational and financial data points derived from
novel and traditional sources to continuously improve decision-making
and optimize our clinical pathways and decision algorithms over time.
For more information please visit https://www.nanthealth.com/.

About GPS Cancer®

GPS Cancer® is a unique, comprehensive test available through
NantHealth. GPS Cancer integrates tumor/normal DNA and RNA sequencing,
with enhanced expression analysis and bioinformatics of complex biologic
pathway systems, providing oncologists with a comprehensive molecular
profile of a patient's cancer to inform personalized treatment
strategies. GPS Cancer testing is conducted in CLIA-certified and
CAP-accredited laboratories. For more information, visit https://www.nanthealth.com/gps-cancer/.

About Liquid GPS®

Liquid GPS is a blood-based molecular test that provides oncologists
with a powerful tool for noninvasive tumor profiling and quantitative
monitoring of treatment response. Liquid GPS looks beyond cfDNA to
cfRNA, which allows profiling and trending of actionable biomarkers that
cannot be assessed through cfDNA alone. In addition to providing
molecular insight into key guidelines-based biomarkers (e.g., EGFR, ALK,
ROS1, KRAS), this powerful RNA-based approach enables a variety of
capabilities and applications not typically available from a liquid
biopsy test. For more information, visit https://www.nanthealth.com/liquid-gps/.

This news release contains certain statements of a forward-looking
nature relating to future events or future business performance.
Forward-looking
statements can be identified by the words "expects," "anticipates,"
"believes," "intends," "estimates," "plans," "will," "outlook" and
similar expressions.
Forward-looking statements are based on
management's current plans, estimates, assumptions and projections, and
speak only as of the date they are made.
Risks and uncertainties
include, but are not limited to: our ability to successfully integrate a
complex learning system to address a wide range of healthcare issues;
our ability to successfully amass the requisite data to achieve maximum
network effects; appropriately allocating financial and human resources
across a broad array of product and service offerings; raising
additional capital as necessary to fund our operations; achieving
significant commercial market acceptance for our sequencing and
molecular analysis solutions; establish relationships with, key thought
leaders or payers' key decision makers in order to establish GPS Cancer
as a standard of care for patients with cancer; our ability to grow the
market for our Systems Infrastructure, and applications; successfully
enhancing our Systems Infrastructure and applications to achieve market
acceptance and keep pace with technological developments; customer
concentration; competition; security breaches; bandwidth limitations;
our ability to continue our relationship with NantOmics; our ability to
obtain regulatory approvals; dependence upon senior management; the need
to comply with and meet applicable laws and regulations; unexpected
adverse events; clinical adoption and market acceptance of GPS Cancer;
and anticipated cost savings. We undertake no obligation to update any
forward-looking statement in light of new information or future events,
except as otherwise required by law.
Forward-looking statements
involve inherent risks and uncertainties, most of which are difficult to
predict and are generally beyond our control.
Actual results or
outcomes may differ materially from those implied by the forward-looking
statements as a result of the impact of a number of factors, many of
which are discussed in more detail in our reports filed with the
Securities and Exchange Commission.

 
NantHealth, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
   
 
June 30,

2018

December 31,
2017

(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 29,409 $ 61,660
Accounts receivable, net 18,968 11,491
Inventories 731 839
Deferred implementation costs 11 1,960
Related party receivables, net 860 585
Prepaid expenses and other current assets   6,225     5,358  
Total current assets 56,204 81,893
Property, plant, and equipment, net 24,366 18,517
Deferred implementation costs, net of current 4 3,951
Goodwill 115,930 114,625
Intangible assets, net 69,278 69,424
Investment in related party 142,203 156,863
Related party receivable, net of current 1,915 1,727
Other assets   1,874     2,195  
Total assets $ 411,774   $ 449,195  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 4,881 $ 3,164
Accrued and other current liabilities 11,767 18,134
Deferred revenue 15,218 10,057
Related party payables, net   5,618     4,504  
Total current liabilities 37,484 35,859
Deferred revenue, net of current 8,108 7,126
Related party liabilities 14,575 11,500
Related party promissory note 112,666 112,666
Related party convertible note, net 8,156 7,947
Convertible notes, net 77,065 74,845
Other liabilities   5,599     5,950  
Total liabilities   263,653     255,893  
 
Stockholders' equity
Common stock, $0.0001 par value per share, 750,000,000 shares
authorized; 109,385,560 and 108,383,602 shares issued and
outstanding at June 30, 2018 and December 31, 2017, respectively
(including 3,490 shares of restricted stock)
11 10
Additional paid-in capital 885,887 886,669
Accumulated deficit (737,535 ) (693,233 )
Accumulated other comprehensive loss   (242 )   (144 )
Total stockholders' equity   148,121     193,302  
Total liabilities and stockholders' equity $ 411,774   $ 449,195  
 
 
NantHealth, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except share and per share amounts)
(Unaudited)
       
Three Months Ended

June 30,

Six Months Ended

June 30,

2018 2017 2018 2017
 
Total net revenue $ 22,047 $ 23,514 $ 44,311 $ 42,618
 
Total cost of revenue   10,582     9,652     21,651     21,170  
Gross Profit   11,465     13,862     22,660     21,448  
 
Operating Expenses:
Selling, general and administrative 18,388 19,225 39,122 36,660
Research and development 5,889 8,376 11,040 17,302
Amortization of acquisition-related assets   1,054     1,054     2,108     2,108  
Total operating expenses   25,331     28,655     52,270     56,070  
 
Loss from operations (13,866 ) (14,793 ) (29,610 ) (34,622 )
Interest expense, net (4,262 ) (4,013 ) (8,460 ) (7,982 )
Other income (expense), net (1,334 ) 13 (1,154 ) 248
Loss from related party equity method investment, including
impairment
  (2,945 )   (38,885 )   (6,206 )   (43,411 )
Loss from continuing operations before income taxes (22,407 ) (57,678 ) (45,430 ) (85,767 )
(Benefit from) provision for income taxes   (601 )   18     (1,651 )   55  
Net loss from continuing operations (21,806 ) (57,696 ) (43,779 ) (85,822 )
Loss from discontinued operations, net of tax   (1,591 )   (12,368 )   (1,785 )   (25,357 )
Net loss $ (23,397 ) $ (70,064 ) $ (45,564 ) $ (111,179 )
 
Net loss per share:
Continuing operations
Basic and diluted - common stock $ (0.20 ) $ (0.48 ) $ (0.40 ) $ (0.71 )
 
Discontinued operations
Basic and diluted - common stock $ (0.01 ) $ (0.10 ) $ (0.02 ) $ (0.20 )
 
Total net income (loss) per share
Basic and diluted - common stock $ (0.21 ) $ (0.58 ) $ (0.42 ) $ (0.91 )
 
Weighted average shares outstanding:
Basic and diluted - common stock   109,120,438     121,756,108     108,851,348     121,687,454  
 
           
NantHealth, Inc.
Condensed Consolidated Statements of Operations
Reconciliation of results under ASC 606 and ASC 605
(Dollars in thousands, except share and per share amounts)
(Unaudited)
 
Three Months Ended

June 30, 2018

Six Months Ended

June 30,

As Reported Adjustments due to ASC 606 Without new Revenue Standard As Reported Adjustments due to ASC 606 Without new Revenue Standard
2018   2018 2018   2018
 
Total net revenue 22,047 (821 ) 21,226 44,311 (1,357 ) 42,954
Total cost of revenue   10,582       (47 )     10,535       21,651     (82 )   21,569  
Gross Profit   11,465       (774 )     10,691       22,660     (1,275 )   21,385  
 
Operating Expenses:
Selling, general and administrative 18,388 11 18,399 39,122 484 39,606
Research and development 5,889 5,889 11,040 11,040
Amortization of acquisition-related assets   1,054             1,054       2,108         2,108  
Total operating expenses   25,331       11       25,342       52,270     484     52,754  
 
Loss from operations (13,866 ) (785 ) (14,651 ) (29,610 ) (1,759 ) (31,369 )
Interest expense, net (4,262 ) (4,262 ) (8,460 ) (8,460 )
Other income (expense), net (1,334 ) (1,334 ) (1,154 ) (1,154 )
Loss from related party equity method investment, including
impairment
  (2,945 )           (2,945 )     (6,206 )       (6,206 )
Loss from continuing operations before income taxes (22,407 ) (785 ) (23,192 ) (45,430 ) (1,759 ) (47,189 )
(Benefit from) provision for income taxes   (601 )     (120 )     (721 )     (1,651 )   (239 )   (1,890 )
Net loss from continuing operations (21,806 ) (665 ) (22,471 ) (43,779 ) (1,520 ) (45,299 )
Loss from discontinued operations, net of tax   (1,591 )           (1,591 )     (1,785 )       (1,785 )
Net loss $ (23,397 )     (665 )   $ (24,062 )   $ (45,564 ) $ (1,520 ) $ (47,084 )
 
Net loss per share:
Basic and diluted - common stock $ (0.21 )   $ (0.01 )   $ (0.22 )   $ (0.42 ) $ (0.01 ) $ (0.43 )
 
Weighted average shares outstanding:
Basic and diluted - common stock   109,120,438           109,120,438       108,851,348       108,851,348  
 
 
NantHealth, Inc.
Supplemental Revenue Schedule
(Dollars in thousands)
(Unaudited)
       
Three Months Ended

June 30,

Six Months Ended

June 30,

2018 2017 2018 2017
 
Revenue:
Software-as-a-service related $ 16,220 $ 14,946 $ 32,386 $ 29,743
Software and hardware related 885 3,279 2,340 3,877
Maintenance   2,388   3,468   4,835   5,487
Total software-related revenue 19,493 21,693 39,561 39,107
Sequencing and molecular analysis 924 450 1,764 960
Home health care services   1,630   1,371   2,986   2,551
Total net revenue $ 22,047 $ 23,514 $ 44,311 $ 42,618
 
Cost of Revenue:
Software-as-a-service related $ 5,741 $ 5,195 $ 12,342 $ 11,428
Software and hardware related 789 1,024 1,675 2,028
Maintenance 234 129 449 290
Amortization of developed technologies   1,293   1,142   2,466   2,885
Total software-related cost of revenue 8,057 7,490 16,932 16,631
Sequencing and molecular analysis 1,689 1,512 3,120 3,105
Home health care services   836   650   1,599   1,434
Total cost of revenue $ 10,582 $ 9,652 $ 21,651 $ 21,170
 
 
NantHealth, Inc.
Non-GAAP Net Loss and Non-GAAP Net Loss Per Share
(Dollars in thousands, except share and per share amounts)
(Unaudited)
       
Three Months Ended

June 30,

Six Months Ended

June 30,

2018 2017 2018 2017
 
Net loss from continuing operations $ (21,806 ) $ (57,696 ) $ (43,779 ) $ (85,822 )
Adjustments to GAAP net loss:
Loss from related party equity method investment including
impairment loss
2,945 38,885 6,206 43,411
Stock-based compensation expense from continuing operations 1,808 344 4,432 (314 )
Corporate restructuring from continuing operations 1,392 1,589
Acquisition related sales incentive 425 671 570 1,334
Change in fair value of derivatives liability (1 ) (24 ) (1 ) (239 )
Non-cash interest expense related to convertible notes 1,235 1,088 2,429 2,139
Intangible amortization from continuing operations 2,347 2,196 4,574 4,993
Securities litigation costs 749 823
Impairment of equity securities 1,750 1,750
Tax benefit resulting from certain non-cash tax items   (599 )       (1,706 )    
Total adjustments to GAAP net loss from continuing operations   10,659     44,552     19,077     52,913  
Net loss - Non-GAAP from continuing operations $ (11,147 ) $ (13,144 ) $ (24,702 ) $ (32,909 )
 
Weighted average shares outstanding   109,120,438     121,756,108     108,851,348     121,687,454  
 
Net loss per share from continuing operations - Non-GAAP $ (0.10 ) $ (0.11 ) $ (0.23 ) $ (0.27 )
 
Reconciliation of Net Loss per Common Share to Net Loss per
Common Share - Non-GAAP (Unaudited):
Three Months Ended

June 30,

Six Months Ended

June 30,

2018 2017 2018 2017
Net loss per common share from continuing operations $ (0.20 ) $ (0.48 ) $ (0.40 ) $ (0.71 )
Adjustments to GAAP net loss per common share from continuing
operations:
Loss from related party equity method investment including
impairment loss
0.03 0.32 0.06 0.36
Stock-based compensation expense from continuing operations 0.02 0.04
Corporate restructuring from continuing operations 0.01 0.01
Acquisition related sales incentive 0.01 0.01 0.01
Change in fair value of derivatives liability
Non-cash interest expense related to convertible notes 0.01 0.01 0.02 0.02
Intangible amortization from continuing operations 0.02 0.02 0.03 0.04
Securities litigation costs 0.01 0.01
Impairment of equity securities 0.02 0.02
Tax benefit resulting from certain non-cash tax items   (0.01 )       (0.02 )    
Total adjustments to GAAP net loss per common share from continuing
operations
  0.10     0.37     0.17     0.44  
Net loss per common share from continuing operations - Non-GAAP $ (0.10 ) $ (0.11 ) $ (0.23 ) $ (0.27 )

View Comments and Join the Discussion!