Market Overview

Catasys Announces 2020 First Quarter Financial Results

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  • Record Quarterly Revenue of $12.3 Million in Q1 2020, up 81% Year over Year and up 5% from Q4 2019
  • Effective Outreach Pool Increased to 145,000 in Q1 2020, up 202% Year over Year and up 34% from 108,000 at Q4 2019
  • Record Quarterly Net Enrollment increase of 1,604 in Q1 2020, up 838% Year over Year, exceeding Company expectations, and increased an additional 1,339 in April 2020
  • Record Number of Members Enrolled in the OnTrak Program, Exceeding 10,176; up from 6,996 at Q4 2019
  • Company Reiterates 2020 Revenue Guidance of $90 Million
  • Company to Host Conference Call at 4:30 pm ET Today

Catasys, Inc. (NASDAQ:CATS) ("Catasys" or the "Company"), an AI and telehealth enabled, virtualized outpatient healthcare treatment company, today reported its financial results for the first quarter ended March 31, 2020. The Company provides big data-based analytics and predictive identification and engagement capabilities to health plans and their members through its OnTrak™ solution on the Catasys PRE™ (Predict-Recommend-Engage) platform.

Management Commentary

Mr. Terren Peizer, the Company's Chairman and CEO, stated, "We delivered very strong financial results in the first quarter and continued to expand our relationships with health plans as they recognize Catasys as an innovative leader in the healthcare engagement space focused on behavioral health and chronic disease. Subsequent to the end of the quarter, we achieved record levels of enrolled members to our OnTrak program, now exceeding 10,000 people as of today and surpassing the 25,000 mark since our company's inception."

Mr. Peizer continued, "COVID-19 has illuminated many challenges in the healthcare system as the pandemic has increased anxiety and exacerbated mental health struggles for many Americans. Throughout the crisis, the Catasys team has continued to deliver exceptional care and service to our members as we focus acutely on improving member health, saving lives, and lowering the total cost of care."

Mr. Peizer concluded, "The many operational improvements we've instituted and the enhancements we've made to our team so far this year have set us up well to support rapid growth through the back half of the year and we remain committed to our guidance of $90.0 million of revenues for 2020. We believe we are incredibly well positioned to capitalize on the opportunities ahead of us as we strive to deliver positive outcomes and tangible results."

First Quarter 2020 Results:

  • Revenue for the first quarter of 2020 was $12.3 million, representing an 81% increase compared to the same period in 2019 and a 5% increase from the prior quarter.
  • Operating loss for the first quarter of 2020 was ($6.0) million, yielding an operating loss margin of (49%), compared to an operating loss of ($2.5) million for the same period in 2019, yielding an operating loss margin of (37%).
  • Adjusted EBITDA for the first quarter of 2020 was ($3.6) million compared to Adjusted EBITDA of ($1.5) million for the same period in 2019.
  • Net loss for the first quarter of 2020 was ($7.6) million, or a ($0.45) diluted net loss per share, compared to net loss of ($2.9) million, or a ($0.18) diluted net loss per share for the same period in 2019.
  • Non-GAAP net loss for the first quarter of 2020 was ($5.3) million, or a ($0.32) diluted net loss per share, compared to non-GAAP net loss of ($1.9) million, or a ($0.12) diluted net loss per share for the same period in 2019.

2020 First Quarter and Recent Operating Highlights

  • The increase in net enrolled members of 1,604 in Q1 2020 was ahead of Company expectations and impacted by seasonal disenrollments associated with members changing health plans. The continued increase in net enrolled members of 1,339 in the first month of Q2 2020 benefited from higher than expected gross enrollments coupled with lower than expected disenrollments during the month, which demonstrates the positive impact our OnTrak program can have to members in periods when external factors can trigger or exacerbate mental health disorders.
  • Effective Outreach Pool increased to 145,000, representing a 202% increase year over year and an increase of 34% from Q4 2019.
  • In January 2020, Catasys expanded its OnTrak-A solution with a leading national health plan into California.
  • In March 2020, Catasys expanded its OnTrak-A solution with a leading national health plan into Colorado, Washington D.C., Virginia and Louisiana.
  • In April 2020, Catasys announced the expansion of its OnTrak-A solution with a leading national health plan into Indiana, Wisconsin, Kentucky and Arkansas.
  • With these expansions, OnTrak is now available in 30 states, as well as the nation's capital, and additional expansions are expected in the remainder of 2020.
  • We continue to hire front line employees in line with our enrollment increases to be able to continue to sustain the growth rate into the future.
  • Mr. Brandon H. LaVerne joined Catasys as Chief Financial Officer, bringing over 26 years of financial experience, including most recently serving for 12 years as Chief Financial Officer for PCM, Inc., a $2.2 billion technology solutions provider.

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, 2020, the Company provides the following outlook:

  • Revenues of at least $90 million in 2020, representing year-over-year growth of 156% from revenues for 2019.

Conference Call – Thursday, May 7, 2020 – 4:30 pm ET

The Company will also host a conference call/webcast that same day at 4:30 pm ET/1:30 pm PT.

Investors, analysts, employees and the general public are invited to listen to the conference call via:

Conference Call

833-954-1830 (domestic) or 862-298-9413

Webcast

https://event.on24.com/wcc/r/2326353/0F9ABAD5B2C48DE230D39D068B75CFF0

Those who are unable to attend the conference call live can use the following information to hear a replay version:

Conference ID#:

 

3269835

Conference Call Replay:

 

800-585-8367 (domestic) or 404-537-3406 (international)

Expiration Date:

 

5/14/2020

About Catasys, Inc.

Catasys, Inc. is a leading AI and technology-enabled healthcare company whose mission is to help improve the health and save the lives of as many people as possible. Its Catasys PRE™ (Predict-Recommend-Engage) platform predicts people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages people who aren't getting the care they need. By combining predictive analytics with human engagement, Catasys delivers improved member health and validated outcomes and savings to healthcare payers.

Catasys' integrated, technology-enabled OnTrak solution, a critical component of the Catasys PRE platform, is designed to treat members with behavioral conditions that cause or exacerbate chronic medical conditions such as diabetes, hypertension, coronary artery disease, COPD, and congestive heart failure, which result in high medical costs.

Catasys has a unique ability to engage these members, who do not otherwise seek behavioral healthcare, leveraging proprietary enrollment capabilities built on deep insights into the drivers of care avoidance.

OnTrak integrates evidence-based psychosocial and medical interventions delivered either in-person or via telehealth, along with care coaching and in-market Community Care Coordinators who address the social and environmental determinants of health, including loneliness. The program improves member health and delivers validated cost savings to healthcare payers of more than 50 percent for enrolled members. OnTrak is available to members of leading national and regional health plans in 30 states and in Washington, D.C.

Learn more at www.catasys.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. 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 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 condensed 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 measure include EBITDA, Adjusted EBITDA, non-GAAP Net Loss and non-GAAP net loss per share which are not U.S. GAAP financial measures to clarify and enhance an understanding of 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. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

Adjusted EBITDA consists of net loss before interest, taxes, depreciation, amortization and stock based compensation. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

Non-GAAP net loss consists of net loss adjusted for stock based compensation and debt issuance write-off. Non-GAAP net loss per share consists of loss per share adjusted for non-GAAP net loss. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

We believe the above 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 may vary from that of others in our industry. Neither EBITDA, Adjusted EBITDA nor non-GAAP net loss should be considered as an alternative to net loss before taxes, net loss, loss per share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.

CATASYS, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

For the Three Months Ended

March 31,

 

 

 

2020

 

2019

 

Revenue

 

$

12,338

 

 

$

6,811

 

 

Cost of revenue

 

7,233

 

 

3,027

 

 

Gross profit

 

5,105

 

 

3,784

 

 

 

 

 

 

 

 

Operating expenses

 

11,109

 

 

6,299

 

 

Operating loss

 

(6,004)

 

 

(2,515)

 

 

 

 

 

 

 

 

Other income (expense)

 

62

 

 

(85)

 

 

Interest expense

 

(1,653)

 

 

(321)

 

 

Net loss

 

$

(7,595)

 

 

$

(2,921)

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.45)

 

 

$

(0.18)

 

 

 

 

 

 

 

 

Weighted-average shares outstanding, basic and diluted

 

16,693

 

 

16,198

 

 

CATASYS, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

March 31,

2020

 

December 31,

2019

Assets

 

 

 

Current assets:

 

 

 

Cash and restricted cash

$

12,001

 

 

$

13,610

 

Receivables, net

2,982

 

 

3,615

 

Unbilled receivables

2,719

 

 

2,093

 

Deferred costs

847

 

 

341

 

Prepaid expenses and other current assets

986

 

 

733

 

Total current assets

19,535

 

 

20,392

 

Long-term assets:

 

 

 

Property and equipment, net

142

 

 

150

 

Restricted cash, long-term

408

 

 

408

 

Deferred costs, long-term

156

 

 

112

 

Right-of-use assets

2,646

 

 

2,793

 

Total assets

$

22,887

 

 

$

23,855

 

 

 

 

 

Liabilities and stockholders' deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,734

 

 

$

1,385

 

Accrued compensation and benefits

2,816

 

 

3,640

 

Deferred revenue

6,710

 

 

5,803

 

Current portion of lease liabilities

533

 

 

519

 

Other accrued liabilities

2,739

 

 

2,060

 

Warrant liabilities

627

 

 

691

 

Total current liabilities

15,159

 

 

14,098

 

Long-term liabilities:

 

 

 

Long-term debt, net

33,250

 

 

31,597

 

Long-term lease liabilities

1,931

 

 

2,069

 

Total liabilities

50,340

 

 

47,764

 

 

 

 

 

Stockholders' deficit:

 

 

 

Preferred stock, $0.0001 par value; 50,000,000 shares authorized; no shares issued and outstanding

 

 

 

Common stock, $0.0001 par value; 500,000,000 shares authorized; 16,876,581 and 16,616,165 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

2

 

 

2

 

Additional paid-in capital

311,454

 

 

307,403

 

Accumulated deficit

(338,909)

 

 

(331,314)

 

Total stockholders' deficit

(27,453)

 

 

(23,909)

 

Total liabilities and stockholders' deficit

$

22,887

 

 

$

23,855

 

CATASYS, INC.

Consolidated Statements of Cash Flows

(in thousands)

 

 

For the three months Ended

March 31,

 

 

2020

 

2019

Cash flows used in operating activities

 

 

 

 

Net loss

 

$

(7,595)

 

 

$

(2,921)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Stock-based compensation

 

2,272

 

 

1,024

 

Depreciation

 

23

 

 

38

 

Amortization

 

347

 

 

100

 

Change in fair value of warrants

 

(64)

 

 

91

 

Deferred rent

 

 

 

(26)

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts payable

 

349

 

 

322

 

Leases liabilities

 

(88)

 

 

 

Other accrued liabilities

 

(145)

 

 

(261)

 

Prepaid and other current assets

 

(612)

 

 

(6)

 

Deferred revenue

 

907

 

 

(501)

 

Receivables

 

633

 

 

(2,219)

 

Unbilled receivables

 

(626)

 

 

 

Net cash used in operating activities

 

(4,599)

 

 

(4,359)

 

 

 

 

 

 

Cash flows used by investing activities

 

 

 

 

Purchases of property and equipment

 

(14)

 

 

 

Net cash used in investing activities

 

(14)

 

 

 

 

 

 

 

 

Cash flows provided by financing activities

 

 

 

 

Proceeds from revolving loan

 

 

 

2,500

 

Proceeds from GS loan

 

1,453

 

 

 

Debt issuance costs

 

 

 

(107)

 

Proceeds from warrant exercise

 

20

 

 

100

 

Proceeds from options exercise

 

1,567

 

 

 

Capital lease obligations

 

(36)

 

 

(2)

 

Net cash provided by financing activities

 

3,004

 

 

2,493

 

 

 

 

 

 

Net decrease in cash and restricted cash

 

(1,609)

 

 

(1,866)

 

 

 

 

 

 

Cash and restricted cash at beginning of period

 

14,018

 

 

3,570

 

Cash and restricted cash at end of period

 

$

12,409

 

 

$

1,704

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

Interest paid

 

 

 

192

 

Financing and investing activities:

 

 

 

 

Reclassification of warrant liability to equity upon adoption of ASU 2017-11

 

$

 

 

$

86

 

Warrants issued in connection with revolving loan

 

 

 

461

 

Stock option exercise in transit

 

192

 

 

 

CATASYS, INC.

Reconciliation of Non-GAAP Measures

(in thousands, except per share data)

Reconciliation of Operating Loss to Adjusted EBITDA

 

 

For the Three Months Ended December 31,

 

 

2020

 

2019

Operating Loss

 

$

(6,004)

 

 

$

(2,515)

 

Depreciation

 

23

 

 

38

 

Amortization

 

147

 

 

 

EBITDA

 

(5,834)

 

 

(2,477)

 

Stock-based compensation

 

2,272

 

 

1,024

 

Adjusted EBITDA

 

$

(3,562)

 

 

$

(1,453)

 

Adjusted EBITDA Margin

 

(29)

%

 

(21)

%

Non-GAAP weighted-average common shares outstanding, diluted

 

16,590

 

 

$

16,091

 

Reconciliation of Net Loss to Non-GAAP Net Loss and Net Loss per Share to Non-GAAP Net Loss per Share

 

 

For the Three Months Ended March 31,

 

 

2020

 

2019

Net loss

 

$

(7,595)

 

 

$

(2,921)

 

Stock-based compensation

 

2,272

 

 

1,024

 

Write off debt issuance costs

 

 

 

 

Non-GAAP net loss

 

$

(5,323)

 

 

$

(1,897)

 

Non-GAAP basic and diluted net loss per share

 

$

(0.32)

 

 

$

(0.12)

 

Weighted-average common shares outstanding, basic and diluted

 

16,693

 

 

16,198

 

Non-GAAP weighted-average common shares outstanding, diluted

 

16,590

 

 

$

16,091

 

 

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