Catasys, Inc. (NASDAQ:CATS) (“Catasys” or the “Company”), a leading AI
and technology-enabled healthcare company, today reported its financial
results for the first quarter ended March 31, 2019. The Company provides
big data-based analytics and predictive modeling driven healthcare
services to health plans and their members through its OnTrak™ solution.
Management Commentary
Mr. Terren Peizer, Chairman and CEO, stated, “The first quarter
continued the positive momentum Catasys built throughout the past year,
as considerable growth in our outreach population due to expansion
within our existing agreements with health plans led to strong
enrollment and top line improvement during the period. Catasys continued
to focus on leveraging its technological expertise to drive innovative
solutions to address a wider populace, as evidenced by today’s
announcement that we are expanding the use of OnTrak to help identify
and address the epidemic of social isolation and loneliness, a key
social determinant of health. In addition, we will continue to pursue
partnerships with technology companies such as Circulation and Lyft.
This particular partnership will combine our OnTrak Care Team’s ability
to engage members with Circulation’s ability to provide safe and secure
transportation through Lyft and other providers. By identifying member
vulnerabilities and overcoming barriers to both engagement and
treatment, we will be able to substantially improve member health.”
Outlook for 2019
Mr. Peizer continued, “Our outreach population continues to grow ahead
of expectations, and we believe that reaching 100,000 eligible lives is
imminent. We are reiterating our previous guidance of $35 million in
revenues for 2019, which does not include new contracts and subsequent
launches, initial launches of existing contracts, new expansions within
existing contracts, or new product sales, all of which may increase our
outreach pool through the remainder of the year. If and when these
possible subsequent developments occur, the Company may revise guidance.
Operationally, we are very excited about the progress we have made so
far in 2019, and feel even stronger about our future potential. We have
focused on reinvesting in our business throughout this growth phase,
including strengthening our senior management team, enhancing our
technological capabilities to better serve members and delivering
validated cost savings to health plan customers.”
Company Reiterates 2019 GAAP Revenue Guidance
- Catasys expects to report revenues of at least $35 million in 2019.
-
The Company anticipates that this revenue increase will be supported
through accelerating enrollment growth during the remainder of 2019,
with the largest portion of the revenue increase to occur in the
second half of the year. -
This guidance solely represents existing enrollment launches with
current health plan partners and program expansions with existing
customers -
Annual guidance does not include new contracts and subsequent
launches, initial launches of existing contracts, and new expansions
within existing contracts that may increase its outreach pool
throughout the year. As a result of these subsequent developments, the
Company may revise guidance at that time.
2019 First Quarter and Recent Operating Highlights
-
Catasys’ outreach pool of eligible members continued its rapid ramp in
May, increasing to approximately 92,000 due to significant expansion
within existing contracts, an increase from approximately 41,000 at
December 31, 2018, and up from 32,000 at the end of the first quarter
of 2018. New customer launches continue to take approximately 12
months to ramp up to an approximate 20% yearly enrollment rate. One
year after launch, the Company generally enrolls 20% of its outreach
pool over a year. Catasys generally receives approximately $6,500 net
per enrolled member. -
New enrollment for the quarter ended March 31, 2019, increased 48%
year over year. -
Catasys continued enhancing its senior management team with the
appointment of Carol Murdock as Chief Commercial Officer, leading
business development, account management, marketing and corporate
communications.
Management Commentary on 2019 First Quarter Operating Results
Mr. Rick Anderson, President and COO, stated, “Favorable enrollment
trends continued to drive higher revenues during the period, largely due
to expansions within existing agreements with our health plan customers
to include new states and treatments. We recently announced an agreement
with Optima Health to provide our OnTrak solution to eligible Commercial
members in Virginia, which is expected to launch in the second quarter
of 2019, and also expanded our OnTrak-Ci program with a leading health
insurance provider to eligible Medicare Advantage members in two new
states, Alabama and Mississippi, as well as Florida. In addition,
Catasys expanded its OnTrak-C solution to eligible Medicaid members in
Texas, which will now be able to participate in OnTrak for treatment of
anxiety and depression, as well as substance use disorders. The Company
remains in discussions with several customers regarding potential
expansions in the form of new states, new lines of business or utilizing
our technological advancements to expand coverage to new populations.”
2019 First Quarter Financial Review
Revenues
-
Revenue increased 256% to $6.8 million for the first quarter of 2019,
from $1.9 million during the same period in 2018. There was a net
increase in the number of members enrolled in the Company’s OnTrak
solution during the first quarter of 2019 compared with the same
period in 2018.
Gross Margin
-
Gross margin, which consists of revenue less the Cost of Healthcare
Services, increased to 55.6% for the first quarter, compared to a
negative gross profit total in the prior-year period and up from 52.8%
in the fourth quarter of 2018. -
Cost of Healthcare Services consists primarily of salaries related to
Catasys’ care coaches, outreach specialists, community care
coordinators, healthcare provider claims payments to its network of
physicians and psychologists, and fees charged by third party
administrators for processing these claims. -
The costs for such staff are included in Cost of Healthcare Services
during training and ramp-up periods. Margins will be impacted by the
hiring of staff in preparation for anticipated future customer
contracts and corresponding increases in members eligible for OnTrak.
Operating Expenses
-
Operating expenses in the first quarter of 2019 were $6.3 million,
compared to $3.9 million in the prior-year period. This increase was
mainly due to higher expenses related to investments in new
technology, servicing contracts and investments in key personnel to
support future growth compared to the prior-year period.
Net Income (Loss)
-
For the first quarter of 2019, net loss was $2.9 million, or $0.18 per
diluted share, compared to a net loss of $4.2 million, or $0.27 per
diluted share, in the prior-year period.
Conference Call – Thursday, May 9, 2019 – 4:30 pm ET
The Company will host a conference call/webcast on Thursday, May 9,
2019, at 4:30 pm ET/1:30 pm PT.
Investors, analysts, employees and the public are invited to listen to
the conference call via:
Conference Call
877-705-2969 (domestic) or 201-689-8868 (international)
Webcast
https://78449.themediaframe.com/dataconf/productusers/cats/mediaframe/30211/indexl.html.
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: | 5/16/2019 | |
About Catasys, Inc.
Catasys, Inc. harnesses proprietary big data predictive analytics,
artificial intelligence and telehealth, combined with human interaction,
to deliver improved member health and validated outcomes and savings to
health plans. Our mission is to help improve the health and save the
lives of as many people as possible.
Catasys’ integrated, technology-enabled OnTrak solution–contracted with
a growing number of national and regional health plans–is designed to
treat members with behavioral conditions that cause or exacerbate
co-existing 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. 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
several leading health plans in Alabama, California, Connecticut,
Florida, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana,
Massachusetts, Mississippi, Missouri, Nebraska, New Jersey, North
Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas,
Virginia, West Virginia and Wisconsin.
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.
| CATASYS, INC. | ||||||||||
| CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||
| (in thousands, except per share data) | ||||||||||
| (unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Revenue | $ | 6,811 | $ | 1,911 | ||||||
| Cost of revenue | 3,027 | 2,287 | ||||||||
| Gross profit (loss) | 3,784 | (376 | ) | |||||||
| Operating expenses | 6,299 | 3,871 | ||||||||
| Operating loss | (2,515 | ) | (4,247 | ) | ||||||
| Other income | 6 | 40 | ||||||||
| Interest expense | (321 | ) | (1 | ) | ||||||
| Change in fair value of warrant liability | (91 | ) | (10 | ) | ||||||
| Net loss | $ | (2,921 | ) | $ | (4,218 | ) | ||||
| Net loss per share, basic and diluted from operations: | $ | (0.18 | ) | $ | (0.27 | ) | ||||
|
Weighted-average shares used to compute basic and diluted net loss per share |
16,198 | 15,898 | ||||||||
| CATASYS, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (in thousands, except share and per share data) | ||||||||||
| (unaudited) | ||||||||||
| March 31, | December 31, | |||||||||
| 2019 | 2018 | |||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and restricted cash | $ | 1,296 | $ | 3,162 | ||||||
| Receivables, net | 3,601 | 1,382 | ||||||||
| Prepaid expenses and other current assets | 948 | 942 | ||||||||
| Total current assets | 5,845 | 5,486 | ||||||||
| Long-term assets | ||||||||||
|
Property and equipment, net of accumulated depreciation of $1,839 and $1,801, respectively |
225 | 263 | ||||||||
| Restricted cash, long term | 408 | 408 | ||||||||
| Debt issuance costs | 739 | 166 | ||||||||
| Total Assets | $ | 7,217 | $ | 6,323 | ||||||
| Liabilities and stockholders’ deficit | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable | $ | 819 | $ | 497 | ||||||
| Accrued compensation and benefits | 1,177 | 1,537 | ||||||||
| Deferred revenue | 3,694 | 4,195 | ||||||||
| Loan payable | 1,167 | – | ||||||||
| Other accrued liabilities | 1,623 | 1,501 | ||||||||
| Total current liabilities | 8,480 | 7,730 | ||||||||
| Long-term liabilities | ||||||||||
| Long term debt, net of discount of $423 and $478, respectively | 8,861 | 7,472 | ||||||||
| Warrant liabilities | 552 | 86 | ||||||||
| Total Liabilities | 17,893 | 15,288 | ||||||||
| Commitments and Contingencies | ||||||||||
| 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; 16,205,146 and 16,185,146 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively |
2 | 2 | ||||||||
| Additional paid in capital | 297,898 | 296,688 | ||||||||
| Accumulated deficit | (308,576 | ) | (305,655 | ) | ||||||
| Total Stockholders’ deficit | (10,676 | ) | (8,965 | ) | ||||||
| Total Liabilities and stockholders’ deficit | $ | 7,217 | $ | 6,323 | ||||||
| CATASYS, INC. | ||||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
| (in thousands) | ||||||||||
| (unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Operating activities: | ||||||||||
| Net loss | $ | (2,921 | ) | $ | (4,218 | ) | ||||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||
| Depreciation and amortization | 38 | 85 | ||||||||
| Amortization of debt discount | 44 | – | ||||||||
| Warrants issued for services | – | 86 | ||||||||
| Deferred rent | (26 | ) | (22 | ) | ||||||
| Stock compensation expense | 1,024 | 328 | ||||||||
| Amortization of debt issuance costs | 56 | – | ||||||||
| Common stock issued for services | – | 112 | ||||||||
| Fair value adjustment on warrant liability | 91 | 10 | ||||||||
| Changes in current assets and liabilities: | ||||||||||
| Receivables | (2,219 | ) | (700 | ) | ||||||
| Prepaids and other current assets | (6 | ) | 12 | |||||||
| Deferred revenue | (501 | ) | 652 | |||||||
| Accounts payable and other accrued liabilities | 61 | 239 | ||||||||
| Net cash used in operating activities | $ | (4,359 | ) | $ | (3,416 | ) | ||||
| Financing activities: | ||||||||||
| Proceeds from Horizon revolving loan | $ | 2,500 | $ | – | ||||||
| Debt issuance costs | (105 | ) | – | |||||||
| Capital lease obligations | (2 | ) | (9 | ) | ||||||
| Proceeds from warrant exercise | 100 | – | ||||||||
| Net cash provided by (used in) financing activities | $ | 2,493 | $ | (9 | ) | |||||
| Reconciliation of cash and restricted cash: | ||||||||||
| Cash | 1,296 | 3,091 | ||||||||
| Restricted cash | 408 | 479 | ||||||||
| Total cash and restricted cash | $ | 1,704 | $ | 3,570 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||||
| Interest | $ | 192 | $ | 363 | ||||||
| Non-cash activity investing and financing activities: | ||||||||||
| Warrants issued in connection with A/R Facility | $ | – | $ | 64 | ||||||
| Warrants issued in connection with Horizon financing | $ | 461 | $ | – | ||||||
|
Reclassification of warrant liability to equity upon adoption of ASU 2017-11 |
$ | 86 | $ | – | ||||||
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