EX-99.1 2 q32022exhibit991.htm EX-99.1 Document

Exhibit 99.1

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News Release
 
For Immediate Release

Ontrak Announces 2022 Third Quarter Financial Results

•Q3 Revenue of $2.8 million
•Company pays off in full its $7.5 million outstanding GS loan balance; draws down a total of $11 million to date on the Keep Well Agreement
•Company raises $3.3 million, net, in a registered direct offering of shares of Company's common stock with institutional investors
•Company notes progress in sales prospect pipeline, including two plans in finalization of MSA and SOW phase
•Company to Host Conference Call at 4:30 pm ET Today
 
Henderson, NV – November 9, 2022 – Ontrak, Inc. (NASDAQ: OTRK) (“Ontrak” or the “Company”), a leading AI-powered and telehealth-enabled healthcare company, today reported its financial results for the third quarter ended September 30, 2022.


Management Commentary

“All of us at Ontrak Health are encouraged by the growing momentum in our sales pipeline, enhancements to our clinical model, and effectiveness of our AI-enhanced technology platform. It’s why I believe we are close to new customer contracts that will position us for a return to growth in 2023,” commented Founder, Executive Chairman, and Chief Executive Officer, Terren Peizer.


Third Quarter 2022 Financial Results Highlights

•Revenue for the third quarter of 2022 was $2.8 million, representing an 85% decrease compared to the same period in 2021.
•Operating loss for the third quarter of 2022 was $(11.1) million compared to an operating loss of $(5.5) million for the same period in 2021.
•Adjusted EBITDA for the third quarter of 2022 was $(7.7) million compared to adjusted EBITDA of $(1.7) million for the same period in 2021.
•Net loss for the third quarter of 2022 was $(12.8) million, or an $(0.62) diluted net loss per common share (after deduction for undeclared preferred stock dividends), compared to net loss of $(7.9) million, or a $(0.54) diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends) for the same period in 2021.
•Non-GAAP net loss for the third quarter of 2022 was $(9.4) million, or a $(0.48) non-GAAP diluted net loss per common share (after deduction for undeclared preferred stock dividends), compared to non-GAAP net loss of $(4.5) million, or a $(0.35) non-GAAP diluted net loss per common share (after deduction for declared and undeclared preferred stock dividends) for the same period in 2021.


Third Quarter 2022 and Recent Operating Highlights

•Total enrolled members numbered 1,365 at the end of Q3 2022.
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•On August 26, 2022, the Company's board of directors ("Board") appointed James Messina to serve on the Board and on its Audit Committee, Nominations and Governance Committee, and Compensation Committee. This appointment follows the resignation of Robert Rebak from the Board and each committee of the Board on which Mr. Rebak served.
•On August 18, 2022, the Company's management approved a restructuring plan as part of management's cost saving measures in order to reduce its operating costs, optimize its business model and help align with its previously stated strategic initiatives, reducing approximately 34% of positions and $7.7 million of annual compensation related costs, as well as approximately $3.0 million of annual third party costs. During Q3 2022, the Company incurred a total of approximately $0.9 million of termination benefits to the impacted employees, including severance payments and benefits.
•On August 2, 2022, the Company entered into a securities purchase agreement with institutional investors for the purchase and sale of five million shares of the Company’s common stock at an at-the-market purchase price of $0.80 per share in a registered direct offering. The offering closed on August 4, 2022 and the Company received total net proceeds of approximately $3.3 million (excluding $0.7 million of total offering related fees).
•On July 25, 2022, the Company appointed Dr. Judy Feld as Chief Medical Officer ("CMO"), following Dr. Robert Accordino’s resignation effective July 29, 2022 from his role as CMO.
•On July 15, 2022, the Company repaid $7.5 million of the remaining GS loan balance, with $2.5 million of its cash on hand and $5.0 million draw down on the Keep Well Agreement, which represented full payoff of the GS loan agreement.
•The Company is finalizing an amendment to the Master Note Purchase Agreement, pursuant to which it expects the maturity date will be extended to 2024.


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 confirms its existing revenue outlook:

•2022 revenue in the range of $14 - $16 million.

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.

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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 the fourth quarter of 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 effectively align our resources, manage our operating costs and address the change in staffing needs; our ability to draw on the remaining available amount, as well as extend the maturity date of 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; continued business disruption and related risks resulting from the outbreak of the novel coronavirus 2019; general economic conditions, nationally and globally, and their effect on the market for our service; competitive pressures and trends in our industry and our ability to successfully compete with our competitors; changes in laws, regulations, or policies; our receipt of a deficiency notification from the Nasdaq Stock Market regarding the trading price of our common stock; 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 based on information available to us on the date hereof, 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.

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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. 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, Non-GAAP net loss and Non-GAAP net loss per common share may vary from that of others in our industry. None of EBITDA, Adjusted EBITDA, Non-GAAP net loss or 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.


Contact

For Investors:

Ryan Halsted
Gilmartin Group
investors@ontrakhealth.com




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ONTRAK, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Revenue$2,843 $18,594 $12,004 $73,801 
Cost of revenue1,436 5,856 6,488 27,125 
Gross profit1,407 12,738 5,516 46,676 
Operating expenses:
Research and development2,833 4,563 9,113 13,531 
Sales and marketing1,151 2,269 3,893 7,839 
General and administrative7,552 11,325 27,694 33,966 
Restructuring, severance and related costs934 49 934 1,339 
Total operating expenses12,470 18,206 41,634 56,675 
Operating loss(11,063)(5,468)(36,118)(9,999)
Other expense, net(1,241)(361)(3,213)(1,004)
Interest expense, net(440)(2,054)(2,996)(6,090)
Loss before income taxes(12,744)(7,883)(42,327)(17,093)
Income tax expense(20)— (140)— 
Net loss$(12,764)$(7,883)$(42,467)$(17,093)
Dividends on preferred stock - declared and undeclared(2,239)(2,239)(6,716)(6,716)
Net loss attributable to common stockholders$(15,003)$(10,122)$(49,183)$(23,809)
Net loss per common share, basic and diluted$(0.62)$(0.54)$(2.24)$(1.31)
Weighted-average common shares outstanding, basic and diluted 24,339 18,915 21,995 18,236 










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ONTRAK, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)

September 30,December 31,
20222021
Assets(unaudited)
Current assets:
   Cash and cash equivalents $7,253 $58,824 
   Restricted cash - current4,477 6,716 
   Receivables, net4,590 5,938 
   Unbilled receivables412 3,235 
   Deferred costs - current145 600 
   Prepaid expenses and other current assets2,179 5,019 
Total current assets19,056 80,332 
Long-term assets:
   Property and equipment, net2,505 3,785 
   Restricted cash - long-term204 406 
   Goodwill 5,713 5,713 
   Intangible assets, net1,430 2,346 
   Other assets1,038 444 
   Operating lease right-of-use assets712 656 
Total assets$30,658 $93,682 
Liabilities and stockholders' equity
Current liabilities:
   Accounts payable$1,768 $1,001 
   Accrued compensation and benefits2,095 2,343 
   Deferred revenue288 441 
   Current portion of operating lease liabilities655 595 
   Other accrued liabilities 2,710 5,953 
Total current liabilities7,516 10,333 
Long-term liabilities:
   Long-term debt, net9,218 35,792 
   Long-term operating lease liabilities711 932 
   Long-term finance lease liabilities8 136 
   Other liabilities— 934 
Total liabilities17,453 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 September 30, 2022 and December 31, 2021— — 
   Common stock, $0.0001 par value, 500,000,000 shares authorized; 26,914,155 and
  20,680,186 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
3 2 
   Additional paid-in capital446,837 436,721 
   Accumulated deficit(433,635)(391,168)
Total stockholders' equity13,205 45,555 
Total liabilities and stockholders' equity$30,658 $93,682 



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ONTRAK, INC.
Consolidated Statements of Cash Flows
(in thousands, unaudited)
For the Nine Months Ended
September 30,
20222021
Cash flows from operating activities
Net loss$(42,467)$(17,093)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense6,282 8,871 
Write-off of debt issuance costs3,334 — 
Depreciation expense2,222 658 
Amortization expense1,946 2,181 
Gain on forgiveness of PPP loan— (171)
Change in fair value of warrants(121)— 
Change in fair value of contingent consideration— 1,305 
401(k) employer match in common shares528 860 
Common stock issued for consulting services102 — 
Changes in operating assets and liabilities:
Receivables1,348 11,478 
Unbilled receivables2,823 (834)
Prepaid expenses and other current assets2,966 1,674 
Accounts payable758 (285)
Deferred revenue(153)(15,633)
Leases liabilities(160)(208)
Other accrued liabilities(1,928)(3,914)
Net cash used in operating activities(22,520)(11,111)
Cash flows from investing activities
Purchase of property and equipment(1,004)(3,865)
Net cash used in investing activities(1,004)(3,865)
Cash flows from financing activities
Repayments of 2024 Notes(39,194)— 
Proceeds from Keep Well Notes11,000 — 
Proceeds from issuance of common stock4,000 — 
Common stock issuance costs(706)— 
Dividends paid(2,239)(6,712)
Debt issuance costs(792)— 
Proceeds from warrant exercise— 58 
Proceeds from options exercise— 5,584 
Finance lease obligations(226)(243)
Financed insurance premium payments(2,325)(2,154)
Payment of taxes related to net-settled stock awards(6)— 
Net cash used in financing activities(30,488)(3,467)
Net change in cash and restricted cash(54,012)(18,443)
Cash and restricted cash at beginning of period65,946 103,210 
Cash and restricted cash at end of period$11,934 $84,767 
Supplemental disclosure of cash flow information:
Interest paid$2,307 $5,483 
Income taxes paid210 91 
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Non-cash financing and investing activities:
Common stock issued in connection with Keep Well Agreement$1,249 $— 
Warrants issued in connection with 2024 Notes458 — 
Financed insurance premium352 — 
Warrants issued in connection with Keep Well Notes322 — 
Common stock issued to settle contingent consideration293 — 
Accrued debt issuance costs138 — 
Finance lease and accrued purchases of property and equipment31 230 
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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
September 30,		Nine Months Ended
September 30,
2022202120222021
Operating loss$(11,063)$(5,468)$(36,118)$(9,999)
Depreciation expense798 276 2222 658 
Amortization expense (1)412 525 1,217 1,547 
EBITDA(9,853)(4,667)(32,679)(7,794)
Stock-based compensation expense1,219 2,910 6,282 8,871 
Restructuring, severance and related costs (2)934 49 934 1,339 
Acquisition related costs (3)— — — 583 
Adjusted EBITDA $(7,700) $(1,708)$(25,463)$2,999 


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
September 30,		Nine Months Ended
September 30,
2022202120222021
Net loss$(12,764)$(7,883)$(42,467)$(17,093)
Stock-based compensation expense1,219 2,910 6,282 8,871 
Write-off of debt issuance costs (4)1,311 — 3,334 — 
Restructuring, severance and related costs (2)934 49 934 1,339 
Gain on change in fair value of warrant liabilities(70)— (121)(29)
Loss on change in fair value of contingent liability (5)— 470 — 1,305 
Acquisition related costs (3)— — — 583 
Gain on forgiveness of PPP loan (6)— — — (171)
Non-GAAP net loss(9,370)(4,454)(32,038)(5,195)
Dividends on preferred stock - declared and undeclared(2,239)(2,239)(6,716)(6,716)
Non-GAAP net loss attributable to common stockholders$(11,609)$(6,693)$(38,754)$(11,911)
Net loss per common share - basic and diluted$(0.62)$(0.54)$(2.24)$(1.31)
Non-GAAP net loss per common share - basic and diluted (0.48)(0.35)(1.76)(0.65)
Weighted-average common shares outstanding - basic and diluted 24,339 18,91521,995 18,236 
_______________________
(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.
(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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