Catasys, Inc. (NASDAQ: CATS), a leading AI and technology-enabled healthcare company, today reported its financial results for the fourth quarter and year ended December 31, 2017. The Company provides big data-based analytics and predictive modeling driven healthcare services to health plans and their members through its OnTrak™ solution.
Fourth Quarter 2017 and Recent Business Highlights
2018 Guidance
Management Commentary
Mr. Rick Anderson, President and COO of Catasys, stated, “We are very pleased with our enrollment growth trends, which have led to, and we anticipate will continue to lead to higher billings. We are also rapidly ramping up our outreach pool of eligible members. In January 2018, Catasys expanded OnTrak for the treatment of anxiety, depression and substance use disorders into Illinois with the fourth largest health insurance plan in the nation. This followed the successful launch of this program in Oklahoma in August 2017. We also announced in January 2018 the signing of a contract with a top 10 health insurer for our OnTrak solution program for certain members with anxiety, depression and substance use disorders, and launched the OnTrak-Ci program to eligible Medicare Advantage members in February 2018. With this contract, Catasys is now partnering with six of the eight largest health plans in the U.S. We have seen a notable acceleration in launches in recent months and expect this, as well as our expanding book of business, to continue to increase our total outreach pool, which will subsequently drive enrollment throughout 2018.”
Outlook for 2018
Mr. Terren Peizer, Chairman and CEO of Catasys, stated, “We remain on track to achieve our previous guidance of $20.0 million of billings for 2018, and have set conservative enrollment growth trend guidelines in order to reach this estimate. We have had a strong start to 2018 and expect to continue increasing enrollments in existing programs and expanding programs for existing customers to new states. We also anticipate launches of our OnTrak solution with new customers in the first half of 2018 and beyond. Finally, we intend to devote continued time and resources to new products that utilize our existing platform and data driven analytics to widen Catasys’ potential outreach population. Given these positive indicators and our ability to capitalize on growth opportunities, we remain confident that our provided guidance is a conservative floor for this year and that billing totals will stand to benefit from these developments in 2018.”
Fourth Quarter and Year-end 2017 Financial Review
Billings
Revenues
Deferred Revenue
Operating Expenses
Net Income (Loss)
Conference Call – March 7, 2018 – 4:30 pm ET
The Company will host a conference call/webcast on Wednesday, March 7, 2018, 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: |
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: | 3/14/2018 |
About Catasys, Inc.
Catasys, Inc. harnesses proprietary big data predictive analytics, artificial intelligence and telehealth, combined with human intervention, to deliver improved member health and cost savings to health plans through integrated technology enabled treatment solutions. It is our mission to provide access to affordable and effective care, thereby improving health and reducing cost of care for people who suffer from the medical consequences of behavioral health conditions; helping these people and their families achieve and maintain better lives.
Catasys' 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. 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 matched with data driven motivational and consumer engagement technologies.
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 Connecticut, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Massachusetts, Missouri, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wisconsin.
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
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.
CATASYS, INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
(In thousands, except per share amounts) | December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Healthcare services revenues | $ | 3,035 | $ | 3,788 | $ | 7,717 | $ | 7,075 | ||||||||
Operating expenses | ||||||||||||||||
Cost of healthcare services | 2,030 | 1,289 | 6,391 | 4,670 | ||||||||||||
General and administrative | 3,667 | 2,320 | 11,811 | 8,838 | ||||||||||||
Depreciation and amortization | 115 | 39 | 246 | 141 | ||||||||||||
Total operating expenses | 5,812 | 3,648 | 18,448 | 13,649 | ||||||||||||
Loss from operations | (2,777 | ) | 140 | (10,731 | ) | (6,574 | ) | |||||||||
Other income | 88 | 16 | 132 | 106 | ||||||||||||
Interest expense | (1 | ) | (1,215 | ) | (3,409 | ) | (5,354 | ) | ||||||||
Loss on conversion of note | - | - | (1,356 | ) | - | |||||||||||
Loss on issuance of common stock | - | - | (145 | ) | - | |||||||||||
Loss on debt extinguishment | - | (2,424 | ) | - | (2,424 | ) | ||||||||||
Change in fair value of warrant liability | 11 | 1,420 | 1,778 | 2,093 | ||||||||||||
Change in fair value of derivative liability | - | 554 | 132 | (5,774 | ) | |||||||||||
Loss from operations before provision for income taxes | (2,679 | ) | (1,509 | ) | (13,599 | ) | (17,927 | ) | ||||||||
Provision for income taxes | 2 | 2 | 6 | 9 | ||||||||||||
Net loss | $ | (2,681 | ) | $ | (1,511 | ) | $ | (13,605 | ) | $ | (17,936 | ) | ||||
Basic and diluted net loss per share: | ($0.17 | ) | ($0.16 | ) | ($0.99 | ) | ($1.95 | ) | ||||||||
Basic weighted number of shares outstanding | 15,889 | 9,206 | 13,751 | 9,179 | ||||||||||||
* The financial statements have been retroactively restated to reflect the 1-for-6 reverse-stock split that occurred on April 25, 2017 |
CATASYS, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands, except for number of shares) | December 31, | December 31, | ||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 4,779 | $ | 851 | ||||
Receivables, net of allowance for doubtful accounts | ||||||||
of $476 and $0, respectively | 511 | 1,052 | ||||||
Prepaids and other current assets | 366 | 420 | ||||||
Total current assets | 5,656 | 2,323 | ||||||
Long-term assets | ||||||||
Property and equipment, net of accumulated depreciation | ||||||||
of $1,542 and $1,620, respectively | 612 | 410 | ||||||
Deposits and other assets | 336 | 371 | ||||||
Total Assets | $ | 6,604 | $ | 3,104 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT) | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 980 | $ | 870 | ||||
Accrued compensation and benefits | 1,177 | 2,089 | ||||||
Deferred revenue | 2,914 | 1,525 | ||||||
Other accrued liabilities | 578 | 575 | ||||||
Short term debt, related party, net of discount | ||||||||
of $0 and $216, respectively | - | 9,796 | ||||||
Short term derivative liability | - | 8,122 | ||||||
Total current liabilities | 5,649 | 22,977 | ||||||
Long-term liabilities | ||||||||
Deferred rent and other long-term liabilities | 25 | 117 | ||||||
Capital leases | 2 | 31 | ||||||
Warrant liabilities | 30 | 5,307 | ||||||
Total Liabilities | 5,706 | 28,432 | ||||||
Commitments and contingencies (note 8) | ||||||||
Stockholders' equity/(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; | ||||||||
15,889,171 and 9,214,743 shares issued and outstanding | ||||||||
at December 31, 2017 and December 31, 2016, respectively | 2 | 1 | ||||||
Additional paid-in-capital | 294,220 | 254,390 | ||||||
Accumulated deficit | (293,324 | ) | (279,719 | ) | ||||
Total Stockholders' equity/(deficit) | 898 | (25,328 | ) | |||||
Total Liabilities and Stockholders' Equity/(Deficit) | $ | 6,604 | $ | 3,104 | ||||
* The financial statements have been retroactively restated to reflect the 1-for-6 reverse-stock split that occurred on April 25, 2017 |
CATASYS, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
Twelve Months Ended | ||||||||
(In thousands) | December 31, | |||||||
2017 | 2016 | |||||||
Operating activities: | ||||||||
Net loss | $ | (13,605 | ) | $ | (17,936 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 246 | 141 | ||||||
Amortization of debt discount and issuance costs included in interest expense | 3,082 | 4,651 | ||||||
Loss on debt extinguishment | - | 2,424 | ||||||
Warrants issued for services | 252 | - | ||||||
Provision for doubtful accounts | 590 | 47 | ||||||
Deferred rent | (81 | ) | (70 | ) | ||||
Share-based compensation expense | 465 | 697 | ||||||
Common stock issued for services | 181 | - | ||||||
Loss on conversion of convertible note | 1,356 | - | ||||||
Loss on issuance of common stock, related party | 145 | - | ||||||
Fair value adjustment on warrant liability | (1,778 | ) | (2,093 | ) | ||||
Fair value adjustment on derivative liability | (132 | ) | 5,774 | |||||
Changes in current assets and liabilities: | ||||||||
Receivables | (49 | ) | (509 | ) | ||||
Prepaids and other current assets | 54 | 155 | ||||||
Deferred revenue | 1,389 | 77 | ||||||
Accounts payable and other accrued liabilities | 517 | 916 | ||||||
Net cash used by operating activities | $ | (7,368 | ) | $ | (5,726 | ) | ||
Investing activities: | ||||||||
Purchases of property and equipment | $ | (448 | ) | $ | (106 | ) | ||
Deposits and other assets | 35 | 16 | ||||||
Net cash used by investing activities | $ | (413 | ) | $ | (90 | ) | ||
Financing activities: | ||||||||
Proceeds from the issuance of common stock and warrants | $ | 16,458 | $ | - | ||||
Proceeds from prom issuance of bridge loan, related party | 1,300 | 300 | ||||||
Payments on convertible debenture | (4,363 | ) | - | |||||
Proceeds from the issuance of senior promissory note, related party | - | 5,505 | ||||||
Transactions costs | (1,667 | ) | - | |||||
Capital lease obligations | (19 | ) | (54 | ) | ||||
Net cash provided by financing activities | $ | 11,709 | $ | 5,751 | ||||
Net increase (decrease) in cash and cash equivalents | $ | 3,928 | $ | (65 | ) | |||
Cash and cash equivalents at beginning of period | 851 | 916 | ||||||
Cash and cash equivalents at end of period | $ | 4,779 | $ | 851 | ||||
Supplemental disclosure of cash paid | ||||||||
Interest | $ | 106 | $ | 149 | ||||
Income taxes | $ | 40 | $ | 48 | ||||
Supplemental disclosure of non-cash activity | ||||||||
Common stock issued for exercise of warrants | $ | - | $ | 46 | ||||
Common stock issued for services | $ | 181 | $ | - | ||||
Warrants issued for services | $ | 252 | $ | - | ||||
Common stock issued for conversion of debt and accrued interest | $ | 7,163 | $ | - | ||||
Common stock issued upon settlement of deferred compensation to officer | $ | 1,122 | $ | - | ||||
Property and equipment acquired through capital leases | ||||||||
and other financing | $ | - | $ | 34 |
CATASYS, INC. AND SUBSIDIARIES | |||||||||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||||||||
(unaudited) | |||||||||||||||
For the Three Months Ended | For the Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues | $ | 3,035 | $ | 3,788 | $ | 7,717 | $ | 7,075 | |||||||
Add: | |||||||||||||||
Net Change in Deferred Revenue | (267 | ) | (1,707 | ) | 1,407 | (205 | ) | ||||||||
Billings, non-GAAP | $ | 2,768 | $ | 2,081 | $ | 9,124 | $ | 6,870 | |||||||
* Net change in deferred revenue associated with Q4 billings |
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Catasys, Inc.
Marianne Acosta, 310-444-4346