Ontrak(OTRK) - 2024 Q4 - Annual Report

Revenue and Financial Performance - Revenue for 2024 was $10.8 million, a decrease of 15% from $12.7 million in 2023, primarily due to a reduction in average enrolled members[222]. - Total revenue decreased by $1.9 million, or 15%, in 2024 compared to 2023, primarily due to a decrease in average enrolled members[235]. - Gross profit decreased by $2.0 million, or 22%, with a gross profit margin of 63% in 2024, down from 69% in 2023[236][237]. - The company incurred a net loss of $25.5 million in 2024, compared to a net loss of $27.9 million in 2023[234]. - Cash flow from operations improved to $(13.4) million in 2024 from $(15.5) million in 2023, attributed to a decrease in net loss and improved operating expenses from strategic headcount reductions[223]. Operating Expenses and Cost Management - Total operating expenses decreased by $5.3 million, or 18%, in 2024, with significant reductions in research and development, sales and marketing, and general and administrative costs[238]. - Interest expense, net decreased by $5.4 million, or 75%, in 2024, attributed to lower average outstanding loan balances[242]. - The company implemented multiple restructuring plans over the last two years, resulting in a reduction of annual compensation costs by approximately $2.0 million in February 2024 and $2.7 million in March 2023[218]. Cash and Liquidity - As of December 31, 2024, total cash was $5.7 million, with a working capital of approximately $0.8 million and an average monthly cash burn rate of $1.1 million[244]. - The company has raised concerns about its ability to continue as a going concern due to insufficient cash on hand to meet obligations for the next 12 months[248]. - The company anticipates requiring additional capital to fund operations through and beyond the second quarter of 2025, raising substantial doubt about its ability to continue as a going concern[246][247]. - The company has approximately $13.6 million of secured debt outstanding under the Keep Well Agreement[248]. Customer and Program Developments - A health plan customer accounted for approximately 59% of revenue in 2024, billing $6.5 million, while another customer represented 33.8% of revenue in 2023, billing $4.3 million[215]. - The callable outreach pool for the WholeHealth+ program increased to 4,908 at December 31, 2024, up 127% from 2,161 at the end of 2023, due to program expansion with a major health plan customer[224]. - The callable outreach pool for the Ontrak Engage program was 20,648 at December 31, 2024, reflecting the launch of this program on an à la carte basis in the first half of 2024[225]. - Management is actively pursuing growth strategies and engaging with prospects and existing customers to expand business relationships[245]. Stock and Debt Transactions - The company executed a 1-for-15 reverse stock split effective September 23, 2024, to enhance its stock price and marketability[209]. - Acuitas agreed to purchase $5.0 million of Keep Well Notes, with the purchase completed as of the filing date, and the payment due after August 30, 2025[210]. - Acuitas may purchase up to an additional $5.5 million of Keep Well Notes, with ongoing discussions regarding this potential purchase[248]. - Debt issuance costs for 2024 included $3.3 million related to promissory notes and $2.7 million of warrants expensed[240]. Legal and Compliance Matters - Legal defense costs related to various securities class actions and investigations totaled approximately $5.2 million, with $4.9 million paid by the insurer as of December 31, 2024[217]. - The company was not in compliance with the consolidated recurring revenue covenant of $11.0 million as of December 31, 2024, but was in compliance with the consolidated liquidity covenant[245]. Other Financial Information - The company reported a net cash used in operating activities of $13.4 million for the year ended December 31, 2024, an improvement from $15.5 million in 2023[249]. - Net cash provided by financing activities was $9.6 million in 2024, primarily from $8.0 million in borrowings under the Keep Well Agreement and $3.5 million from warrant exercises[251]. - The company utilized $0.2 million in investing activities in 2024, compared to $0.3 million in 2023, related to capitalized software development costs[250]. - The company conducted its annual goodwill impairment test on October 1, 2024, and determined no impairment existed[263]. - Research and development costs are expensed as incurred, primarily including personnel and related expenses for software development[262]. - Deferred revenue represents billed but unrecognized revenue, recognized as performance obligations are satisfied[261].