Ontrak(US:OTRK)2023-11-20 21:23Revenue Performance - For the three and nine months ended September 30, 2023, the company billed a health plan customer approximately $1.2 million and $3.1 million, representing 32.6% and 33.8% of total revenue for those periods [178]. - Revenue for the three months ended September 30, 2023, was $3.7 million, a 31% increase from $2.8 million in the same period in 2022 [190]. - Revenue for the nine months ended September 30, 2023, was $9.2 million, a 23% decrease from $12.0 million in the same period in 2022 [190]. - Total revenue for the three months ended September 30, 2023, increased by $0.9 million, or 31%, compared to the same period in 2022, primarily due to an increase in average total enrolled members [201]. - Total revenue for the nine months ended September 30, 2023, decreased by $2.8 million, or 23%, compared to the same period in 2022, mainly due to a decrease in total average enrolled members [201]. - Commercial revenue decreased to $1.216 million for the three months ended September 30, 2023, down 4% from $1.267 million in the same period of 2022, while government revenue increased by 59% to $2.499 million [201]. - The percentage of revenue from commercial customers decreased to 33% for the three months ended September 30, 2023, compared to 45% for the same period in 2022, while government revenue increased to 67% from 55% [202][203]. Financial Position - As of September 30, 2023, the company had total cash and restricted cash of $9.2 million and working capital of approximately $1.5 million [214]. - The total cash and cash equivalents, including restricted cash, was $9.2 million as of September 30, 2023 [224]. - The company raised net proceeds of $5.5 million from the Public Offering and reclassified $6.0 million from restricted cash to unrestricted cash [215]. - The company expects cash on hand, along with recent capital raised, to be sufficient to meet obligations for at least the next 12 months [218]. - The company will need additional capital to successfully execute its growth strategy, with potential equity or debt financings being considered [220]. Operating Performance - Cash flow from operations for the three months ended September 30, 2023, improved to $(1.8) million from $(8.3) million in the same period in 2022 [192]. - Operating loss for the three months ended September 30, 2023, was $(4.1) million, an improvement from $(11.1) million in the same period in 2022 [200]. - Net loss for the nine months ended September 30, 2023, was $(21.5) million, compared to $(42.5) million in the same period in 2022 [200]. - The average monthly cash burn rate from operations for the nine months ended September 30, 2023, was $1.3 million, a decrease from $2.5 million in the same period of 2022 [221]. - Net cash used in operating activities during the nine months ended September 30, 2023, was $11.9 million, compared to $22.5 million in the same period of 2022, indicating a year-over-year improvement [221]. - Net cash provided by financing activities was $11.6 million for the nine months ended September 30, 2023, compared to net cash used of $30.5 million in the same period of 2022 [223]. Cost Management - The company implemented cost optimization initiatives throughout 2022 and in March 2023, contributing to a significant reduction in operating costs and improved gross profit margins [206]. - Total operating expenses decreased by $5.7 million, or 46%, in the three months ended September 30, 2023, compared to the same period in 2022, primarily due to reductions in research and development, sales and marketing, and general and administrative costs [208][209]. - The company reduced its workforce by approximately 19% in March 2023, resulting in an expected annual compensation cost reduction of $2.7 million [188]. - The company incurred approximately $0.5 million in termination-related costs due to workforce reductions in March 2023 [189]. Strategic Initiatives - The company plans to expand sales and marketing resources to acquire new customers across major health plans and self-insured employers [169]. - The company aims to leverage AI technology and new predictive algorithms to enhance coaching solutions and improve operational efficiencies [169]. - The company expects to offset the revenue loss from a health plan customer, which accounted for approximately $1.2 million in revenue for the three months ended September 30, 2023, with new customers expected to begin using services in early 2024 [204]. Compliance and Governance - The company received a letter from Nasdaq indicating that its Series A Preferred Stock would be delisted due to non-compliance with the minimum bid price requirement [180]. - The company has not paid dividends on the Series A Preferred Stock for six consecutive quarters, granting holders the right to elect two directors to the board [182]. - The company entered into a Fifth Amendment to the Keep Well Agreement, reducing the minimum amount for a Qualified Financing from $10.0 million to $8.0 million [171]. - The maturity date of the remaining $2.0 million Keep Well Notes was extended from September 30, 2024, to two years and six months after the closing date of the Qualified Financing [171]. - The company implemented a 1-for-6 reverse stock split effective July 27, 2023, with trading on a post-split basis starting July 28, 2023 [183]. Legal Matters - As of September 30, 2023, the company had submitted claims for approximately $2.4 million in legal costs, with $1.2 million paid by the insurer [184]. - Income tax benefit for the nine months ended September 30, 2023, was $0.08 million, primarily related to a reversal of accrued estimated income taxes [212].