Akili(AKLI) - 2024 Q1 - Quarterly Results

Executive Summary & Strategic Direction Akili is undergoing a significant strategic review, including evaluating alternatives, restructuring debt, and refocusing operations Strategic Initiatives and Business Update The company is evaluating strategic alternatives, has fully prepaid its debt, and is focusing on existing products and partnerships - Akili's board of directors has initiated an ongoing process to evaluate potential strategic alternatives to maximize shareholder value[2][7] - On May 8, 2024, Akili voluntarily prepaid its debt and all outstanding obligations under its agreement with Silicon Valley Bank[5] - Following this repayment and a prior bond cancellation, the Company no longer has any outstanding debt payment obligations[5] - After recent restructuring, efforts are focused on supporting Shionogi's regulatory and commercialization activities[5] - The company is pursuing regulatory authorization for EndeavorOTC while exploring strategic alternatives[5] - The Company has suspended financial guidance until further notice due to the evaluation of strategic alternatives[7] - Akili will no longer report certain commercial metrics for EndeavorOTC, given reduced promotional activity[5] Financial Performance Overview The company's Q1 2024 results show lower revenue but an improved net loss, with non-GAAP measures used to clarify performance First Quarter 2024 Financial Highlights Q1 2024 saw lower revenues and gross margins due to reduced ad spend, though net loss improved quarter-over-quarter Revenues and Gross Margins | Metric | Q1 2024 | Q4 2023 | | :----- | :------ | :------ | | Revenues | $383 thousand | $749 thousand | | Gross Margins | 55% | 66% | - The primary reason for the decrease in revenues was reduced EndeavorOTC advertising spend[9] - The decline in gross margins was primarily due to the impact of lower product revenue against certain fixed costs[9] Operating Expenses | Metric | Q1 2024 | Q4 2023 | | :---------------------- | :------ | :------ | | GAAP Total Operating Expenses | $11.1 million | $12.1 million | | Non-GAAP Total Operating Expenses | $9.8 million | $11.6 million | - The decrease in both GAAP and non-GAAP total operating expenses was driven by reductions in EndeavorOTC advertising spend[9] Net Loss | Metric | Q1 2024 | Q4 2023 | | :------------ | :------ | :------ | | GAAP Net Loss | $(9.8) million | $(11.1) million | | Non-GAAP Net Loss | $(9.3) million | $(10.8) million | Cash Position | Metric | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $63.2 million | $75.2 million | Non-GAAP Financial Measures Explanation The company uses non-GAAP measures, excluding items like stock-based compensation, to provide a clearer view of ongoing business performance - Akili derives non-GAAP financial measures by excluding items such as stock-based compensation expense, severance costs, and changes in earn-out liabilities[8] - Management believes these non-GAAP measures offer a useful complement to GAAP results for analyzing ongoing business and operating performance[8] Product Information This section details the company's digital therapeutic products, EndeavorOTC for adults and the prescription-based EndeavorRx for children EndeavorOTC EndeavorOTC is a digital therapeutic for adults with ADHD, available under FDA's emergency policy but not yet fully cleared - EndeavorOTC is a digital therapeutic designed to improve attention function and ADHD symptoms in adults 18 years and older[11] - It is available under the FDA's current Enforcement Policy for Digital Health Devices but has not been cleared or authorized by the FDA for any indications[11] - No serious adverse events have been reported in any of its clinical studies[11] EndeavorRx EndeavorRx is a prescription digital therapeutic for improving attention function in children aged 8-17 with ADHD - EndeavorRx is a prescription digital therapeutic indicated to improve attention function in children ages 8-17 with ADHD[12] - It is intended for use as part of a broader therapeutic program and is not a standalone treatment or medication substitute[12] - The most common side effect observed was frustration; no serious adverse events were associated with its use[12] About Akili Akili is a digital medicine company developing cognitive treatments delivered through engaging video game experiences - Akili pioneers cognitive treatments through game-changing technologies, creating a new category of medicine experienced like entertainment[13] - Its platform is powered by proprietary therapeutic engines designed to target cognitive impairment at its source in the brain[13] Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements subject to significant risks and uncertainties, and the company disclaims any obligation to update them - Forward-looking statements are subject to risks related to the evaluation of strategic alternatives, managing the business post-restructuring, and obligations under the Shionogi agreement[14][15] - Additional risks include obtaining FDA approval for EndeavorOTC, generating revenue, defending intellectual property, and navigating regulatory requirements[15] - The Company cautions against undue reliance on these statements and disclaims any obligation to update them[15] Financial Statements This section presents the unaudited condensed consolidated balance sheets, statements of operations, and a GAAP to non-GAAP reconciliation Unaudited Condensed Consolidated Balance Sheets The balance sheets show the company's financial position at March 31, 2024, compared to prior periods, highlighting changes in assets and liabilities Unaudited Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :-------------------------- | :------------- | :---------------- | :------------- | | Cash and cash equivalents | $63,161 | $75,150 | $87,869 | | Total current assets | $64,998 | $78,030 | $121,325 | | Total assets | $67,365 | $80,383 | $124,597 | | Total current liabilities | $11,212 | $12,967 | $11,420 | | Total liabilities | $17,157 | $21,851 | $32,157 | | Total stockholders' equity | $50,208 | $58,532 | $92,440 | Unaudited Condensed Consolidated Statements of Operations The statements of operations detail financial performance for Q1 2024, showing decreased revenues and a reduced net loss versus prior periods Unaudited Condensed Consolidated Statements of Operations (in thousands) | Metric | Q1 2024 | Q1 2023 | Q4 2023 | | :-------------------------- | :------ | :------ | :------ | | Revenues | $383 | $113 | $749 | | Cost of revenues | $173 | $137 | $252 | | Gross profit (loss) | $210 | $(24) | $497 | | Research and development | $4,183 | $6,084 | $4,296 | | Selling, general and administrative | $6,892 | $13,011 | $7,824 | | Total operating expenses | $11,075 | $19,095 | $12,120 | | Operating loss | $(10,865) | $(19,119) | $(11,623) | | Net loss | $(9,763) | $(20,711) | $(11,147) | GAAP to Non-GAAP Reconciliation This table reconciles GAAP to non-GAAP operating expenses and net loss, adjusting for items like stock-based compensation and earn-out liabilities Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands) | Metric | Q1 2024 | Q1 2023 | Q4 2023 | | :-------------------------- | :------ | :------ | :------ | | GAAP Total Operating Expenses | $11,075 | $19,095 | $12,120 | | Stock-based compensation | $(1,302) | $(2,759) | $(556) | | Expenses related to workforce reduction | $- | $(2,329) | $- | | Non-GAAP Total Operating Expenses | $9,773 | $14,007 | $11,564 | | GAAP Net Loss | $(9,763) | $(20,711) | $(11,147) | | Stock-based compensation | $1,302 | $2,759 | $556 | | Expenses related to workforce reduction | $- | $2,329 | $- | | Change in estimated fair value for earn-out liabilities | $(888) | $2,013 | $(181) | | Non-GAAP Net Loss | $(9,349) | $(13,610) | $(10,772) | Investor and Media Contact This section provides contact information for investor and media inquiries - Matt Franklin, President and Chief Executive Officer, is listed as the contact for investor and media inquiries[19]