Ontrak announces 2023 Q4 and year end financial results

Ontrak, Inc. reported its financial results for the fourth quarter and year ended December 31, 2023.

Management commentary
“In addition to new business development efforts, we focused this quarter on continued innovation with a technology focus. We introduced our Advanced Engagement System to offer increased efficiencies and higher ROI, while maintaining a patient-centered focus amidst a challenging macro environment facing our health plan partners,” said Brandon LaVerne, the Company’s Chief Executive Officer and Chief Operating Officer. “Our WholeHealth+ program is incredibly important and aligned to help solve for these macro issues by delivering proven health outcomes and reducing costs while also increasing engagement, leading to increased quality scores. We are confident in our value-proposition to health plan partners, and are seeing continued demand in our recent customer expansions and further progress in our pipeline as a result.”

Fourth quarter 2023 financial results highlights

• Revenue for the fourth quarter of 2023 was $3.5 million, representing a 41% increase compared to the same period in 2022.
• Operating loss for the fourth quarter of 2023 was $(5.2) million compared to an operating loss of $(8.0) million for the same period in 2022.
• Adjusted EBITDA for the fourth quarter of 2023 was $(3.6) million compared to adjusted EBITDA of $(6.1) million for the same period in 2022.
• Net loss for the fourth quarter of 2023 was $(6.4) million, or a $(0.29) diluted net loss per common share (after deduction for undeclared preferred stock dividends), compared to net loss of $(9.1) million, or a $(2.52) diluted net loss per common share (after deduction for undeclared preferred stock dividends) for the same period in 2022.
• Non-GAAP net loss for the fourth quarter of 2023 was $(5.8) million, or a $(0.27) non-GAAP diluted net loss per common share (after deduction for undeclared preferred stock dividends), compared to non-GAAP net loss of $(7.6) million, or a $(2.19) non-GAAP diluted net loss per common share (after deduction for undeclared preferred stock dividends) for the same period in 2022.

Adjusted EBITDA, non-GAAP net loss and non-GAAP diluted net loss per common share are non-GAAP financial measures. See our description and reconciliation of such non-GAAP measures at the end of this release.

Fiscal year 2023 financial results highlights

• Revenue for the full year of 2023 was $12.7 million, representing a 12% decrease from prior year.
• Operating loss for the full year of 2023 was $(20.6) million compared to an operating loss of $(44.1) million for the prior year.
• Adjusted EBITDA for the full year of 2023 was $(14.7) million compared to adjusted EBITDA of $(31.5) million for the prior year.
• Net loss for the full year of 2023 was $(27.9) million, or a $(3.30) diluted net loss per common share (after deduction for undeclared preferred stock dividends), compared to net loss of $(51.6) million, or a $(15.61) diluted net loss per share (after deduction for undeclared preferred stock dividends) for the prior year.
• Non-GAAP net loss for the full year of 2023 was $(24.9) million, or a $(3.04) non-GAAP diluted net loss per common share (after deduction for undeclared preferred stock dividends), compared to non-GAAP net loss of $(39.6) million, or a $(12.54) non-GAAP diluted net loss per share (after deduction for declared and undeclared preferred stock dividends) for the prior year.

Fourth quarter 2023 and recent operating highlights

• Total enrolled members in our WholeHealth+ program numbered 1,758 at the end of Q4 2023, compared to 2,297 at the end of Q3 2023 and 1,333 at the end of Q4 2022.
• The Company’s effective outreach pool was 2,161 at December 31, 2023 compared to 3,861 at December 31, 2022. As of the date of filing this report, the Company’s effective outreach pool was 5,094.
• On February 29, 2024, the Company announced the expansion of Ontrak’s WholeHealth+ program to a larger commercial population with a health plan customer, one of the largest health systems in the U.S. Mid-Atlantic and Southeast. On March 12, 2024, the Company announced a continuing expansion of its strategic partnership with the same health plan customer to offer its program to eligible self-insured groups. The expanded partnership initially represents more than 6.5 times increase in the number of this customer’s members who are eligible for the Ontrak WholeHealth+ program.
• On October 10, 2023, the Company was notified by a health plan customer of its intent not to continue using the Company’s services after February 2024. The customer also informed us that the notification was related to the customer’s financial and budgetary constraints and not reflective of the performance or value of the Company’s services. For the year ended December 31, 2023, we billed this customer approximately $4.3 million, representing 33.8% of our total revenue.
• On October 31, 2023, the Company and Acuitas Capital entered into a Fifth Amendment to the Master Note Purchase Agreement, as amended (the “Fifth Amendment”), which, among other things, in the event the Company completes a Qualified Financing, as defined in the Keep Well Agreement, the following were provided: i) the conversion of Keep Well Notes plus accrued and unpaid interest thereon, less $7.0 million, ii) in lieu of the provision set forth in the Fourth Amendment concerning investment of Escrowed Funds in an offering (which is described below), the Company and Acuitas to consummate a private placement which would consist of the escrowed funds and $5.0 million of Keep Well Notes in pre-funded warrants. In addition, the maturity date of the remaining $2.0 million Keep Well Note was changed from September 30, 2024 to the date that is two years and six months after the closing date of the offering (May 14, 2026), unless it becomes due and payable in full earlier, whether by acceleration or otherwise.
• On November 14, 2023, the Company announced the closing of its previously announced public offering of:
  • 4,592,068 shares of its common stock and 9,184,136 warrants to purchase up to 9,184,136 shares of its common stock at a combined public offering price of $0.60 per share of common stock and accompanying warrants, and
  • 5,907,932 pre-funded warrants to purchase up to 5,907,932 shares of its common stock and 11,815,864 warrants to purchase up to 11,815,864 shares of its common stock at a combined public offering price of $0.5999 per pre-funded warrant and accompanying warrants, which represents the per share public offering price for the common stock and accompanying warrants less the $0.0001 per share exercise price for each pre-funded warrant.
  • The Company estimates net proceeds of approximately $5.3 million from the public offering described above.
• In addition, concurrent with the public offering described above, the Company announced the closing of its previously announced concurrent private placement (the “Private Placement”) of $11.0 million worth of unregistered pre-funded warrants to purchase shares of the Company’s common stock and unregistered warrants to purchase shares of the Company’s common stock to Acuitas. The Company issued 18,333,333 pre-funded warrants to purchase up to 18,333,333 shares of its common stock and 36,666,666 warrants to purchase up to 36,666,666 shares of its common stock at a purchase price of $0.5999 per pre-funded warrant and accompanying warrants, which represents the per share public offering price for the common stock and accompanying warrants less the $0.0001 per share exercise price for each pre-funded warrant. The warrants accompanying the pre-funded warrants have an exercise price of $0.85 per share. The consideration for the Private Placement Securities purchased by Acuitas consisted of (a) the $6.0 million of escrowed funds then held in an escrow account, and (b) $5.0 million of senior secured convertible notes outstanding under the Keep Well Notes.
• Prior to the closing of the public offering and private placement described above, Acuitas converted approximately $16.3 million of outstanding senior secured convertible notes, pursuant to which the Company issued to Acuitas 18,054,791 shares of its common stock and warrants to purchase 18,054,791 shares of its common stock, as well as 9,027,395 shares of its common stock and warrants to purchase 9,027,395 shares of its common stock upon obtainment of shareholder approval in December 2023.
• In February 2024, the Company announced the introduction of Recovering Quality of Life Assessment (ReQoL) into its cutting-edge WholeHealth+ Product and Solutions Suite. ReQoL assessments can be used in healthcare and research settings to evaluate the impact of mental health conditions, psychological interventions, and healthcare interventions on patients’ lives because they focus on understanding the person over the diagnosis, consistent with recovery strategies.
• In March 2024, the Company and Acuitas Capital entered into a Sixth Amendment to the Master Note Purchase Agreement, as amended (the “Sixth Amendment”). In accordance with the Sixth Amendment, on April 5, 2024, the Company issued and sold to Acuitas Capital, and Acuitas Capital purchased from the Company, a senior secured convertible promissory note with a principal amount of $1.5 million (the “Initial Demand Note”), and in Acuitas Capital’s sole discretion, Acuitas Capital may purchase from the Company, and the Company will issue and sell to Acuitas, up to an additional $13.5 million in principal amount of Demand Notes. In connection with each Demand Note purchased by Acuitas from the Company (including the Initial Demand Note), subject to stockholder approval effective date occurring, the Company will issue to Acuitas (or an entity affiliated with Acuitas, as designated by Acuitas) a warrant (“Demand Warrant”), to purchase such number of shares of the Company’s common stock that results in 200% warrant coverage. Each Demand Warrant will have a term of five (5) years. The initial exercise price of each Demand Warrant will be (a) in the case of the Demand Warrant issued in connection with the Initial Demand Note and in respect of the next $3.0 million of principal amount of Demand Notes purchased by Acuitas, the lesser of (i) $0.3442 (after giving effect to the reduction of the exercise price of the Public Offering Warrants and Private Placement Warrant (collectively, the “November 2023 Warrants”) that occurred on April 5, 2024) and (ii) the greater of (1) the consolidated closing bid price of the Company’s common stock as reported on The Nasdaq Stock Market or such other exchange on which the Company’s common stock is listed (the “Exchange”) immediately preceding the time the applicable Demand Note is deemed issued by the Company and (2) $0.12, and (b) in the case of the Demand Warrants issued in connection with any subsequent Demand Notes, the consolidated closing bid price of the Company’s common stock as reported on the Exchange immediately preceding the time the applicable Demand Note is deemed issued by the Company, which initial exercise price will, in each case of clauses (a) and (b) above, be subject to further adjustment in accordance with the terms of the Demand Warrant and the Sixth Amendment.
• From March 28, 2024 through April 2, 2024, the Company received a total of $1.9 million of cash proceeds from the exercise of Public Offering Warrants by certain holders thereof for a total of 5,166,664 shares of the Company’s common stock.

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.

For the quarter ending March 31, 2024, the Company estimates revenue in the range of $2.5 million to $2.9 million.
MB Bureau