NEWS DETAIL

NantHealth Reports 2019 Third-Quarter Financial Results

CULVER CITY, Calif.--(BUSINESS WIRE)--NantHealth, Inc. (NASDAQ-GS: NH), a next-generation, evidence-based, personalized healthcare company, today reported financial results for its third quarter ended September 30, 2019.

“For the 2019 third quarter, the top line for our SaaS business grew significantly over the same quarter last year,” said Bob Petrou, Chief Financial Officer, NantHealth. “This performance, largely driven by an expanding customer base and increasing number of covered lives, demonstrates the integral role NantHealth's SaaS solutions play in providing a continuum of care for payers, providers and, most importantly, the patients we serve. At the companywide level, we have made great progress managing our financial performance and growing gross margin, all resulting in reduced cash burn and enhanced bottom line results.”

Software and Services Q3 Highlights:

  • Clinical Decision Support (Eviti®):
  • Renewed a partnership contract with a leading provider of clinical solutions. The contract has a three-year term and a minimum estimated total value of $38.4 million
  • Signed an agreement with Wexford Health Sources, one of the nation's largest correctional healthcare companies, bringing evidence-based standards and value-based oncology care to patients
  • Renewed an agreement with a large national health plan for federal employees, retirees and their families. Plan members will continue to receive streamlined preauthorization of cancer care
  • Launched several enhancements designed to provide payers with additional information about care management, including the intended use of brand name drugs and visibility into settings where care is provided. Payers with multiple plans can now permit their users to view multiple dashboards, which saves time by reducing the need for multiple logins and passwords
  • Received full accreditation from URAC for the Eviti platform. Eviti continues to meet URAC Health Utilization Management standards, valid through September 1, 2022. The designation recognizes those companies abiding by evidence-based standards and value-based care
  • Payer Engagement (NaviNet®):
  • Added NaviNet's Authorization Attachment application to the NaviNet implementation for one of the nation's largest health insurance organizations. This feature ensures providers receive the right supporting documentation to make more informed, timely decisions
  • Expanded NaviNet Open functionality to provide additional notifications within the Authorization application, enabling users to receive information timely and respond quickly to critical requests, eliminating potential delays in caring for patients
  • NaviNet's AllPayer product completed the conversion of 3,602 provider offices, more than 80% of AllPayer customers, from a legacy pricing model which will result in more than $1.0 million of additional annual recurring revenue
  • Connected Care (VCX, DCX):
  • Introduced VCX 3.0 (formerly VitalsConX), designed to reduce patient overstays and facilitate faster decision making. VCX 3.0 accelerates automated vital sign capture and provides easy entry of other customized observations at the point of care. Updates include streamlined data validation and a touch-based user interface to document vital signs quickly and easily. VCX 3.0 now supports “smart” patient vital sign monitors, including GE VC150
  • Announced new Shuttle cable features to help improve data collection, efficiency and accuracy using a medical-grade serial-to-USB interface cable
  • Signed a contract with Baxter expanding DCX (formerly DeviceConX) medical device driver development, enabling Baxter to connect additional devices to electronic medical record (EMR) systems.
  • In Q4, at the HIMSS Asia Pacific 2019 meeting, NantHealth led the Interoperability Showcase along with GE Healthcare, AirStrip and iProcedures. Together, the companies showcased how clinicians can spend less time on documentation and more time analyzing data in near real-time to improve patient outcomes

Sequencing and Molecular Analysis – Highlights:

  • Presented a poster on GPS Cancer at the IASLC (World Lung) meeting in Barcelona. Dr. Hossein Borghaei, Fox Chase Cancer Center, and authors from NantHealth and NantOmics, presented a poster, “222 NSCLC's Classified by PAM50: Luminal A NSCLC Is a Distinct Subtype with Low TMB and Immune Suppressive TME.” The poster concludes NantHealth and NantOmics can use GPS Cancer to identify a unique subset of patients who are likely to be resistant to conventional immune checkpoint inhibitor therapy, using a method that has not previously been well characterized in this clinical setting
  • Presented a poster at the European Society for Medical Oncology (ESMO) meeting. NantHealth and NantOmics, together with investigators from Moffitt Cancer Center, presented a poster, “Differential expression of immunoregulatory molecules and highly-associated cancer genes may provide novel insights into strategic trial design for therapeutics.” The poster describes novel associations of immune checkpoint gene expression with cancer related genomic mutations beyond Tumor Mutation Burden (TMB) as a biomarker for immunotherapy response

Business and Financial Highlights

  • For the 2019 third quarter, total net revenue was $22.4 million, compared with $22.3 million in the 2018 third quarter. On June 7, 2019, the Company completed the divestiture of its home health care services business. Accordingly, financial results for the 2019 third quarter do not include the results of operations from this business, which over the last year averaged approximately $1.5 million of revenue per quarter.
  • Gross profit increased to $14.0 million, or 63% of total net revenue, compared with $11.1 million, or 50% of total net revenue, for the prior year period. The increase was primarily driven by continued growth of the Company's higher margin SaaS business and overall cost management.
  • Selling, general and administrative expenses declined to $15.1 million from $17.0 million in 2018 third quarter. The decrease was mainly driven by ongoing cost management efforts and efficiencies in overall processes.
  • Research and development expenses decreased to $4.6 million from $4.8 million.
  • Net loss from continuing operations, net of tax, was $16.4 million, or $0.15 per share, compared with $97.5 million, or $0.89 per share, for the 2018 third quarter.
  • On a non-GAAP basis, net loss from continuing operations was $7.4 million, or $0.07 per share, down from $10.8 million, or $0.10 per share, for the third quarter of last year. The improvement reflects the company's ongoing efforts to manage costs, growth of its SaaS business and efficiencies and process improvements.
  • At September 30, 2019, cash and cash equivalents totaled $9.3 million, an increase of $2.3 million from June 30, 2019.

Conference Call Information and Forward-Looking Statements

Thursday, November 7, 2019, after market close, the company will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) to review its results of operations for the third quarter ended September 30, 2019. The conference call will be available to interested parties by dialing 844-309-3709 from the U.S. or Canada, or 281-962-4864 from international locations, passcode 3294717. The call will be broadcast via the Internet at www.nanthealth.com. Listeners are encouraged to visit the website at least 10 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software. A playback of the call will be archived and accessible on the same website for at least three months.

Discussion during the conference call may include forward-looking statements regarding topics such as the company's financial status and performance, regulatory and operational developments, and other comments the company may make about its future plans or prospects in response to questions from participants on the conference call.

Use of Non-GAAP Financial Measures

This news release contains references to Non-GAAP financial measures, including adjusted net loss and adjusted net loss per share, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). The Company's management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor's overall understanding of the financial results for the Company's core business. Additionally, it provides a basis for the comparison of the financial results for the Company's core business between current, past and future periods. Other companies may define these measures in different ways. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP. Non-GAAP per share numbers are calculated based on one class of common stock and do not incorporate the effects, if any, of using the two-class method.

About NantHealth, Inc.

NantHealth, a member of the NantWorks ecosystem of companies, provides leading solutions across the continuum of care for physicians, payors, patients and biopharmaceutical organizations. NantHealth enables the use of cutting-edge data and technology toward the goals of empowering clinical decision support and improving patient outcomes. NantHealth's comprehensive product portfolio combines the latest technology in payor/provider platforms that exchange information in near-real time (NaviNet and Eviti), connected care solutions that deliver medical device interoperability (DCX device connectivity platform and VCX patient vitals software) and molecular profiling services that combine comprehensive DNA & RNA tumor-normal profiling with pharmacogenomics analysis (GPS Cancer®). For more information, please visit www.nanthealth.com or follow us on Twitter, Facebook and LinkedIn.

This news release contains certain statements of a forward-looking nature relating to future events or future business performance. Forward-looking statements can be identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “plans,” “will,” “outlook” and similar expressions. Forward-looking statements are based on management's current plans, estimates, assumptions and projections, and speak only as of the date they are made. Risks and uncertainties include, but are not limited to: our ability to successfully integrate a complex learning system to address a wide range of healthcare issues; our ability to successfully amass the requisite data to achieve maximum network effects; appropriately allocating financial and human resources across a broad array of product and service offerings; raising additional capital as necessary to fund our operations; achieving significant commercial market acceptance for our sequencing and molecular analysis solutions; establish relationships with, key thought leaders or payers' key decision makers in order to establish GPS Cancer as a standard of care for patients with cancer; our ability to grow the market for our Systems Infrastructure, and applications; successfully enhancing our Systems Infrastructure and applications to achieve market acceptance and keep pace with technological developments; customer concentration; competition; security breaches; bandwidth limitations; our ability to continue our relationship with NantOmics; our ability to obtain regulatory approvals; dependence upon senior management; the need to comply with and meet applicable laws and regulations; unexpected adverse events; clinical adoption and market acceptance of GPS Cancer; and anticipated cost savings. We undertake no obligation to update any forward-looking statement in light of new information or future events, except as otherwise required by law. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Actual results or outcomes may differ materially from those implied by the forward-looking statements as a result of the impact of a number of factors, many of which are discussed in more detail in our reports filed with the Securities and Exchange Commission.

NantHealth, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
 
September 30, 2019 December 31, 2018
(Unaudited)
Assets
Current assets
Cash and cash equivalents

$ 9,326

$ 18,305

Accounts receivable, net

10,948

15,286

Inventories

202

496

Related party receivables, net

1,047

1,007

Prepaid expenses and other current assets

23,670

4,350

Total current assets

45,193

39,444

Property, plant, and equipment, net

16,351

22,978

Goodwill

115,930

115,930

Intangible assets, net

54,045

64,703

Investment in related party

33,612

40,000

Related party receivable, net of current

1,029

1,611

Operating lease right-of-use assets

10,353

Other assets

1,903

1,671

Total assets

$ 278,416

$ 286,337

 
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable

$ 2,912

$ 1,650

Accrued and other current liabilities

35,044

13,832

Deferred revenue

17,792

16,263

Related party payables, net

3,771

4,791

Notes payable

946

Total current liabilities

60,465

36,536

Deferred revenue, net of current

2,764

6,704

Related party liabilities

22,583

17,708

Related party promissory note

112,666

112,666

Related party convertible note, net

8,736

8,378

Convertible notes, net

83,281

79,433

Operating lease liabilities

11,418

Other liabilities

23,080

22,081

Total liabilities

324,993

283,506

 
Stockholders' equity (deficit)
Common stock, $0.0001 par value per share, 750,000,000 shares authorized; 110,619,906 and 109,491,277 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

11

11

Additional paid-in capital

888,994

887,289

Accumulated deficit

(935,135

)

(884,122

)

Accumulated other comprehensive loss

(447

)

(347

)

Total stockholders' (deficit) equity

(46,577

)

2,831

Total liabilities and stockholders' equity (deficit)

$ 278,416

$ 286,337

NantHealth, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Total net revenue

$ 22,356

$ 22,292

$ 71,771

$ 66,603

 
Total cost of revenue

8,372

11,226

29,478

32,878

Gross Profit

13,984

11,066

42,293

33,725

 
Operating Expenses:
Selling, general and administrative

15,136

17,001

47,101

56,123

Research and development

4,568

4,835

14,232

15,875

Amortization of acquisition-related assets

1,054

1,054

3,163

3,163

Impairment of intangible assets

3,977

Total operating expenses

20,758

22,890

68,473

75,161

 
Loss from operations

(6,774

)

(11,824

)

(26,180

)

(41,436

)

Interest expense, net

(4,556

)

(4,306

)

(13,443

)

(12,766

)

Other (expense) income, net

(3,588

)

226

(5,039

)

(928

)

Loss from related party equity method investment

(1,983

)

(83,306

)

(6,401

)

(89,512

)

Loss from continuing operations before income taxes

(16,901

)

(99,210

)

(51,063

)

(144,642

)

Benefit from income taxes

(527

)

(1,778

)

(168

)

(3,429

)

Net loss from continuing operations

(16,374

)

(97,432

)

(50,895

)

(141,213

)

Loss from discontinued operations, net of tax

(3

)

(32

)

(118

)

(1,817

)

Net loss

$ (16,377

)

$ (97,464

)

$ (51,013

)

$ (143,030

)

 
Net loss per share:
Continuing operations
Basic and diluted - common stock

$ (0.15

)

$ (0.89

)

$ (0.46

)

$ (1.29

)

 
Discontinued operations
Basic and diluted - common stock $ — $ — $ —

$ (0.02

)

 
Total net loss per share
Basic and diluted - common stock

$ (0.15

)

$ (0.89

)

$ (0.46

)

$ (1.31

)

 
Weighted average shares outstanding:
Basic and diluted - common stock

110,619,905

109,471,712

110,261,279

109,060,408

NantHealth, Inc.

Supplemental Revenue Schedule

(Dollars in thousands)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Revenue:
Software-as-a-service related

$18,328

$15,937

$54,421

$48,323

Software and hardware related

1,009

1,450

5,135

3,790

Maintenance

2,743

2,522

7,771

7,357

Total software-related revenue

22,080

19,909

67,327

59,470

Sequencing and molecular analysis

276

742

1,581

2,506

Home health care services

1,641

2,863

4,627

Total net revenue

$22,356

$22,292

$71,771

$66,603

 
Cost of Revenue:
Software-as-a-service related

$ 5,659

$ 5,863

$17,155

$18,205

Software and hardware related

624

737

2,203

2,412

Maintenance

484

234

1,065

683

Amortization of developed technologies

1,143

1,233

3,519

3,700

Total software-related cost of revenue

7,910

8,067

23,942

25,000

Sequencing and molecular analysis

462

2,323

4,065

5,443

Home health care services

836

1,471

2,435

Total cost of revenue

$ 8,372

$11,226

$29,478

$32,878

Contacts

Investor Contact:
Robert Jaffe
[email protected]
424.288.4098

NantHealth, Inc.

Non-GAAP Net Loss from Continuing Operations and
Non-GAAP Net Loss Per Share from Continuing Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net loss from continuing operations

$ (16,374

)

$ (97,432

)

$ (50,895

)

$ (141,213

)

Adjustments to GAAP net loss:
Loss from related party equity method investment

1,983

83,306

6,401

89,512

Stock-based compensation expense from continuing operations

526

373

1,849

4,805

Acquisition related sales incentive

425

995

Change in fair value of derivatives liability

(5

)

(7

)

Change in fair value of Bookings Commitment

3,159

4,664

Impairment of investment in IOBS

1,750

Noncash interest expense related to convertible notes

1,447

1,273

4,207

3,702

Intangible amortization from continuing operations

2,197

2,287

6,682

6,863

Impairment of intangible assets

3,977

Loss on sale of business

582

Securities litigation costs

500

887

500

1,709

Tax benefit resulting from certain noncash tax items

(885

)

(1,943

)

(519

)

(3,649

)

Total adjustments to GAAP net loss from continuing operations

8,927

86,603

28,343

105,680

Net loss from continuing operations - Non-GAAP

$ (7,447

)

$ (10,829

)

$ (22,552

)

$ (35,533

)

 
Weighted average shares outstanding

110,619,905

109,471,712

110,261,279

109,060,408

 
Net loss per share from continuing operations - Non-GAAP

$ (0.07

)

$ (0.10

)

$ (0.20

)

$ (0.33

)

 
Reconciliation of Net Loss per Common Share from Continuing Operations
to Net Loss per Common Share from Continuing Operations - Non-GAAP (Unaudited):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net loss per common share from continuing operations

$ (0.15

)

$ (0.89

)

$ (0.46

)

$ (1.29

)

Adjustments to GAAP net loss per common share from continuing operations:
Loss from related party equity method investment

0.03

0.77

0.05

0.82

Stock-based compensation expense from continuing operations

0.02

0.04

Acquisition related sales incentive

0.01

Change in fair value of derivatives liability
Change in fair value of Bookings Commitment

0.03

0.04

Impairment of Investment in IOBS

0.02

Noncash interest expense related to convertible notes

0.01

0.01

0.04

0.03

Intangible amortization from continuing operations

0.02

0.02

0.06

0.05

Impairment of intangible assets

0.04

Loss on sale of business

0.01

Securities litigation costs

0.01

0.02

Tax benefit resulting from certain noncash tax items

(0.01

)

(0.02

)

(0.03

)

Total adjustments to GAAP net loss per common share from continuing operations

0.08

0.79

0.26

0.96

Net loss per common share from continuing operations - Non-GAAP

$ (0.07

)

$ (0.10

)

$ (0.20

)

$ (0.33

)