NantHealth, Inc.
Q2 2021 Earnings Call Transcript

Published: 5 Aug 2021

[Operator:]

Greetings, and welcome to the NantHealth 2021 Second Quarter Financial Results Conference Call. During the presentation all participant’s will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. As a reminder, this call is being recorded today, Thursday, August 5, 2021. I would now like to turn the call over to Robert Jaffe, Investor Relations for NantHealth. Please go ahead.

[Robert Jaffe:]

Welcome, everyone, and thank you for joining us today to discuss NantHealth's 2021 second quarter financial results. On the call today are Ron Louks, Chief Operating Officer; and Bob Petrou, our Chief Financial Officer. This call is being broadcast live at www.nanthealth.com. A playback will be available for three months on NantHealth's website. I would like to make the cautionary statement and remind everyone that all of the information discussed on today's call is covered under the safe harbor provisions of the Litigation Reform Act. The company's discussion today will include forward-looking information, reflecting management's current forecast of certain aspects of the company's future, and actual results could differ materially from those stated or implied. In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with US Generally Accepted Accounting Principles and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review NantHealth's press release announcing its full 2021 second quarter financial results for the company's reasons for including those non-GAAP financial measures in its financial results announcement. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is also contained in the company's earnings press release issued earlier today. In a moment, Ron will provide a brief overview of the quarter and discuss the business, followed by Bob, who will discuss the financial results in more detail. We will then open the call for questions. With that said, I will now turn the call over to Ron Louks. Ron?

[Ron Louks:]

Thanks, Robert. Good afternoon, everyone, and welcome to NantHealth's 2021 second quarter financial results conference call. We hope all of you and your families are safe and well. I'd like to start today by welcoming Dr. Tiffany Avery as our new Chief Medical Officer, Tiffany takes over for Dr. Bobby Reddy, who has left NantHealth to join our sister company, ImmunityBio, we wish Bobby well. Dr. Avery has been with NantHealth for 2.5 years as our Medical Director of oncology, she’ll be responsible for providing clinical strategic direction and guiding development and deployment of our products and initiatives. Turning to our financial highlights. Total revenue was $16.1 million and our gross margin for the quarter was 56%, which is mostly flat quarter-on-quarter. R&D expense increase to $4.8 million from $4.2 million as we continued our investments in enhancing our products and services, and further developing our capabilities. We believe these investments will pay dividends in the form of top-line growth in mid to late next year. In the second quarter, we completed $137.5 million financing transaction and use a portion of proceeds to pay up nearly all of our 2016 notes. As a result of the transaction, the maturity of our debt has been significantly extended, and our cash position increased to $52 million at June 30th. Bob will discuss the financials in more detail shortly. Now, let's discuss her software and services business. I'll begin with our Eviti business. During the quarter, we expanded Eviti Connect beyond oncology to include autoimmune diseases. As a reminder, autoimmune diseases affect more than 50 million people in the US alone, making this an important new area for Eviti business. We're currently working with customer to launch later this year a tailored pilot program for autoimmune diseases. At the same time, we continue to develop Eviti Connect for autoimmune diseases, including the creation of a completely new CMS library application. Eviti Connect has now achieved a significant milestone. For the last 10 years, Eviti Connect has played an important role in assisting oncology practices and health plans to provide high quality and high value patient care. More than of the 345,000 members have received evidence based cancer treatment protocols, and more than 6,900 medical practices across the US have used Eviti Connect. Over the same period, I'm proud to say that, we have launched more than 80 major product releases and continuing to update the regimen library clinical trials database. Turning to Payer Engagement, which down through the recently launched Population Health management tools, AllPayer, a direct-to-provider solution recorded eight consecutive quarters of growth. We consolidated AllPayer pricing tiers into one simplified plan, and released the new Medicare Eligibility and Benefits API. Turning to our recently acquired Network Monitoring business, OpenNMS, we debuted an updated visual identity, including a new logo and website. We announced a new reseller Software Information Resource Corporation, and secure a five-year renewal from a major government agency. We delivered hardware appliances for beta testing of secure distributed monitoring with a Fortune 500 consumer electronics company. And we released Meridian 2021 to enterprise OpenNMS users. And Horizon 28, which enables users to visualize and filter traffic flows by quality of service. To sum up, we completed a new financing which generally extended the maturity of our debt and increased our cash position after repaying the 2016 Notes. We expanded our Eviti Connect solution into a new disease state autoimmune and expect to launch a tailored pilot program later this year. And we continue to invest in the further development of products and services capabilities. With that, over of your business, I'll turn the call over to Bob to discuss our financial results in more detail, Bob?

[Bob Petrou:]

Thank you, Ron. For Q2 2021, total Revenue was $16.1 million compared with $17.6 million in the prior year second quarter. The decline was expected mainly related to the amortization of services related to expired the renewal contracts as we have mentioned previously. Total revenue of $16.1 million in the quarter was flat the previous quarter. Gross profit was $9.1 million or 56% of revenue, a decrease from $10.3 million or 58% of revenue for the same quarter in the prior year. The majority of the decline is tied to the lower revenue in the quarter. Gross margin will remain under pressure until higher revenue generated to offset the cost base required to manage our product offerings. Total operating expenses increased 3.5% to $17.7 million from 17.1 million in the prior year second quarter. This is driven by our continued investment in our products and the acquisition of OpenNMS in Q2 of 2020. Quarter-on-quarter, total operating expenses decline, so we expect OpEx to increase as we continue to fund the development of our OpenNMS product lines and other product offerings. For Q2 2021, net loss from continuing operations attributable to NetHealth was $15.3 million or $0.13 per share. This is compared with $48.3 million or $0.44 per share in the prior-year second quarter. On a non-GAAP basis, net loss from continuing operations attributable to both to NetHealth in Q2 2021 was $8.8 million or $0.08 per share. This is compared with $7.5 million or $0.07 per share from the second quarter of last year. Finally, cash and cash equivalents were approximately $52 million at June 30, 2021. This is compared with $10.8 million as at March quarter end. Not including convertible note funding and associated expenses, usage of cash was approximately $6.5 million. With the majority of the 2016 convertible notes behind us, available cash on hand will allow for the continued investment in our products and offerings for future growth we expect. With that, I will now turn the call back over to Robert.

[Robert Jaffe:]

Thanks, Bob. Dave, we're now – we've completed the prepared portion of this conference. We're ready to open up the call to questions.

[Operator:]

[Robert Jaffe:]

Thanks, Dave. Thanks, everyone for joining us today. We look forward to sharing our progress on our next scheduled conference call. Thanks again for joining us today.

[Operator:]

And that will conclude the call for today. We thank you very much for your participation. You may now disconnect.