Press Release

NantHealth Reports 2020 Third Quarter Financial Results

Nov 05, 2020 at 4:05 PM EST
  • Q3 2020 Financial Highlights:
    • Total net revenue was $18.8 million, up from $18.6 million
      • Total software-related revenue increased to $18.7 million from $18.3 million in Q3 2019 and rose 7% from Q2 2020
    • Recently acquired OpenNMS Group contributed revenue
    • Gross margin remained steady at 60% of total revenue

CULVER CITY, Calif.--(BUSINESS WIRE)--Nov. 5, 2020-- NantHealth, Inc. (NASDAQ-GS: NH), a provider of enterprise solutions that help businesses transform complex data into actionable insights, today reported financial results for its third quarter ended September 30, 2020.

“Our 2020 third quarter total software-related revenue increased to $18.7 million from $18.3 million for the same quarter last year and climbed 7% on a sequential quarterly basis,” said Ron Louks, Chief Operating Officer, NantHealth. “The current year third quarter included a revenue contribution from our recently completed acquisition of OpenNMS. We are pleased to report that our gross margin remained strong at 60% of total revenue, selling, general and administrative expenses were lower, and our bottom line improved considerably. We view our overall financial performance as a solid achievement, given the challenges associated with operating during the ongoing pandemic.

“At the same time, we ramped up our investment in R&D. We continued our development of data solutions capabilities, by expanding our software portfolio and service offerings, and investing in cloud, SaaS and AI technologies.

“We are making excellent progress on integrating the highly complementary OpenNMS business into our operations. OpenNMS provides a number of cross marketing opportunities, by leveraging NantHealth’s data science and AI competencies and OpenNMS’ network monitoring solutions for critical data flows. In addition, we believe the acquisition will drive opportunities to expand into industries beyond healthcare and bring new sets of services to customers of both entities.”

Software and Services Highlights:

  • Clinical Decision Support (Eviti®):
    • Expanded client-base and net new clients through NantHealth’s Eviti channel partner, a leading clinical solutions provider
    • Expanded Eviti Connect across the Medicaid population of a leading U.S. health insurance company. Of the 13 states originally announced, six states have gone live through the third quarter of 2020
  • Payer Engagement (NaviNet®):
    • We expanded API capabilities with a new service offering for provider and revenue cycle organizations to connect with payers via the NaviNet Open platform to conduct Eligibility & Benefits, Claim Status Inquiry, Authorizations, and Referral transactions
    • Launched several user-centric enhancements that will provide a richer user experience on NaviNet Open, including self-service capability that allows NaviNet AllPayer subscribers to quickly and easily configure provider information for registration and access
  • Network Monitoring (OpenNMS®):
    • Released Meridian® 2020
    • A Fortune 500 Healthcare IT company went into production with the OpenNMS Architecture for Learning Enabled Correlation (ALEC) AI engine

Business and Financial Highlights

For the 2020 third quarter:

  • Total net revenue was $18.8 million compared with $18.6 million in Q3 of 2019 and up from $17.6 million in Q2, 2020. Within total revenue, there was $18.7 million of total software-related revenue, compared with $18.3 in previous year
  • Gross profit was $11.2 million, or 60% of total net revenue, consistent with the prior year period
  • Selling, general and administrative (SG&A) expenses declined to $12.4 million from $13.7 million in 2019 third quarter
  • Research and development (R&D) expenses increased to $4.7 million from $3.3 million, primarily due to expanding our software portfolio and service offerings, and investing in cloud, SaaS and AI technologies
  • Net loss from continuing operations attributable to NantHealth, net of tax, narrowed to $11.0 million, or $0.10 per share from $16.4 million, or $0.15 per share
  • Non-GAAP net loss from continuing operations attributable to NantHealth was $7.2 million, or $0.07 per share, compared with $7.5 million, or $0.07 per share, for the third quarter of last year
  • At September 30, 2020, cash and cash equivalents totaled $26 million

Conference Call Information and Forward-Looking Statements

Later today, 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, 2020. 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 9966656. 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 enterprise solutions that help businesses transform complex data into actionable insights. By offering efficient ways to move, interpret, and visualize complex and highly sensitive information, NantHealth helps its customers in healthcare, life sciences, logistics, telecommunications, and other industries, to automate, understand, and act on data while keeping it secure and scalable. NantHealth’s product portfolio comprises the latest technology in molecular analysis (GPS Cancer), payer/provider collaboration platforms for real-time coverage decision support (NaviNet and Eviti), and Data Products that provide multi-data analysis, reporting and professional services offerings. OpenNMS, a NantHealth subsidiary, helps businesses monitor and manage network health and performance. For more information, visit nanthealth.com, follow us on Twitter, Facebook and LinkedIn, and subscribe to our blog.

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 integrate OpenNMS into our operations;; 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, 2020 December 31, 2019
(Unaudited)
Assets
Current assets
Cash and cash equivalents

$

25,908

 

$

5,243

 

Accounts receivable, net

 

4,195

 

 

6,179

 

Related party receivables, net

 

1,577

 

 

823

 

Prepaid expenses and other current assets

 

4,460

 

 

19,341

 

Current assets of discontinued operation

 

-

 

 

6,327

 

Total current assets

 

36,140

 

 

37,913

 

Property, plant, and equipment, net

 

14,232

 

 

14,985

 

Goodwill

 

98,333

 

 

97,307

 

Intangible assets, net

 

50,202

 

 

51,848

 

Investment in related party

 

-

 

 

31,702

 

Related party receivable, net of current

 

612

 

 

1,108

 

Operating lease right-of-use assets

 

7,604

 

 

8,470

 

Other assets

 

1,856

 

 

1,818

 

Noncurrent assets of discontinued operation

 

-

 

 

21,336

 

Total assets

$

208,979

 

$

266,487

 

 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable

$

2,151

 

$

3,377

 

Accrued and other current liabilities

 

14,833

 

 

31,988

 

Deferred revenue

 

3,276

 

 

7,098

 

Related party payables, net

 

4,606

 

 

4,120

 

Notes payable

 

1,065

 

 

238

 

Current liabilities of discontinued operation

 

-

 

 

10,680

 

Total current liabilities

 

25,931

 

 

57,501

 

Deferred revenue, net of current

 

715

 

 

1,129

 

Related party liabilities

 

29,365

 

 

24,227

 

Related party promissory note

 

112,666

 

 

112,666

 

Related party convertible note, net

 

9,268

 

 

8,864

 

Convertible notes, net

 

89,023

 

 

84,648

 

Deferred income taxes, net

 

1,697

 

 

1,669

 

Operating lease liabilities

 

8,508

 

 

9,728

 

Other liabilities

 

24,135

 

 

21,542

 

Noncurrent liabilities of discontinued operation

 

-

 

 

1,649

 

Total liabilities

 

301,308

 

 

323,623

 

 
Stockholders' deficit
Common stock, $0.0001 par value per share, 750,000,000 shares authorized; 111,214,133 and 110,619,678 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

11

 

 

11

 

Additional paid-in capital

 

890,590

 

 

889,955

 

Accumulated deficit

 

(983,108

)

 

(946,884

)

Accumulated other comprehensive loss

 

(283

)

 

(218

)

Total NantHealth stockholders' deficit

 

(92,790

)

 

(57,136

)

Noncontrolling interests

 

461

 

 

-

 

Total stockholders' deficit

(92,329

)

(57,136

)

Total liabilities and stockholders' deficit

$

208,979

 

$

266,487

 

NantHealth, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2020

 

2019

 

2020

 

2019

Revenue
Software-as-a-service related

$

18,355

 

$

18,328

 

$

53,997

 

$

54,421

 

Maintenance

 

299

 

 

-

 

 

299

 

 

-

 

Professional services

 

62

 

 

-

 

 

62

 

 

-

 

Total software-related revenue

$

18,716

 

$

18,328

 

$

54,358

 

$

54,421

 

Sequencing and molecular analysis

 

49

 

 

276

 

 

172

 

 

1,581

 

Home health care services

 

-

 

 

-

 

 

-

 

 

2,863

 

Total net revenue

$

18,765

 

$

18,604

 

$

54,530

 

$

58,865

 

 
Cost of Revenue
Software-as-a-service related

$

5,935

 

$

5,638

 

$

17,552

 

$

17,004

 

Maintenance

 

131

 

 

121

 

 

131

 

 

288

 

Professional services

 

15

 

 

-

 

 

15

 

 

-

 

Amortization of developed technologies

 

1,222

 

 

1,143

 

 

3,508

 

 

3,519

 

Total software-related cost of revenue

$

7,303

 

$

6,902

 

$

21,206

 

$

20,811

 

Sequencing and molecular analysis

 

216

 

 

462

 

 

827

 

 

4,066

 

Home health care services

 

-

 

 

-

 

 

-

 

 

1,471

 

Total cost of revenue

$

7,519

 

$

7,364

 

$

22,033

 

$

26,348

 

 
Gross Profit

$

11,246

 

$

11,240

 

$

32,497

 

$

32,517

 

 
Operating Expenses
Selling, general and administrative

 

12,442

 

 

13,708

 

 

36,864

 

 

42,843

 

Research and development

 

4,681

 

 

3,262

 

 

12,446

 

 

10,503

 

Amortization of acquisition-related assets

 

958

 

 

1,054

 

 

2,691

 

 

3,162

 

Impairment of intangible asset

 

-

 

 

-

 

 

-

 

 

3,977

 

Total operating expenses

$

18,081

 

$

18,024

 

$

52,001

 

$

60,485

 

Loss from operations

 

(6,835

)

 

(6,784

)

 

(19,504

)

 

(27,968

)

Interest expense, net

 

(4,861

)

 

(4,556

)

 

(14,291

)

 

(13,443

)

Other income (expense), net

 

747

 

 

(3,586

)

 

(2,550

)

 

(5,022

)

Loss from related party equity method investment

 

-

 

 

(1,983

)

 

(31,702

)

 

(6,401

)

Loss from continuing operations before income taxes

$

(10,949

)

$

(16,909

)

$

(68,047

)

$

(52,834

)

Provision for (benefit from) income taxes

 

77

 

 

(529

)

 

174

 

 

(659

)

Net loss from continuing operations

$

(11,026

)

$

(16,380

)

$

(68,221

)

$

(52,175

)

(Loss) income from discontinued operations, net of tax attributable to NantHealth

 

(16

)

 

3

 

 

31,955

 

 

1,162

 

Net loss

$

(11,042

)

$

(16,377

)

$

(36,266

)

$

(51,013

)

Net loss attributable to noncontrolling interests

$

(42

)

 

-

 

 

(42

)

 

-

 

Net loss attributable to NantHealth

$

(11,000

)

$

(16,377

)

$

(36,224

)

$

(51,013

)

 
Basic and diluted net income (loss) per share attributable to NantHealth:
Continuing operations - common stock

$

(0.10

)

$

(0.15

)

$

(0.62

)

$

(0.47

)

Discontinued operations - common stock

$

-

 

$

-

 

$

0.29

 

$

0.01

 

Total net loss per share - common stock

$

(0.10

)

$

(0.15

)

$

(0.33

)

$

(0.46

)

 
Weighted average shares outstanding
Basic and diluted - common stock

 

110,929,357

 

 

110,619,905

 

 

110,859,611

 

 

110,261,279

 

NantHealth, Inc.
Non-GAAP Net Loss from Continuing Operations Attributable to NantHealth and
Non-GAAP Net Loss Per Share from Continuing Operations Attributable to NantHealth
(Dollars in thousands, except per share amounts)
(Unaudited)
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2020

 

2019

 

2020

 

2019

Net loss from continuing operations attributable to NantHealth

$

(10,984

)

$

(16,380

)

$

(68,179

)

$

(52,175

)

Adjustments to GAAP net loss from continuing operations attributable to NantHealth:
Loss from related party equity method investment

 

-

 

 

1,983

 

 

31,702

 

 

6,401

 

Stock-based compensation expense from continuing operations

 

633

 

 

521

 

 

1,761

 

 

1,797

 

Change in fair value of derivatives liability

 

(56

)

 

-

 

 

7

 

 

-

 

Change in fair value of Bookings Commitment

 

(657

)

 

3,159

 

 

3,070

 

 

4,664

 

Noncash interest expense related to convertible notes

 

1,644

 

 

1,446

 

 

4,779

 

 

4,207

 

Intangible amortization from continuing operations

 

2,165

 

 

2,197

 

 

6,184

 

 

6,681

 

Impairment of intangible asset

 

-

 

 

-

 

 

-

 

 

3,977

 

Loss on sale of business

 

-

 

 

-

 

 

-

 

 

582

 

Securities litigation costs

 

-

 

 

500

 

 

(103

)

 

500

 

Tax provision (benefit) resulting from certain noncash tax items

 

20

 

 

(885

)

 

(16

)

 

(519

)

Total adjustments to GAAP net loss from continuing operations attributable to NantHealth

3,749

 

8,921

 

47,384

 

28,290

 

Net loss from continuing operations attributable to NantHealth - Non-GAAP

$

(7,235

)

$

(7,459

)

$

(20,795

)

$

(23,885

)

 
Weighted average shares outstanding

 

110,929,357

 

 

110,619,905

 

 

110,859,611

 

 

110,261,279

 

 
Net loss per share from continuing operations attributable to NantHealth - Non-GAAP

$

(0.07

)

$

(0.07

)

$

(0.19

)

$

(0.22

)

 

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

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2020

 

2019

 

2020

 

2019

Net loss per common share from continuing operations attributable to NantHealth

$

(0.10

)

$

(0.15

)

$

(0.62

)

$

(0.47

)

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

 

-

 

 

0.03

 

 

0.28

 

 

0.04

 

Stock-based compensation expense from continuing operations

 

0.01

 

 

-

 

 

0.02

 

 

0.02

 

Change in fair value of derivatives liability

 

-

 

 

-

 

 

-

 

 

-

 

Change in fair value of Bookings Commitment

 

(0.01

)

 

0.03

 

 

0.03

 

 

0.04

 

Noncash interest expense related to convertible notes

 

0.01

 

 

0.01

 

 

0.04

 

 

0.04

 

Intangible amortization from continuing operations

 

0.02

 

 

0.02

 

 

0.06

 

 

0.06

 

Impairment of intangible asset

 

-

 

 

-

 

 

-

 

 

0.04

 

Loss on sale of business

 

-

 

 

-

 

 

-

 

 

0.01

 

Securities litigation costs

 

-

 

 

-

 

 

-

 

 

-

 

Tax provision (benefit) resulting from certain noncash tax items

 

-

 

 

(0.01

)

 

-

 

 

-

 

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

0.03

 

0.08

 

0.43

 

0.25

 

Net loss per common share from continuing operations attributable to NantHealth - Non-GAAP

$

(0.07

)

$

(0.07

)

$

(0.19

)

$

(0.22

)

 

Investor Contact:
Robert Jaffe
rjaffe@rjaffeco.com
424.288.4098

Source: NantHealth, Inc.