NantHealth Inc

NASDAQ:NH

Earnings Call Transcript 2022-Q3

[Robert Jaffe, Investor Relations]

Welcome everyone and thank you for joining us today to discuss NantHealth's 2022 Third 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 forward-looking 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 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 2022 third quarter financial results for the company's reasons for including those non-GAAP financial measures in its financial results announcement. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is also attached to the company's earnings press release issued earlier today.

In a moment, Ron will discuss the business followed by Bob, who will discuss the financial results. We will then open the call for questions.

With that said, I will now turn the call over to Ron Louks. Ron?

[Ron Louks, Chief Operating Officer]

Thanks, Robert. Good afternoon everyone and welcome to NantHealth's 2022 third quarter financial results conference call.

Turning briefly to our financial performance. We reported total revenue of $16.6 million, the fourth consecutive quarter of top line growth. Gross margin for the quarter was 58%, the highest our gross margin has been since the fourth quarter of 2020.

We are pleased that over the last several quarters, we have generated positive momentum, we are particularly pleased that our efforts to broaden our product offerings for existing customers is paying dividends.

Now let's discuss our Software and Services business beginning with our Eviti business. In October, we secured a three-year contract extension with a large national commercial insurer that provides coverage to over two million of their Medicaid members across multiple states. This Eviti Connect client has used this renewal period to add our formulary redirection solution.

We announced the Eviti Connect platform has once again earned full URAC accreditation for Health Utilization Management through 2025. Our existing customer, Maryland Physicians Care signed a two-year renewal agreement, ensuring it continues to receive a unique and tailored solution for its member with auto -- for its members with autoimmune diseases and we added to Eviti Connect, a new capability that it allows payer clients to comply seamlessly with state-mandated preferred drug list. This feature eliminates the need from annual reviews and secondary processing when those preferred drugs are prescribed.

Turning to payer engagement. We secured an agreement with an existing customer, one of America's leading health insurance organizations, which added 750,000 new members for NaviNet. We went live with NaviNet Open Prior Authorization for a key customer. This capability is designed to streamline workflows and data collection to enable automated decisions to reduce manual processes. This initial deployment has been completed with further roll outs planned in the current fourth quarter, and we added new platform functionality to speed up prior authorization process. This enables more timely patient care.

Turning to our Network Monitoring business, the OpenNMS Group, we completed shipment of small form factor OpenNMS Minion appliances for user testing. These hardware appliances are highly optimized for secure, scalable and reliable distributed monitoring via the OpenNMS Minion component.

We made significant progress toward the development of capability that will let customers monitor infrastructure built using VMware SD-WAN. This initiative marks a significant milestone in the OpenNMS Managed Services Provider, MSP support program.

And finally, we delivered several service engagements that position OpenNMS as a strategically significant within the clients' IT organizations. Clients included a large national retail chain, an entertainment streaming service and a top wireless communication provider.

To sum up, revenues increased for the fourth consecutive quarter and gross margin of around 58% was high since the fourth quarter of 2020. Our Eviti Connect platform are in full URAC accreditation for health utilization management through 2025. During the third quarter and thus far into the fourth, we signed multiple renewal agreements and contract extensions, some of them include additional products and services.

With that overview of our business, I'll turn the call over to Bob to discuss our financial results in more detail. Bob?

[Bob Petrou, Chief Financial Officer]

Thank you Ron. For Q3 2022, total revenue was $16.6 million, compared with $14.4 million in the prior year third quarter. The year-on-year increase was mostly due to growth in the increased Eviti services from the previous year.

Year-to-date revenue for 2022 was up approximately 6% from the same period last year at $49.5 million versus $46.6 million. Gross profit for the quarter was $9.7 million, which is an increase from the $7.5 million in the same quarter last year. Gross profit percent was 58%, up from 52% this quarter last year. Year-to-date gross margin for 2022 was up approximately 9% from the same period last year, which is mostly tied to the increase in revenue.

Total operating expenses increased to 28.3% and $23.9 million from $18.6 million in the prior year third quarter. Year-to-date operating expenses for 2022 are up approximately 21.2% from the same period last year. This is a result of the continued investments we're making in our product portfolios into the structure technology build-out.

For Q3 2022, net loss attributable to NantHealth was $13.7 million, or $0.12 per share. This compared with $10.8 million, or $0.09 per share in the prior year third quarter. Year-to-date net loss attributable to NantHealth are similar to the same period last year at approximately $42 million.

On a non-GAAP basis net loss from continuing operations in Q3 2022 was $14 million, or $0.12 per share is compared with $11.5 million, or $0.10 per share for the third quarter of last year.

Finally, cash and cash equivalents were approximately $0.6 million at September 30, which is compared with $5.7 million at June 30, 2022. Usage of cash was approximately $5.1 million, which was driven by normal working capital needs.

With that, I will now turn the call back over to Robert.

[Robert Jaffe, Investor Relations]

Thanks Bob. Operator, we've completed our prepared remarks, and we're now open to -- we'd like to open up the call to questions. Thanks.

[Robert Jaffe, Investor Relations]

Thanks operator. And thank you everyone for joining us today. We look forward to sharing our progress on our next planned conference call. Have a good night.

[Operator]

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.