~ Glocal Ruling from Arbitral Tribunal in Favor of Company for up to $110.2 Million in Damages ~
~ Sale of Cloudbreak Health Business Closed on March 15, 2024 ~
~ Gross Cash Proceeds of $180 Million from the Cloudbreak Sale Will Be Used to Pay Down Debt, Including All of the Company's $115 Million 2026 Notes and a Substantial Portion of its $57.2 Million 2025 Notes ~
~ Continues Simplification Strategy Focused on Profitable TTC Behavioral Healthcare Business ~
DELRAY BEACH, Fla., March 21, 2024 (GLOBE NEWSWIRE) -- UpHealth, Inc. ("we," "UpHealth," or the "Company") (OTC: UPHL) today provided a corporate update and announced financial results for the fourth quarter and full year ended December 31, 2023.
"In short, 2023 was a challenging, yet transformative, year for UpHealth, as we continued to take steps to stabilize the business," said Martin Beck, Chief Executive Officer. "We have recently closed the sale of our Cloudbreak Health, LLC ("Cloudbreak") business and will use the proceeds to significantly de-lever our balance sheet, giving us the financial flexibility to pursue a more simplified, profitable strategy that focuses on our growing, cash flow positive, behavioral health business, TTC Healthcare, Inc. ("TTC Healthcare").
Mr. Beck continued, "I once again want to thank our stakeholders, employees and constituents of UpHealth who continue on this path with us. I can assure you that the UpHealth leadership team is more dedicated and focused than ever on its newly defined and simplified strategy to profitably scale TTC Healthcare."
Glocal Ruling from Arbitral Tribunal Regarding Glocal
Yesterday, the Company provided an update on the arbitration brought by UpHealth Holdings, Inc. ("Holdings"), a wholly-owned direct subsidiary of UpHealth, against Glocal Healthcare Systems ("Glocal") and several of Glocal's officers and shareholders (together with Glocal, the "Respondents"). On March 18, 2024, the International Court of Arbitration of the International Chamber of Commerce (the "ICA") transmitted the Final Award to the parties. In the Final Award, the arbitral tribunal ("Tribunal") found the Respondents liable for breach of contract and directed them to pay Holdings up to $110.2 million in damages, as well as most of the legal costs and other expenses that Holdings incurred in the arbitration. The $110.2 million damages are apportioned based on the shareholders percentage of each of the Indian directors and shareholders of Glocal: 34.38% to be paid by Dr. Syed Sabahat Azim, 34.38% by Richa Sana Azim, 4.69% by Mr. Gautam Chowdhury, 22.54% by Mr. Meleveetil Damodaran, and 4.02% by Kimberlite Social India Private Limited.
The dispute arose out of Holdings' acquisition of Glocal pursuant to a Share Purchase Agreement dated October 30, 2020, and the subsequent breach by Respondents of their contractual obligations to relinquish control of Glocal to Holdings. In particular, the Tribunal found that the Respondents "failed to give [Holdings] control of [Glocal]" after the closing of the acquisition, despite the payment in full of the acquisition consideration. The Respondents were held personally liable.
The Company remains steadfast in its determination to hold fully accountable the Respondents in the ICA proceeding, who sold us Glocal and then refused to relinquish control of it, using misleading and baseless claims, for their indefensible conduct and the resulting harm caused to UpHealth and its stockholders. We appreciate the unanimous decision from the arbitrators and we thank them for a thorough and impartial elaboration and ruling.
Cloudbreak Sale Transaction
- On March 15, 2024, the Company completed the sale of its wholly owned subsidiary Cloudbreak and its MarttiTM translation offering to a newly formed entity controlled by GTCR LLC for $180 million in gross cash proceeds.
- The proceeds of the Cloudbreak sale, after transaction-related fees and expenses, have been deposited into three escrow accounts: a Notes escrow ($139 million), a Tax escrow ($27 million), and a Working Capital escrow ($3 million). Funds in the Notes escrow will be released on June 3, 2024, but no later than June 15, 2024, and will be used to satisfy in full, plus accrued interest, the Company's 2026 notes and to repurchase approximately $20 million of the Company's 2025 Notes, plus accrued interest, leaving approximately $37 million of 2025 Notes outstanding, which will constitute the Company's entire long term debt. Funds in the Tax escrow will be used to satisfy the Company's 2024 tax liability and any funds not required for this purpose will be used to repurchase additional 2025 Notes. Funds in the Working Capital escrow will be used to satisfy any obligations of the Company resulting from a difference between Cloudbreak's targeted and actual working capital as of the closing of the transaction, and any funds not used for this purpose will be used to repurchase additional 2025 Notes.
Fourth Quarter and Full Year 2023 Financial Highlights
As previously reported, Holdings filed for bankruptcy protection on September 19, 2023, and its Thrasys, Inc. ("Thrasys") and Behavioral Health Services ("BHS") subsidiaries filed for bankruptcy protection on October 20, 2023, in response to an unexpected judgment in favor of a contract counterparty. These bankruptcy cases continue and the operations of Thrasys and BHS have largely ceased. It is expected that Holdings could emerge from bankruptcy protection in the second half of 2024. It is important to note that the Company and TTC Healthcare are not part of the bankruptcy proceedings.
As a result of the Company's previously announced deconsolidation of Holdings and its subsidiaries, Thrasys, BHS, and TTC Healthcare, the Company's GAAP revenues and earnings results for the fourth quarter of 2023 only include results from UpHealth, Inc. and Cloudbreak and its subsidiaries.
- Revenues totaled $17.3 million for the fourth quarter of 2023 and $130.0 million for the full year of 2023, compared to $40.5 million for the fourth quarter of 2022 and $158.8 million for the full year of 2022;
- Gross margin was 54% for both the fourth quarter and full year of 2023: compared to 45% for the fourth quarter of 2022 and 44% for the full year of 2022;
- Net loss attributable to UpHealth was $10.0 million for the fourth quarter of 2023 and $57.8 million for the full year of 2023, compared to a net loss attributable to UpHealth of $27.4 million for the fourth quarter of 2022 and $223.0 million for the full year of 2022;
- Net loss per share attributable to UpHealth was $(0.54) for the fourth quarter of 2023 and $(3.26) for the full year of 2023, compared to a net loss per share attributable to UpHealth of $(1.82) for the fourth quarter of 2022 and $(15.17) for the full year of 2022;
- Adjusted EBITDA, which includes the performance of Cloudbreak, was $2.3 million for the fourth quarter of 2023 and $19.6 million for the full year of 2023, compared to $1.9 million for the fourth quarter of 2022 and $3.2 million for the full year of 2022.
Proforma results, which include the results of all business units, including Holdings and its subsidiaries, for the full year of 2023, and Innovations Group, Inc. ("IGI") through the date of its sale on May 11, 2023, are as follows:
- Proforma fourth quarter 2023 revenues were $38.6 million, compared to $40.5 million in revenues for the fourth quarter of 2022. Growth in proforma revenues in the fourth quarter of 2023 was driven by top line growth at TTC Healthcare and Cloudbreak and by certain non-recurring revenues associated with the cessation of operations at Thrasys;
- Proforma fourth quarter 2023 gross margins were 62%, compared to 45% for the fourth quarter of 2022. Proforma margin improvement in the fourth quarter was largely driven by an improved payor mix at TTC Healthcare;
- Proforma fourth quarter 2023 Adjusted EBITDA was $11.1 million, compared with $1.9 million in the fourth quarter of 2022. Proforma Adjusted EBITDA growth in the fourth quarter of 2023 was driven by strong revenue growth and margin expansion coupled with reduced corporate expenses;
- Proforma full-year 2023 revenues were $151.2 million, compared to $158.8 million for the full year of 2022;
- Proforma full-year 2023 gross margins were 56%, compared to 44% for the full year of 2022; and
- Proforma full-year 2023 Adjusted EBITDA was $28.3 million, compared to $3.2 million for the full year of 2022.
UpHealth Will Focus on Expanding Our Profitable TTC Healthcare Business
TTC Healthcare currently offers its patients a full continuum of evidence-based mental health and substance use disorder services in four facilities in Florida and continues to show strong census growth, with an attractive payor mix, including the U.S. Department of Veterans Affairs. TTC Healthcare's financial results were previously reported as part of UpHealth's Services segment.
- TTC Healthcare's revenues were $12.1 million, gross margins were 60%, and adjusted EBITDA was $4.6 million, before the allocation of corporate expenses for the fourth quarter of 2023, compared to $7.9 million in revenues, gross margins of 43%, and $1.3 million in adjusted EBITDA, before the allocation of corporate expenses for the fourth quarter of 2022.
- TTC Healthcare's revenues were $44.1 million, gross margins were 57%, and adjusted EBITDA was $15.9 million, before the allocation of corporate expenses for the full year of 2023, compared to $31.0 million in revenues, gross margins of 45%, and $4.9 million in adjusted EBITDA, before the allocation of corporate expenses for the full year of 2022.
- TTC Healthcare's performance in 2023, and in particular the fourth quarter 2023, was driven by strong volumes and a significantly improved payor mix. We expect future volumes to remain robust and for gross margins to revert over the course of 2024 to historical norms in the range of 50%.
TTC Healthcare serves the large and growing market in the United States for mental health and substance use disorder services. The business is an excellent platform from which to drive future growth. TTC Healthcare's core strengths of high-quality care, strict regulatory compliance and efficient back-office operations can be leveraged across a larger asset base and UpHealth will aggressively pursue geographic and service line expansion of TTC Healthcare via partnerships, joint ventures, acquisitions, and de novo projects. TTC Healthcare has a demonstrated track record of denovo growth, having opened a residential treatment facility near Ocala, Florida in January 2021, which enabled the business to increase its offering of mental health services, and a new facility in Delray Beach, Florida in July 2021, which enabled the business to increase its volumes under in-network contracts. The UpHealth team is excited to focus its energies on growing TTC Healthcare and looks forward to reporting its progress in the coming quarters.
About UpHealth, Inc.
UpHealth, Inc. is a leading provider of a full continuum of behavioral health solutions through the utilization of evidence-based treatments and services. Operating through its TTC Healthcare subsidiary, UpHealth targets mental health issues and substance use disorders with services provided by psychiatrists, physicians, neurologists, licensed therapists, and clinical social workers. The Company's levels of care include detox, residential, partial hospitalization programs, intensive outpatient programs, outpatient, and telehealth. UpHealth's clients include health plans, healthcare providers, and community-based organizations. For more information, please visit https://uphealthinc.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of U.S. federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding the amounts to be paid to Holdings by the Respondents pursuant to the Final Award, the repurchases of the 2026 Notes and 2025 Notes and the availability of funds in the Tax escrow and Working Capital escrow that may be used for this purpose, in each case, including the amounts and timing thereof, the expected emergence of Holdings from bankruptcy, including its timing, the projected operation and financial performance of UpHealth and its various subsidiaries, including TTC Healthcare, its product offerings and developments and reception of its product by customers, and the anticipated cash flow of UpHealth, and UpHealth's expectations, hopes, beliefs, intentions, plans, prospects or strategies regarding the future revenue and the business plans of UpHealth's management team. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this press release are based on certain assumptions and analyses made by the management of UpHealth considering their respective experience and perception of historical trends, current conditions, and expected future developments and their potential effects on UpHealth as well as other factors they believe are appropriate in the circumstances. There can be no assurance that future developments affecting UpHealth will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the parties), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including whether the Respondents will comply with the Final Award, including by paying the amounts awarded to Holdings as set forth therein, uncertainty with respect to how the Indian courts shall decide various matters that are before them, the ability of UpHealth to utilize funds in the Notes escrow and Working Capital escrow for the repurchases of the 2026 Notes and 2025 Notes, the ability of UpHealth to service or otherwise pay its debt obligations following such repurchases, including to holders of the Company's notes that will remain outstanding, the ability of Holdings to emerge from bankruptcy in the expected timeframe or at all, the mix of services utilized by UpHealth's customers and such customers' needs for these services, market acceptance of new service offerings, the ability of UpHealth to scale and expand what it does for existing customers as well as to add new customers, whether UpHealth will be able to regain and sustain compliance with the continued listing standards of the NYSE or comply with the initial listing standards of another national securities exchange, and that UpHealth will have sufficient capital to operate as anticipated. Should one or more of these risks or uncertainties materialize or should any of the assumptions being made prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. UpHealth undertakes no obligation to update or revise any forward-looking statements, whether because of new information, future events, or otherwise, except as may be required under applicable securities laws.
Contact:
Jude Gorman/Dan Moore
Collected Strategies
UPH-CS@collectedstrategies.com
| UPHEALTH, INC. | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands, unaudited) | |||||||
| December 31, 2023 | December 31, 2022 | ||||||
| ASSETS | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 2,548 | $ | 15,557 | |||
| Accounts receivable, net | 14,665 | 21,851 | |||||
| Inventories | - | 161 | |||||
| Due from related parties | - | 14 | |||||
| Prepaid expenses and other current assets | 2,996 | 2,991 | |||||
| Assets held for sale, current | - | 2,748 | |||||
| Total current assets | 20,209 | 43,322 | |||||
| Property, plant and equipment, net | 9,527 | 14,069 | |||||
| Operating lease right-of-use assets | 1,902 | 7,213 | |||||
| Intangible assets, net | 22,717 | 31,362 | |||||
| Goodwill | 80,310 | 159,675 | |||||
| Equity investment | 96,768 | 21,200 | |||||
| Other assets | 375 | 438 | |||||
| Assets held for sale, noncurrent | - | 62,525 | |||||
| Total assets | $ | 231,808 | $ | 339,804 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts payable | $ | 11,723 | $ | 17,983 | |||
| Accrued expenses | 10,590 | 38,763 | |||||
| Deferred revenue | 48 | 2,738 | |||||
| Due to related party | 948 | 229 | |||||
| Lease liabilities, current | 3,522 | 5,475 | |||||
| Other liabilities, current | - | 462 | |||||
| Liabilities held for sale, current | - | 3,319 | |||||
| Total current liabilities | 26,831 | 68,969 | |||||
| Related-party debt, noncurrent | - | 281 | |||||
| Debt, noncurrent | 146,524 | 145,962 | |||||
| Deferred tax liabilities | - | 1,200 | |||||
| Lease liabilities, noncurrent | 3,273 | 8,741 | |||||
| Other liabilities, noncurrent | 76 | 727 | |||||
| Liabilities held for sale, noncurrent | - | 7,787 | |||||
| Total liabilities | 176,704 | 233,667 | |||||
| Stockholders' Equity: | |||||||
| Preferred stock | - | - | |||||
| Common stock | 2 | 2 | |||||
| Additional paid in capital | 696,150 | 688,355 | |||||
| Treasury stock, at cost | (17,000 | ) | (17,000 | ) | |||
| Accumulated deficit | (624,048 | ) | (566,209 | ) | |||
| Total UpHealth, Inc., stockholders' equity | 55,104 | 105,148 | |||||
| Noncontrolling interests | - | 989 | |||||
| Total stockholders' equity | 55,104 | 106,137 | |||||
| Total liabilities and stockholders' equity | $ | 231,808 | $ | 339,804 | |||
| UPHEALTH, INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (In thousands, except per share amounts, unaudited) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues: | |||||||||||||||
| Services | $ | 17,186 | $ | 29,571 | $ | 110,039 | $ | 110,953 | |||||||
| Licenses and subscriptions | - | 1,954 | 6,548 | 12,566 | |||||||||||
| Products | 163 | 8,972 | 13,411 | 35,284 | |||||||||||
| Total revenues | 17,349 | 40,497 | 129,998 | 158,803 | |||||||||||
| Costs of revenues: | |||||||||||||||
| Services | 7,882 | 16,051 | 51,073 | 62,954 | |||||||||||
| License and subscriptions | - | 347 | 1,147 | 1,260 | |||||||||||
| Products | 147 | 5,884 | 8,183 | 24,434 | |||||||||||
| Total costs of revenues | 8,029 | 22,282 | 60,403 | 88,648 | |||||||||||
| Gross profit | 9,320 | 18,215 | 69,595 | 70,155 | |||||||||||
| Operating expenses: | |||||||||||||||
| Sales and marketing | 1,503 | 4,329 | 11,288 | 15,951 | |||||||||||
| Research and development | 256 | 1,944 | 4,367 | 7,888 | |||||||||||
| General and administrative | 6,293 | 11,782 | 38,884 | 48,755 | |||||||||||
| Depreciation and amortization | 1,279 | 2,868 | 6,454 | 16,140 | |||||||||||
| Stock-based compensation | 1,095 | 1,876 | 3,740 | 6,464 | |||||||||||
| Goodwill, intangible asset, and other long-lived asset impairments | - | 1,791 | 49,958 | 116,239 | |||||||||||
| Acquisition, integration, and transformation costs | 4,157 | 7,032 | 44,476 | 20,111 | |||||||||||
| Total operating expenses | 14,583 | 31,622 | 159,167 | 231,548 | |||||||||||
| Loss from operations | (5,263 | ) | (13,407 | ) | (89,572 | ) | (161,393 | ) | |||||||
| Other income (expense): | |||||||||||||||
| Interest expense | (7,492 | ) | (6,194 | ) | (28,195 | ) | (26,500 | ) | |||||||
| Gain (loss) on deconsolidation of subsidiary | - | - | 59,065 | (37,708 | ) | ||||||||||
| Loss on extinguishment of debt | - | - | - | (14,610 | ) | ||||||||||
| Other income (expense), net, including interest income | 646 | 779 | 1,068 | 7,892 | |||||||||||
| Total other income (expense) | (6,846 | ) | (5,415 | ) | 31,938 | (70,926 | ) | ||||||||
| Net loss before income tax benefit (expense) | (12,109 | ) | (18,822 | ) | (57,634 | ) | (232,319 | ) | |||||||
| Income tax benefit (expense) | 2,085 | (8,360 | ) | 1,218 | 9,384 | ||||||||||
| Net loss | (10,024 | ) | (27,182 | ) | (56,416 | ) | (222,935 | ) | |||||||
| Less: net loss attributable to noncontrolling interests | - | 174 | 1,423 | 65 | |||||||||||
| Net loss attributable to UpHealth, Inc. | $ | (10,024 | ) | $ | (27,356 | ) | $ | (57,839 | ) | $ | (223,000 | ) | |||
| Net loss per share attributable to UpHealth, Inc.: | |||||||||||||||
| Basic and diluted | $ | (0.54 | ) | $ | (1.82 | ) | $ | (3.26 | ) | $ | (15.17 | ) | |||
| Weighted average shares outstanding: | |||||||||||||||
| Basic and diluted | 18,520 | 15,030 | 17,724 | 14,699 | |||||||||||
| UPHEALTH, INC. | |||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (In thousands, unaudited) | |||||||
| For the years ended December 31, | |||||||
| 2023 | 2022 | ||||||
| Operating activities: | |||||||
| Net loss | $ | (56,416 | ) | $ | (222,935 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and amortization | 10,953 | 21,800 | |||||
| Amortization of debt issuance costs and discount on convertible debt | 10,835 | 12,789 | |||||
| Stock-based compensation | 3,740 | 6,464 | |||||
| Goodwill, intangible asset, and other long-lived asset impairments | 49,958 | 116,239 | |||||
| Provision for credit losses | (459 | ) | 1,336 | ||||
| Loss on extinguishment of debt | - | 14,610 | |||||
| Gain from intercompany impairment | (876 | ) | - | ||||
| (Gain) loss on deconsolidation of subsidiary | (59,065 | ) | 37,708 | ||||
| Loss (gain) on fair value of warrant liabilities | 8 | (242 | ) | ||||
| Loss (gain) on fair value of derivative liability | 3 | (7,529 | ) | ||||
| Deferred income taxes | (1,200 | ) | (9,543 | ) | |||
| Non-cash impact of operating lease right-of-use assets | 1,601 | 4,031 | |||||
| Other | - | (84 | ) | ||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||
| Accounts receivable | 3,102 | (5,839 | ) | ||||
| Inventories | 144 | 417 | |||||
| Prepaid expenses and other current assets | (1,441 | ) | (100 | ) | |||
| Accounts payable and accrued expenses | 25,176 | 13,148 | |||||
| Operating lease liabilities | (1,763 | ) | (4,003 | ) | |||
| Deferred revenue | 957 | 954 | |||||
| Due to related parties | (209 | ) | (478 | ) | |||
| Other liabilities | (2,722 | ) | (1,184 | ) | |||
| Net cash used in operating activities | (17,674 | ) | (22,441 | ) | |||
| Investing activities: | |||||||
| Purchases of property and equipment and capitalized software development costs | (3,969 | ) | (6,836 | ) | |||
| Due to related parties | - | (14 | ) | ||||
| Deconsolidated cash | (35,606 | ) | (8,743 | ) | |||
| Net cash received from sale of business | 54,835 | - | |||||
| Net cash provided by (used in) investing activities | 15,260 | (15,593 | ) | ||||
| Financing activities: | |||||||
| Proceeds from equity issuance | 4,155 | - | |||||
| Proceeds from debt | - | 67,500 | |||||
| Repayments of debt | (10,273 | ) | (48,234 | ) | |||
| Repayment of forward share purchase | - | (18,521 | ) | ||||
| Payments of debt issuance costs | - | (1,475 | ) | ||||
| Repayments of seller notes | - | (18,680 | ) | ||||
| Payments of finance lease obligations | (3,329 | ) | (3,106 | ) | |||
| Payments for taxes related to net settlement of equity awards | (91 | ) | (95 | ) | |||
| Distributions to noncontrolling interests | (956 | ) | (139 | ) | |||
| Payment of amount due to member | (100 | ) | - | ||||
| Net cash used in financing activities | (10,594 | ) | (22,750 | ) | |||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (1 | ) | (460 | ) | |||
| Decrease in cash and cash equivalents | (13,009 | ) | (61,244 | ) | |||
| Cash and cash equivalents, beginning of period | 15,557 | 76,801 | |||||
| Cash and cash equivalents, end of period | $ | 2,548 | $ | 15,557 | |||
UPHEALTH, INC.
NON-GAAP FINANCIAL INFORMATION
Non-GAAP Financial Information
This press release includes financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (GAAP). To supplement UpHealth's consolidated financial statements presented in accordance with GAAP, UpHealth presents investors with non-GAAP financial measures, including Adjusted EBITDA, proforma consolidated statements of operations, and proforma Adjusted EBITDA.
- Adjusted EBITDA consists of net income (loss) attributable to UpHealth, Inc., excluding depreciation and amortization; stock-based compensation; impairment of goodwill, intangible assets, and other long-lived assets; acquisition, integration, and transformation costs; other income (expense); income tax benefit (expense); net income (loss) attributable to noncontrolling interests; and other non-recurring charges to GAAP net income (loss) attributable to UpHealth, Inc. Other non-recurring charges to GAAP net income (loss) attributable to UpHealth, Inc. may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments, the cumulative effect of a change in accounting principles, or other expenses determined to be non-recurring.
- Proforma consolidated statements of operations and proforma Adjusted EBITDA include the results of all business units, including Holdings and its subsidiaries, for the full year of 2023, and Innovations Group, Inc. ("IGI") through the date of its sale on May 11, 2023.
UpHealth believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to UpHealth's financial condition and results of operations. Management believes that the items described above provide an additional measure of UpHealth's operating results and facilitates comparisons of UpHealth's core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present, and future operating performance and as a supplemental means to evaluate UpHealth's ongoing operations. UpHealth believes that these non-GAAP financial measures are useful to investors in their assessment of UpHealth's operating performance.
Adjusted EBITDA is not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. You should not consider this measure in isolation or as a substitute for analysis of UpHealth's results as reported under GAAP. UpHealth compensates for these limitations by prominently disclosing GAAP financial measures and providing investors with reconciliations from UpHealth's GAAP operating results to the non-GAAP financial measures for the relevant periods.
The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.
| UPHEALTH, INC. | |||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(1) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues | $ | 17,349 | $ | 40,497 | $ | 129,998 | $ | 158,803 | |||||||
| Gross margin | 54 | % | 45 | % | 54 | % | 44 | % | |||||||
| Net loss attributable to UpHealth, Inc. | $ | (10,024 | ) | $ | (27,356 | ) | $ | (57,839 | ) | $ | (223,000 | ) | |||
| Net income (loss) attributable to noncontrolling interests | - | 174 | 1,423 | 65 | |||||||||||
| Net loss | (10,024 | ) | (27,182 | ) | (56,416 | ) | (222,935 | ) | |||||||
| Other income (expense) | 6,846 | 5,415 | (31,938 | ) | 70,926 | ||||||||||
| Income tax expense (benefit) | (2,085 | ) | 8,360 | (1,218 | ) | (9,384 | ) | ||||||||
| Loss from operations | (5,263 | ) | (13,407 | ) | (89,572 | ) | (161,393 | ) | |||||||
| Depreciation and amortization | 2,328 | 4,561 | 10,953 | 21,800 | |||||||||||
| Stock-based compensation | 1,095 | 1,876 | 3,740 | 6,464 | |||||||||||
| Acquisition, integration, and transformation costs; impairment of goodwill, intangible assets, and other long-lived assets; and non-recurring expenses(2) | 4,157 | 8,823 | 94,434 | 136,350 | |||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 2,317 | $ | 1,853 | $ | 19,555 | $ | 3,221 | |||||||
(1)See Non-GAAP Financial Information section for definitions of the Company's non-GAAP financial measures.
(2)Amounts reflect acquisition, integration, and transformation costs and impairment of goodwill, intangible assets, and other long-lived assets from the consolidated statements of operations, as well as other operating expenses considered to be non-recurring during the period.
| UPHEALTH, INC. | |||||||||||||||
| SEGMENT INFORMATION(1) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues: | |||||||||||||||
| Virtual Care Infrastructure(2) | $ | 17,349 | $ | 17,574 | $ | 70,151 | $ | 64,997 | |||||||
| Services(3) | - | 19,143 | 47,225 | 75,796 | |||||||||||
| Integrated Care Management(4) | - | 3,780 | 12,622 | 18,010 | |||||||||||
| Total | $ | 17,349 | $ | 40,497 | $ | 129,998 | $ | 158,803 | |||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Gross Profit: | |||||||||||||||
| Virtual Care Infrastructure(2) | $ | 9,320 | $ | 8,939 | $ | 38,764 | $ | 29,882 | |||||||
| Services(3) | - | 6,974 | 23,232 | 26,586 | |||||||||||
| Integrated Care Management(4) | - | 2,302 | 7,599 | 13,687 | |||||||||||
| Total | $ | 9,320 | $ | 18,215 | $ | 69,595 | $ | 70,155 | |||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Gross Margin %: | |||||||||||||||
| Virtual Care Infrastructure(2) | 54 | % | 51 | % | 55 | % | 46 | % | |||||||
| Services(3) | n/a | 36 | % | 49 | % | 35 | % | ||||||||
| Integrated Care Management(4) | n/a | 61 | % | 60 | % | 76 | % | ||||||||
| Total | 54 | % | 45 | % | 54 | % | 44 | % | |||||||
| See Non-GAAP Financial Information section for definitions of the Company's non-GAAP financial measures. | ||
| (1) | Segment Information The Company's business is organized into three operating business segments: Virtual Care Infrastructure; Services; and Integrated Care Management. The reportable segments are consistent with how management views the Company's services and products and the financial information reviewed by the chief operating decision makers. The Company manages its businesses as components of an enterprise for which separate information is available and is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assess performance. | |
| (2) | In the Virtual Care Infrastructure segment, which consists of the U.S. Telehealth business, the Company provides its customers with a unified telehealth solution and digital health tools, marketed under the name MarttiTM, aimed at increasing access to healthcare and resolving health disparities across the care continuum. As discussed in Note 1, Organization and Business, to the Company's consolidated financial statements, the Company deconsolidated Glocal as of July 1, 2022; accordingly, the financial results of Glocal in the six months ended June 30, 2022 are included in the Company's consolidated financial statements, and the financial position of Glocal as of December 31, 2023 and December 31, 2022 and the financial results of Glocal in the six months ended December 31, 2022 and the twelve months ended December 31, 2023 are not included in the Company's consolidated financial statements. | |
| (3) | In the Services segment, which consists of the Behavioral business, the Company provides inpatient and outpatient substance abuse and mental health treatment services for individuals with drug and alcohol addiction and other behavioral health issues. The Company offers a complete continuum of care from detoxification services, residential care, partial hospitalization programs, and intensive outpatient and outpatient programs. As discussed in Note 1, Organization and Business, to the Company's consolidated financial statements, the Company deconsolidated Holdings as of September 30, 2023; accordingly, the financial position of Holdings as of December 31, 2022 and financial results of Holdings in the nine months ended September 30, 2023 are included in our consolidated financial statements and the financial position of Holdings as of December 31, 2023 and the financial results of Holdings in the three months ended December 31, 2023 are not included in the Company's consolidated financial statements. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1, Organization and Business, occurred on September 19, 2023. The Company concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material. Additionally, during the three months ended June 30, 2023, the Company substantially completed the wind-down of a company within the Behavioral business. The Services segment also consisted of the Pharmacy business, which sold custom compounded medications, until the sale of the business on May 11, 2023. | |
| (4) | In the Integrated Care Management segment, the Company provides its customers with an advanced, comprehensive, and extensible technology platform, marketed under the umbrella "SyntraNetTM" to manage health, quality of care, and costs, especially for individuals with complex medical, behavioral health, and social needs. As discussed in Note 1, Organization and Business, to the Company's consolidated financial statements, the Company deconsolidated Holdings as of September 30, 2023; accordingly, the financial position of Holdings as of December 31, 2022 and financial results of Holdings in the nine months ended September 30, 2023 are included in our consolidated financial statements and the financial position of Holdings as of December 31, 2023 and the financial results of Holdings in the three months ended December 31, 2023 are not included in the Company's consolidated financial statements. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1, Organization and Business, occurred on September 19, 2023. The Company concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material. | |
| UPHEALTH, INC. | |||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP to GAAP INCOME STATEMENT | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Three Months Ended December 31, 2023 | Year Ended December 31, 2023 | ||||||||||||||||||||||
| Proforma | Adjustments(1) | GAAP | Proforma | Adjustments(2) | GAAP | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Services | $ | 34,386 | $ | (17,200 | ) | $ | 17,186 | $ | 127,239 | $ | (17,200 | ) | $ | 110,039 | |||||||||
| Licenses and subscriptions | 4,008 | (4,008 | ) | - | 10,556 | (4,008 | ) | 6,548 | |||||||||||||||
| Products | 163 | - | 163 | 13,411 | - | 13,411 | |||||||||||||||||
| Total revenues | 38,557 | (21,208 | ) | 17,349 | 151,206 | (21,208 | ) | 129,998 | |||||||||||||||
| Costs of revenues: | |||||||||||||||||||||||
| Services | 14,106 | (6,224 | ) | 7,882 | 57,297 | (6,224 | ) | 51,073 | |||||||||||||||
| License and subscriptions | 538 | (538 | ) | - | 1,685 | (538 | ) | 1,147 | |||||||||||||||
| Products | 147 | - | 147 | 8,183 | - | 8,183 | |||||||||||||||||
| Total costs of revenues | 14,791 | (6,762 | ) | 8,029 | 67,165 | (6,762 | ) | 60,403 | |||||||||||||||
| Gross profit | 23,766 | (14,446 | ) | 9,320 | 84,041 | (14,446 | ) | 69,595 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 2,841 | (1,338 | ) | 1,503 | 12,626 | (1,338 | ) | 11,288 | |||||||||||||||
| Research and development | 2,339 | (2,083 | ) | 256 | 6,450 | (2,083 | ) | 4,367 | |||||||||||||||
| General and administrative | 8,562 | (2,269 | ) | 6,293 | 41,153 | (2,269 | ) | 38,884 | |||||||||||||||
| Depreciation and amortization | 1,300 | (21 | ) | 1,279 | 6,475 | (21 | ) | 6,454 | |||||||||||||||
| Stock-based compensation | 1,095 | - | 1,095 | 3,740 | - | 3,740 | |||||||||||||||||
| Goodwill, intangible asset and other long-lived asset impairment | - | - | - | 49,958 | - | 49,958 | |||||||||||||||||
| Acquisition, integration, and transformation costs | 12,081 | (7,924 | ) | 4,157 | 52,400 | (7,924 | ) | 44,476 | |||||||||||||||
| Total operating expenses | 28,218 | (13,635 | ) | 14,583 | 172,802 | (13,635 | ) | 159,167 | |||||||||||||||
| Loss from operations | (4,452 | ) | (811 | ) | (5,263 | ) | (88,761 | ) | (811 | ) | (89,572 | ) | |||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense | (7,493 | ) | 1 | (7,492 | ) | (28,196 | ) | 1 | (28,195 | ) | |||||||||||||
| Gain on deconsolidation of subsidiary | - | - | - | 59,065 | - | 59,065 | |||||||||||||||||
| Other income (expense), net, including interest income | 384 | 262 | 646 | 806 | 262 | 1,068 | |||||||||||||||||
| Total other income (expense) | (7,109 | ) | 263 | (6,846 | ) | 31,675 | 263 | 31,938 | |||||||||||||||
| Net loss before income tax benefit | (11,561 | ) | (548 | ) | (12,109 | ) | (57,086 | ) | (548 | ) | (57,634 | ) | |||||||||||
| Income tax benefit | 2,085 | - | 2,085 | 1,218 | - | 1,218 | |||||||||||||||||
| Net loss | (9,476 | ) | (548 | ) | (10,024 | ) | (55,868 | ) | (548 | ) | (56,416 | ) | |||||||||||
| Less: net loss (income) attributable to noncontrolling interests | 605 | (605 | ) | - | 2,028 | (605 | ) | 1,423 | |||||||||||||||
| Net loss attributable to UpHealth, Inc. | $ | (10,081 | ) | $ | 57 | $ | (10,024 | ) | $ | (57,896 | ) | $ | 57 | $ | (57,839 | ) | |||||||
| Net loss per share attributable to UpHealth, Inc.: | |||||||||||||||||||||||
| Basic and diluted | $ | (0.54 | ) | $ | - | $ | (0.54 | ) | $ | (3.27 | ) | $ | - | $ | (3.26 | ) | |||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic and diluted | 18,520 | 18,520 | 18,520 | 17,724 | 17,724 | 17,724 | |||||||||||||||||
(1) Reflects the operations of Holdings and its subsidiaries (including TTC Healthcare, Thrasys, and BHS) for the three months ended December 31, 2023 due to their deconsolidation on September 30, 2023.
(2) Reflects the operations of Holdings and its subsidiaries (including TTC Healthcare, Thrasys, and BHS) for the three months ended December 31, 2023 due to their deconsolidation on September 30, 2023, as well as the gain on deconsolidation of subsidiary recognized on September 30, 2023.
| UPHEALTH, INC. | |||||||||||||||||||||||
| RECONCILIATION OF PROFORMA TO NON-GAAP ADJUSTED EBITDA | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Three Months Ended December 31, 2023 | Year Ended December 31, 2023 | ||||||||||||||||||||||
| Proforma | Adjustments(1) | Non-GAAP | Proforma | Adjustments(2) | Non-GAAP | ||||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||||
| Loss from operations | $ | (4,452 | ) | $ | (811 | ) | $ | (5,263 | ) | $ | (88,761 | ) | $ | (811 | ) | $ | (89,572 | ) | |||||
| Depreciation and amortization | 2,387 | (59 | ) | 2,328 | 11,012 | (59 | ) | 10,953 | |||||||||||||||
| Stock-based compensation | 1,095 | - | 1,095 | 3,740 | - | 3,740 | |||||||||||||||||
| Acquisition, integration, and transformation costs and non-recurring expenses | 12,081 | (7,924 | ) | 4,157 | 102,358 | (7,924 | ) | 94,434 | |||||||||||||||
| Adjusted EBITDA | 11,111 | (8,794 | ) | 2,317 | 28,349 | (8,794 | ) | 19,555 | |||||||||||||||
(1) Reflects the operations of Holdings and its subsidiaries (including TTC Healthcare, Thrasys, and BHS) for the three months ended December 31, 2023 due to their deconsolidation on September 30, 2023.
(2) Reflects the operations of Holdings and its subsidiaries (including TTC Healthcare, Thrasys, and BHS) for the three months ended December 31, 2023 due to their deconsolidation on September 30, 2023, as well as the gain on deconsolidation of subsidiary recognized on September 30, 2023.
