Cue Health Reports Third Quarter 2023 Financial Results
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SAN DIEGO, CA – November 8, 2023 – Cue Health Inc. ("Cue") (Nasdaq: HLTH), a healthcare technology company, today reported financial results for the third quarter 2023.
Recent Highlights
•Reported third quarter total revenue of $17.5 million, approximately 50% above the midpoint of our guidance range of $11 to $13 million.
•Three tests in review with the FDA:
•Cue® Flu A/B + COVID-19 Multiplex Molecular Test Emergency Use Authorization (EUA) for at-home and point-of-care use.
•Cue Flu A/B Molecular Tests De Novo application for at-home and point-of-care use.
•Cue RSV Molecular Test De Novo application for at-home and point-of-care use.
•Flu A/B, RSV, and COVID Multiplex Molecular Test development program is progressing with plans for an EUA submission and an initial objective of having this multiplex available for the 2024-2025 respiratory season.
•Announced the Herpes + Mpox Multiplex Molecular Test development program with initial plans to enter the market in 2024 with an EUA regulatory pathway.
•Publication of an independent, peer-reviewed study in Microbiology Spectrum, which finds that Cue’s COVID-19 test demonstrates accuracy comparable to laboratory PCR, while being fast and easy-to-use in the point-of-care setting.
•Annualized run rate cost savings of approximately $165 million, overachieving our previously stated cost reduction goal of $150 million.
•Net change in cash for the quarter was $(17.1) million.
•Ended the third quarter with cash and cash equivalents of $111.5 million.
“In the third quarter our revenue exceeded our expectations, and we continued to execute on our strategic priorities with strong financial discipline. Our cost lowering program has now achieved $165 million in annualized savings, above our $150 million target,” said Ayub Khattak, Chairman and CEO of Cue Health. “We have our Flu + COVID Multiplex Molecular Test, Flu De Novo, and RSV De Novo all deep in review with the FDA. I’m proud of the Cue team for the strong execution across all fronts.”
Third Quarter 2023 Financial Results
Revenue was $17.5 million for the third quarter of 2023. Private sector revenue was $14.4 million or 82% of total revenue with strong ordering from existing customers. Public sector revenue was $3.1 million and disposable test cartridge revenue was $13.2 million.
GAAP product gross profit was a loss of $7.4 million in the third quarter of 2023.
GAAP operating expenses in the third quarter of 2023 were $60.0 million, excluding cost of revenue, in line with second quarter spend and a 37% decrease from $94.6 million in the fourth quarter of 2022.
Received employee retention credit of $20.9 million during the third quarter and recognized in tax credits on the income statement.
GAAP net loss in the third quarter of 2023 was $47.0 million and earnings per diluted share was a loss of $0.31, an improvement of $0.24 from the second quarter of 2023. Cue's adjusted net loss was $63.6 million and adjusted earnings per diluted share was a loss of $0.42. Adjusted EBITDA was a loss of $36.6 million.
Cue ended the third quarter with cash of $111.5 million and the company continues to operate with no debt obligations.
Guidance
Cue Health expects fourth quarter 2023 revenues in the range of $16 million to $18 million.
About Cue Health
Cue Health Inc. (Nasdaq: HLTH) is a healthcare technology company that uses diagnostic-enabled care to empower people to live their healthiest lives. The Cue Health platform offers individuals and healthcare providers convenient and personalized access to lab-quality diagnostic tests at home and at the point-of-care, as well as on-demand telehealth consultations and treatment options for a wide range of health and wellness needs. Cue’s customers include federal and state public sector agencies and the private sector, which includes healthcare providers, enterprises, and individual consumers. Cue received De Novo authorization from the U.S. Food and Drug Administration (FDA) for its COVID-19 test, which became the first home use respiratory test to receive this FDA approval. Cue also received Emergency Use Authorization from the FDA for its molecular Mpox test at the point-of-care. To further expand its test menu, Cue has made other submissions that are now under review by the FDA, including for the Cue® Flu A/B + COVID-19 Molecular Test and the Cue® RSV Molecular Test, both of which are designed for at-home and point-of-care use. Cue, founded in 2010, owns over 100 patents and is headquartered in San Diego. For more information, please visit www.cuehealth.com.
Forward-Looking Statements
Statements in this press release about future expectations, plans and prospects, including statements related to the submission of any FDA applications and expectations around receiving clearance and authorization, growth in our customer base, expectations regarding production capacity, potential technology enhancements, expectations related to availability of our programs and testing volumes, the ability to achieve growth in the future, and future results of operations and performance and our guidance, including fourth quarter 2023 guidance, as well as any other statements regarding matters
that are not historical facts, may constitute “forward-looking statements”. The words, without limitation, “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “would,” “develop,” “pave,” “seek,” “offer,” “grow”, “expand”, “look forward”, “believe,” “design” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these or similar identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those related to the expected capabilities of the flu A/B standalone, flu A/B + COVID multiplex, RSV test, Strep Throat test, Mpox test and Chlamydia + Gonorrhea multiplex test, the expansion of Cue Care, our ability to maintain customer growth rates, our ability to increase private sector revenue, our ability maintain or replace the revenue historically generated from our government contracts, our ability to effectively scale our manufacturing capacity to meet contractual obligations with our customers and market demand, our ability to realize operating expense annualized savings as a result of the previously announced cost reduction program, and the factors discussed in the "Risk Factors" section of Cue’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023 and of Cue’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 to be filed with the SEC. Any forward-looking statements contained in this press release are based on the current expectations of Cue’s management team and speak only as of the date hereof, and Cue specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
The Cue Mpox (Monkeypox) Molecular Test has not been FDA cleared or approved, but has been authorized for emergency use by FDA under an EUA. This product has been authorized only for the detection of nucleic acid from monkeypox virus, not for any other viruses or pathogens. The emergency use of this product is only authorized for the duration of the declaration that circumstances exist justifying the authorization of emergency use of in vitro diagnostics for detection and/or diagnosis of infection with the monkeypox virus, including in vitro diagnostics that detect and/or diagnose infection with non-variola Orthopoxvirus, under Section 564(b)(1) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 360bbb-3(b)(1), unless the declaration is terminated or authorization is revoked sooner.
Use of Non-GAAP Financial Measures
To supplement our financial information presented in accordance with GAAP, we consider certain financial measures that are not prepared in accordance with GAAP, including Adjusted Product Gross Profit Margin, Adjusted Operating Expenses, Adjusted Net (loss) Income, Adjusted Diluted EPS and Adjusted EBITDA (loss). We use these financial measures in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our business and financial performance. We believe that these non-GAAP financial measures provide useful information to investors about our business and financial performance, enhance their overall understanding of our past performance and future prospects, and allow for greater transparency with respect to metrics used by our management in their financial and operational decision making. We are presenting these non-GAAP financial measures to assist investors in seeing our business and financial performance through the eyes of management, and because we believe that these non-GAAP financial measures provide an additional tool for investors to use in comparing results of operations of our business over multiple periods with other companies in our industry.
Adjusted EBITDA is defined as net loss before interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation, tax credits, restructuring expense, disputed vendor payment, inventory charges – inventory reserves / warranty reserves.
Adjusted product gross profit (loss) is defined as product gross profit (loss), before disputed vendor payment, inventory charges – inventory reserves / warranty reserves.
Adjusted operating expenses is defined as operating expenses before cost of revenue, restructuring expense.
Adjusted net loss is defined as Net loss, before tax credits, disputed vendor payment, restructuring expense and tax effects.
Adjusted diluted EPS is defined as Diluted EPS before tax credits, disputed vendor payment, restructuring expense and tax effects.
Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations. Thus, these non-GAAP metrics should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP. For reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures see the financial tables below.
Contact Us
Lorna Williams
ir@cuehealth.com
Cue Health
press@cuehealth.com
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Product revenue | $ | 14,757 | $ | 66,660 | $ | 46,842 | $ | 328,465 | |||||||||||||||
| Grant and other revenue | 2,720 | 2,929 | 5,296 | 8,234 | |||||||||||||||||||
| Total revenue | 17,477 | 69,589 | 52,138 | 336,699 | |||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Cost of product revenue | 22,180 | 50,595 | 91,349 | 239,190 | |||||||||||||||||||
| Sales and marketing | 7,051 | 18,129 | 26,358 | 69,268 | |||||||||||||||||||
| Research and development | 37,103 | 42,516 | 118,372 | 115,303 | |||||||||||||||||||
| General and administrative | 15,848 | 25,625 | 47,489 | 77,946 | |||||||||||||||||||
| Restructuring expense | — | 137 | 14,518 | 2,020 | |||||||||||||||||||
| Total operating costs and expenses | 82,182 | 137,002 | 298,086 | 503,727 | |||||||||||||||||||
| Loss from operations | (64,705) | (67,413) | (245,948) | (167,028) | |||||||||||||||||||
| Interest expense | (304) | (346) | (815) | (413) | |||||||||||||||||||
| Tax credits | 20,939 | — | 20,939 | — | |||||||||||||||||||
| Other income, net | 1,833 | 409 | 5,525 | 458 | |||||||||||||||||||
| Net loss before income taxes | (42,237) | (67,350) | (220,299) | (166,983) | |||||||||||||||||||
| Income tax expense (benefit) | 4,733 | (1,047) | 4,733 | (4,433) | |||||||||||||||||||
| Net loss | $ | (46,970) | $ | (66,303) | $ | (225,032) | $ | (162,550) | |||||||||||||||
| Net loss per share – basic | $ | (0.31) | $ | (0.45) | $ | (1.48) | $ | (1.10) | |||||||||||||||
| Weighted-average number of shares used in computation of net loss per share – basic | 153,699,408 | 148,285,721 | 152,226,999 | 147,443,196 | |||||||||||||||||||
| Net loss per share – diluted | $ | (0.31) | $ | (0.45) | $ | (1.48) | $ | (1.10) | |||||||||||||||
| Weighted-average number of shares used in computation of net loss per share – diluted | 153,699,408 | 148,285,721 | 152,226,999 | 147,443,196 | |||||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and share data)
| September 30, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 111,454 | $ | 241,530 | |||||||
| Restricted cash | 800 | 800 | |||||||||
| Accounts receivable, net | 1,320 | 18,751 | |||||||||
| Inventories, net - current | 63,555 | 82,210 | |||||||||
| Prepaid expenses | 9,862 | 15,728 | |||||||||
| Other current assets | 5,248 | 12,134 | |||||||||
| Total current assets | 192,239 | 371,153 | |||||||||
| Non-current inventories, net | 27,640 | 25,436 | |||||||||
| Property and equipment, net | 166,311 | 189,275 | |||||||||
| Operating lease right-of-use assets | 80,829 | 85,321 | |||||||||
| Intangible assets, net | 21,539 | 16,867 | |||||||||
| Other non-current assets | 3,735 | 6,528 | |||||||||
| Total assets | $ | 492,293 | $ | 694,580 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 11,109 | $ | 7,150 | |||||||
| Accrued liabilities and other current liabilities | 39,920 | 52,378 | |||||||||
| Deferred revenue, current | 623 | 1,566 | |||||||||
| Operating lease liabilities, current | 5,109 | 7,739 | |||||||||
| Finance lease liabilities, current | 1,646 | 2,362 | |||||||||
| Total current liabilities | 58,407 | 71,195 | |||||||||
| Operating leases liabilities, net of current portion | 42,961 | 44,045 | |||||||||
| Finance lease liabilities, net of current portion | — | 849 | |||||||||
| Other non-current liabilities | 2,091 | 1,997 | |||||||||
| Total liabilities | 103,459 | 118,086 | |||||||||
| Stockholders’ Equity | |||||||||||
| Common stock | 2 | 1 | |||||||||
| Additional paid-in-capital | 831,938 | 794,567 | |||||||||
| Accumulated deficit | (443,106) | (218,074) | |||||||||
| Total stockholders’ equity | 388,834 | 576,494 | |||||||||
| Total liabilities and stockholders’ equity | $ | 492,293 | $ | 694,580 | |||||||
Non-GAAP Measures
(In thousands, except share data)
The following table presents the reconciliation of Net loss to Adjusted EBITDA, for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net loss | $ | (46,970) | $ | (66,303) | $ | (225,032) | $ | (162,550) | |||||||||||||||
| Interest expense | 304 | 346 | 815 | 413 | |||||||||||||||||||
| Income tax expense (benefit) | 4,733 | (1,047) | 4,733 | (4,433) | |||||||||||||||||||
| Depreciation and amortization | 13,572 | 11,404 | 37,992 | 32,989 | |||||||||||||||||||
| Stock-based compensation | 12,687 | 15,690 | 38,597 | 48,515 | |||||||||||||||||||
| Tax credits | (20,939) | — | (20,939) | — | |||||||||||||||||||
| Restructuring expense | — | 137 | 14,518 | 2,020 | |||||||||||||||||||
| Disputed vendor payment | — | — | 12,000 | — | |||||||||||||||||||
| Inventory charges - inventory reserves / warranty reserves | — | 2,610 | — | 45,454 | |||||||||||||||||||
| Adjusted EBITDA | $ | (36,613) | $ | (37,163) | $ | (137,316) | $ | (37,592) | |||||||||||||||
The following table presents the reconciliation of Product gross profit (loss) margin to Adjusted product gross profit (loss) margin, for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Product revenue | $ | 14,757 | $ | 66,660 | $ | 46,842 | $ | 328,465 | |||||||||||||||
| Cost of product revenue | 22,180 | 50,595 | 91,349 | 239,190 | |||||||||||||||||||
| Product gross profit (loss) | (7,423) | 16,065 | (44,507) | 89,275 | |||||||||||||||||||
| Product gross profit (loss) margin | (50) | % | 24 | % | (95) | % | 27 | % | |||||||||||||||
| Disputed vendor payment | — | — | 12,000 | — | |||||||||||||||||||
| Inventory charges - inventory reserves / warranty reserves | — | 2,610 | — | 45,454 | |||||||||||||||||||
| Adjusted product gross profit (loss) | $ | (7,423) | $ | 18,675 | $ | (32,507) | $ | 134,729 | |||||||||||||||
| Adjusted product gross profit (loss) margin | (50) | % | 28 | % | (69) | % | 41 | % | |||||||||||||||
The following table presents the reconciliation of Net loss / diluted EPS to Adjusted net loss / diluted EPS, for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2023 | ||||||||||||||||||||||
| Dollar Amount | Per Diluted Share | Dollar Amount | Per Diluted Share | ||||||||||||||||||||
| Net loss / diluted EPS | $ | (46,970) | $ | (0.31) | $ | (225,032) | $ | (1.48) | |||||||||||||||
| Tax credits | (20,939) | (0.14) | (20,939) | (0.14) | |||||||||||||||||||
| Disputed vendor payment | — | — | 12,000 | 0.08 | |||||||||||||||||||
| Restructuring expense | — | — | 14,518 | 0.10 | |||||||||||||||||||
| Tax effects | 4,325 | 0.03 | 4,325 | 0.03 | |||||||||||||||||||
| Adjusted net loss / diluted EPS | $ | (63,584) | $ | (0.42) | $ | (215,128) | $ | (1.41) | |||||||||||||||