UpHealth Announces Third Quarter Fiscal 2021 Financial Results

DELRAY BEACH, Fla., Nov. 10, 2021 /PRNewswire/ -- UpHealth, Inc. ("UpHealth" or the "Company") (NYSE: UPH), a global digital health company delivering technology platforms, infrastructure, and services to modernize care delivery and health management, today announced financial results for the third quarter ended Sept. 30, 2021.

"Our first full quarter as a public company marks tremendous growth and success, as we boldly push the integration of our operations and consistently pursue our transformation to a global, leading, digital healthcare, public company. The results convincingly demonstrate the clear value and differentiators of the UpHealth model as well as the dedication of our people and support of our investors, clients, and partners," said Dr. Ramesh Balakrishnan, chief executive officer of UpHealth. "As we continue to build this incredible team, we're excited about the future. We are well capitalized to become a leading force in digital health with our unmatched combination of technology, infrastructure, and services."               

Third Quarter 2021 Results

Revenue for the third quarter of 2021 was $49.1 million, a 25% increase over last quarter's pro forma revenue. Gross margin expanded from 36% to 40%, representing an 11% improvement from last quarter's pro forma gross margin. On a pro forma basis, revenue from the first quarter of 2021 increased 28% to the second quarter of 2021, and increased a further 25% from the second quarter to the third quarter of 2021.

Historically, UpHealth reported its revenue and gross margin on a business unit basis to provide continuity with historical results. As a result of the integration and alignment of the businesses, the Company is now operating along three business lines and will report financial information for the following segments: Integrated Care Management, Virtual Care Infrastructure, and Services. The Services segment includes the Digital Pharmacy and Behavioral Health business units.

Revenue and gross margin by segment for the third quarter of 2021 were:

• Integrated Care Management generated $11.9 million of revenue (24% of total revenue), with a gross margin of 40%;
• Virtual Care Infrastructure, the largest revenue contributor, generated $19.2 million of revenue (39% of total revenue), with a gross margin of 40%; and
• Services generated $18.1 million of revenue (37% of total revenue), with a gross margin of 41%.

Third quarter net income attributable to UpHealth was $32.6 million, or $0.28 per fully diluted share, including a $49.9 million gain on fair value of derivative liability associated with the convertible notes due to changes in the Company's stock price.

Adjusted EBITDA for the third quarter was $5.0 million, an increase from $2.3 million last quarter on a pro forma basis.

Please refer to the discussion and tables below under "Non-GAAP Financial Information."

Year-to-Date Nine Month Results

On a GAAP basis, year-to-date revenue for the third quarter was $93.8 million, and gross margin was 41%.  On a pro forma basis, year-to-date revenue was $118.8 million, which was 38% higher than pro forma revenue for same period in 2020.  Pro forma year-to-date gross margin was 40%.

Year-to-date revenue and gross margin by segment for the third quarter of 2021 were:

• Integrated Care Management generated $29.4 million of GAAP revenue (31% of total revenue and 25% of pro forma total revenue), with a gross margin of 49%;
• Virtual Care Infrastructure, generated $26.7 million of revenue (28% of total revenue), with a gross margin of 40%. On a pro forma basis, Virtual Care Infrastructure generated $42.3 million of revenue (36% of pro forma total revenue), with a gross margin of 39%, and
• Services generated $37.6 million of revenue (40% of total revenue), with a gross margin of 35%. On a pro forma basis, Services generated $47.1 million of revenue (40% of pro forma total revenue), with a gross margin of 34%.

Year-to-date GAAP net loss attributable to UpHealth was $3.1 million, or $(0.03) per fully diluted share, including a $49.9 million gain on fair value of derivative liability associated with the convertible notes due to changes in the Company's stock price.

Year-to-date Adjusted EBITDA was $7.9 million and pro forma Adjusted EBITDA was $10.3 million.

Please refer to the discussion and tables below under "Non-GAAP Financial Information".

Balance Sheet and Cash Flow

At Sept. 30, 2021, UpHealth reported $68.3 million of cash, cash equivalents, and restricted cash. In October, subsequent to the close of the third quarter, UpHealth raised $43.0 million, net of underwriting discounts and commissions and estimated offering expenses of $3.3 million, from the issuance of approximately 26.5 million shares of common stock, substantially increasing the Company's free float and increasing the total number of outstanding shares to approximately 144 million. Proceeds of the equity offering will enable UpHealth to satisfy its short-term liabilities and fund ongoing working capital and capital expenditure requirements associated with the Company's continued growth. If the equity offering had been completed prior to Sept. 30, 2021, the Company would have reported approximately $111.3 million of cash, cash equivalents, and restricted cash as of Sept. 30, 2021. The Company will retain sufficient liquidity as it continues to invest capital to fund growth in excess of cash flow from operations through at least the second quarter of 2022.

Significant Third Quarter Business Highlights

• UpHealth entered into a significant contract in California to deploy SyntraNet for the largest specialty mental health plan in the state and completed platform extensions that support a very ambitious CalAIM initiative to better manage health for individuals with complex medical, behavioral health and social needs, increasing the population on platform from around 6.8 million to nearly 7.1 million.
• UpHealth expanded the U.S. footprint of MARTTI, its HIPAA compliant, virtual care platform, in Q3. MARTTI currently supports 168,000 encounters per month and over 26,000 video endpoints at over 2,100 healthcare locations in the U.S.
• The Company recorded its largest volume of telehealth use in the U.S. with over 7.4 million minutes of consultations, compared to 6.1 million minutes in Q2 and 4.6 million minutes in Q3 2020.
• UpHealth's domestic business added contracts with RWJ Barnabas, IU Health System, and AxessPointe Health, with an annual contract value of $5.5 million, and a total contract value of $16.5 million over 36 months.
• UpHealth also completed the installation of 550 digital clinics in Madhya Pradesh, with 260 of them being operational. The clinics will eventually serve a population of almost 25 million.
• The Company was contracted to install and deploy 260 digital clinics in the Democratic Republic of the Congo, with a contract value of $66 million over 5 years. The build-out is already underway.
• UpHealth strengthened its leadership team by adding Mike Rolla from the Livongo side of Teladoc, as chief revenue officer and Sarah Arnquist from Beacon Health Options as senior vice president of Integrated Behavioral Health.

Financial Outlook

The Company's capital raise in October strengthened the balance sheet and secured the working capital needed for continued and ambitious growth through 2022. The Company maintains its financial projections for 2021 of $180 million, and adjusted EBITDA of $16-20 million before public company expenses.

Conference Call

UpHealth management will host a live question-and-answer session with investors and analysts beginning at 5 p.m. Eastern Daylight Time today, Nov. 10, 2021. The call can be accessed live over the telephone by dialing (844) 200-6205, passcode 347674, from the U.S. or International callers can dial (929) 526-1599, passcode 347674. There will also be a simultaneous, live webcast available on the Investor Relations section of the Company's web site at https://investors.uphealthinc.com/events-and-presentations/default.aspx or directly here. The webcast will be archived for approximately 30 days.

About UpHealth Inc.

UpHealth is a global digital health company that delivers digital-first technology, infrastructure and services to dramatically improve how healthcare is delivered and managed. The UpHealth platform creates digitally enabled "care communities" that improve access and achieve better patient outcomes at lower cost, through digital health solutions and interoperability tools that serve patients wherever they are, in their native language. UpHealth's clients include global governments, health plans, healthcare providers and community-based organizations. For more information, please visit https://uphealthinc.com and follow us at @UpHealthInc on Twitter and UpHealth Inc on LinkedIn.

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, the financial statements of UpHealth, its product offerings and developments  and reception of its product by customers, and its 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 in light of 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 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 expand what it does for existing customers as well as to add new customers, that UpHealth will have sufficient capital to operate as anticipated, and the impact that the novel coronavirus and the illness, COVID-19, that it causes, as well as government responses to deal with the spread of this illness and the reopening of economies that have been closed as part of these responses, may have on UpHealth's operations, the demand for UpHealth's products, global supply chains and economic activity in general. 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. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). To supplement UpHealth's condensed consolidated financial statements presented in accordance with GAAP, UpHealth presents investors with non-GAAP financial measures, including pro forma revenue, pro forma gross margin, and adjusted EBITDA.

• Pro forma revenue consists of GAAP revenue and revenue from UpHealth's subsidiaries prior to their acquisition.
• Pro forma gross margin consists of GAAP gross margin and gross margin from UpHealth's subsidiaries prior to their acquisition.
• Adjusted EBITDA consists of net income (loss) attributable to UpHealth, Inc., excluding depreciation and amortization, stock-based compensation, lease abandonment expenses, acquisition-related costs, other income (expense), income tax benefit (expense), income (loss) from equity method investment, 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.

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.

Pro forma revenue, pro forma gross margin and Adjusted EBITDA are 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 these measures 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.

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SOURCE UpHealth, Inc.