UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM | ||
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 10, 2023
(Exact name of Registrant, as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||||||||||||
Mailing address:
(Address of principal executive
offices)
Registrant's telephone number, including area code: (858 ) 412-8151
Former name or address, if changed since last report: Not Applicable.
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On May 10, 2023, Cue Health Inc. ("Cue Health" or the "Company"), issued a press release announcing the Company’s financial results for the first quarter ended March 31, 2023. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.
The information contained in this Current Report on Form 8-K and in the accompanying exhibit are “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | ||||
Press Release issued by Cue Health dated May 10, 2023. | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document). | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Cue Health Inc. | ||||||||
Date: May 10, 2023 | By: | /s/ Aasim Javed | ||||||
| Name: | Aasim Javed | |||||||
| Title: | Chief Financial Officer | |||||||
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Cue Health Reports First Quarter 2023 Financial Results
____________________
SAN DIEGO, CA – May 10, 2023 – Cue Health Inc. ("Cue") (Nasdaq: HLTH), a healthcare technology company, today reported financial results for the first quarter 2023.
Recent Highlights
•Reported first quarter revenue of $24.8 million
•Granted U.S. Food and Drug Administration (FDA) Emergency Use Authorization (EUA) for Cue Mpox (Monkeypox) Molecular Test for point-of-care use
•Submitted the Cue RSV Molecular Test as a De Novo submission to the FDA for home and point-of-care use during the second quarter, as planned
•Launched Cue Pharmacy, a new Cue Integrated Care Platform expansion to enable individuals to connect with a healthcare provider and be prescribed common medications as a subscription
•Launched Cue Lab, a collection of at-home test kits for a wide variety of diagnostic panels and standalone tests providing personalized care from the convenience and privacy of home
•Cue Strep Molecular Test is on track with clinical studies ongoing and a submission to the FDA expected in the second half of 2023
•Cue Chlamydia + Gonorrhea Molecular Test is on track with clinical studies ongoing and a submission to the FDA expected in the second half of 2023
•Achieved our previously announced cost reduction goal of $100 million of annualized run rate cost savings in the first quarter, earlier than anticipated
•Initiated additional cost reduction efforts expected to contribute an additional $50 million of annualized savings, bringing the total goal to $150 million of annualized cost savings
•Ended the first quarter with cash and cash equivalents of $178.2 million and no debt obligations
“We reached several significant milestones including launching Cue Pharmacy, Cue Lab, and receiving authorization for the Cue Mpox test, our second FDA authorization,” said Ayub Khattak, Chairman and CEO of Cue Health. “We have four Cue tests submitted to the FDA, including for RSV and a Flu + COVID combo test. We are executing our strategic plan including expanding the menu on the Cue Health Monitoring System as well as expanding the offering for the Cue Integrated Care Platform. We have cut our annualized costs by an expected $150 million to weather the macroeconomic climate as we make significant progress on our plan.”
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First Quarter 2023 Financial Results
Revenue was $24.8 million for the first quarter of 2023. Private sector revenue was $24.2 million or 98% of total revenue with strong ordering from existing customers. Public sector revenue was $0.6 million and disposable test cartridge revenue was $22.4 million.
GAAP product gross profit margin was a loss of 63% in the first quarter of 2023. Adjusted product gross profit margin was a loss of 14% excluding a disputed payment charge impacting cost of product revenue.
GAAP operating expenses in the first quarter of 2023 were $80.8 million, excluding cost of revenue, including $7.9 million of restructuring expense related to the implementation of the cost reduction plan. On an adjusted basis, excluding the impact of the restructuring expense, operating expenses were $72.9 million or a 23% decrease compared to $94.6 million in the fourth quarter of 2022.
GAAP net loss in the first quarter of 2023 was $94.2 million and earnings per diluted share was a loss of $0.62. Cue's adjusted net loss was $74.3 million and adjusted earnings per diluted share was a loss of $0.48. Adjusted EBITDA was a loss of $47.6 million.
Cash and cash equivalents were $178.2 million as of March 31, 2023 and the company continues to operate with no debt obligations.
Guidance
Cue Health expects second quarter 2023 revenues in the range of $8 million to $10 million reflecting an expected shift to a seasonal respiratory pattern for COVID testing volumes.
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’s COVID-19 test was the first FDA-authorized molecular diagnostic test for at-home and over-the-counter use without a prescription. Cue has since received Emergency Use Authorization from the FDA for its molecular mpox test at the point of care and, to expand its test menu, the company has a number of other submissions under review by the FDA. 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, growth in our customer base, expectations regarding production capacity, potential technology enhancements and future performance and our guidance, including second 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” and similar expressions are intended to identify forward-looking statements, although not all forward-looking
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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 March 31, 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 COVID-19 Molecular Test has not been FDA cleared or approved; but has been authorized by FDA under an Emergency Use Authorization, or EUA. This product has been authorized only for the detection of nucleic acid from SARS-CoV-2, 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 COVID-19 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.
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.
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 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.
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Adjusted EBITDA is defined as net income before interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation, restructuring expense, disputed vendor payment.
Adjusted product gross profit (loss) is defined as product gross profit (loss), before disputed vendor payment.
Adjusted net (loss) income is defined as Net (loss) income, before disputed vendor payment, restructuring expense and tax effects.
Adjusted diluted EPS is defined as Diluted EPS before 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
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenue | |||||||||||
| Product revenue | $ | 24,494 | $ | 177,454 | |||||||
| Grant and other revenue | 271 | 1,956 | |||||||||
| Total revenue | 24,765 | 179,410 | |||||||||
| Operating costs and expenses: | |||||||||||
| Cost of product revenue | 39,823 | 86,697 | |||||||||
| Sales and marketing | 11,248 | 34,168 | |||||||||
| Research and development | 44,733 | 28,787 | |||||||||
| General and administrative | 16,938 | 26,910 | |||||||||
| Restructuring expense | 7,873 | — | |||||||||
| Total operating costs and expenses | 120,615 | 176,562 | |||||||||
| (Loss) income from operations | (95,850) | 2,848 | |||||||||
| Interest expense | (220) | (51) | |||||||||
| Other income, net | 1,872 | 6 | |||||||||
| Net (loss) income before income taxes | (94,198) | 2,803 | |||||||||
| Income tax (benefit) expense | — | — | |||||||||
| Net (loss) income | $ | (94,198) | $ | 2,803 | |||||||
| Net (loss) income per share – basic | $ | (0.62) | $ | 0.02 | |||||||
| Weighted-average number of shares used in computation of net (loss) income per share – basic | 151,083,716 | 146,526,370 | |||||||||
| Net (loss) income per share – diluted | $ | (0.62) | $ | 0.02 | |||||||
| Weighted-average number of shares used in computation of net (loss) income per share – diluted | 151,083,716 | 153,036,804 | |||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and share data)
| March 31, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 178,201 | $ | 241,530 | |||||||
| Restricted cash | 800 | 800 | |||||||||
| Accounts receivable, net | 9,799 | 18,751 | |||||||||
| Inventories, current | 82,006 | 82,210 | |||||||||
| Prepaid expenses | 11,617 | 15,728 | |||||||||
| Other current assets | 4,574 | 12,134 | |||||||||
| Total current assets | 286,997 | 371,153 | |||||||||
| Non-current inventories | 27,718 | 25,436 | |||||||||
| Property and equipment, net | 184,197 | 189,275 | |||||||||
| Operating lease right-of-use assets | 84,542 | 85,321 | |||||||||
| Intangible assets, net | 19,774 | 16,867 | |||||||||
| Other non-current assets | 5,333 | 6,528 | |||||||||
| Total assets | $ | 608,561 | $ | 694,580 | |||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
| Accounts payable | $ | 16,644 | $ | 7,150 | |||||||
| Accrued liabilities and other current liabilities | 40,173 | 52,378 | |||||||||
| Deferred revenue, current | 754 | 1,566 | |||||||||
| Operating lease liabilities, current | 7,739 | 7,739 | |||||||||
| Finance lease liabilities, current | 2,148 | 2,362 | |||||||||
Total current liabilities | 67,458 | 71,195 | |||||||||
| Operating leases liabilities, net of current portion | 42,826 | 44,045 | |||||||||
| Finance lease liabilities, net of current portion | 417 | 849 | |||||||||
| Other non-current liabilities | 1,997 | 1,997 | |||||||||
| Total liabilities | 112,698 | 118,086 | |||||||||
| Stockholders’ Equity | |||||||||||
Common stock, $0.00001 par value; 500,000,000 and 500,000,000 shares authorized, 151,567,650 and 150,406,014 issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 2 | 1 | |||||||||
| Additional paid-in-capital | 808,133 | 794,567 | |||||||||
| Accumulated deficit | (312,272) | (218,074) | |||||||||
| Total stockholders’ equity | 495,863 | 576,494 | |||||||||
| Total liabilities and stockholders’ equity | $ | 608,561 | $ | 694,580 | |||||||
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Non-GAAP Measures
(In thousands, except share data)
The following table presents the reconciliation of Net (loss) income to Adjusted EBITDA, for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net (loss) income | $ | (94,198) | $ | 2,803 | |||||||
| Interest expense | 220 | 51 | |||||||||
| Depreciation and amortization | 12,064 | 10,606 | |||||||||
| Stock-based compensation | 14,407 | 16,035 | |||||||||
| Restructuring expense | 7,873 | — | |||||||||
| Disputed vendor payment | 12,000 | — | |||||||||
| Adjusted EBITDA | $ | (47,634) | $ | 29,495 | |||||||
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 March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Product revenue | $ | 24,494 | $ | 177,454 | |||||||
| Cost of product revenue | 39,823 | 86,697 | |||||||||
| Product gross profit (loss) | (15,329) | 90,757 | |||||||||
| Product gross profit (loss) margin | (63) | % | 51 | % | |||||||
| Disputed vendor payment | 12,000 | — | |||||||||
| Adjusted product gross profit (loss) | $ | (3,329) | $ | 90,757 | |||||||
| Adjusted product gross profit (loss) margin | (14) | % | 51 | % | |||||||
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The following table presents the reconciliation of Net (loss) income / diluted EPS to Adjusted net (loss) income / diluted EPS, for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2023 | |||||||||||
| Dollar Amount | Per Diluted Share | ||||||||||
| Net (loss) income / diluted EPS | $ | (94,198) | $ | (0.62) | |||||||
| Disputed vendor payment | 12,000 | 0.08 | |||||||||
| Restructuring expense | 7,873 | 0.06 | |||||||||
| Tax effects | — | — | |||||||||
| Adjusted net (loss) income / diluted EPS | $ | (74,325) | $ | (0.48) | |||||||
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