Cue Health Reports Fourth Quarter and Full-Year 2022 Financial Results

Rhea-AI Summary

Cue Health Inc. (Nasdaq: HLTH) reported a fourth quarter revenue of $146.8 million in 2022, boosted by $92.4 million in deferred revenue from a U.S. Department of Defense agreement. Full-year revenue reached $483.5 million. The company launched multiple diagnostic tests and a new at-home testing kit while aiming to save $100 million annually through a cost reduction plan. However, GAAP net income showed a loss of $31.5 million for Q4 and $194.1 million for the entire year. Cash reserves were strong at $241.5 million with no debt obligations. The company projects Q1 2023 revenues between $20 million and $25 million.

Positive

• Fourth quarter revenue increased to $146.8 million, including $92.4 million in deferred revenue.
• Full-year revenue reached $483.5 million, demonstrating strong demand in the private sector.
• Achieved all test menu expansion milestones, including multiple submissions to the FDA.
• Launched Cue CareTM, a diagnostic-to-treatment solution enhancing accessibility.
• Implemented a cost reduction plan expected to generate annual savings of $100 million.
• Maintained strong cash reserves of $241.5 million with no debt.

Negative

• GAAP net income loss of $31.5 million in Q4 and $194.1 million for the full year.
• Adjusted net income loss of $74.4 million in Q4 and $191.8 million for the year.
• Operating expenses rose to $94.6 million in Q4 and $359.2 million for the full year.

SAN DIEGO--(BUSINESS WIRE)-- Cue Health Inc. ("Cue") (Nasdaq: HLTH), a healthcare technology company, today reported financial results for the fourth quarter and full-year 2022.

Recent and Full-Year 2022 Highlights

• Reported fourth quarter revenue of $146.8 million, including $92.4 million in deferred revenue related to our agreement with the U.S. Department of Defense. Full-year 2022 revenue was $483.5 million.
• Achieved all test menu expansion milestones for 2022 including four molecular diagnostic tests submissions to the U.S. Food and Drug Administration (FDA):
  • COVID-19 de novo submission for full clearance in the second quarter of 2022
  • Flu A/B de novo submission in the third quarter of 2022
  • Flu A/B + COVID multiplex submission for emergency use authorization (EUA) in the third quarter of 2022
  • Mpox, formerly known as monkeypox, submission for EUA for point-of-care use in the first quarter of 2023
  • RSV molecular test clinical studies completed in the first quarter of 2023
  • Chlamydia + Gonorrhea molecular clinical studies began in the fourth quarter of 2022
  • Strep Throat molecular clinical studies began in the fourth quarter of 2022
• Launched Cue Care^TM our foundational diagnostic-to-treatment solution, enabling individuals to consult with a healthcare professional and get treatment delivered to their home within hours, if medically indicated.
• Introduced a new collection of at-home diagnostic test kits for a variety of health conditions, including sexually transmitted infections, heart health, and food sensitivities, providing personalized care from the convenience and privacy of home. Individuals order tests online, collect samples, mail to a CLIA-certified laboratory partner, and get results delivered to their Cue Health App, with the option to access Cue Care for clinical consultation and prescriptions, if medically indicated.
• Executed a cost reduction plan, which is expected to result in cash savings of approximately $100 million on an annualized basis, while prioritizing near-term revenue generating opportunities.
• Cash and cash equivalents of $241.5 million as of December 31, 2022, while the $100 million secured revolving credit facility remains undrawn and company continues to operate with no debt obligations.

“Our full year 2022 results reflect the success we’ve seen with our first product and the investments we’ve made to execute on all of our strategic priorities, which position us well to become the category leader in diagnostic testing both in the home and at the point of care,” said Ayub Khattak, Chairman and CEO of Cue Health. “From diagnostic testing to virtual care to the procurement of treatment for a range of infectious diseases as well as a growing menu of general health and wellness concerns, Cue has strengthened its integrated care platform to empower people to live their healthiest lives.”

Fourth Quarter 2022 Financial Results

Revenue was $146.8 million for the fourth quarter of 2022, including $92.4 million of deferred revenue recognized in the quarter from our agreement with the U.S. Department of Defense.

Excluding deferred revenue, fourth quarter of 2022 revenue was $54.4 million from ongoing operations, driven by stronger than anticipated COVID-19 testing orders from existing customers.

Private sector revenue was $52.4 million, 36% of total revenue or 96% of revenue from ongoing operations. Public sector revenue was $94.4 million or $1.9 million excluding deferred revenue. Disposable test cartridge revenue was $50.5 million.

GAAP product gross profit margin was 38% in the fourth quarter of 2022. Adjusted product gross profit margin was 18% excluding the impact of deferred revenue and one-time adjustments to inventory reserves related to excess readers and reader components.

Operating expenses in the fourth quarter of 2022 were $94.6 million, excluding cost of revenues, reflecting an increase in research and development spend to support product development, software technology, and menu expansion investments.

GAAP net income in the fourth quarter of 2022 was a loss of $31.5 million and earnings per diluted share was a loss of $0.21. Cue's adjusted net income was a loss of $74.4 million and adjusted earnings per diluted share was a loss of $0.50. Adjusted EBITDA was a loss of $54.0 million.

Full-Year 2022 Financial Results

Revenue was $483.5 million for the full year of 2022 or $391.1 million when excluding deferred revenue.

Private sector revenue was $374.7 million, or 77% of total revenue. Public sector revenue was 23% of total revenue or $108.8 million. Disposable test cartridge revenue was $358.1 million for the full year 2022.

GAAP product gross profit margin was 30% for the full year 2022. Adjusted product gross profit margin was 38% after excluding one-time inventory charges of $92.8 million and the impact from deferred revenue.

Operating expenses for the full year 2022 were $359.2 million including $2.0 million of restructuring expenses taken during the fiscal year.

GAAP net income for the full year 2022 was a loss of $194.1 million and earnings per diluted share was a loss of $1.31. Cue's Adjusted net income was a loss of $191.8 million and Adjusted earnings per diluted share was a loss of $1.29. Adjusted EBITDA was a loss of $91.5 million.

Cash and cash equivalents were $241.5 million as of December 31, 2022. In addition, Cue Health's $100 million secured revolving credit facility remains undrawn and Cue Health operates with no debt obligations.

Guidance

Cue Health expects first quarter 2023 revenues in the range of $20 million to $25 million.

About Cue Health

Cue is a healthcare technology company that makes it easy for individuals to access health information and places diagnostic information at the center of care. Cue enables people to manage their health through real-time, actionable, and connected health information, offering individuals and their healthcare providers easy access to lab-quality diagnostics anywhere, anytime, in a device that fits in the palm of the hand. Cue’s first-of-its-kind COVID-19 test was the first FDA-authorized molecular diagnostic test for at-home and over-the-counter use without a prescription and physician supervision. Outside the United States, Cue has received the CE mark in the European Union, Interim Order authorization from Health Canada, regulatory approval from India's Central Drugs Standard Control Organization, and PSAR authorization from Singapore's Health Sciences Authority. Cue was founded in 2010 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 first 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” 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 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.

This product 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.

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.

Adjusted EBITDA is defined as net income before interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation, restructuring expense, inventory charges – inventory reserves/warranty reserves, DoD deferred revenue release, banking and finance-related items including fair value adjustments - convertible notes.

Adjusted product gross profit is defined as product gross profit, before DoD deferred revenue release and inventory charges – inventory reserves / warranty reserves.

Adjusted net (loss) income is defined as Net (loss) income, before Inventory charges – inventory reserves / warranty reserves, DoD deferred revenue release, restructuring expense and tax effects.

Adjusted diluted EPS is defined as Diluted EPS before Inventory charges – inventory reserves / warranty reserves, DoD deferred revenue release, 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.

CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share data)
	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Revenue
Product revenue	$	145,701			$	191,280			$	474,166			$	615,796
Grant and other revenue		1,076				1,226				9,310				2,311
Total revenue		146,777				192,506				483,476				618,107
Operating costs and expenses:
Cost of product revenue		90,783				102,796				329,973				276,542
Sales and marketing		19,312				21,198				88,580				28,729
Research and development		56,149				21,679				171,452				42,829
General and administrative		19,157				23,452				97,103				79,788
Restructuring Expense		—				—				2,020				—
Total operating costs and expenses		185,401				169,125				689,128				427,888
Income (loss) from operations		(38,624	)			23,381				(205,652	)			190,219
Interest expense		(232	)			(57	)			(645	)			(9,809	)
Change in fair value of redeemable convertible preferred stock warrants		—				—				—				53
Change in fair value of convertible notes		—				—				—				(59,560	)
Loss on extinguishment of debt		—				—				—				(1,998	)
Other income (expense), net		2,035				291				2,493				272
Net income (loss) before income taxes		(36,821	)			23,615				(203,804	)			119,177
Income tax expense (benefit)		(5,315	)			(10,615	)			(9,748	)			32,759
Net income (loss)	$	(31,506	)		$	34,230			$	(194,056	)		$	86,418
Net income (loss) per share attributable to common stockholders – basic	$	(0.21	)		$	0.23			$	(1.31	)		$	0.63
Weighted-average number of shares used in computation of net income (loss) per share attributable to common stockholders – basic		149,711,419				146,367,756				148,024,749				52,815,449
Net income (loss) per share attributable to common stockholders – diluted	$	(0.21	)		$	0.22			$	(1.31	)		$	0.59
Weighted-average number of shares used in computation of net income (loss) per share attributable to common stockholders – diluted		149,711,419				152,531,173				148,024,749				59,635,384

CONDENSED BALANCE SHEETS
(In thousands, except share amounts and share data)
	December 31, 2022				December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	241,530			$	409,873
Restricted cash		800				13,837
Accounts receivable		18,751				104,589
Inventories		82,210				88,388
Prepaid expenses		15,728				45,889
Other current assets		12,134				7,446
Total current assets		371,153				670,022
Non-current inventories		25,436				—
Property and equipment, net		189,275				177,456
Operating lease right-of-use assets		85,321				79,474
Intangible assets, net		16,867				7,673
Other non-current assets		6,528				5,435
Total assets	$	694,580			$	940,060
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	7,150			$	37,208
Accrued liabilities and other current liabilities		52,378				29,498
Income taxes payable		—				8,297
Deferred revenue, current		1,566				82,165
Operating lease liabilities, current		7,739				7,147
Finance lease liabilities, current		2,362				2,621
Total current liabilities		71,195				166,936
Deferred revenue, net of current portion		—				10,283
Operating leases liabilities, net of current portion		44,045				46,464
Finance lease liabilities, net of current portion		849				3,271
Other non-current liabilities		1,997				6,356
Total liabilities		118,086				233,310
Stockholders’ Equity (Deficit)
Common stock, $0.00001 par value; 500,000,000 and 500,000,000 shares authorized, 150,406,014 and 146,402,991 issued and outstanding at December 31, 2022 and December 31, 2021, respectively		1				1
Additional paid-in-capital		794,567				730,767
Accumulated deficit		(218,074	)			(24,018	)
Total stockholders’ equity (deficit)		576,494				706,750
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	694,580			$	940,060

Non-GAAP Net Income (Loss)
(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 December 31,								Year Ended December 31,
		2022				2021				2022				2021
Net (loss) income	$	(31,506	)		$	34,230			$	(194,056	)		$	86,418
Interest expense		232				57				645				9,809
Income tax expense (benefit)		(5,315	)			(10,615	)			(9,748	)			32,759
Depreciation and amortization		11,953				6,430				44,942				32,509
Stock-based compensation		15,776				17,421				64,291				42,979
Restructuring expense		—				—				2,020				—
Inventory charges - inventory reserves / warranty reserves		47,352				—				92,806				—
DoD deferred revenue release		(92,448	)			—				(92,448	)			—
Fair value adjustment - convertible notes		—				—				—				59,560
Forgiveness of promissory notes		—				—				—				12,880
Banking and finance-related items		—				—				—				7,998
Adjusted EBITDA	$	(53,956	)		$	47,523			$	(91,548	)		$	284,912

The following table presents the reconciliation of Product gross profit margin to Adjusted product gross profit margin, for the periods presented:

	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Product revenue	$	145,701			$	191,280			$	474,166			$	615,796
Cost of product revenue		90,783				102,796				329,973				276,542
Product gross profit		54,918				88,484				144,193				339,254
Product gross profit margin		38	%			46	%			30	%			55	%
DoD deferred revenue release		(92,448	)			—				(92,448	)			—
Adjusted product revenue		53,253				191,280				381,718				615,796
Inventory charges - inventory reserves / warranty reserves		47,352				—				92,806				—
Adjusted product gross profit	$	9,822			$	88,484			$	144,551			$	339,254
Adjusted product gross profit margin		18	%			46	%			38	%			55	%

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 December 31,								Year Ended December 31,
	2022								2022
	Dollar Amount				Per Diluted Share				Dollar Amount				Per Diluted Share
Net (loss) income / diluted EPS	$	(31,506	)		$	(0.21	)		$	(194,056	)		$	(1.31	)
Inventory charges - inventory reserves / warranty reserves		47,352				0.32				92,806				0.63
DoD deferred revenue release		(92,448	)			(0.62	)			(92,448	)			(0.62	)
Restructuring expense		—				—				2,020				0.01
Tax effects		2,165				0.01				(114	)			—
Adjusted net (loss) income / diluted EPS	$	(74,437	)		$	(0.50	)		$	(191,792	)		$	(1.29	)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230315005833/en/

Lorna Williams

ir@cuehealth.com

Cue Health

press@cuehealth.com

Source: Cue Health Inc.

FAQ

What were Cue Health's Q4 2022 financial results?

Cue Health reported a fourth quarter revenue of $146.8 million, including $92.4 million in deferred revenue.

What is the full-year 2022 revenue for Cue Health?

Cue Health's full-year 2022 revenue was $483.5 million.

What cost-saving measures has Cue Health implemented?

Cue Health has initiated a plan expected to save approximately $100 million annually.

What is Cue Health's revenue guidance for Q1 2023?

The company projects Q1 2023 revenues in the range of $20 million to $25 million.