NantHealth, Inc. Common Stock (NH) Q1 2021 Earnings Call Transcript

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NantHealth, Inc. Common Stock (NH)
Q1 2021 Earnings Call
May 06, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the NantHealth 2021 first-quarter financial results conference call. [Operator instructions] Thank you. I'd like to turn it over to Mr. Robert Jaffe, investor relations at NantHealth.

You may begin the conference, sir.

Robert Jaffe -- Investor Relations

Welcome, everyone, and thank you for joining us today to discuss NantHealth's 2021 first-quarter financial results. On the call today are Ron Louks, chief operating officer; and Bob Petrou, our chief financial officer. This call is being broadcast live at www.nanthealth.com. A playback will be available for three months on NantHealth's website.

I'd like to make the cautionary statement and remind everyone that all of the information discussed on today's call is covered under the safe harbor provisions of the Litigation Reform Act. The company's discussion today will include forward-looking information, reflecting management's current forecast of certain aspects of the company's future, and actual results could differ materially from those stated or implied. In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with U.S. generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.

Investors are encouraged to review NantHealth's press release announcing its full 2021 first-quarter financial results for the company's reasons for including those non-GAAP financial measures in its financial results announcement. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is also contained in the company's earnings press release issued earlier today. In a moment, Ron will provide a brief overview of the quarter and discuss the business, followed by Bob, who will discuss the financial results in more detail. We will then open the call for questions.

With that said, I will now turn the call over to Ron Louks. Ron?

Ron Louks -- Chief Operating Officer

Thanks, Robert. Good afternoon, everyone, and welcome to NantHealth's 2021 first-quarter financial results conference call. We hope all of you and your families remain safe and well. I'll begin with a brief review of our financial results.

Nearly all of our total revenue of $16.2 million was software-related revenue and our gross margin for the quarter was 56%. R&D expense increased to $5 million from $3.6 million as we continued our investments in further developing our SaaS offerings, expanding our data and AI capabilities and our recently acquired OpenNMS business. Bob will discuss our financials in more detail shortly. Turning to our capital structure.

A few weeks ago, we completed $137.5 million financing transaction. The benefits of this transaction include extending the maturity of our debt 2026 from 2021 and providing capital to allow for broader investments in our existing business. We are obviously very pleased with this transaction. Now let's discuss our software and services business.

I'll begin with our Eviti business. During the quarter, we launched Eviti Connect 8.4, which included new functionality that enables drug customization and provides added flexibility and new payer communication capability that reduces delays in treatment plan review. Earlier this week, we announced a major milestone for Eviti Connect, our payer solution for oncology. We launched Eviti Connect for autoimmune diseases, which represent the first expansion for Eviti Connect beyond oncology.

Autoimmune diseases affect more than 50 million people in the U.S. alone, making this an important new area for our Evity business. On a related note, we also announced that we have developed a new flexible platform that will allow us to expand into additional disease states, further extending the applications for Eviti Connect. Also in May, Eviti Connect won a med tech breakthrough award for best overall med tech software.

This is a prestigious award, which recognizes Eviti Connect's innovative ability to bring through digital health and medical technology markets and streamline processes that aid payers and providers in optimizing patient outcomes. Turning to payer engagement. NaviNet and the recently launched Population Health Management tools. In Q1, we secured thre multiyear customer renewal contracts that have secured $700,000 combining into contract value.

AllPayer, our direct-to-provider solution recorded its seventh consecutive quarter of growth. We enhanced NaviNet's essential workflows to support automation to promote greater usability and we launched Population Health Management, a new product offering that integrates multiple data sources into one platform, providing a more complete view of the patient. Turning to our recently acquired network monitoring business OpenNMS, we deployed a solution for a global energy customer that scales the monitoring analysis of network communications by aggregating the data streams, net flow. And we initiated the service pilot for a zero-touch appliance solution with a large national retailer.

To sum up, we announced an important new financing in which we will retire existing convertible notes. The financing significantly extended the maturity of our debt provides additional resources to support our growth and initiatives. We expanded our Eviti Connect solution into a new disease state. And over time, we expect to expand in additional diseases, and we continue to invest in our SaaS offerings, data services, and cloud capabilities.

With that overview of our business, I'll turn the call over to Bob to discuss our financial results in more detail. Bob?

Bob Petrou -- Chief Financial Officer

Thank you, Ron. For Q1 2021, total revenue was $16.2 million, compared with $18.2 million in Q1 of the prior year. The decrease was expected and mainly due to the completion of the amortization on the higher value of NaviNet professional service projects in 2020 versus Q1 2021. Gross profit was $9.1 million or 56% of revenue, a decrease from $11 million or 60% for the same quarter in the prior year.

The decline in gross margin percent is tied to the lower revenue in the quarter. Gross margin will remain under pressure until higher revenue is generated to offset the cost base required to manage our product offerings. Total operating expenses increased 10% to $18.5 million from $16.8 million in the prior-year first quarter. This is mainly driven by our continued investments in data and OpenNMS.

The total operating expenses of $18.5 million were only marginally higher than the last two quarters, which were $18.1 million and $18.2 million, respectfully. We expect a small growth in cost to continue as we continue to build on new products and offerings. For Q1 2021, net loss from continuing operations attributable to NetHealth was $15.4 million or $0.14 per share. This is compared with $8.9 million or $0.08 per share in the prior-year first quarter.

On a non-GAAP basis, net loss from continuing operations attributable to NetHealth in Q1 2021 was $9.6 million or $0.09 per share. This is compared with $6.1 million or $0.06 per share from the first quarter of last year. Finally, cash and cash equivalents were $10.8 million at March 31, 2021, compared with $22.8 million at the end of 2020. Net usage of cash was approximately $12 million, which was mainly driven by our investments, yearly IT costs, and other front-end loaded uses of cash.

Subsequent to Q1 close, we were able to close on additional financing, which will be reflected in our Q2 cash balance. With that, I will now turn the call back over to Robert.

Robert Jaffe -- Investor Relations

Thanks, Bob. Operator, we will now entertain questions from folks.

Questions & Answers:

Operator

Certainly, sir. [Operator instructions] We don't have any questions at this time, sir.

Robert Jaffe -- Investor Relations

OK. Thanks, everyone, for joining us today. We look forward to sharing our progress on our next scheduled conference call. Thanks again for joining us today.

Operator

[Operator signoff]

Duration: 12 minutes

Call participants:

Robert Jaffe -- Investor Relations

Ron Louks -- Chief Operating Officer

Bob Petrou -- Chief Financial Officer

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