Catasys' fourth quarter 2013 revenues up 161%

Catasys, Inc. (OTCBB: CATS), provider of proprietary health management services to health insurers and employers, today announced financial results for the fourth quarter ended December 31, 2013.

Highlights:

• CEO Terren Peizer's total investment in Catasys now exceeds $10 million
• 195% increase in fourth quarter enrollment (based on same number of covered lives) compared with the same quarter last year.
• 195% increase in recognized revenue from the healthcare services segment to $439,000 in the fourth quarter, compared with the same quarter last year, including the recognition of $318,000 in deferred revenue in the fourth quarter of 2013 due to us meeting the required performance guarantees, compared to $39,000 in the same quarter last year.
• 92% increase in deferred revenue from healthcare services segment to $534,000 at December 31, 2013, compared with December 31, 2012.
• Launched programs in two states (Kentucky and West Virginia) for Humana's individually enrolled Medicare Advantage members in the fourth quarter of 2013, which contributed to the fourth quarter increase in enrollment.
• Signed an agreement with Centene to make the Catasys OnTrak program available to Centene's Medicaid members in Wisconsin. This program commenced enrollment in the first quarter of 2014.
• Signed a contract with a national health plan to provide initial services in New Jersey and enrollment is expected to begin this year.

Rick Anderson, President and COO commented, "We signed two national plans in 2013, bringing us to five operational health care services contracts. These are pivotal events as we anticipate that the two combined national plans, along with several other new plans will provide the critical mass that we need to be cash flow positive as those programs ramp up to full enrollment. We have proven our business model and are gaining significant momentum. Expanding enrollment percentages are providing a powerful revenue driver to our business model. With savings to health plans in excess of 50%, and a retention rate of greater than 80% for OnTrak enrollees, we expect this momentum to continue in 2014 and beyond."

Mr. Anderson continued, "In the first quarter of 2014 we signed our first Medicaid plan, which has already launched in one state. This provides us the opportunity to prove out our outcomes in a Medicaid population, which, if successful, we expect to provide the catalyst for the plan to rollout nationally. We consider Medicaid to be an important and growing segment, as a larger portion of Medicaid plans generally suffer from the consequences of substance dependence than in a commercial plan."

Mr. Anderson concluded, "With our business model proven, and our customer base established, we are squarely focused on expansion during 2014. This expansion is expected to occur not only in the form of new health plans, but also by growing within existing health plans. With contracts with two national plans and several regional plans, in 2014 we anticipate continuing to cement our foundation, and expanding our customer base driven by OnTrak's ability to help improve the health of their members and reducing the increasing costs healthcare companies are facing."

Healthcare Services – Overview

• Customers – Catasys presently provides its proprietary OnTrak integrated substance dependence solutions for third-party payors in Kansas, Kentucky, Louisiana, Massachusetts, Oklahoma, West Virgina and Wisconsin.
• Sales Pipeline and Growth – Management expects continued organic growth – as existing insurers continue to recognize the value of the services of our program and expand into new territories and/or lines of business.  Management also expects to continue to grow by signing new insurers. In addition to the recently signed national insurer, the Company had a sales pipeline of 13 million covered lives with 3 million in advanced stages of discussion, as of the end of 2013.
• Cash Position – The Company raised $4.2 million in 2013, $3.2 million of which was from the Company's Chairman and CEO, Terren Peizer. An additional $1 million was raised in January 2014, $919,500 of which was from Mr. Peizer.
• Enrollment – Generally 0.5% of a commercial health plan's covered lives will be eligible for the OnTrak program and the Company anticipates that approximately 20% of those that are eligible will enroll in the program each year after full enrollment is achieved, which is anticipated up to approximately 12 months from the commencement of enrollment.
• Revenues – Healthcare services revenues are generated either monthly based on enrolled members at approximately $8,500 per year, or as a lower case rate when a member enrolls and a share of cost savings realized. Revenue without performance guarantees is recognized ratably over 12 months. If contracts contain a minimum performance guarantee, that portion of the monthly fee subject to the guarantee is reserved as deferred revenue until the performance measurement period is completed. Savings shares are recognized when they are paid.

Fourth Quarter 2013 Results of Operations
For the fourth quarter of fiscal 2013, total revenues increased 161% to $468,000 compared with $179,000 for the same period last year. Increased total revenues are primarily a result of an increase in healthcare services revenue. The Company reported a loss from operations before taxes of $1,494,000, or $(0.08) per basic and diluted share, for the fourth quarter of 2013, compared with a loss of $5,777,000, or $(0.66) per basic and diluted share, in the fourth quarter last year. The financial statements have been retroactively restated to reflect the 10-for-1 reverse stock split that occurred on May 6, 2013.

Total operating expenses for the fourth quarter of 2013 were $2,555,000, down 5%, or $116,000 compared with the fourth quarter in 2012.

Full Year 2013 Results of Operations
For the full year ended December 31, 2013, total revenues increased 60% to $866,000 compared with $541,000 for the same period last year. Increased revenues are a result of a 195% increase in enrollment growth (on an equal number of lives) compared with the same quarter in 2012. The loss from operations before taxes was $(7.1 million), or $(0.48) per basic and diluted share, for 2013, compared with a loss of $(9.6 million), or $(1.65) per share, in the same period last year. The net loss, including a change in fair value of warrant liability of $5,392,000 and provision for income taxes $9,000, was $(4.7 million), or $(0.32) per share, compared with a net loss of $(11.6 million), or $(2.01) per basic and diluted share, in 2012. The financial statements have been retroactively restated to reflect the 10-for-1 reverse stock split that occurred on May 6, 2013.

Total operating expenses for 2013 were $8.0 million, down 21%, or $2.1 million, compared with the same period in 2012. The decrease was due primarily to the reduction in share-based compensation expense related to the outstanding stock options becoming fully vested at the end of 2012 as mentioned above.

OnTrak Program
Catasys' OnTrak program – contracted with a growing number of health insurers – is designed to improve member health and at the same time lower costs to the insurer by utilizing patient centric treatment that integrates evidence based medical and psychosocial interventions along with care coaching in a 52-week outpatient program. OnTrak is currently improving member health and, at the same time, is demonstrating with several health insurers impressive results. These results are evidenced by reduced inpatient and emergency department utilization driving a more than 50 percent reduction in total health care costs for enrolled members.