Today an article came out on Yahoo! Finance suggesting that Catasys would need to raise money in the near future. I won’t go into their numbers, as they are quite wrong, to the point of being similar to Fake News.
I will, however, explain why CATS is fully funded until cash flow positive. Which is an event that management says will be in Q1 of next year, but doesn’t even need to be that soon with the resources the Company currently possesses.
First off, what is the cash level? At the end of Q2, Catasys had $9.2M in cash with zero debt.
Then, what is the burn rate? In the first six months of 2017, CATS burned through $3.3 M in cash. Please see the below picture from the 10-Q.
I apologize if this is tough to see. Here’s the link if you want to look for yourself, Cash Flow is on page 5. If you are looking, the important line item is payables, which would be where a company could hide excess burn…for Catasys, accounts payable increased by $164,000, a truly de minimis amount.
Based on this incredibly rough analysis, Catasys had about 18 months in cash on the balance sheet at the end of Q2. Side note: we are not including receivables of close to a million dollars as well, which would just add to this.
We are also not factoring in the ramp in the business. For the first six months, Catasys was working off a pool of 6,000 potential enrollees. That number jumped to 24,000 in July and there is a much bigger ramp coming in the next few quarters. At a recent conference, the CEO said that the pool of potential enrollees may exceed 100,000 by the end of next year.
The bottom line here is that CATS has ample cash to see itself through the next year or more with no ramp in business. And, with business already picking up and about to jump to much greater heights soon, this is a non-issue for the Company. We continue to own CATS and believe that this will be a great performer for the Tailwinds Select Portfolio for many years to come.