Q4 2019 Earnings Call
Ladies and gentlemen, we thank you for your patience and please continue to stand by like how does this conference will begin shortly again, we thank you for your patience and please continue to stand by the Cats. This conference will begin shortly thank you.
[music].
Greetings and welcome to the Cat is since 2019 fourth quarter and year end financial results Conference call. At this time, all participants Arnie listen only mode. A question answer session will follow the formal presentation. If he would like to ask a question. Please press star one on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I will not pass the floor overtook representative of the company. Thank you you may begin.
Thank you good afternoon, everyone and thank you for joining us before I turn the call over to management I would like to make the following remarks concerning forward looking statements.
All statements in this conference call other than historical facts are forward looking statements. The words anticipate believe estimate expect intend guidance confidence target project and some other especially is typically are used to identify forward looking statements. These forward looking statements are not guarantees of future performance may involve and are subject to certain risks and uncertainties and other factors.
May affect cashes business financial condition and other operating results, which include not are not limited to the risk factors described in the risk factor section of the form 10-K and forms 10-Q as filed with the FCC. Therefore, actual outcomes and results may differ materially from those expressed or implied by these forward looking statements Cas is expressed weakness.
Claims any intention or obligation to update forward looking statements.
With that I'd like to turn the call over to characterize our chairman and CEO Cats, Inc. Please go ahead.
Thank you and welcome everyone I know, it's a very volatile time and so I. Appreciate you taking the time to join us today.
With me on today's call, our Kirkman, Durastar, President and Chief operating officer at Christopher Shirley Our Chief Financial Officer.
Given the obvious environment, let me say first and foremost that the Corona virus Kobin 19 doesn't have a negative impact on our business in fact as reported in our press release today over the last two weeks, we have had all time record enrollment.
Given that on truck programs target those that are both chronic disease and multiple behavioral health diseases, including anxiety.
We RBC live in a very stressful and anxious times.
We will discuss it up it how we are working with our health plan partners and their members to address the environment.
Given all these current events and the first call the or this will be a bit longer call than usual.
We closed out 2019 with a strong finish in the fourth quarter, achieving the 35 million in revenues, we have projected for the year as a result of the continued ramp in our outreach pool and increasing enrollment.
We had nearly 1600, new net enrolled members in or out in our I'd truck program in Q4 compared to 354 in the prior years fourth quarter. This brought us to nearly 7000 total enrolled members during the period up 437%.
Year over year at 29% from Q3 2019.
At the root of all this growth is our effective outreach pool of eligible lives, which stood at 108000 at the end up Q4 up 6% from 102000 in Q3 and as of today, we stand out 128000 up already 18.5% this year.
Remember, we began 2019 with only 38000 lives the effective outreach pool is different from the total outreach pool of eligible lives that we have talked about in the past we will use effective outreach pool going forward as it represents the lives that we are.
Our actively engaging to enroll entire programs and as such we believe that is more accurately depicts our near term opportunity.
To put the difference in context, our total outreach poor surpassed 150000, the difference can be attributed to bad data outdated contact information and certain ineligible and disregarded populations.
We do believe that through the work with our health plan partners. These two numbers will converge it'd be virtually the same by year end.
In 2019, our effective outreach pool nearly tripled in size as a result of significant expansions with existing health plan partners and launches with new partners last year alone Kansas. This expanded on track to eligible members in five New States, Alabama, Mississippi.
Maryland, Delaware and Ohio last month, we announce another expansion with that no which put us in another new state, Colorado as well as Washington, D.C.. We are now in 28 states and the nation's capital.
Our work in 2019, a set us up for great success than 2020, we continued to make incredible progress and our industry, leading ability to enroll engage and treat these generally care and treatment avoid a members combined with constantly improving technologies has us well.
Question financially and operationally to execute on our initiatives with each new member, we enroll and serve we continue to validate the ROI and value proposition behind our groundbreaking cat assist pre platform and on track programs.
Our health plan partners believe in the work, we do and increasingly so as they continue to expand their relationships with us.
Our effective outreach pool continues to grow and so does the opportunity before us.
Throughout 2019, we built up our engagement team of care coaches and member engagement specialists to ensure that we would be ready for the significant increases and effective outreach pool and enrollment.
Having more than doubled the size of our product lines, we are ready.
To lead us in this effort, we're pleased to welcome Kurt materials to our leadership team in December as President and Chief Operating Officer Kirk is the driving force behind our day to day operations sales and marketing digital technology, and ensuring the company's efficient execution.
As founder and majority shareholder of Canada says it is very comforting and satisfying to have a health care executive with Kurtz ability leadership and stewardship, who previously has successfully scaled advanced data and analytics company to nearly half.
A billion in revenue and with extraordinary profitability.
We also made every effort to continually bolster our board of directors and leadership in 2019, which we believe is critical as we look to achieve the exponential growth we discussed over the past few months.
No Groundbirch Gus Geraldo, who recently served as president of behavioral and specialty health at industry leader Magellan Health and who currently is sent chains managing director of International joined our board. He brings an impressive track record of leading and growing business is a deep under.
Are standing of the dynamics of various healthcare systems around the world and extensive industry relationships developed over his 20 plus years up leadership in health care costs. His leadership and contribution have already paid dividends with our customers.
Just this month, we announced the appointment of Brian Kelly to the newly created role of senior Executive Vice President product portfolio.
As we look to continue on an increasingly rapid trajectory and twentytwenty scaling our programs to broader populations Brian's leadership experience at ascend learning.
From Merck and Dupont will prove valuable in advancing the analytic capabilities and value of cat assist pre so that our market leading team a frontline specialist can better serve even more members in ways that closely integrated with the programs of our health plan customers, which will.
Improved member health and save more lives.
Like Curt Brian has scaled businesses with hundreds of millions in revenue with established healthcare executives like Kurt and Brian We will soon be position to similar they scale our business to hundreds of millions of revenue and beyond.
All that being said our effective outreach pool continues to grow and we anticipate it continuing to grow to at least 200000 in 2020 as a result of I'm going expansions and new partnerships. We have the best of the best leading us on our growth path, we accomplish 35 minor.
Revenue for 2019 as projected and this in spite of several headwinds encountered through the course of the year, we took the appropriate steps and 2019 and continue to do so in 2020 to ensure that we'd be able to handle the exponential growth expected this year and at this time.
We are reiterating our guidance of 90 million in revenue for 2020.
As a reminder, our guidance takes into account only what we know not what we expect.
Thus, we do our best to take into account. The fact that our client base consists of some of the largest companies in America. These are very large very complex organizations, which can mean long lead times senior management turnover corporate restructurings and other unforeseen.
Same customer complications however, as we've done repeatedly in the past we will endeavor to successfully navigate these challenges.
Speaking of large companies with complications you may recall from recent quarterly calls we were set to launch in several states for our National Health plan, a year ago, which would have had significantly surpassing last years 35 million in revenues.
Right before launch they approached us and advised that they would be doing a nationwide RFP for behavioral health solutions. We spent several months preparing the RFP proposal, we then where it buys that we won the RFP.
We were preparing with the National plan for a January 1st launch with Dod track 2.0, then in November the plan informed us it was changing its management structure from a market driven decentralized structure to a centralized corporate one.
With the CEO being the final sign off given the size of the contract on this corporate vetting process.
As you are keenly surmise this introduce risk to the whole contract.
Thankfully I can report today, we are told that the contract is not at risk and we will in fact be launching we are working with the planned for launch April 1st I would be remiss. If I did an insert the cautionary words that this is still a very large income.
Plex company and we still are waiting the details of this statement of work and the sign contract. We are in daily contact with them and our readying for lunch.
Certainly.
We should have clarity in the coming days and hope to be able to provide an update soon.
Switching gears, we continue to explore ways in which we can utilize our gom groundbreaking new platform caddis. This pre predict recommend and engage to better serve members of our health plan partners beyond its application and on track 1.0 and 2.0.
As we work to integrate additional multi condition applications and the Kansas is pretty platform, we strive to improve the functionality of our technologies that will positively impact the lives of an increasingly broader member population with effective lasting treatment while.
Driving significant cost savings and offering an industry leading value proposition for health plan partners.
Now before I turn it over the call to occur to discuss our operations I'd like to give a brief introduction since the only just joined US in December.
Kurt came to us from Optums advanced data and analytics, where he was president of this highly profitable division, which is one of the premier healthcare analytics entities in the country at one of the largest healthcare companies in the world United Health. He is tops in the industry a seasoned later.
20, plus years of industry experience in various operational and strategic role, we demonstrated time and again his ability to create and execute on growth initiatives.
We could not be more thrilled to have them on our leadership team as we look to deliver upon the explosive growth we've seen discussed over the past several months, we've been discussing over the past several months.
With that I'll pass the floor over to occur and will return later to speak on our outlook for the year Kurt.
Thank you for the kind introduction term.
Throughout 2019, Calluses continue to validate the effectiveness and efficiency of its technology is a methodology.
We set the stage for the exponential growth expected this year.
Signing contracts with new Health plan partners and launching several program expansions with existing partners, both by geography and modality.
Because we have achieved proven results and ROI for our customers. We have continued to expand into several new states.
As John mentioned caught us this expanded on track to eligible members and five new states in 2019.
Alabama, Mississippi, Maryland, Delaware in Ohio.
And entered our first new geographies for 2020 by expanding into the state of Colorado, and Washington DC.
We successfully launched on track the California for eligible commercial members beginning January 30, Onest of this year.
And later this month, we will be launching on track for eligible commercial and Medicare advantage members into Colorado, Washington, DC, Virginia in Louisiana.
We are thrilled that not continues to believe in the work we're doing.
Engaging and providing a growing population of their members with access to critical behavioral health care to help them better manage their chronic diseases.
These expansions will grow our total outreach pool significantly as we had further into 2020 and we expect to announce additional expansions with them later this year.
We remain an active discussions with several health plan partners regarding expansions into new states new lines of business, an additional populations such as depression anxiety.
We look forward to announcing new launches this year as we emerged from the pilot phase with a number of health plans.
Our recently established National commercial team has hit the ground Ronnie.
In their contributions are already yielding results for our new business pipeline.
As John discussed earlier, our total outreach pool was at 156000.
At the end of Q4.
The effective outreach pool, consisting of those whom we are currently actively working to engage is at about 128000 eligible members and we anticipate outreaching to the full total outreach pool in the coming months as we correct for health plan specific issues.
Net new enrolled members defined as total new enrollments less graduated and Disenrollment burst was at 1589 in the fourth quarter of 2019.
Up 349% from the prior year period, and 9% from the 1456, we reported for the third quarter 2019.
We expect to see this upward trend continue in the coming quarters, given the continued ramp in our total outreach pool.
Total enrolled members in the fourth quarter of 2019 stood at 6996, a 137% increase from 2952 in the prior year period and up 29% from dies 5407 in the.
Third quarter 2019.
As we continue to build our businesses, we have been able to find increased operating efficiencies, which Christopher will discuss shortly we continue to grow our care teams and the underlying infrastructure to support our rapidly growing eligible member pool and enrolled members.
At the beginning of 2019, our engagement team was at 122 members. We're currently at 257 and continuing to grow our front lines.
Having improved our onboarding and training procedures, new staff are able to effectively engaged with members much more quickly than before and we are seeing the positive results in our enrollment numbers.
I will now turn it over to Christopher for an overview of our financial results.
Thank you Kurt.
Our revenues for the fourth quarter of 2019 increased to 11.8 million compared to 5.6 million. During the same period in 2018, a year over year increase of 109%.
This was driven by an increase in the number of members enrolled and are on track solution. During the fourth quarter of 2019 compared with the same period in 2018.
Revenues for the full year 2019 totaled 35.1 million.
Compared to 15.2 million in 2018, a year over year increase of 131%.
Gross margin for the fourth quarter of 2019 was 41.3%.
Compared to 52.8% in the prior year period.
Sequentially gross margin increased from 30.8% in Q3.
Looking at the full year gross margin improved to 41.8% in 2019 compared to 26.7% in 2018, which is particularly impressive considering we have more than doubled the size of our engagement team of care coaches and outreach specialists over there.
Of course of the year.
We were able to achieve settle margin expansion as we gained efficiencies through scale in our operations.
Our operating expenses for Q4, 2019 entries to 11.9 million compared to 4.2 million in the prior year period.
Throughout 2019, we committed ourselves to investing in new technology, and strengthening our board and management team as we continue along a path of increasingly accelerated growth.
As a result operating expenses in 2019 were 34.7 million compared to 17.7 million in 2018.
On the bottom line, our net loss for the quarter was 8.7 million or 52 cents per diluted share compared to a net loss of 1.4 billion or nine cents per diluted share in the prior year period.
This was the result of increased Opex as well as 2.3 million more stock based compensation expenses in the prior year period relating to options awarded to management and directors.
For 2019 net loss was 25.7 million.
Or $1.56 per diluted share compared to 14.2 million or 89 cents per diluted share in the prior year period.
Adjusting for 5.2 million in stock based compensation expense and 1.5 million and write off of debt issuance costs net loss would have been 18.9 million or $1.15 per diluted share for the year.
We were pleased to have secured the debt financing commitment from Goldman Sachs. In Q3 of 2019 and remain in the strong financial position as we continue to move forward on our growth strategy.
Cash and restricted cash was 13.6 million at December 30, Onest 2019, with working capital at 6.3 million.
We also have 10 million last to access and the Goldman financing.
With that I'll turn it back over to occur for a view into 2020 priorities [noise].
Thank you Christopher [noise].
As we turn to 2020 the opportunity for expansion of the catalyst business remains robust.
We're currently in a position with a strong team and foundation of capabilities to scale, our operations rapidly as we win and execute on new contracts.
We have five key focus areas for 2020 to continue scaling our operations.
First scaling our operations to execute on planned expansions with our health plan customers in 2020 were planning to add close to 100000, new members to our effective outreach pool.
So for example, we have created an internal recruiting team and expanded our network of external recruiters to ensure we can staff the growth needs of our member engagement and care coaching teams.
These changes have already doubled the pool of quality candidates to our teams and our keeping the pace of hiring aligned with our demand.
Second working to drive improvements in our engagement and enrollment processes.
Leveraging external data sources and analytics, we're incorporating new metrics that help us improve information we have on members before they are ever contacted.
For example, we're working with our clients and external data providers to incorporate phone numbers and emails when we have either not receive this information for the health plan or the information is no longer accurate.
This has the potential to increase our effective outreach pool by 15% to 20%.
Third improve our visibility into on track program eligibility for individual members.
When individuals change health plans for employers they made gain or lose program eligibility.
This is particularly challenging when the new plan year starts in January for most members.
For example, we're working with our health plan customers to increase the timing of data feeds and reduce our internal processing times.
In January we are able to process health plan eligibility files quickly.
Enabling us to understand who was switching plants. So that way, we can discuss enroll effected members and enroll new members much more quickly.
Fourth improving integration with our health plan customers, we're working with customers to share a broader set of analytics and also serve as a trusted and influential resource with their members to refer them to additional health plan programs and disease management.
Case management and social determinants of health.
And fifth improving our provider integration.
In certain geographies across the us the availability of behavioral health specialists is low not just for cat assess but for all we are working actively with our customers to contract new providers as well as extend tele health capabilities. So that all members will have convenient access to care.
There, whether it be in person or virtual.
We will enable the above priorities by continuing to scale our analytic capabilities.
We continue to see great opportunity and leveraging our data and analytics to improve how we identify engage and serve our members as well as demonstrate value to our health plan customers.
Having timely clean and reliable data not only increases our effective outreach pool, but also improves our engagement and enrollment efficiency for the on track program.
Pre our data and analytics platform is now processing data on approximately 80% of the membership.
And we'll leave processing approximately 100% of existing data feeds by the end of Q2.
Additionally, our data science team is also implementing new machine learning algorithms that will increase the effective outreach pool.
For example by better identifying individuals with undiagnosed anxiety disorders.
Our plan is to incorporate these new algorithms and resulting metrics into our operations beginning in Q2 and throughout all of 2020.
To increase our opportunity to serve more members and do so in a more effective and efficient manner.
Now I'll turn it back to churn for closing remarks, Thank you Kurt.
Hi, everyone. There were up to the races. In 2020, we set the stage for phenomenal growth with the work we achieved in 2019 and continue to solidify the foundation for continually accelerating growth trajectory with additional expansions and new contracts.
We're pleased to announce the expansions into Colorado.
Washington, DC, Virginia, and Louisiana with that a few weeks ago because of expansions like this are which pool of eligible lives continues to grow and in turn our enrollments and revenues commensurately grow as well, we're well positioned financially following the debt financing deal completed in September of Goldman Sachs, and we will come.
Continue to invest in building out our operational infrastructure, improving our technologies broadening our clinical value proposition expanding our product offerings to be able to help improve the health and say the lives of as many members as possible for our health plan partners as possible and strengthening.
Our management team and board.
We had caddis has have a matra of being member obsessed to be member obsessed. We also recognize we must be frontline obsessed and more broadly employee obsessed. This is a vital part of our culture objective late this is elucidated by our net promoter.
Underscore our NPS, we have an industry leading score of 74 to put this in perspective. This score is higher than apples.
And higher than Amazon's.
Given that our score is many multiples higher that our health plan partners. This is an asset to them as it enhances the relationship with their customer.
Another objective measure of value to our customers is that approximately 97% of our targeted members haven't had a behavioral health claim in the last 12 months, nor have greater than 90% of our targeted members participated in any.
Of the health plan programs. This speaks to the treatment and care avoidance of our members and points to the savings that are sitting there for our health plan partners to capture.
The Corona virus presents significant challenges for our members and I'd like to spend a moment discussing how our team is responding.
Many of our members suffer from exotic.
Corona virus is obviously a cause for major anxiety and catalysis care coaches are uniquely positioned to support those with things I'd, because we have regular and frequent telephonic contact with all of our enrolled members. This means we can help them.
Manage their anxiety point them to the most trusted sources of scientific information and educate them on how to keep themselves and their communities safer.
Our members are also disproportionally impacted by the digital divide they may never have use digital tools or tele health, which is why our care coaches and local community care coordinators are going the extra mile and helping these members to connect to the right.
Providers based on digital readiness.
Our Tele Health network is one of the many options for our members as I mentioned, a moment ago, 97% of catalyst as members have not receive behavioral health services from their health plan in the past 12 month. So we believe we're performing an important public sir.
Service by engaging members, who are concerned about corona virus, but avoiding the healthcare system.
I'd like to thank two leaders, who lead the heart and soul of our company our front line.
My Thanks to say or Armstrong, who heads our clinical teams of care coaches and community care coordinators, and Michael Wayne who heads up our member engagement specialist they are critical to our efforts to support our members in these most challenging of times.
Over the last two years, we have made a concerted effort to upgrade our board and our senior management team frankly, we just didnt have the team that could scale our business to seize.
The size of what we foresee at opportunity.
We have an obvious opportunity to capture savings the health plans won't capture and a compelling and unrivaled value proposition in the industry.
We are getting this message out it is resonating with our health plan partners and with our management enhanced team.
I have mentioned Kurt Darrow, some Brian Kelly, but there are others that have been recently hired and or promoted such as Mary Hardy, who heads up our commercial area, otherwise known as sales and marketing and Julie are right, our Chief Medical Officer, who was previously a chief medical officer at Sir.
Overall health plans and establishes the us and our general category of chronic disease.
These are highly talented people augment our other senior managers to form the beginning of an all star management team you can get that with all of my years of financing and building companies that I appreciate the importance of management to accompany success.
While historically our management capability has lagged our opportunity. We are now properly position, we will continue to position our management team to be able to scale, the immediate opportunity and execute and deliver the results that our stake holders demand.
Not only have we created a value proposition unrivaled in the industry and built a first in class management team, but we are innovating at the highest level. This is exemplified by the Kansas is pre platform, which is the most advanced analytics platform in the industry, we are exploring other ways and.
Which this platform can be used to improve the efficiency and effectiveness of populating and analyzing data at some of the largest healthcare organizations in the country.
Having said all that we are reiterating our guidance of 90 million in revenue in 2020 and are confident in our ability to achieve this target with the additional expansions just announced and with more developments. The come. This is a conservative take on what we can accomplish this year, but again I must caution.
Again, the complications and headwinds that we typically experience with the largest companies in America and the complexities inherent in the healthcare industry.
We anticipate an increasingly accelerated growth trajectory as we continue through 2020 and even more so in 2021.
We have the leadership team needed to drive us onwards, and upwards and a growing engagement team poised to deliver positive outcomes for our increasingly more members and increased savings for our health plan partners.
We are ready.
With that operator, we can now open it up for today.
Thank you ladies and gentlemen at this time, we will be conducting the question and answer session.
We'd like to ask a question. Please press star one on your telephone keypad. The confirmation on will indicate that your line is and the question Q.
Press Star too if you would like to move your question from the Q.
For participants using speaker equipment, and maybe necessary to pick up your handset for Prosigna Sarkies. Once again it is star one if he would like to Q1 question at this time, please hold while we pull for questions.
Thank you My first question comes from the line of Daniel Carlson with Tailwinds Research. Please proceed with your question.
Thanks, guys for taking my questions.
Congrats on a great quarter.
Just a couple of questions about guidance for this year it kind of a two part question I guess since you just said that year last couple of weeks have been record weeks I guess can surmise that you're on track for Q1, and then also looking at the year and that growth here is it going to be a linear growth or do you expect to be more back end loaded.
Thank you Daniel Great question.
So yes, we made a point in our press release, we didn't want to go overboard, but we made a point.
Corona virus does that negatively impact our business and to that point, we have had all time record enrollments.
In the first two weeks of March.
So obviously from March looks pretty good we are reiterating our guidance of 90 million.
I think we want to save some fire power and some headlines for the next quarterly call.
But I think it's safe to say, we're on track with our forecast.
Great and then in terms of the back end loaded let me I'm sorry in terms of the back end loading.
Yes that is going to be consistent in our model.
Hopefully for many many years to come.
As you know as we even as we just announced new state launches it takes and particularly in as commercial mostly commercial some Medicare population. It takes some time to get a steady enrollment rate. So that has the effect of pursing pushing revenue out into the back half of the year.
Yeah.
So, yes, and then as saying last year again in the first half of the air.
Some people are questioning whether or not we can achieve our guidance and.
It was right on schedule. Despite the headwind that we had with that national plan that could have added somewhere in the neighborhood of say $10 million to the 35 million for somewhere in the neighborhood of 45 million depending on what they are what they launched and when they announced launched it.
Got you.
So so speaking a growth then so.
Looking looking out I mean, you are going to exit this year with accelerating growth.
Being probably I'm guessing hundreds and millions of 2021. So I'm just wondering if you can sort of give us without guidance, but sort of a preview in your mind, what we can look for outer years. So.
I find that very interesting.
Last year, when we were talking about 35 million.
And.
Obviously, no one has even focused on the 90 million in guidance. We gave mid November so we might examine that going forward not to give guidance until the food until the fourth quarter call.
Because people didn't even take redo 35 million given the backend loaded of last year.
So we go from 35 million to 90 million, which is quite a significant growth rate.
And as we said on today's call, we hope to end the year with approximately 200000 and outreach pool.
And we know that we want to get through a steady enrollment rate and a run rate of 20% times that so you could start creating a ramp for next year's revenue number that's certainly going to go well.
I can't fair to say, we plan and doubling our revenue for years the Cup.
But that gives you some idea how we view.
2021 at this time.
That's helpful.
Thank you. So so then just a follow up with the market over the place and tough to figure out of value stocks.
With a 100% growth rate what would you say comparables are and how do you think we should look at CAD assist relative value.
Well.
As CEO I, probably shouldn't talk about what.
What I think about value or I guess I could talk a little bit about capitals, I know a little bit about the industry.
I am I know a little bit about investing but since I invested well in excess of 22 million or my personal money to buy the stock and most of it in the most recent years.
I will give us some perspective.
There.
Anthony that the leader in the healthcare I T segment, which is our segment.
Is a is.
Avago.
And Lavaca went public last year and roughly.
A very high valuation and they went public based on a run rate by the end of the fourth quarter and a full year 2019 revenue number of roughly 165 million and I think this year. There. The estimates are for like 230 to 250 million.
Roughly.
And it trades at a two and half billion dollar market cap.
Now.
Looking at their $165 million ish of last year.
I don't have the exact reported number in front of me, but looking at 165 million of last year.
I think it's fair to assume we will be at our north of those numbers next year.
So it gives you an idea of what we believe is the opportunity ahead of us.
And I'd say, it's interesting as you know.
We are small today, but were there is some screens that that investors use that really don't get people's attention. So you are north of 100 million in revenue, which.
We'll be flirting with that screen soon enough.
And I think at that point, we because we don't have a big audience and we don't have a lot of analysts that cover us obviously that represents the opportunities but by the same token.
People don't even know how to classify us.
Today for the first time, because it's somewhat topical we point out the virtualized care that we provide to the member health plan members and we mentioned for the first time that yes, we are a tele health company.
Obviously, you know what's been happening with Teladoc, it's a different model, but in our and our segment of the industry as a valid model, we have virtual scalable replica gold throughout the country, which obviously we are not our operations were not disturbed by everyone working from at home because.
Everyone work from home and our company, except our corporate headquarters here in Los Angeles. So.
We were well prepared for the disturbance.
And we are uniquely working with the health plan members to be a tele health company.
So I'm very excited about our revenue growth the crossing that CASM of 100 million in revenues and.
Sunday getting the attention that will Avago gets and I think we'll get there and incidentally LVD goes growth rate I think if they're talking about 165 million to 230 million their growth rate is well call. It 50 seater do 250 million to share to 60 70, whatever their growth rates about 50%.
We expect to grow at a 100% so I expect at some point the market will recognize us having a great or multiple.
Got it. Thank you that's that's.
Very detailed appreciate the answer and then one last question then I'll jump out but.
Yes, correct based on your comments about issues related to eligibility.
New enrollment periods for National Health plans being that they ended the year are you seeing seasonality related is there any issues around that.
[noise] I would refer to them as issues, because we expect and plan for them I think what we were able to do this year is minimize the impact.
In container in the Disenrollment associated in January rather than having those disenrollment bleed into February and March I think Kurt I think it's fair to say that next year, we'll catch it even earlier than we did this year absolutely. So a combination.
Of continuing to improve the rapidity Ed timeliness of the data we receive.
As well as screening protocols that we're going to be putting in place with our front line opt to understand if people have switched health plans, we should be able to turn pointed out not only catch it earlier, but also decreased the disenrollment impact.
Thank you that's for me, thank you very much and.
Welcome aboard.
Great heavier [laughter]. Thank you.
Thanks, Dan.
Thank you once again, if he would like to ask a question. Please press star one on your telephone keypad at this time.
Our next question comes from the line of Gene Mannheimer with Dougherty and company. Please proceed with your question.
Thank you good afternoon, and congrats on the great finish to 2019.
Karen I guess I wanted to ask with with respect to the 90 million revenue guidance.
How do you have a comfort level with that given that you don't have tremendous visibility into the national launch that you talked about for April one if that for example, if that were to get delayed it what is that due to your.
Visibility into 2020 revenues. Thanks.
That's a great question.
We obviously emphasize quite often the caveat that I mean, if you told me a year ago. When we are frozen pending a national RFP and we win the RFP and we're all set to launch with the plan January 1st and then a curve ball comes in that Theyre changing the management structure.
From a decentralized decentralized and that we have to go through a whole vetting process again.
I just want to believe that.
But that's our life, that's that's life in the Big City as they say the good news is we have these big national plans as our customer.
Now to your question.
Depending and we're we are in our numbers because remember everything is always on us and a slope I had occurred.
Commercial lives when we launch in a commercial population it the curve will be an elongated and the ramp is elongated but when we talk about our Medicare population, it's still a ramp it's still a curve, but its closer tighter.
Yeah.
That said without saying too much about this population.
That said, we do provide firms for slippage [laughter], while we provided for slippage from eight from our from January 1st launch.
We're providing slippage we were ready for on April 1st lunch.
We are providing for some slippage because.
The remember given that we tell you what we know not what we expect an entity or other part of the question. We have the reason we've hit guidance.
2017.
2018 2019.
Is because we have.
Okay, great history, and visibility of what our outreach pool translates into.
A year out.
So we have great visibility into next year now what are the upside. So if the current track slips from April 1st that's Okay. We have room for that in our numbers, but again since we tell you what we know now where we expect there a lot of levers that can happen debt increase.
Our numbers, we just don't include them until they're done.
Theres one opportunity that just occurred today do we have a contract I know we would talk about it but are we excited about it absolutely.
Does that help address any slippage in anything absolutely and and we have a.
A revitalized commercial team.
In quote the sales and marketing area, which I referenced Mary Hardy heading up and of course in conjunction.
We are Julia right, who as you as we keep talking painlessly, we're continuing to expand our product offerings outside of.
The target market target member populations today, including into chronic disease generally that fit the same type of profile as our members today and in conjunction with the catalyst is pre platform. So gene. Thanks for your question short answer is.
We provide for slippage, we have other levers to push to make up any further slippage and but that said we know they expect the curve ball from time to time.
And we do the best to manage through it historically, we've done very well and we have pretty great visibility into even next year outside of whether even the back half of this year.
Great. Thanks, a lot Karen.
Thank you we do have an additional question from the line of Daniel Carlson with Tailwinds Research. Please proceed with your question.
Hey, guys. Thanks for them, if I have a follow up here.
Just wanted to talk about the cash situation than what the what sort of breakeven revenues due to or what sort of revenues do you need for breakeven and with the 10 million lifting revolve or do you think you have enough.
To get you through to that.
I've been waste as figures someone asked that question I should have known or would have been you.
Let's break it down.
Cash on hand, do we have enough cash to get to cash flow positive state or cash flow breakeven cash flow positive. The short answer is yes.
Hard to when will we become cash flow breakeven.
Our model says fourth quarter.
My brain says, let's say first quarter.
Okay.
Great and by the way you asked about a revenue breakeven number that's more difficult to say because as we grow quickly.
The expenses are front loaded because we're hiring and training or manage.
A member engagement specialists, and our care coaches and the six weeks or so that they're being hired and trained and they don't even started out at peak efficiency. Obviously it takes several months to get the peak efficiency.
That negative working capital is going to be a drag on EBITDA and cash flow. So the faster we grow it could have the result of pushing out that breakeven, which is why I kind of say optimistically I hope, it's the first quarter, but so you don't put.
<unk> revenue breakeven, but our model calls for breakeven in the fourth quarter, but let's hope we have so much growth that it has to get pushed out.
Right I mean, I think you really answer my question I'd say, you have enough cash and which in the current market environment is really the important thing. So that's good. So thank you guys appreciate it.
Pleasure. Thank you.
Thank you as a reminder, you May press star one on your telephone keypad Tequila question at this time. Our next question comes from the line of Richard close of Canaccord Genuity. Please proceed with your question.
Great. Thanks congratulations.
The new hires and finishing the year strong.
As a follow up to one of the questions earlier about the how we should think about 2020 rolling out I'm just looking at the consensus number for the first corridor its 15.4 million in revenue.
There's an estimate at 13.7 am estimate at 17 million. So just curious you know I know, you're not giving quarterly guidance, but.
With those numbers laid out there what do you feel more comfortable with.
Well.
I think.
With all due respect to the great people that cover us such as yourself.
I don't think a lot of thought.
Went into and I understand why really when you look at it last year was our first year of of course, it was more than a 100% greater revenue than the prior year and this year will be even greater than that so it's hard to get a feel for how our numbers unfold on a quarterly basis.
So when I look at what the analysts year numbers yearly numbers are entirely comfortable with that.
As as I think the first quarter numbers.
Frankly, do not take into account that the enrollment irregularities, we see in the January February timeframe now Curt points out that we got a lot better this year than last year.
In the coming here will be even better.
Because we're working with the health plans to get the better data in our hands as quickly as possible.
I don't.
We don't do quarterly guidance, but I would say that if you take our guidance for the year.
And you follow a similar type Moran of last year.
My guess is you're going to get be much more accurate on a quarterly basis.
Because last year's revenues were ramp, which I'm not saying this year is the same as last because then I'd be giving guidance.
But but obviously.
It's a better indication now and there is backend loading to our model and we do anticipate obviously with the new obviously the good news is as I pointed out in our in my opening remarks is this national RFP that we won.
There's no more risk in that occurring it's occurring it's launching.
Now obviously when it launches whether its april 1st or July 1st whenever it launches that again, we get very little in the front end of that launch in revenue and it's going to be more backend loaded and whatever.
Her at the more gets back end loaded whatever doesn't happen. This year will certainly go into next year, although like I said, I expect 100% growth rate in our revenues.
More than this more than arpus that this year and certainly a 100% nextshares in the cards.
Okay.
So with respect to the hundred and 28000 number did you guys talked about affected.
Outreach pool currently.
Is the national account, a that's supposed to launch hopefully April 1st is that isn't the 128000 number or one that will launch is it goes into the pool number.
Correct, we again since we don't have the signed contract back yet 'cause it's pending some.
Odds and ends.
Which are more operational odds and ends not contractual odds in it I mean in terms of economic as it has maybe.
We do not we only talk about that which is contracted and ready to launch or at least scheduled to launch.
We never put the that plans numbers in our outreach pool, and obviously, we're expecting it to help spike our outreach pull this year and record and spike it even more and spec it even more next year.
Okay, and just a housekeeping I mean, obviously, there's a affective number metric that you're given.
Its somewhat new.
Or maybe you started at last quarter a secure in today's release you said the third quarter effective pool was 100 in 2000, if I go back to the third corridor release I think you said it was 113000, so just for my house.
Keep in perspective, what's the difference in those two numbers.
Well.
Keep in mind that.
And any given period that outreach pull number is going to jump up and down.
A health plan loses an account.
The number goes down.
A health plan gain an account number goes up.
But it's been a then burn or goal number.
Right, but I'm, saying, there's a lot of movement from when we report a number it's not always a straight lined up.
It moves around quite a bit both up and down within a period.
Okay.
And that from a net new enrollments.
That's the increase your third quarter to fourth quarter, if I'm not mistaken 7% sequentially.
I I, obviously, it sounds like that number's going to accelerate but you are on a quarterly basis, it's gonna be backend loaded.
Is there anything that you see you know in terms of you know maybe impacting that acceleration other than just obviously new enrollments, but.
Is there anything that comment in terms of retention improvements and things along those lines that you can call out my drive up two sequential growth.
Okay. That's an excellent question I'm. So happy you asked it I mean, all occurred answer it more specifically, but let me say generally.
We as a company our operating almost with our hands tied behind our back.
We are operating as an analog figured lovely as an analog company versus a digital company.
A manual company versus an automatic company and we are spending a great deal of effort.
With Curt, Brian and company to get us to that high performance capability as quickly as possible because that has the most dramatic impact.
And our revenue growth.
Besides out which will obviously and to that.
We.
The metrics that we use when we give guidance.
For example in over the last month say whatever.
We're ahead of those metrics are ahead of what we have in our plan.
Is it sustainable we'll we'll know what we hope to find out that it is but our metrics are going to keep improving which is going to improve both our revenues and our profitability and I'm excited that next year, we'll be talking about profitability.
But with that Kurt you could add specifically, what what we're doing in that regard.
Sure. So thanks, Richard a few different pieces, so I'll reiterate a bit of what I talked about earlier. The first step in the foundation is having timely clean and accurate data and so being able to provide that not just in the initial enrollment but to make sure that we're updating.
The information as people are going through the program and allow us to continue to customize.
The Ontrack program to that members individual needs.
Is absolutely critical to your point around.
Improving retention in the program.
Second on that foundation, we have been investing and have rolled out a series of different convenience related tools.
That are member facing.
Up part of it is continuing to grow our capabilities and the tele health space.
Which at this point about 80% of the overall membership has access to tele health capabilities.
To not only engage with us which is 100% of the membership, but our network of proprietary behavioral providers can be accessed through that telehealth capability as well.
Other thing that we've seen starting to move the metrics and is turning said we're hoping these trends continue is we've rolled out broadly.
Secure communications either through our portal Oren SMS texting.
And I think all of us on the call have cellphones now that ring with a bunch of numbers that we don't know we've found that when people are getting a text message from a care coach that they have a relationship with the opportunity to engage scheduled to coaching session and get those member.
First to two to show up in spend the time with the coaches has increased tremendously.
Again, it's a little bit too early to report what the long term effect is but.
We're seeing a lot of encouraging signs of how that's affecting.
Positively our disenrollment rates.
I hope that helps yep, yeah, and maybe an add on to that I think a you know we spent time with you recently you talked about people, finishing the program before the 12 month.
And you know maybe opportunities there to change you know maybe the.
I don't know if its contract terms or what not because you don't want someone finishes I guess.
And exits you're not generating revenue.
Or maybe the full amount of revenue.
There are opportunities to do that where you are ultimately captures.
Potentially lost revenue maybe.
Maybe.
Talk about that a little bit.
Sure. So as we're moving forward with with new contracts and we'll as we expand with existing clients were moving over to a variable graduation model.
Your point it has a couple positive effects.
One when we contract that out in our pricing we account for revenue for the average duration of the program some members will need.
More time in the program. Some members will need last we see an average of around six to seven months is the time that people need to appropriately hit the graduation milestones.
And that's when we have an opportunity to rather than just enroll them.
And and cause any type of potential pay back to our health plan partner. It actually is a a graduation and being able to switch and on track the variable graduation in that way not only has a positive effect on revenue as you alluded to but also allows us to.
Allocate our resources internally more efficiently across the active people in the program.
So it has a dual saxo bank. Thank you for the for the question.
Okay and.
Question for trust or for a you had to call outs. There one was the stock comp I'm not sure what that number were 2.3 million or something to point.
The point Threemillion as your dot.
Incremental stock comp I guess from the corridor or for new hires management and directors I think you said 1.4 million in debt issuance was the 1.4 million debt issuance was that in the third quarter or was that the worst corridor.
<unk> expense.
That was a fourth quarter expense.
Okay. So you essentially Oh, it was 3.7 million expenses that.
You know, maybe you could classify as onetime in nature that definitely or would it be fair to you know I'm sorry down.
Richard one or one clarification, the debt issuance or sorry, the the write off expenses occurred in Q3. There was there were some other expenses in Q4 that were onetime in nature relating to some of these management transitions that we had.
Okay.
Alright, so let's make it easy [laughter].
If we were to take your.
And change number for operating expenses in the corner.
You know and ex those one times.
Numbers bad guys I guess, what would your run rate go forward as we think about the first quarter in terms of Weibo about.
Be.
I think.
So look we are.
I think maybe just.
Yeah, we didnt provide bottom line guidance, Richard So we didnt, we're really not going to comment on investments that we're making in the quarter.
Okay, but your operating expenses.
It should be less than the 11 million that occurred in the fourth quarter.
I'm, just trying to get I will give where where do we start the year factor, but it. This way, let me just say because more relative well the relevant takeaway.
Is that our cash burn is going down.
Okay.
Alright, Thanks, a lot I appreciate it congratulations and good luck to starting the year.
Well, we sort of two weeks to go but we're a well that's a good start.
[music].
Thanks, Richard Thanks, Richard.
Thank you. My next question comes from the line of Jeff Colby Lars with Diamond Bridge Capital. Please proceed with your question.
Hi, guys Chairman I heard you say that viruses, but you need some of the press a too that the virus has no impact on.
Business and I'm, just curious if that.
Well, let me let me reported EPS was to think like it hasn't had any impact on our business. We don't expect it to have an impact on our business, but if it does little will tell you when it happens.
Right. Okay. Yeah, it's just wondering maybe and then.
It take away was really the backdrop of what's happening in the country is no different whats.
I've been happening for many years in this country depression anxiety and substance use disorder.
And.
Canyons with chronic diseases.
His worsening in the country every year. This is making sure we don't know yet right. It's early but this is making I believe it's just a belief personal belief is exacerbating that which is a backdrop. Unfortunately, that's positive for our business.
Sure Okay.
I was wondering if any quarantines that may be in fact could you detour a patient from.
Going to the steps that you have other you're seeing a psychiatrist psychologists are the doctor and I was wondering you say what percentage of on track is.
Done face to face verses over the phone roughly.
The vast majority of it as over the phone.
Okay, and and again as we said if a member let's say a members quarantined.
If a member is quarantine number one.
They will be in constant communication with our care coach they will be and if they still have provider visits remaining.
There will be doing those via our telehealth applications.
Right. Okay, and then also I think I heard Curt say that companies using an external recruiting.
Staff and.
I think would that be kind of new.
Now and can you elaborate on how your coordinating external recruiting efforts with the internal people.
Sure. Thanks so.
We've done a couple of things differently. This year historically when it came to our member engagement specialist and care coaches, we predominantly we're using individual external recruiting firms. So we've done two different things. One is we've set up in internal recruiting team and they have.
Two functions one is to manage across the the external firms as well as to focus on high value.
More senior management positions that are supervisors or management in the overall member engagement specialists or care coaching teams.
Secondly, we added additional external firms that specialize energy areas.
So that way, we can have so to speak multiple lines in the water.
And that's what I referred to earlier as we've we've more than doubled.
Our <unk> access to high quality candidates.
One other things that.
Was was identified even before I came here, but but as we went through the numbers in the ramps.
Being able to make sure that we can stay on track no pun intended with our hiring plans was going to be absolutely critical to the successful customer launches and our ability to to drive revenue.
Especially in the back half of year would the ramp that's been referenced.
Okay and then it hurt you all spent something about.
A benefit to the outreach pool by 15% to 20% and it wasn't.
I'm clear.
Oh that entire point, you're making you remember.
What you did it yeah yeah.
Yeah. So we're doing multiple things, but the example, I gave is we've been we have worked historically with and are exploring.
Additional external data sources. So there are companies that provide data around contact information.
This is just one example, but health plans.
Depending on which health plan in terms of the number of accurate phone numbers or emails that they will provide can have missing. This in the datasets that that could be 30 40, 50%.
It's not a direct overlap with our effective outreach pool, because when we apply our analytics.
You know, we're focusing in on people with multiple chronic conditions and multiple April health conditions are those are people that the health plan tend to track a little bit more closely as best as they can.
So what we're doing is again in partnership with our health plan.
Customers.
Were working to identify where there are gaps in the information or when we put information forward into our operations and realize that the phone numbers or the emails are no longer valid we feed that back and we're leveraging.
The opportunity to bring in third party data to have accurate contact information.
And that piece alone. We're seeing early results that are in the 15% to 20% uptick by filling in those data gaps.
Does that make sense.
Yes. It does so that's why are you, saying I'm the effective outreach pool equal the total leverage goal by the end of this year using this external data.
That is our sincere hope and with the 15% to 20%, we're starting to get pretty close we need to operationalize that across as many plan, but as time has referenced.
Before in terms of working with these large customers.
Any type of change even like this in terms of being able to integrate additional data.
Requires approval processes and Todd.
I see okay, alright, great. Thanks for your help good luck.
Thank you.
Thank you as a final reminder, ladies and gentlemen, if he would like to keep my question. Please press star one on your telephone keypad at this time, please hold while they pull for any additional questions.
Okay, well, thanks to all of you on this difficult environment for your time.
Please feel free to reach out to us with any additional questions and I continue to be very much on the move and making myself available to existing and potential investors.
Fortunately the Roth Capital Conference, which I was going to attend next week has been canceled in Laguna and Unfortunately, the Oppenheimer Health care Conference, which I was scheduled to speak at next week in New York has also been postpone to September.
But I plan to participate another investor conferences throughout the year and as you may know I do travel quite a bit might not travels much going forward.
But certainly we are doing zoom calls, we did a variety of zoom calls yesterday with some very large institutions.
And we'll doosan calls anytime that you want a welcome us into your home.
But I hope to sit down with many of you. During my travels we look forward to speaking to you again during the Q1 financial results call in May Goodnight, everyone and be safe.
Ladies and gentlemen.
Today's teleconference. We thank you for your participation and you may disconnect your lines at this time.