Q4 2020 Ontrak Inc Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly these continue to some day and thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to Theyre on track fourth quarter 'twenty 'twenty earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that session you will need to press star one on your telephone.
Yeah.
If you require any further assistance please press star zero other.
I'll now hand, the conference over to your Speaker today, Caroline Paul with Investor Relations.
Thank you and thank you all for participating on today's call. Joining me today are Karen Kaiser Chairman and Chief Executive Officer, Brandon Laverne, Chief Financial Officer, and Kirkman, <unk>, President and Chief operating Officer, who will join US for the question and answer portion of the call.
Earlier today on track released financial results for the quarter ended December 31st 2020, a coffee on the press release is available on the company's website.
Before we begin I would like to make the following remarks concerning forward looking statements on.
All statements in this conference call other than historical facts are forward looking statements. The words anticipate believe estimate expect intend guidance confidence target for JAKKS.
And some other expressions typically are used to identify forward looking statements used.
These forward looking statements are not guarantees of future performance, but may involve and are subject to certain risks and uncertainties. Other factors that may affect on track business financial condition and operating results, which include but are not limited to the risk factors described in the risk factors section on the form 10-K on form 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 on.
Track, especially to clean disclaims any intent or obligation to update these forward looking statements with that I'd like to turn the call over to Taryn.
Thank you.
Afternoon, everyone and thank you for joining us today.
As we outlined in our pre announcement last week, we had a solid performance in 2020, despite the unprecedented headwinds that we faced with lower medical utilization and rising unemployment and the Aetna data freeze pending the compliance review and ultimately an executed contract.
Of course, the nation face far worst challenges with the pandemic rising mental health issues and cultural trauma.
Our results were overshadowed by the news that we shared last Monday about the termination of our on track hyphen, a aetna contract effective June 'twenty six 2021.
We remain committed to ensuring quality care for all this plans members through the transition and we are engaging with the health plan to better understand their quote NAV for cars and quote termination decision.
Moreover, we have a solid strategy for regaining aetna's business with our third party validated medical cost savings and associated ROI, our clinical outcomes and our Q for N P. S of 80.
N P. S is a proven indicator of member retention.
The average M. P. S for our health plan is in single digits, which creates continued opportunities for on track to heightened member satisfaction with our health plan customers. You may recall that we were predominantly addressing substance use disorder with Aetna our strategy includes the larger opportunity.
To address anxiety and depression, and the full continuum of utilization care.
While the recent news of butter Aetna contract was certainly both a surprise and disappointment, we'd like to reflect that our team's recent accomplishments and the momentum within our customer base as we exited 2020.
Amid the growing mental health crisis on track continues to play an instrumental role in engaging care avoidant individuals with the health care system to reduce their medical expense and create lasting clinical outcomes.
In the next month, we will have we will have recently extended or expanded with every customer.
No. It was the exception to this trend.
We finished the year strongly despite the previously mentioned headwinds with revenue of 83 million, reflecting 136% growth from last year the last year on.
Our total active enrolled members grew rapidly as well totaling 15702 members at the end of the quarter, our effective outreach pool ended the quarter at 152000 and increased sequentially from 144000.
As we push forward into 'twenty 'twenty, one our overall outlook for the year recognizes headwinds and tail wins to achieve revenue of $100 million. We continue to believe that this guidance is conservative in light of the over $88 million from customers with existing.
Tracks or in the signature phase for.
Furthermore, we remain confident that in 2022, we returned to revenue growth run rate of a 100%. We are only scratching the surface of our 33 billion dollar opportunity.
With that as a backdrop, let me provide a few updates on the headwinds and tailwind we're seeing let's start with the headwinds.
Most significant headwind is the aetna contract termination and Jim We will continue to graduate and dis enroll members through the end of June while we are engaged with the health plan and determining specific next steps our guidance does not contemplate services for these members beyond the end of June.
Turning to the utilization growth of our outreach for Q4 was naturally impacted by lower utilization of non COVID-19 health care services, especially in the latter part of the quarter as we have previously discussed this lower utilization during the pandemic caused high cost members too.
Dropped below the medical expense expense threshold for inclusion in our outreach pool, the resulting loss of individuals from the outreach pool was partially offset by members added to our outreach pool through health plan expansions and the enhancements we made to our algorithms over.
The course of 'twenty 'twenty, one as vaccinations increase and health care resources are less constrained, we expect normal utilization patterns will resume.
This headwind will become a tailwind that is expected to accelerate the growth of our outreach pool.
Now, let's let's now review the five tailwind that will be important to our growth trajectory.
First.
We have seen very rapid enrollment of Medicare advantage members under our Cigna contract, which expanded in October 'twenty 'twenty and an already tops 5100 members. This contributed to our fourth quarter revenue growth. We've been helping these members access critical behavioral health care and.
<unk> 13 states and anticipate demand for broader engagement with Cigna Cigna's members.
Second the nation faces a severe shortage of quality behavioral health providers, which has heightened the value of our contractual relationships with over 11600 high quality behavioral health providers, whom we train and from whom we received valuable.
Remember progress reports.
Our customers value our ability to help members navigate the complex provider landscape coordinate member care and close the loop with respect to clinical outcomes.
We anticipate this number to grow to approximately 15000 in Q2, giving on track the largest qualified behavioral health network in the industry.
Third.
We are pleased to have received record high member satisfaction levels demonstrated by an industry, leading Q4 'twenty 'twenty net promoter score of 80 for on track program versus an N. P. S. A 74 in Q3.
This puts our product rated higher than the most popular brand names Netflix Apple Starbucks Amazon etcetera for.
For the anticipated 'twenty 'twenty, one launch avaya attract tiered care programs for the full spectrum of behavioral health needs from high to low acuity positions us to meet our 100% of the behavioral health needs of those who suffer from the medical consequences of <unk>.
Diagnosed and untreated behavioral health conditions this significantly increases our total addressable market.
Net.
We see continued momentum in our pipeline and customer expansions are off to a great start we were recently awarded a significant expansion with one of our health plan partners.
This contract includes Medicaid and Medicare populations and will now be sent to the state for final review.
We have been advised that the state typically approves these contracts within 30 days.
Lastly, we are focused on the possibility of regaining aetna's business by appealing to those benefiting from our third party validated value proposition of medical cost savings associated ROI clinical outcomes and the industry, leading N P. S.
Of 80 S.
As part of our growth plan for 2020, one we continue to find ways to strengthen our position by expanding our addressable market and investing and are on track passport.
Last quarter, we announced the acquisition of lifestyle, Joe Our science backed behavioral change platform that combines digital modules with coaching support through a single mobile application.
The integration has been progressing well we have recently signed a three year contract extension at a higher billing rate with a subsidiary of Berkshire Hathaway and another contract extension with Dolby and we have received encouraging feedback on our product roadmap that we have presented to our major.
Health plan customers.
Our new suite of digital programs, including mobile first depression, and anxiety more modules that build upon our life dojo platform will scale, our ability to serve more members.
I'm also very pleased that Chris cutter, former founder and CEO of life Dojo is now leading our product program. He brings a deep understanding of customer needs and operates at start up speed, which is exactly what is needed in such a rapidly growing marketplace.
The solid results that we produced in 2020, and our recent capital raising activities I mean theyre on track remains in a strong financial position. Despite the loss of that now.
This strength allows us to invest in growth opportunities, while still maintaining capital to deploy for other strategic opportunities that may develop including acquisitions and importantly partnerships.
I'll now turn the call over to Brandon Laverne, our Chief Financial Officer, and will return with closing comments.
Thank you Terry.
During the fourth quarter, we recorded revenue of $29 $3 million most of which was received on a per enrolled member per month basis.
For our Signet expansion, which is handled on what we call a case rate.
We built for the entire program upon initial enrollment with proportionate credits back for any dis enrollments during the first six months.
As a result of a day as a result of this increased our deferred revenue at the end of the year to $21 million.
At the beginning of the quarter.
We had 14345 enrolled members with 15702 at the end of the fourth quarter, an increase of 1357 and a simple average of 15023.
That equates to revenue of about 1947 per enrolled member for the quarter.
Or annualized at approximately $7800 per enrolled member per year.
This compares to our third quarter average of about 7300 per enrolled member per year.
And also to our full year average of about 7200 per year as well.
Breaking down the Q for enrollment a bit more.
We enrolled a total of 6714 members during Q4 compared to 7192 in Q3 for.
For a 7% decrease sequentially, reflecting the ongoing sales outreach pool data related to the Aetna customer.
And 73% more than the 3870 gross enrollments in Q4 of last year.
Despite the headwinds mentioned by Terry on earlier.
Dividing Q4 gross enrollment by our outreach pool, which averaged 147000 during Q4. It annualize this to an 18% enrollment rate during the fourth quarter slightly lower than the 20% annualized rate we saw on Q3.
But again impacted by the outreach pool data related to Aetna.
Well this customer represented 58% of our revenues in 2020.
We will review the impact of these metrics as we think ahead to 2021.
Or just enrollment rate average between 8% to 9% per month during the fourth quarter, resulting in its this enrolling a total of 3911 enrolled members during the quarter.
Further we graduated 1446 enrolled members during the quarter, which equates to about 11% of enrolled members in the program at the beginning of the quarter.
The net impact of all that wasn't net enrollment increase of 1357 in the fourth quarter.
Our gross margin in the fourth quarter of 54.1% increased sequentially from 45, 6% compared to 41, 3% in the fourth quarter of last year.
An increase sequentially each quarter this year.
For the full year, our gross margin was 47, 4% compared to 41, 8% last year.
We ended the quarter with 486 team members included in our cost of sales up 7% sequentially from 455 at the end of Q3 and up 50% from 257 at the same time last year.
Primarily made up of care coaches and member engagement specialists.
We of course, we're extremely proud we're able to say we had positive adjusted EBITDA throughout the fourth quarter.
Turning to the balance sheet and cash flow our cash flow used in operations for the fourth quarter was nearly breakeven at just $100000.
Use of cash and ended the year with $6 2 million cash used in operations is apparent to $16 9 million used in operations last year.
On the balance sheet, we ended the quarter with cash and cash equivalents of $86 $9 million, but including restricted cash associated with our preferred stock dividend payments through August 2022, total cash was $103 million on.
Our cash balance primarily increased primarily as a result for the net proceeds of $41 $4 million generated for the follow on offering of our Nonconvertible series a preferred stock.
We remain confident that we have sufficient capital on access to future capital to manage our operations and execute on the strategic initiatives we've outlined.
As Terry indicated, we now expect revenue of $100 million of which over $88 million from customers with existing contracts or in the signature phase on.
This amount we currently anticipate approximately 18 million will come from the Aetna.
Members prior to the currently notice termination date at the end of June 2021.
Further note that we already have $21 million already billed sitting in deferred revenue on the balance sheet as of year end.
In light of the pending termination of the Aetna contract in June I wanted to provide some information that may help with understanding the business going forward.
In 2020 net.
And it represented 58% of total revenue.
At the end of 2020, they represented approximately 82% of the outreach pool.
And 61% of members during.
During the fourth quarter. The revenue was also 58% on Florida revenue represented 66% of the average member count.
What this demonstrates is that our average revenue per member during the quarter was less for this customer then the remainder of the business.
As I said before the revenue per member for all of 2020 was $7200 yet.
Excluding aetna members it was nearly $9500.
While the outreach pool will be significantly impacted by the loss of this customer.
The remaining outreach pool should have a significantly increased enrollment rate for.
For example, if we look at 2020 as a whole the annualized enrollment rate for the whole company was 17%.
It was 40%, excluding this customer and accelerated to 53% in the fourth quarter and it's trending at 60% in the first quarter of 2021, reflecting the expansion launch with Cigna.
As we continue into the coming quarters, we will continue to update this information as our other health plan customers to become a higher percentage of revenue and in fact, the statistics going forward.
I'll now turn the call back over to Terry for his closing remarks.
Thank you Brandon.
Overall I am very pleased with the headway we made in 2020 in spite of the difficult utilization environment and other headwinds, which is a testament to our team's tireless efforts and the investments we have made in our technology over a number of years.
As I reflect on the progress we have made I am continually reminded that on track programs are highly differentiated from any other solutions in the market because of our health plan expertise unique engagement methodologies, the significant impact on Medicare and Medicaid pop.
<unk> and the deep intelligence that we have amassed on care avoidant population.
The tremendous gaps in care for care avoidant populations are enduring and I'm confident in our positioning and the value we deliver.
You may recall that we highlighted the millman actuarial study that looked at 2017 pre COVID-19 data that stated that 5.7% of the U S. Commercial population is responsible for 44%.
The total medical spend.
This population and went on to show that little expense on the behavioral health care needs of this cohort.
This is our care avoidant population and its impact that we uniquely address.
About our team I want to thank every one of our teammates starting with the frontline of our member engagement and care community through our provider network teammates. So our digital technology and product Group project management finance and HR teammates.
From top to bottom in our company we are mission driven.
Our mission is to help improve the health and save the lives of as many people as possible.
And we achieved this daily.
Our mission driven culture is the driving force of our engagement capability.
This is why no one has been able to successfully duplicate our third party validated clinical outcomes medical cost savings Rois and N P. S.
Our future is as bright as ever.
With that we will now open up to questions.
I'll moderate him.
Thank you operator.
Thank you and I'm, Sorry reminder, to ask a question press star one on your telephone to withdraw your question press the pound or cash King. Please standby, while we compile the Q&A roster.
First question is from Andrew Desilva with B Riley security team.
Hey, good afternoon, Thanks for taking my question.
I'd, just like to spend a little bit of time on understanding that the pipeline.
It'd be useful if you could maybe just quantify or qualify the pipeline as it relates to potential dollar values and about how much you would qualify as maybe late stage versus a mid stage and early stage customers within there and and I understand that each payer is different but he's seen.
Mike.
Earlier part of the marketing was based on validation obtained by utilization from early adopters.
The loss of Aetna change or has it changed any.
Any of your discussions with prospects within the pipeline.
Uh huh.
Thanks.
So let's start with the last piece.
We proactively outreached, both to existing clients as well as in potential discussions.
You have to explain again, what we know about the process and the decision that.
Hum.
And there has been no concern expressed from existing clients and the conversations with potential folks in the pipeline you know based on analysis specific to their businesses and their members are continuing for so we haven't seen any headwind so far for soon.
<unk> with the losses that now with other customers or prospects.
So that's that's piece one.
In terms of how we're approaching the market and the pipeline.
We're looking at it sort of in three different buckets. So one is you know there are both planned and near term expansions with existing clients.
And so you know with with Cigna for example, there's additional states that they've moved into we're looking to expand and they're asking us to bring our services into those new states for their members.
With customers like Health Alliance and C. B C.
Smaller more regional plans on being able to extend our relationship in time, but also go together to their ASO clients to expand our offering because they see the value.
And then what.
Last you know Taryn mentioned, a very near term a contract that has been sent to.
The state for a review on that would significantly expand the relationship we have that customer. So that's sort of group one and those are all pretty near term.
This point, we're not quantifying the different components.
But we are actively working on all aspects of continuing to drive the pipeline for word with small medium and large client opportunities.
The second piece is.
Listing clients that have earlier opportunities.
So we're continuing to pursue expansions with large national plans like Sigma with their commercial business as well as expanding across Centene.
And then the last bucket is net new clients and I would put those in in two buckets.
There are medium to large health plan that some old named some new names that were continuing to pursue that have added significantly.
Two the pipeline, especially in the last quarter in terms of the opportunities.
These are.
Generally earlier in the process.
With the hopes of closing.
Closing and starting something in the second half of this year.
Because these are newer clients its likely that they're going to start with pilot phases, which will be smaller in scope. Initially and then expand over time like we have seen.
With our large accounts like Sigma.
And then something that's really exciting to me.
Within that new client bucket is we're actually.
Building a lot of interest from large provider networks.
Who have both medical.
And behavioral components to their clinical networks, but are looking for.
More outpatient and telehealth based services to add to their mix and so we are talking with some of the largest providers systems in the United States as well as some other largest at risk Medicare advantage systems again. These are earlier conversations because it's a new <unk>.
Tight it's going to take us some time to figure out the best way to set these deals up but high interest because as Terrence said.
They're really acute need.
For access to behavioral health services caused by the pandemic and ongoing challenges in access in the behavioral health space.
Right.
That was correct that was excellent let me add something to that.
We've been and in some cases, our health plans and large.
A large health plans are reaching out to us.
And on a theme that is emerging in the last few weeks amongst our health large health plans.
Medium health plans.
And the health care systems that Curt was talking about is they acknowledge and like our high touch.
<unk> ability our engagement capability.
So that gives you an idea what when were classified as a vendor.
And we get credited for the savings that makes us actually the lowest cost provider versus an expensive program or a high cost provider that our model is very valued by the industry and I believe that will carry our pipeline further faster.
Yeah, the feedback from the Medicare and Medicaid books of business in particular.
Is that the approach of a digital solution alone is not enough for their members.
Correct.
Okay now that's very very useful context, thanks for that and.
Just staying.
With the existing customers or are there any contracts that are up for renewal. This year and can you just give a little color or at least refresh my memory on the typical contract duration and what maybe carve outs typically exists for something to be terminated earlier, not saying that are we would expect anything like that.
Kind of curious.
Oh, you know what what exemptions exist.
Okay.
So I can jump in.
You know as you all might remember.
Late third quarter early fourth quarter.
We extended the Centene contract.
We obviously signed in the second quarter and implemented in October.
I mean, I'm, sorry, the third quarter and into wanted in October for Cigna contract and so when you look at the rest of our clients.
With with with Health Y N C B C optima.
<unk>.
We expect that in by the end of the first quarter all of those will have either an extension for an expansion or both.
So other than that.
We will have renewed and expanded contracts with each and every client.
In terms of like the criteria.
Criteria sorry.
Oh, you're answering your questions. Thank you.
In terms of their criteria.
These are generally.
You know large health plans, whether nationally or in their region.
And the typical contracts do have.
The ability to cancel with a notice period and so that's the typical setup, we have not been successful and on removing those termination causes to date.
But again, where the relationship we have with these clients in terms of the level of engagement on the <unk>.
Transparency and sharing data.
In jointly.
Looking at opportunities and challenges that are that arise as we're working together is much different and as I said it earlier, we proactively reached out to explain what.
What we saw with the Aetna Contra.
Contract ending and how.
Get feedback from our clients and again the consistent feedback was we are doing the right things, we're continuing to drive value based on their businesses and and there are no challenges at this moment.
In terms of the.
The structure in terms of timeline, we've generally moved two contracts that are one.
One year renewal.
And so at this point.
You know again, unless there is an explicit cash.
Insulation.
Those will continue to renew year over year.
Okay. So you are effectively that can evergreen class that that makes sense and then on just as my my last question and this is just maybe a little bit more nuanced, but you noted that the way Aetna was categorizing them on track.
Was as a provider so if that's the actual context of how there.
I'm looking at you there has to be some sort of or correct me if I'm on a continuation of care for patients or are they saying that.
At the end of June that's good enough for their members to get referred out to an approved provider or is it more.
For nuance in that and is there maybe.
Something.
Those that can be monetized out of that relationship just as it relates to the continuation of care.
So we're in process of working with them to sell.
The net.
Transition process member by member.
You know with the thousands of members that we were serving across their Medicare and their commercial books of business.
Not in and its other itself is going to be quite a process. We're early in that process, because we're not again far away from having received.
On the termination.
And so we don't have a set plan yet, but our objective is to make sure. We have a successful transition for each and every person that were.
We are serving today.
Okay. Great day. Thank you very much best of luck going forward.
One.
Thank you. Thank you very much.
Our next question comes from Charles Meade with Colin.
Oh, Yeah, Hey, guys. Thanks for taking the question.
Can we talk about maybe the you talked about the strategy to sort of regain the aetna business here.
Can you go on to a little bit more about that.
To do so would you be talking with the <unk>.
New group within that.
And starting a new conversation or is it going to be the behavioral health group that you were working with currently and discussing a new way to a new relationship with them, maybe any kind of.
Color on that would be helpful.
Well I'll address the latter is always possible, but as we've repeatedly pointed out that we are classified as a provider.
And that as a vendor.
And the behavioral health depart division of Aetna.
Does that get credit it doesn't at least from our understanding does that get credit for medical cost savings, which is unique to all of our other customers and the industry generally.
Kind of an old model that we have we don't see elsewhere.
No.
Certainly someone if you take a step up at Aetna, If you look at.
The management team of that now they clearly care overall about clinical outcomes.
Savings ROI things that all the other health plans care about but because were classified as a provider we were seen as inexpensive provider because where our program might seem expensive, but as I pointed out earlier, we're really the lowest cost provider.
Because our savings is so much greater than the actual cost of the program. So.
Like all of our as I've mentioned last week and today.
We work with the medical side on all of our health plans.
That's what distinguishes this for aetna from the others and our relationship.
So we're going on.
Endeavour to engage those.
Yeah.
This matters and believe me there are people at Aetna and there are people at Cvs, who bought Aetna that care about the whole health an integrated care of these membership populations.
Thanks.
A follow up question would be I want to talk about the you know you're launching the tiered products.
Any kind of feedback you can give us so far from existing and prospective clients about them you know what's been the interest level like them.
How much of that is is any of that assumed in the 2021 guidance at all.
Particularly do you certainly 80 $888 million.
Kurt Yeah, so right now.
There is there's no assumption around tiers below the current on track program and the 2021 guidance.
So that part is clear and we're working.
To make any short term sales.
Upside to push us towards towards an above.
The numbers.
In terms of the other feedback.
No different different clients have different components of these in place so I would say.
The the large health plans like the aspect of having an integrated solution for low medium and high acuity individuals because as we all know through time.
People with both medical and behavioral challenges will move from those buckets. So the idea that we can deploy a low cost primarily digital solution to those that are on the lower acuity end of the spectrum, but use it as a means to monitor those.
Visuals and create triggers as to one day when they might need additional services.
But be able to provide that sort of medium as well as high acuity.
Bundle.
And have the analytics integrated across that spectrum should demonstrate both engagement as well as performance.
And that performance has to do both with access to their behavioral health system as well as the traditional metrics around utilization and cost savings that we've talked about.
So so that's that's one piece the medium to small health plans.
Really the feedback is that they're looking at this package as an ideal approach to their ASO clients. So I mentioned earlier in the pipeline question that we have a couple of customers that are really interested in working with us.
To be able to offer this across there yeah, so clients and sell jointly with them.
So so far the feedback is good.
We're continuing to learn from the market in terms of how we price and offer and integrate.
A big part of the interest across all of our solutions, including our current solution is how do we continue to improve and drive integration both with the health plan.
As well as the provider system.
Thank you I hope that answers your question Charles.
I think also let me add.
Let me add something there.
What's interesting is a lot of the prominent digital platforms.
They're being asked by their health plan customers.
Can they impact the higher utilizes as well these health plans with like.
One vendor to handle all of their behavioral health needs.
Its unique about us.
<unk> unique about our opportunity is like we've mentioned repeatedly today that we don't know of anyone who impacts this high cost care avoidant population like we do.
We don't know a lot of people even attempting to do it.
But we can integrate with the digital.
Platforms that we're creating and we can partner and we can do a lot of things, where we can we uniquely can offer the full continuum of care now this will happen over time as we continue on the buildup value on the high utilizes and then incorporate and build upon.
Our we'll call it the lower utilizes our tears seeking a store.
Starting with the life dojo, app and adding on more.
So we as we've said over the year plus we can do with everyone that segment. The digital platforms is getting commoditized.
But our area is unique and we're the only ones that address it.
Great. Thanks for the questions.
Charles.
Thank you. Our next question is from Sean Dodge with.
RBC capital market.
Hi, Thanks, good afternoon.
Darrin the expansion you mentioned just signing for a couple of populations that now.
It just needs to be signed by the state can you give us a sense of the incrementals on annualized revenue that should contribute and then on.
On the guidance you had bucket it.
<unk> hundred $88 million or under contract or signing fees and 12 million to go get this expansion as it was that part of the go get or was that part of the.
What was being contemplated in that 88%.
I'll, let Brandon answer that but generally stay well I'll say this.
That it is relative to our guidance it is a significant number.
But I'll, let Brandon B, a little more invasive.
[laughter] Thanksgiving.
Thanks for the question John So, yes, this would be part of it because it's right. There. It's in front of US. It's what we would classify in the signature phase and so that's been in the $88 million.
And so it is in our guidance and we do expect that this this particular customer will become.
That's a pretty good chunk of our overall business.
So it's it's a good size expansion.
Okay and then.
On the eligibility pool, you you talked about the people not seeking health care because of COVID-19 and that causing them to drop out of a out of the pool is.
As it normalizes utilization snaps back do you have a sense of how many people are in this I don't know.
It kind of Shadow pool, how many people are covered by your non contra.
Contracts that didn't have substance abuse disorders that aren't currently being captured on.
For eligible because of their medical spending is temporarily dips.
Yeah.
Jump ball.
[laughter].
Yeah.
So I know I can take that one this is kurt.
You know when.
Of course, when we've been monitoring this.
And that has been included in the numbers. So I'll give you a rough range because.
We don't we don't have the full view of what this would look like at the time, because we went through this COVID-19 experience with Aetna and the mix of their business.
In terms of commercial versus Medicare.
Is different than a lot of our other customers.
So it's somewhere between 25% to 30%.
Of the overall historically that we've seen come down.
And so I would expect as we look forward.
To see an uptick of of similar.
Other similar range as utilization starts to normalize.
Okay.
Okay. So so.
If health care utilization normalize has been the other than the non <unk> part of the eligibility pool, you think could be 20% to 30% higher roughly.
Yeah, again, I mean that our historical analysis.
Includes aetna and there's obviously, a very different mix across all of the different clients. So.
Yes, I think it's in that 25% to 30% range.
Okay.
Great.
Thanks again for taking my questions.
Thanks, Sean.
Our next question comes from Richard close with Canaccord Genuity.
Yeah can you hear me okay.
Thank you okay. Great. Thanks first question just again on that outreach pool are you guys, giving specific numbers for the outreach pool.
Now with Aetna.
Excluded is there a specific point number that youre, providing maybe I missed that.
Yeah, Richard what what I, what I'd mentioned is is that Aetna represented about 82% of the outreach pool as of the end of the year. So that'll that'll give you some rough rough math.
I have to tell you what's left.
The key there is that the outreach pool acts very differently and as Curt indicated Aetna was.
The mix of commercial.
Medicare was much much different than the rest of our populations.
Not not plus we had the the <unk>.
Stale data for the last eight months.
Embedded in there and so the pool itself, regardless of its size will act very very differently going forward with the populations, we now have going for it.
Okay, much much bigger enrollment much bigger enrollment rate I mean multiples many multiples and it also pushes in the curve and it refreshes often.
Okay and so.
Maybe dive deeper on to that enrollment rates, obviously, 60%.
You know pretty significant number do you guys got a balance that at all in terms of.
You know clearly a really.
On a steep ramp in and Sigma in the for and a half months or so.
Is there any ever.
Is there ever any concern I should say that you're maybe enrolling too fast.
Well the key point here is that the outreach pool continues to turn and so if we enroll too fast we're taking a member out of the pool, but but we are getting data faster than we ever have.
For new new people, who were hitting the utilization or.
Any other reason that we're able to get them into the pool for the first time.
So we continue to address these folks as they come into the pool.
As anyone as anyone's new weather however, they got there.
And so it's not like we're going through the entire pool and there's nobody left it continues to refresh.
Okay. So.
Then as we think about provider versus vendor and obviously.
If you looked at it as a vendor you're you know saving money on the medical cost, even though you might be a significant number from a routing you a check.
Each quarter or whatnot on.
You don't think that you know growing low enrolling 60% is.
Raises eyebrows or anything like that.
Well.
Kirk on an elaborate but we recently met with this particular plan.
And they they have always let us go.
As high as we could.
And their attitude is the more people you enroll the more savings we get.
Which is hopefully how're you want everyone to be.
But yeah that's.
As recently as this week, we've had those conversations.
Okay.
And then Brendan maybe just to understand the expense or items.
As we think about 2021 with Aetna ramping down and then you're talking about going from 11000 and change I guess.
Clinicians.
For 15000 over the course of the year, how are you thinking about.
Or how should we think about expenses.
Throughout the quarters.
Yeah.
Sure. So you know if.
If I start with gross margin as a as a starting point.
If you look at the numbers that I described you can see that you know the aetna contract was frankly not as profitable.
As you know other lines of business.
And so when we think about how we are addressing that you know we have opportunities.
Two to improve and you know if you look at the the organizational structure. You know we have a lot of folks who are serving serving our members every day.
And they do a great job at it and we want to keep them busy.
And so the faster we can enroll the faster we can launch new plans the faster we can engage our new health plans and everything that credit mentioned earlier.
Better when we think about the the bottom half of the of the P&L.
Very focused on doing everything that we have laid out from a strategy perspective, and so we we don't intend to slow down.
We've lost a large customer that's great.
I shouldn't say, it's not great. It's it is what it is.
However, we.
Our continuing to move the business.
As if were the same as we were before.
And we have two we want to and and and so we do expect to spend some money.
As we have just achieved EBITDA positivity for the.
Frankly, just not the fourth quarter, but the last five months in a row.
Through December.
You know I do believe that's going to be a little bit more challenging.
With the revenue moderating.
In the new world, but.
But we still we're still looking at the overall strategy of the company to grow on top line as fast as we can.
And keeping our expenses in check overall.
Okay.
So as we think about customer diversification and.
If you have at night at like 8400, I think it was last week in last week's press release.
The 5100 Sigma.
So that's sort of the other buckets the remaining customers at about 2200, so as we think about the euro.
Gross there through 2021.
Is there any type of target that we should think in terms of like what the.
The other customers make up.
By year end or anything along those lines.
Kurt.
I mean, we do have targets that we've set internally I don't think at this point and branding correct me if I'm wrong, we're articulating those externally but.
Richard the intent both in terms of how we're deploying resources.
As well as how we're prosecuting against the pipeline and you know the data that we're expecting.
You know in the next in the next handful of weeks to be able to work with.
Milliman and Stanford to understand our results and validate them.
That's the strategy to move into new clients. There are some new clients that are waiting for that information.
There are some new clients that are looking to move forward based on the analysis that we've done on their books of business.
But we are aggressively trying to move the needle Richard on the balance of large existing clients versus diversifying and definitely having.
More new clients take up a bigger percentage, especially as we get into <unk>.
2022.
Okay, and do I have time for one more question.
Yeah.
Okay. So as we think about you know customer diversification, obviously, you're about life dojo, but that's relatively small and that got you into the employer business a little bit how do you think about like M&A in terms of diversification or.
Consolidation.
Within the area as well, obviously you guys have a lot of positive attributes yourself.
Well like Joe Joe was more than like what yes. It was a small acquisition.
It was.
A platform that we can build upon.
And in hand.
To transform it from a what was then a wellness app to the full suite of behavioral health module.
Which again substance use dependents depression and anxiety, so it was and it's and it.
Also a significant productivity enhancer for our care community. So we view that as a tool to get to where we want to go not the and in of itself, yes. It gets us into a player market.
But it was really more.
Uh huh.
Stepping stone to our digital platform.
As far as I'm not sure what the other part of your question is asking.
They get parents, so it's really about how going forward, we're thinking about partnerships and M&A too.
Further diversify our business and so the way that we're thinking about that Richard is how do we like.
Like life do Joe.
AD.
Good products that have strong data in both engagement and.
And outcomes.
And so we are continuing to aggressively look at.
On a behavioral focus where we can find programs. So at this point, we're not looking at.
Just capabilities, but where we can have programs that target.
Different populations, whether they're lower.
Lower on the acuity spectrum or populations that we don't currently address and our solution to be able to diversify our portfolio and have a broader solution set.
With the idea that we talked about earlier on.
Hum, allowing health plans to be able to buy more services from one vendor on track.
Then having to try to buy it and put it together themselves.
But to keep everybody on it.
Are you now.
Digital front door.
Integrated coaching.
The ability to to integrate with the behavioral provider network.
And the foundations.
AI powered personalization those are the principles that we're working off of and we want to find interventions that will allow us to do.
Deploy those on different populations and with good engagement and outcomes data on the intake.
Okay. Thank you.
Thank you. Our next question comes from Jean non Hanger with colleagues for security.
Yeah.
Thanks, He guys in our in the past you've talked about some 35, new logos in the pipeline worth several hundred thousand in outreach lives can you just provide an update there in terms of number of logos in the pipe potential outreach pool.
With expansions thank you.
Curt and Brendan.
In terms of the number I mean, we've continued to grow that I would say.
They're not all equally risk adjusted gene. So you know in terms of magnitude we're talking about since we last talked another 25% plus increase in terms of new logos.
How they translate to outreach pool potential.
And we're continuing to pursue new opportunities not all of those come in the same size and shape. So some of the.
Opportunities were looking at large national health plan their pilot.
Potentially as big as some of our smallest clients that are fully rolled out right now.
So so we're continuing to push that but.
Since we talked I would I would say, 25% to 30% continued to increase.
Okay, that's great.
Terms of Cigna, maybe if you could talk a little bit about the.
Potential there you know you cited 5100 members what what that comprises how much of your total agreements and what is and what percent of the potential for the total potential within that customer.
Yeah.
Brandon I'll, let you dissect this one.
Sure. So we haven't disclosed exactly what the revenue per customer is for.
For Cigna, but I would tell you this that we are.
And it was alluded to on an earlier question I mean, we are definitely out the gate fast.
We've already had conversations started conversations with this customer about how we can think about this going forward. The overall business. The overall contract was scoped at around $90 million for over three years.
At the beginning.
If you just flat line that that sounds like 30 million a year and at the very beginning we started talking about how we believe that Aetna I'm sorry, the thing that could be about $40 million.
For the first year for 2021.
And it appears we are moving faster than that and so that's why we're having the conversations we look to a little bit of history to say you know, what's the likelihood of other.
Of cigna's, saying keep going early indications are positive.
And and so the intent is to you know together with expansions into some other new states that credit mentioned with them that we will we will come to a conclusion that this is great for all of their members as well as Cigna itself.
And we can move that forward and increase the overall scope of the of the contract the contract did accommodate.
Some element of going in excess of the $90 million.
Which is why we you know originally even said that we could do 40 million in the first year or so.
We're already in that phase of.
How much can be over exceed and is that something that we can continue to sustain from them from a membership perspective, you know we have the we have the staff we have the capability and.
The NPS score to prove that its working.
And all of the clinical outcomes to show it and so everything has been full speed ahead there.
And it's just a matter of as we get through the next few quarters.
On to see how this continues to expand.
Do expect enrolment rates to normalize anytime you jump out of a program.
The rates tend to start start fast and they will normalize but when.
I mentioned earlier that the whole year last year, except net was was 40%.
And we've been for years talking about.
Remember that was half of that.
And so this is this is something that we see a lot of tremendous success with in this particular market and.
On Medicare advantage is a big reason why we're pushing forward with a lot of a lot of our pipeline in that space as well.
Alright, very helpful color Brandon Thanks for.
Last one for me.
Some questions asked.
That's your M&A strategy as it relates to you as the buyer.
How about you as a seller I mean with your stock down two thirds off its high I imagine there's some some.
Private equity interest in the space, perhaps some strategic or is it.
If you're comfortable talking about that at all thanks.
Well I mean, my other $2.
To be as transparent as possible.
On.
It shouldn't surprise anyone we have received a lot of inquiries for last week.
Obviously on the majority shareholder today.
<unk>.
I am a rational business person I will always optimize the value of the company.
I think it's fair to say that we're not going to get picked off.
We're not going to acquiesce to.
Just because our stock lifeblood of value this past week.
It doesn't mean that we've lost any.
And I said it pretty strongly on the call I feel great about our future as our future is bright as it's ever been I think the other thing sets us back a year.
So we're going to replace them, we hopefully will add them.
We'll replace them.
And get back to you know where that 100% growth rate and we use that 100% growth rate because we've constantly achieved in excess of 100% growth rate.
And we see when you're looking at our total addressable market and the opportunity we have in Medicare and Medicaid populations alone that really again digital apps are not going to solve for.
As well as.
On the aging of the population and then on the commercial side won't solve for that.
Digital apps are great for the seekers.
But the real got the real chunk of savings and the real cost of the system is at 44% of medical spend tied to five 7% of the population and that they're not getting appropriate be able health care.
Now.
So to your question, yes, we have seen we received a lot of inquiry.
No formal offers no things of that sort, yet and who knows.
But we're not going to get picked off and there are some partnerships that have come up.
We will.
Valuate anything that can enhance our long term shareholder value, but not we're not looking for a short term solution for the loss of value that we experience.
Got you. Thank you thanks Darren.
Thank you and this concludes our Q&A session I would like to turn the call back to Tim Pacer for his final thoughts.
Well, thank you everyone.
It's been quite a week.
Appreciate your support.
On the whole team does our whole company does.
We're going to work really hard to deliver the results that you've seen from us consistently over the years.
Everyone have a great night and again, thank you for joining us.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now goodbye.
Okay.
[music].
Yes.