Q3 2021 Uphealth Inc Earnings Call
Stratified population better understand what is happening with their health and other needs.
And coordinates care teams to manage a wide range of health program.
Central and integrates with our other offerings with our virtual care infrastructure and services and this integration will allow us to significantly expand cross selling opportunities.
In Q3, we won a significant contract in California to deploy internet for the largest specialty mental health plan in the state.
Some of our clients using central that already include the county of Alameda <unk> Health plan of the California Mental Health services Authority.
In Q3, we also completed the platform extensions to central net that support a very ambitious initiative in California called Count aim to better manage health for individuals with complex medical behavioral and social needs and we grew the population on the platform from around.
$6 8 million to almost $71 million.
Our second offering is our virtual care infrastructure.
This infrastructure allows clients to extend access to care and care teams with video endpoints complete exams with connected Iot diagnostics and advanced clinical decision support system for our domestic business, we package and deploy the infrastructure.
Sure as our marquee platform with video endpoints.
That will include remote monitoring and diagnostics as well for our international business, we package the infrastructure with our Hello life platform with Standalone digital clinics and acute care digital hospitals with substantially expanded capabilities to support.
Full diagnostic primary and acute care visits including imaging labs and medications.
In Q3, we expanded the U S footprint for the HIPAA compliant Marty virtual care platform and we currently support 168000 accounts per month.
Over 26000 video endpoints at over 2100 <unk> locations in the U S. We also recorded our largest volume of use of Marquis with over seven 4 million minutes of consolidation. This is compared with $6 1 million minutes in Q2.
<unk> and $4 6 million in Q3 of 2020.
With our domestic peripheral care infrastructure business, we added contracts with Robert Wood, Johnson, Barnabas, IU health system and access points health with an annual contract value of $5 5 million and a total value of over 26 months of $16 5 million.
We also opened Spanish interpretation operations in Colombia, and expanded operations in Peru to meet increased demand.
Internationally.
With our virtual care infrastructure, we completed installation of 550 digital clinics in Madhya Pradesh and.
250 of them are currently operational.
With these clinics, we will eventually serve a population of almost $25 million.
We are also very proud to report that we deployed our first Hello life fully digital hospital in this quarter in Naga land, India. This is a truly revolutionary offering and with it we extend our virtual care infra.
The structure to include acute and critical care in inpatient settings, So Hello life.
Hello lines infrastructure allows seamless delivery of health for the home of the patients to hospitalization and post hospitalization.
The digital hospital is the first of its kind it allows physicians to remotely examined patients not just with consolidations, but it was much expanded capabilities to view infused medications monitor ventilated flow conduct physical examinations with connected Endoscopes ekg's other.
Diagnostic devices complete bedtime bedside tests and prescribed medications remotely.
In Q3, we also contracted to install and deploy 260 digital clinics in the Democratic Republic of Congo, and are underway with the build out of these the DRC contract value was $66 million over five years.
So ill health digital clinics offer the ability to broaden our full patient encounter complete with physical exam diagnostic testing and pharmacy dispensing and it is a clear example of how a telehealth enabled digital first.
Producible novel can improve quality of care very efficiently globally.
Our third that offering is our services line.
The <unk> platforms and infrastructure designed to onboard a wide range of provided networks and make them available virtually at the point of care today, we provide a core set of in house services and these include first market leading language interpretation with our.
HIPAA compliant marquee platform and medically trained interpreters.
Medications with a full service retail and compounding pharmacy licensed in 50 States and D C.
In Q3, we introduced new Proscriptive direct a new service to deliver physician recommends supplement that extends our leadership in the management of health with personalized protocol.
A third service area for US is behavioral health services, where we are in the process of integrating psychiatry and medical services with a full continuum of mental health treatment capability to create a comprehensive care model for being able to have this is what we offer the market in Q.
Three we expanded contracts to deliver behavioral health services to include community care life and health.
Care for first responders and other groups. We also credentialed additional facility to deliver mental health programs etcetera.
Turning now to our growth strategy.
We continue to advance.
Both at a significant pace with five key focus areas.
First focus we are continuing to implement contracts across all our solution offerings.
<unk> focus we will include the communication and collaboration infrastructure provided by Marty the virtual care platform with the <unk> integrated care platform in the first use case for this.
B to bring language services to existing clients, who are on the integrated care platform.
Third focus is to capitalize on cross selling opportunities.
We will combine the integrated care platform central met with our expertise to manage health programs.
And for example.
Use our experience delivering and managing behavioral health services to support health plans manage whole person care programs and other similar initiatives. We will also bring additional value to our existing client base across 2100 healthcare facilities, specifically in areas of inflammation integration deeper.
Analytics and care management with prescriptive guidance.
Our fourth focus area for growth is to develop strategic partnership opportunities to deliver services such as language in medication management to other digital Health Company partners near term focus will be on embedding language services with delivery into the acute care space.
And expanding medication management for health plan clients.
And final growth focus area as an expansion of our business models, we will broaden the virtual care infrastructure to create a very compelling reproducible model for emerging markets to deliver acute care with fully digital hospitals and hybrid clinical team.
As part of the consolidation and building of our global upheld offering we strengthened the leadership team.
<unk> added two new members, Mike rollout joined us from the longer side of Teladoc as Chief revenue Officer.
Sarah on crest joined Us from Beacon health options.
SVP of integrated behavioral health, we are really delighted to have both of them on the team.
Each of them will significantly advance and transform their areas of business focus.
In close partnership with our board of Directors, we also engaged top.
Advisory industry leaders Ketchum global marketing and communication firms to help us bring up health message in a compelling way to the market and to increase our visibility.
Czars to implemented comprehensive.
Compliance program across all of upheld and a national leaving management and transformation firm to accelerate our integration and go to market initiatives. The goal of these engagements is to continue to enhance the integration and consolidation of our global entities and to mix.
<unk>, the synergy and creation of value across all of our pads.
So to summarize our third quarter has been exceptionally strong.
Financially exceeding projections on revenue growth and profitability and continuing the transformation of the company into co viewing global public enterprise.
I can say confidently that we are solidly positioned to execute and meet our financial targets for the rest of 2021 and drive continuous and profitable growth into 2022, we increased our number of clients contracts and revenue we introduced new breakthrough.
And we continued progress on our integration initiatives. We are excited about the future. We are well capitalized to become a leading force in digital health and have an unmatched combination of technology infrastructure and services that we bring to our clients with.
That I will turn the call over to Martin to go into more details on our financials.
Thanks, very much for mesh we appreciate everyone joining us today.
Before I begin my review of our third quarter results I want to first comment on the presentation as it pertains to the absence of results and comparison periods.
Call that we've completed the merger with good capital to on June <unk>. It was only from that date forward that we have consolidated results that we can report on a GAAP basis.
Due to timing factors related to the various business combination transactions encompassing multiple entities as well as the global scope of our operations. It was not possible to provide consolidated GAAP or pro forma results that were sufficiently complete for all of the year earlier periods.
This is the first full quarter that upheld financial statements include all of the businesses combined in the June 9th transaction.
Accordingly, we are only able to share results for the three six and nine month periods ending September 32021, with you. Today. However, I will provide some additional context, where possible to help you better understand our overall performance.
I'll start with a review of our results on a GAAP basis, and we will include pro forma comparisons where appropriate.
Revenues for the third quarter of 2021 were $49 1 million, which exceeded expectations.
Historically, we reported the company's revenue and gross margins on a business unit basis to provide continuity with historical results as we advanced with the integration and alignment of the businesses. We think it's important to show the company as it is now operating which is along three business lines.
Integrated care management.
Second virtual care infrastructure, and food services, which includes the digital pharmacy and behavioral health business units.
Looking at third quarter revenue broken down by segment on a GAAP basis virtual care infrastructure was the largest contributor with $19 $2 million of revenue or 39, 1% of total revenue.
Services, which again includes our digital pharmacy, and behavioral health businesses had GAAP revenue of $18 million or <unk> $36 six for the third quarter total.
Finally integrated care management had third quarter revenues of $11 9 million or.
Or 24, 2% of the total.
On a geographic basis, 65% of third quarter revenues came from the United States, 16% for Europe, and 19% from Asia and Africa.
Third quarter revenues would not markedly affected by COVID-19 in any of our operating jurisdictions that we have experienced labor supply issues in our behavioral health business and it's possible that supply chain issues could impact the rollout of digital infrastructure assets in India.
While we are not able to offer complete year earlier pro forma revenue figures for comparison, let me provide a little color on the trends we saw within the various segments to give you a better sense of overall performance.
On a pro forma basis total revenues increased 28% from Q1 to Q2 2021 and increased another 25% from Q2 to Q3 2021.
<unk> year to date September 32021, pro forma revenues of $118 8 million or approximately 38% higher than the combined unaudited pro forma revenues for the same period in 2020.
The largest revenue growth in Q3 came in our virtual care infrastructure business line, which saw revenues grow from $12 4 million pro forma in Q2 to $19 2 million in Q3, an increase of 55%.
The company's revenue mix continues to shift towards the higher margin integrated care management and virtual care infrastructure businesses.
These two business lines increased from 48% of total pro forma 2020 revenues to over 60% of year to date, Q3, 2021 pro forma revenues and to over 63% of third quarter revenues.
Gross margin on a GAAP basis was 40% during the quarter and margins by segment were as follows integrated care management, 40% virtual care infrastructure, 40% and services 41%.
We view gross margin is a key metric for us health and as being useful for comparing our results to our peers.
Q3 gross margin of 40% was an increase of nearly 11% from the company's pro forma gross margin of 36% in the second quarter.
This improvement stemmed largely from increased volumes in the U S telehealth and behavioral health businesses and as a result of mix factors in the integrated care management business line factors, which we discussed during last quarter's call.
Third quarter net income on a GAAP basis was $32 6 million.
This included a $49 9 million reduction from $61 $8 million as of June 30 to $11 9 million as of September 30.
And the fair value of the derivative liability associated with the convertible notes as a result of changes in the company's stock price during the quarter.
The reduction in the derivative liability is recorded as a gain on fair value derivative liability a component of other income in the company's consolidated statements of operations.
Third quarter, adjusted EBITDA was $5 million, which exceeded expectations, and which was more than double our Q2 pro forma EBITDA.
In addition to residual transaction related expenses adjustments were made to EBITDA for various lease abandonment expenses.
As a reminder, adjusted EBITDA is a non-GAAP measure and we have included a reconciliation of GAAP net earnings to adjusted EBITDA in the press release.
I want to spend a few minutes discussing the companys liquidity position.
As of September 32021 accounts had a cash balance of approximately $68 million.
The company had short term debt instruments, including notes to shareholders and a forward purchase agreement, which together totaled approximately $51 million. Excluding the current portion of the derivative liabilities and a $160 million convertible note.
We raised approximately $43 million from the issuance of approximately $26 5 million shares of common stock subsequent to the close of the third quarter.
Issuance substantially increased the company's free float and increase the total number of outstanding shares to approximately $144 million.
Proceeds of the equity offering will enable upheld to satisfy its short term liabilities and to fund ongoing working capital and capital expenditure requirements associated with the company's continued growth.
Pro forma for the equity offering the company would have had approximately $111 million of cash on the balance sheet as of September 30.
And we will retain sufficient liquidity as it continues to invest capital to fund growth in excess of cash flow from operations through at least the second quarter of 2022.
We continue to make excellent progress in integrating our operations our operating plan calls for the selective integration and expansion of various sales and marketing functions and from the consolidation of certain business process functions, including financial systems and reporting capabilities.
Work is proceeding according to our internal schedules we.
We have built out a strong and experienced finance and accounting team. We've completed the first phase now workday implementation at the <unk> level and are in the process of implementing workday at the three business lines. We are currently consolidated in employee benefits and our insurance spend across the business lines and our recently closed or significantly reduced our foot.
Printed six locations in the U S and Puerto Rico.
These cost cutting activities will be supplemented by additional reductions in operating expenses and we will be able to provide more details on the scope and magnitude of both our revenue and cost synergies once we complete our 2022 budgeting process.
As <unk> stated, we reiterate our financial projections for 2021% of revenues of $180 million and adjusted EBITDA of $16 million to $20 million before public company expenses.
That concludes our prepared remarks, operator, we're now ready to take questions.
Thank you. Thank you I would like to ask a question. Please press star followed by one on your telephone keypad.
If you change your mind you can press star followed by Keith to cancel your request.
When comparing to ask a question. Please ensure that you'll find is likely.
Our first question comes from Mike Latimore of Northland Capital markets. Mike. Your line is open. Please go ahead.
Yes, good afternoon, and congratulations on the quarter.
Great to see another quarter of strong execution, there post merger.
Yes.
In the third quarter here, the virtual care infrastructure grew quite a bit sequentially can you just provide a little more detail on that.
Is it more related to the U S or international markets and should we think of that as sort of.
Recurring business.
Maybe that forms a base off of which you can build in the fourth quarter.
Mike.
Thank you for participating in Texas the question.
As you know the virtual care infrastructure is a high growth area for upheld and what we see in Q3, which we expect to continue is growth both in the U S and the international markets and this is recurring growth. What you saw was a continue.
<unk> expansion of the utilization of the infrastructure in the U S with existing clients expanding the number of minutes expanding the number of encounters as well. As addition of some really marquee new logos as well and we anticipate that will continue to expand have an even more so when we bring in some of the.
Synergistic offerings in the international market, what do you.
So in Q3 is the deployment of the large contract in Madhya Pradesh.
And the <unk>.
Expansion into Africa, just the beginning of that with the <unk>.
Democratic Republic of Congo.
What we see here in the international market is a recurring model and an expanding model both with the delivery of the infrastructure and the ongoing recurring services. They support as we service. These populations and of course, we cannot underestimate the absolute tremendous.
The revolutionary nature of the of the New Digital hospital, which is also creating substantial expansion opportunities for us.
Great.
And then just thinking about the model probably is there sort of a natural seasonality in the business such that you would expect.
More.
Sure.
More spending or year end spending like in fourth quarters or is that not natural disposal.
We don't have any any marked similarity Mike.
Yes.
Okay.
The as far as seasonality.
The.
As you are.
No. The both these models are driven by the need for care, both in the U S and internationally and more so.
The move by our customers and clients to these new models, where we're a virtual care infrastructure can bring not only access to care, but also access to expanded care teams. So no seasonality.
Substantially in these businesses.
Got it got it and then.
Sure.
Just last on the maybe.
One of your filings you talked about $154 million of I think it was.
Virtual care.
The original infrastructure business. So you could see recognize over the next 18 months or so I guess can you.
Talk about a little bit more about the catalyst for recognizing that business and visibility into income.
Thanks, Mike I'll ask Martin to to respond to the detail on that hi, Mike how are you.
Hey, Mark.
You are joining us.
As you look at the business.
Both the integrated care management, and the virtual cab infrastructure business lines, which together constitute about 63% of Q3 revenues are contractually.
Driven businesses that gives us very strong visibility into future revenues, we haven't published backlog information at this point, but I can say that from a from an overall business perspective, we're about where we were at this time last year in terms of percentage of wood.
Revenue that's already under contract.
And the contract that you're referencing would fall squarely into that bucket.
We have the contract and it's about execution on that contract which were.
Well underway on.
Got it.
Alright, great well congratulations good luck correctly here.
Thank you very much Greg.
Thank you Mike.
Our next question comes from Mike Needham <unk> of Oppenheimer.
Your line is open. Please proceed.
Alright. Thank you congrats on the quarter a couple of questions. One can you discuss the trajectory of revenues by segment heading into 2022 and also we can touch on kind of how we should be thinking about margins for next year as well and then overall kind of if you can kind of give us the lay out like the tailwind and headwinds for next year as well as we turned the corner here.
Thanks, very much Mike for participating in the question.
Turn that over to Martin back to answer.
Hi.
Good how are you doing.
Good. Thanks, yes, so if you look at the.
The revenue mix of the business.
Think about that in terms of trajectory going forward we've seen.
An increasing mix and growth in the integrated care management and value add.
Integrated care management.
Virtual care infrastructure segments.
Those in those segments in 2020 constituted about 48% of total revenues.
In the third quarter, they constituted 63% in total revenues.
So that's where the growth is coming and we would continue we would expect to continue to see that.
Increased rate of growth.
Those two business lines.
Those business lines tend to have the higher margins as well.
And so we're very happy with the.
The progress on the gross margin.
An improvement of about <unk> 11 of 11% from.
Q2 to Q3 on a pro forma basis.
We would expect that that gross margin would.
Continue to improve as.
The revenue mix improves.
Okay great.
Also can you discuss post obviously the capital raise kind of the positioning of the balance sheet. As we think about 2022, the puts and takes into that and how we should be thinking about cash flow and your timing around turning positive on that front as well.
Sure. Thanks, Mike.
Mike Matson to address that again as well. Thanks, alright. Thanks. So if you look at the Q.
We have had about $68 million worth of.
Cash on the balance sheet as of <unk>.
<unk>.
<unk>.
We engaged in an equity offering.
<unk> added about $43 million of cash to the balance sheet, so sort of on a pro forma basis.
Would have had approximately $111 million of cash on the balance sheet.
10 to 30 again pro forma for <unk>.
The equity offering.
Retain sufficient liquidity.
We continue to invest to fund growth in excess of cash flow from operations through at least the second quarter of 2022, when we would expect the business to.
Scott.
To generate positive operating cash flow and Mike that that assumes the continued growth of the business.
At the rate that we've outlined.
If we are able to grow faster.
Yeah.
With the proviso that we want to do it in a.
A way that generates positive EBITDA, but it's the growth rates tend to be a little bit higher than we are currently projecting we may need a little bit more working capital to fund that but as it stands right now.
You would see liquidity being sufficient well into the second quarter of 2022.
Alright, I appreciate the color and congrats again.
Thank you very much Mike.
Thank you Mike. Our next question comes from Frank Hakkinen of Lake Street.
Your line is open.
Martin Thanks for taking my questions I wanted to come back to predictability just one more time.
Heard your 63% are contractually driven businesses and I heard you kind of referenced.
What percent of.
Next year's revenue is kind of in hand recurring in nature, but maybe just go top down for us, what's giving you the confidence to standby that 50% growth rate for next year and how much of that you feel is contracted and are already in place and how much more you need to get in the door to reach or exceed that number next year.
Frank Thanks for joining thanks for the question.
Start with that and then hand it over to Martin So if you look at the.
Our contracted businesses virtual care and the integrated care platform. These are multiyear contracts.
That are based on <unk>.
<unk> that expand year over year. So if you look at.
The virtual care platform.
In the U S. The expansion comes from an ongoing increase in the minutes of utilization as well as in counters.
And within the existing customers, which are multi year contracts and the adding of new logos. So based on the pipeline based on the expansion based on the uptake in utilization that's what's behind the confidence in the predictability that we have been.
Projecting in the in the international side, what the best way to think about this is once we've deployed these digital clinics in a catchment area. There is an ongoing expanding revenue stream from the services. They enable because we've essentially got a population that is assigned to us.
And our progressively serving more and more of the population and Thats an ongoing stream. Those are also a multi year contract that there.
The population is there.
And the dynamics are such that it's <unk>.
Highly predictable and growth oriented.
Those in.
In the virtual care infrastructure, the dynamics behind the predictability of the numbers in the modeling that we've provided.
<unk> on the integrated care platform, it's a similar dynamic multi year contracts.
Based on populations and Theres, a two tier here with just the expansion of the population within these integrated care communities, we create but also an expansion of the population that get enrolled in a number of these programs.
Which we support and enable which results in an added pm PM within that overall population. So both those elements. The total number of population on the platform and the expansion of initiatives that we're supporting our expanding and when you when we look at the.
Further.
Drivers of growth.
Which are moving the health systems and managed care into these new models of care. That's the that's where we get the confidence in the growth rate that we're projecting.
Perfect that's really helpful and then.
And my follow up I wanted to touch on that second piece of the integrated and integrated care growth you spoke to the expansion of the population that getting enrolled in these programs can you just walk through an example, and just trying to illustrate for US just how impactful that can be when you transition somebody into one of these programs.
Sure. Thank you Frank So I'll give you. An example, so if you take.
The <unk> that there is $1 7 million.
Lives in that.
About one four plus on the platform.
There's a number of programs and there are programs to manage.
Yeah.
Individuals for homeless their.
Graham to manage.
Individuals who have specific complex conditions.
<unk> health conditions, and so on and.
The.
<unk>.
The ratio so if we charge X.
Dollars per member per month for the general population overall that can increase 10 times when that individual moves into a specific program. So.
Even if we didn't grow the population as we move the individuals into these programs.
The revenue side of it can have.
Has that potential of up to 10 times additional P. M. P M.
Does that answer your question Frank.
Yes, that's perfect very helpful. I'll stop there thanks for taking my questions and congrats on all the progress.
Thank you Frank.
Thank you Frank our next question today comes from Bill Sutherland with Benchmark company.
Your line is open. Please go ahead.
Thank you.
Martin Burmaster good evening.
Sure.
I wanted to look at the services line just for a second that the gross margin.
And just a major step up quarter.
Quarter over quarter, if you could give us a little color behind that.
Thanks for joining Texas question, and I'll ask Martin to talk to that.
Bill.
Hey, Brian.
We are pleased with the.
The uptick in gross margins at the services line as we.
Just on our last call.
We expected some improvement in that.
<unk> gross margin.
On the heels of stronger volumes, particularly on the U S. Behavioral health business. So we saw that come to fruition and that really drove.
Good bit of the improvement.
And.
Good.
Yes.
A number that we should think about going forward and then Conversely, I know that there has been a low pressure on great cares gross margin because of the European implementation.
Does that.
Joe.
Maybe it's 40 degree way to think about.
Integrated care.
A higher number as in the past.
Let me address that bill so that is the.
The best way to think about the integrated care and the margin is that.
The margins are depressed a little when we're creating these new referenced configuration and once that's in place. They go back to the peak.
The European initiative represented a new.
Model reference model, we set.
And we expect those margins to start to go back up.
As we get into the next phases of.
Of that contract in terms of.
Ongoing expansion of the services margin Martin you want to add to that yes, certainly look better.
You saw.
Overall margins on the gross margin basis.
From 36 to 40.
Part of that is mix part of it is improvement in the services line.
We expect.
Continued strong growth in the two really higher margin segments on a normalized basis, that's integrated care management and virtual care infrastructure. So we think that will provide a lift to.
The overall gross margin going forward.
<unk>.
We would.
To keep the services margin in the high <unk> low <unk>.
Distant basis going forward.
Okay.
The shifts.
Continue the improvement in gross margin hopefully going forward.
<unk>.
One more I was thinking about.
Yes.
The.
The outlook for.
The international business I'm sorry.
International virtual care business.
When you are.
Can you tell us a little bit about the financial characteristics when you're in the deployment phase.
When you move to operating in the clinics.
Does that change.
The margin profile.
Let me address that Bill and then I'll ask Martin to add to it. So both phases are high margin businesses for the international.
And virtual care infrastructure and services business.
The shift.
So we target.
Margins in the deployment of the infrastructure itself.
And Martin can get into the numbers there.
Ongoing operationally essentially what happens is that we are shifting to a services recurring services model, which is also generating.
Substantial margin.
Relatively so the dynamics are a shift from.
The margins on the deployment of the infrastructure to margin on the deployment and provision of ongoing recurring services. That's the structural characteristic in the phase.
But as I mentioned both of those phases.
Our targeted at.
At <unk>.
Margins for US anything you want to add to that.
Robert I think that was exactly right roadmap so.
On the infrastructure side of things, so, we're making margin and.
It's a very healthy margin and then we make a healthy margin on the services side. There is obviously a ramp up on the services side as volumes increase and so that.
Margin on the services side.
Scott and irrelevant are relatively modest.
Level and ramp up over time.
The importance of having.
Number of these different contractual vehicles at different stages in their life.
Going forward.
And then last for me.
I know, there's a lot of opportunities out there for the year.
For the.
Virtual model internationally.
Can you give us a sense.
The opportunity pipeline.
You all are.
Working on.
The sensors.
If you ask the internal team is like infinite demand is how we would put it.
So it's really a question of how much that can be fulfilled.
Pipeline can be.
Pipeline is much more massive.
So it is not the constraining side of the equation here, it's really how much working capital they wanted to deploy.
To sustain what level of growth, but this is a breakthrough model for the emerging economies, a new model for infrastructure and and how you can deliver not just primary care, but even acute care and there is just a tremendous interest in leapfrogging legacy.
And things that we've done in the past to what is really a very exciting 21st century digital first model.
Model for these countries, who are just in the process of expanding investments in health care infrastructure and health care benefits.
So the demand is created.
Created by both those factors.
And having a new model.
<unk> is a perfect match for the demand.
Alright, okay.
Thank you both for pillar.
Thanks.
Thanks, Bill Thank you Bill.
Thank you Bill our final question comes from Matt Tucker of harvest.
Please go ahead.
Hi, guys. Thanks for taking the question.
Just a couple of questions on the Cal aim.
Relationships.
Do you mind, giving some framework in terms of how you are working with them now how big the membership population is and how you're contracting with that Medicaid program.
Innovative California.
Matt Thanks for joining us and thanks for the question.
As you know count aim is a program that kicks in next year. It build upon programs had been deployed.
Up to now to build upon whole person care it builds upon health.
And the purpose of the program is to demonstrate a new way to manage.
The Medicaid population.
<unk> is at the heart of the challenge.
Providing health care.
To that to that population its individuals with complex medical conditions, behavioral health and social factors affecting their health.
No.
But.
We are.
Focused on is expanding our beachhead in the largest planned participating and counting which is allied care health plan.
As well as working with some of their.
Provider networks.
And what we are initially focused on is the expansion within <unk>.
Our largest Medicaid plan in the states actually in the country.
And.
Expanding from there into the provider network and additional plans that are a part of that whole initiative.
Got it and just to drill down a little further if I could remind me how many members are in the Cowie program.
How many members potentially could you be contracted with through the plans that you work with in 'twenty two.
So the entire California, Medicaid population, which is in.
<unk>.
I think it's $12 million to $13 million.
In the <unk> program.
Currently we are.
Serving.
Somewhere in that two five to 3 million members.
In that program and we expect expect to expand that to account for close to 50% of the population under that program as it rolls out.
Got it so call it $6 million to $7 million as it rolls out.
You will be contracting with them on a negotiated <unk> basis.
That is correct.
And will you be taking risks under those contracts.
We will not be taking risk under those contracts.
But as at least not yet.
Our looking at arrangements as we add.
Services to help manage health programs at.
Models, where we could participate in certain incentives attached to it.
And other metrics that we can help move.
Got it and is there a preliminary P. M. P. M. We could assume for that six to 7 million lives.
That's part of our pricing models. So we don't disclose that but there is another growth element maps, which is related to the overall expansion of Medicaid itself.
Within the state.
As you know and that's across the whole country to the population under Medicaid is also growing.
Got it okay.
Great. Thank you and then.
Second question I had is related to the direct contracting program with Medicare.
What are your overall views of that program and are there ways that you can participate in that through partnering with provider groups are taking risk or health plans in the DC area.
Yes, absolutely. So one of the reasons that we use the word managed care organization.
Our target customer is that there are many flavors of that kind of organization traditional health plans.
Providers and various risk based and delegated arrangements, but also entities like the BCE direct contracting entity as well as flavors of accountable care organization. These are all target customers for us and exactly the set of capabilities that would bring to a health plan.
Would bring to the TCE as well.
Both in terms of technology and infrastructure and as we outlined.
Value added services to help them manage programs and metrics that they need to hit as part of that TCE program.
Got it but again this would be a case, where do you see would then share some of the PMT I'm with you on a non risk basis as you expand the membership base.
Sort of indirectly contracting with.
That is correct.
Got it and.
And that would kick in 'twenty two as well.
We haven't explicitly modeled and expansion into DC ease.
But it's one of the target in the.
Managed care expansion in 'twenty two.
Debt that we are modeling.
Got it so that would be incremental to the 50% revenue growth that you spoke to for 'twenty two preliminarily.
That is correct.
Okay and then just.
The last question I had is I know you guys have invested materially in filling out this platform with <unk> digital platform I think in the range of $100 million over a decade or so correct me if I'm wrong, but is there any other material investment that you need to make to be competitive or to have.
The most comprehensive solution joining joined the market in 'twenty two.
We have made substantial investments in dollars, but also we have some very innovative.
Breakthroughs that we've made and how the platform is designed built around this concept of an integrated care community.
The major elements of investments, we need to make on the platform are behind us the COO.
Core functions are in place, but we do have as with technology ongoing enhancement ongoing buildout of reference models rules protocols guidelines assessments.
We will continue to keep.
Ahead of <unk>.
Technology competitors.
More along maintenance Capex type of investments.
Some of it yes, I would take the ongoing.
Continuous improvement of the platform.
Got it okay. Thank you very much.
Thank you. Thank you.
Today's Q&A session I would like to hand, you back to Ramesh for any closing remarks.
Thank you very much want to thank everybody for joining us today and.
And just state again that we are very very proud of what we have been able to do in Q3.
Not just the financial growth, but the growth in customers contract new products that we have introduced.
We are poised with capital for growth are very optimistic and confident in being able to create a leading digital health company in the market. So thank you all for participating today.
This concludes the third quarter.
Quarter earnings Conference call. Thank you all for joining VIP and have a great rest of your day you may now disconnect your lines.
Okay.
No.
Yes.
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Okay.