Q2 2023 Ontrak Inc Earnings Call

August 9, 2023

Good day and thank you for standing by welcome to on tracks to Q23 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

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Please be advised that today's conference is being recorded I would now like to introduce your host for today's call Ryan Halsted. Please begin.

Thank you operator, and thank you all for participating on today's call. Joining me today are Brandon Laverne, Chief Executive Officer, and Chief Operating Officer, Mary Lou Osborn, President and Chief Commercial Officer, and James Park, Chief Financial Officer earlier today <unk>.

<unk> released financial results for the quarter ending June 32023, a copy of 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. All statements in this conference call other than historical facts are forward looking statements.

Words anticipate believes estimates expects intend guidance confidence targets projects and some other expressions typically are used to identify forward looking statements.

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 <unk> business financial condition and other operating results, which include but are not limited to the risk factors described in the risk factors section of the form 10.

K and Form 10-Q as filed with the SEC.

Therefore, actual outcomes and results may differ materially from those expressed or implied by these forward looking statements on track expressly disclaims any intent or obligation to update. These forward looking statements with that I would like to turn the call over to Brian .

Thanks, Brian and welcome everyone.

We believe the current health care environment continues to be favorable and driving demand for our new portfolio of behavioral health solutions.

Recent trends cited by managed care Payors and behavioral health providers growing demand for behavioral health care services, combined with commensurate need to grow and improve their behavioral health networks.

With the recent proposed rule on mental health parity by the by the administration. The regulatory landscape also appears to be supportive of expanding access to critical behavioral health care services.

The rule proposals to add enforcement measures of the mental health parity and addiction equity act, including requiring plans to improve their networks with mental health clinicians and evaluate the outcomes of their coverage rules to make sure people have equivalent access between their mental health and medical benefits.

These developments along with the feedback we hear from our members keep us focused on our mission to help improve the health and save the lives of as many people as possible.

We bring that mission to life every day through the dedicated efforts of all of our employees, but particularly our frontline member enrollment specialists member support specialists and care coaches.

These specifically trained professionals engage directly with members explaining the benefits of Ontrack health programs customizing effective care plans and guiding members to the most appropriate care and treatment pathways.

Average is more than a self guided app based care program fit into this.

Sustained integrated high touch and digitally assisted individually tailored program that tackles, chronic comorbidities and the underlying behavioral health conditions that consistently drive high costs in the health care system.

As I've mentioned on previous calls by expanding our product offering we have created greater opportunities to serve more members more markets and expand our footprint beyond the 2% to 4% of high acuity members. We have traditionally served through our successful whole health plus program.

The positive response from new business prospects has been encouraging as marilu will describe later in our call.

Our modularized product portfolio now allows customers to access any number of entr'acte health solutions, depending on their specific needs and member population.

As a reminder of the highly differentiated product offerings that we now offer.

Number one on track identify which uses AI enabled predictive algorithms and imputed diagnoses to find hard to reach members and provide meaningful insights into their health, enabling customers to contact these members on their own or with our help.

This is attractive to customers with their own well developed existing program offerings, who otherwise confront challenges and identify need among our members.

Number two is on track outreach.

Which are member enrollment specialists use evidenced based outreach approaches to connect with new members identified either through on track identify or from a customer self generated target list and enroll them either into the customer's existing offerings or our own coaching model.

This is attractive to customers facing enrollment challenges, who lack of experience and highly refined approach of our enrollment team.

Third our on on track engage coaching model includes evidenced based techniques and consistent coaching sessions designed to affect the buyer change and our members' behavior.

This can be used as a coaching only solution for low to mid acuity cohorts and our coaching and provider network solution from mid to high acuity populations.

This is attractive to customers lacking highly scaled engagement and collaborative resources necessary to drive durable behavior change.

And fourth on track access enables customers to build out their behavioral health networks and improve access and availability.

Attracted to customers lacking access to well developed provider networks or without the needed resources to keep their network on pace with the growing demand.

And to enhance Ontrack access I am proud to announce entr'acte health has achieved the prestigious NCQA certification as a credentials verification organization.

This recognition reaffirms our dedication to upholding the highest standards of quality and compliance in our operations.

Here into the rigorous insecure standards, we ensure that our customers have access to the most reliable and trustworthy healthcare solutions available, allowing them to meet their access and coordination goals with confidence in east <unk>.

During last quarters call I summarized some of the augmented intelligence and operational enhancements, we implemented during Q1 of 2023.

I'd now like to highlight some of the tangible results of those implementations.

Our virtual assistant, Illinois has already helped us deliver a 12% increase in member retention rates through a cadence of automated calls that provide check ins on health status capture member needs in <unk>.

Scheduled calls with care coaches.

Our previously reported 40% increase in care coach case loads, driven by adding AI capabilities operational enhancements for administrative functions continues to improve after another quarter of data in.

In Q2 2023, we have achieved an additional 20% increase in care coach case loads.

Outcomes like these highlight what we feel is our unique value proposition.

<unk> ability to combined person centered human engagement with the latest and augmented intelligence solutions.

That's the promise of our advanced engagement system real time, AI driven improvements to the ongoing efforts of our enrollment agents and care coaches. This adds to improve member health measurable sustained outcomes intangible savings for our customers.

I would now like to turn the call over to Mary Lou Osborn.

Thanks, so much Brandon.

I am thrilled to announce we have signed a new customer contract.

Respected.

Medicaid Health plan.

This new agreement covers all adult members and includes each of our product solutions for members with high.

Moderate and Mount acuity.

I will briefly summarize each of our solutions being offered to this new customer.

Our entre whole health plus solution.

<unk> identified the planned high cost.

High acuity members with chronic comorbidities and underlying but unaddressed behavioral health conditions.

This comprehensive solution will provide member outreach engagement care coaching and behavioral health provider treatment program.

Are on track engage solution will operate care coaching solution that supports members and provides ongoing coaching to help members address physical and behavioral health challenges.

Without the immediate need for provider intervention.

In addition, we have collaborated with our new health plan customer to expand our services and further support our medical management efforts.

Through our proactive outreach approach to their most impacted members with serious mental illness.

Our new on track member portal will feature a curated health information delivered through our member facing stay on track Dotcom website to provide educational and timely content for all of the health plans adult members on how do we improve overall wellbeing.

In addition, we will be supporting this health plan on quality heated measures clothing critical gaps in care.

Participating in clinical collaboration and improving member health outcomes.

We anticipate this contract to be effective in Q4 pending state regulatory approval.

We believe this new contract represents an exciting new blueprint for the types of engagements we expect in the future.

Contract can survey health plans entire adult membership with multiple solutions across acuity, including a coaching only solution.

A coaching program tailored to meet the needs of members with serious mental illness.

A collaborative clinical approach to closing heaters gaps in care.

And providing additional well being content for all members.

This contract highlights <unk> ability to provide an array of products to meet multiple customer and member needs along with our experience to the.

Customized solutions and meeting specific customer calls without placing undue startup costs on track.

As we further refine our new flexible product offering we believe it will be a crucial method of enhancing revenue with each customer as well as expanding the number of potential customers on tract and effectively impact.

Next we recently secured a sign business associated agreement with a major western health care system and have just received their Medicare advantage member data, which we are currently analyzing to identify solutions for this impacted population.

Our data analytics process will unfold over the next few months.

As we work toward developing and delivering a pricing proposal in early Q4.

We also have a new non binding letter of intent in place with a prominent value based provider group that is interested in our solutions across multiple states and varying number acuity levels.

This group is now reviewing their patient data to determine which populations are their highest priority and best suited for our solutions.

We expect this customers needs to be well served by our whole health plus contract outreach ontrack engaged and on track access solutions.

With further proves the viability of on track new product portfolio.

We also continue to market to various industry segments and have mbas in place with three different premier consulting firms, where we are collaborating to determine which of our products solutions can be integrated into their health care service offerings to their clients.

So overall, we have significant recent success and are building momentum in our pipeline across many segments as we present, our new go to market strategy and customized compelling proposal to prospects, we remain optimistic about our progress and look forward to more.

More successful engagements in.

Now I'd like to turn the call over to James Park, Our Chief Financial Officer.

Thanks, Mary Lou.

During the second quarter, we recorded revenues of $3 million to 24% year over year decrease due primarily to a decrease in total enrolled members during the second quarter of 2023.

To the same period in 2022.

<unk> of 17% from Q1 of 2023.

At the beginning of the quarter, we had 1526 enrolled members and ended with 1000 $880 million at the end of the quarter.

<unk> 1708.

That equates to a revenue of about $528 per health plan enrolled member per month for the quarter same.

Same as the member per month in Q1 of 2023, and an increase from $490 per health plan enrolled member per month in Q2 of 2022.

Regarding our Q2 member metrics, we enrolled a total of 1091 members during the quarter.

825 in Q1, this year and 364 in Q2 of 2022.

This was four consecutive quarters in a row that we have been able to steadily increase our gross enrolments.

The increases are modest it is a result of our strong relationship with our existing customers that we continue to enhance.

Dividing Q2 gross enrollments by our outreach pool, which averaged 10121 for the quarter.

Annualized this towards 43% enrollment rate compared to 62% enrollment rate in Q1 of 2023 and 39% in Q2 of 2022.

Our average monthly this enrollment rate was 11% in the current quarter, which was the same in Q1 of 2023 and 12% in Q2 of 2022.

Further we graduated 128 members enrolled in the program.

Members in the program during the quarter.

This equates to about 8% of the enrolled members in the program at the beginning of the quarter.

First of all this was a net enrollment increase of 363 members in the current quarter.

Our gross margin for the second quarter was 72, 8%, which increased sequentially from 66, 5%.

Increased from 43, 5% in the second quarter of last year.

The increase in our gross margins sequentially for Q2 was primarily due to the continued operational efficiencies in our member facing teams.

With the utilization of various AI and other systems and process improvements we discussed in prior quarters.

Our coaching capacity has now improved by more than 60%.

Late last year, when we began to implement these initiatives.

All while continuing to provide the quality of care, our members and customers expect.

Turning to the balance sheet and cash flow our cash flow from operations in the second quarter was negative $5 1 million compared to negative $3 $7 million in the second quarter of last year.

A $5 million in Q1 of 2023.

This resulted in our average monthly cash burn to be around $1 $7 million per month. This year so far.

What's sort of in line with our expectations.

As we continue to increase our gross enrollment enrolled members and go live with a new customer discussed we expect our cash burn rate to continue to decrease.

We ended the quarter with cash and cash equivalents of $6 $1 million down from $7 $4 million up during the last quarter.

<unk> restricted cash our total cash was $10 $1 million at the end of the quarter down from $12 $1 million at the end of last quarter.

Regarding our outlook.

We are reaffirming our revenue guidance of $12 million to $14 million for revenues from our current customer base for the year.

We have not increased our revenue guidance with the signing of the new customer discussed. The go live date is expected to be in early Q4 2023.

Primary impact on revenues will be in 2024.

Now we will open it up for questions.

Thank you.

And they in queue as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby we compile the Q&A roster and we please ask that you limit yourself to one question and one follow up.

One moment for questions.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Q2 2023 Ontrak Inc Earnings Call

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