Q3 2023 Ontrak Inc Earnings Call

Good day, and thank you for standing by and welcome to the on track third quarter 'twenty Three earnings conference 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'll need to press star one on your telephone.

Then here automated message advising your hand is raised.

Your question. Please press Star one again, please be advised that today's conference is being recorded I would like to introduce your host for today's call Ryan Halsted. Please.

Please go ahead.

Okay.

Thank you operator, and thank you all for participating in 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 on track released financial results for the quarter ending September 32023, a copy of the press release is available on the Companys 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. The 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 on tracts business financial condition and other operating results, which include but are not limited to the risk factors described in the risk factors sections of the Form 10-K and Form 10-Q as filed with the SEC.

Therefore, actual outcomes and results may differ materially from.

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'd like to turn the call over to Brandon.

Thanks, Brian Good afternoon, everybody.

We're excited to share details on our recent customer signing as well as three prospects that we feel are close to a final signature we are experiencing noticeable momentum in our sales pipeline and believe that continued improvements in our clinical outcomes and technology solutions has resulted in increased traction with prospects.

I believe the enhancements we've made to our product strategy with our whole health suite of behavioral health solutions has played a major role in the business momentum we are seeing.

All of US at Entr'acte health are deeply grateful to our new and existing customers for their support and shared commitment to helping improve the health and save the lives of as many members as possible.

Mary Lou will share more specifics on the new sales activity in a moment.

But first let me cover highlights of some of our achievements over the past quarter.

Our ongoing patient reported outcome study findings demonstrate that our whole health plus product is resulting in improved <unk> and depressive symptoms management reinforcing our commitment to delivering durable outcomes for our members.

Leveraging industry recognized assessments, such as <unk> and <unk> seven.

We've witnessed significant reductions in exile and depressive symptoms among assessed members.

Notably 60% of members demonstrated a clinically significant five point reduction in anxiety symptoms.

And 53% showed the same reduction in depressive symptoms.

Analysis of our Q3 data also demonstrates <unk> ability to identify members with unaddressed behavioral health needs and coach them into care leveraging thousands of in network behavioral health providers is leading to new and updated diagnosis.

Across the Companys book of business, 42% of members diagnosed with substance use disorder did not have the diagnosis showing in the prior year's claims prior to enrollment in <unk> whole health plus program.

Other behavioral health conditions with similar post enrollment results.

27% for depression, 27% for bipolar disorder, 21% for anxiety and 20% for schizophrenia.

<unk> ability to support the identification engagement and documentation of high cost high risk members effectively AIDS healthcare payers and providers focus on improving the management of their chronically ill members with unaddressed behavioral health conditions as well as our documentation for risk adjusted revenue.

We recently released preliminary results from a retrospective observational study showing significant health care cost savings across Medicaid members over 24 months.

Study results demonstrate our commitment to evidenced based solutions and data driven insights that are leading to statistically significant savings for Medicaid members. The graduated from the whole health plus program.

Also in recent weeks, we announced the successful deployment of the trends in core EDA Gateway a notable achievement that.

Simplifies electronic data interchange supports HIPAA compliance and optimize optimizes data transactions for our providers and health plan customers.

This will enable us to process well over half a billion claims data transactions in the coming year and significantly reduce turnaround times.

During the past two quarterly calls I summarized some of the augmented intelligence and operational enhancements, we implemented during the first and second quarter of 2023.

Now I'd like to highlight some of the tangible results of those implementations each of which improves the efficiency of our care coaches and other frontline staff.

Number one our virtual assistant, Illinois continues to help deliver an increase in member retention rates through a cadence of automated calls that provide chickens on health status capture member needs and scheduled calls with care coaches.

During Q3, we saw the efforts of that outreach continue with a 42% reduction in our no contact this enrollment rate from the Ontrack whole health plus program.

Number two the omnichannel delivery of gas seven at PHP nine assessments was launched in Q3, providing members the option to choose the method of delivery for these assessments, whether it's SMS E mail virtual assistant or during coaching calls in an effort to ensure we are receiving the results in the most timely and efficient way possible that.

Works for each member.

And number three since the launch of our efforts to improve care coach case loads in the fourth quarter of 2022, driven by adding AI capabilities and operational enhancements for administrative functions.

We have now seen a collective 90% improvement in the average quarterly care coach case loads since the launch in the fourth quarter of 2022.

All of these positive developments, the new customer and sales momentum clinical outcomes and technology and operational enhancements.

Reinforced the strength of our strategy, our commitment to our customers and members and the dedication of our employees.

And now I'd like to turn it over to Mary Lou Osborn, who has more details upon a new customer and exciting developments in our pipeline Meredith.

Thanks, Brandon I'm thrilled to provide more details about our new customer agreement.

Our new health plan customer will leverage our entire product suite for its 25000 Medicaid members.

We are awaiting an imminent state approval to begin the engagement this quarter with the following on track solutions.

I will touch on each solution.

On track whole health, plus which includes the identification of high cost high acuity members.

With chronic comorbidities and underlying but unaddressed behavioral health conditions.

This program includes specialized care coaching and provider treatment for eligible members and delivers improved clinical outcomes.

And significant cost savings.

On track engage which is our coaching specific solution that identifies members who would benefit from ongoing coaching to help them address physical and behavioral health challenges.

Without a clear need for provider intervention.

In addition to on track engage being available to all adult members Archrock health will further outreach to the health plans most impacted members with serious mental illness to help them address their unique health care needs.

On track access will provide additional behavioral health providers for whole health plus members with prompt access and availability to care leveraging our NCQA certification as it credentials verification organisation.

Contract quality support for the members third jointly collaborating with the health plan on heaters measures closing critical gaps in care and improving health outcomes.

And finally, the new Entr'acte member portal feature specialized and tailored information delivered through our stay on track Dot com website to provide educational and timely content for all of the customers adult members on how to improve their overall wellbeing.

In addition, we are in the final phase of contracting with three other prospects I'll provide a brief update on each prospect.

One we are completing a statement of work with a prominent value based provider group that we'll be leveraging our on track outreach engage and access solutions for their patients.

We're particularly excited about the seamless connection we will be making between their primary care clinics in our care coaches, who will provide virtual support and who may also be onsite based in the clinics.

This initial engagement will cover their members and three major metropolitan markets.

We anticipate that with successful outcomes. This engagement will lead to an additional opportunities for their 200000 patients across 15 states.

Two we are finalizing a proposal for a large health systems Western Medicare advantage plan and expect to reach agreement later this quarter to serve members with our whole health plus and on track engage solutions.

We expect this new contract will go into effect in Q1, 'twenty 'twenty four with successful outcomes, we expect an opportunity to expand to additional members within Medicare advantage and other lines of business.

And three we are working on final approvals of our statement of work from a major north Eastern Health plan.

In addition, the health plan is refreshing its data in order to finalize expectations around a pilot for their Medicaid harp and commercial members in Q1 2024.

With successful outcomes, we believe the plans 1 million members will be a future opportunity for the Ontrack whole health plus program.

In addition, we are in discussions with our existing customers to expand our solutions to additional populations as well as new lines of business.

And our pipeline continues to build momentum we have 27 active prospects representing 20 million total lives.

We are extremely grateful to our existing customers for the partnerships. We have developed together serving members in need of behavioral health support.

And we welcome our new customers with great excitement.

As we build these relationships serving new populations across multiple business lines.

And now I'd like to turn the call over to our Chief Financial Officer James Park.

Thanks, Mary Lou.

During the third quarter, we recorded revenue of $47 million, a 31% year over year increase through family primarily to a 21% increase in portal out there as you all remember through the third quarter of 2023 compared.

Compared to the same period in 2022 and also represented a sequential increase of revenue of 23% from Q2.

At the beginning of the quarter, we had 1889 enrolled members and ended with 2297 at the end of the quarter.

<unk> average of 2093.

That equates to revenue of about $552 per health plan to roll number per month for the quarter, an increase from $528 per member.

Number one.

In Q2.

Great.

And an increase from $502 for health plan enroll number per month in Q2.

Yes.

Regarding our three member metrics, we enrolled a total of 1272 members during the quarter compared to 1091 in Q2 this year and 533 in Q3.

Two.

With a five.

We have been able to steadily increase our gross enrollment.

<unk> Q3 growth in enrollments later this fall.

The average.

10180 for the quarter.

Annualized 250% enrollment rate.

Paired with 43% of normal rate in Q2.

Great.

The 3% in Q3 of 2022.

Our average monthly this enrollment rate was 11% in the prior quarter.

Q2 Q3.

Great.

White increased from 8% in Q3 of two <unk>.

We graduated 187 enrollment during the quarter.

This equates to about 10% with a non members in the program at the beginning of the quarter.

The impact of all this was a net enrollment increase of 408 numbers in the third quarter.

Our gross margin for the third quarter was 72%, which remained consistent from 72, 8% in Q2 of 2043.

An increase from 49, 5% in third quarter of last year.

Increase in our gross margin compared to prior year was primarily due to the continued operational efficiencies in our member frequency.

With the utilization of AI and other clinical possible improvements we discussed earlier in prior quarters.

Our coaching for property have now approved by over 90% with 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 third quarter was negative $1 $8 million compared to negative $8 $3 million in the third quarter of last year and negative $5 $1 million in Q2 of 'twenty three.

This resulted in our average monthly cash burn to be around $1 $3 million per month. This year so far.

$6 million per month for the current quarter.

We believe our operational efficiency and increase in revenues half of approaching positive cash flow in the near future.

Revenues from the public by Mary Lou mentioned.

We ended the quarter with cash and cash equivalents of $3 $2 million down from $6 $1 million up on the last quarter.

<unk> restricted cash total cash flow of $9 $2 million at the end of the quarter down from $10 $1 million at the end of last quarter.

We also just announced the public offering of $6 $3 million before offering related fees.

With a private placement.

It's up $2 million of our people note into common equity.

This provides us with additional capital to execute on our pipeline, while significantly reducing our debt obligation and improving our balance sheet.

Regarding our outlook, we're reaffirming revenue guidance of $12 million to $14 million for revenues from our current customer base for the year.

Now we will open up for questions. Thank you.

And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Draw. Your question. Please press star one again, please standby will be compile the Q&A roster.

And we ask that you limit yourself to one question and one follow up.

One moment for questions.

And again, if you would like to ask a question that is star one one again, if you'd like to ask a question star one one.

Yes.

And I am showing no further questions I will now turn the call back over to Brandon Laverne for closing remarks.

Thank you on behalf of the entire entr'acte team I'd like to thank you for joining with US today have a great day. Thank you.

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

Okay.

[music].

Okay.

Okay.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Sure.

Yes.

Yes.

[music].

Okay.

[music].

[music].

[music].