Q3 2024 Ontrak Inc Earnings Call
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Speaker Change: Thank you for standing by and welcome to be on track Health third quarter 2024 earnings call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone if your question has been answered.
Speaker Change: I'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Brian Holstead Investor Relations. Please go ahead, Sir Thank you operator, and thank you all for participating in today's call joining the call or Brandon Laverne Chief Executive Officer.
Speaker Change: Mary Lou Osborne, President and Chief Commercial Officer, and James Park, Chief Financial Officer earlier today on track reliefs released financial results for the quarter ended September 32020 for 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 stay.
Speaker Change: 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.
Speaker Change: 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 our Form 10-K and Form 10-Q.
Speaker Change: As filed with the SEC, therefore, actual outcomes and results may differ materially from those expressed or implied by these forward looking statements.
Speaker Change: <unk> expressly disclaims any intent or obligation to update these forward looking statements with that I'd like to turn the call over to Brendan.
Brendan: Thank you, Brian and thank you everyone for being on our call today.
Brendan: I'd like to start by sharing some exciting news with respect to our newest customer expansion for some tower health plans offering our engage solution to approximate 20000 plan members.
Brendan: This expansion includes a specialized care coaching program designed for members showing rising health risks.
Brendan: The program aims to support their physical and behavioral health needs bridging the gap for those who may not yet qualify for our more intensive schoolhouse plus intervention.
Brendan: They are required proactive care management.
Brendan: Our engage solution can be offered to members across multiple lines of businesses, including Medicaid harp, Medicare advantage and commercial once.
Brendan: Once identified members have proactively engaged through a unique blend of human interaction and augmented intelligence and offered personalized care coaching support.
Our customers enjoy a seamless expansion of the target membership population on top of the whole health clubs outreach pool.
Collectively we have now secured two new regional health plan customers and for health plan expansions since January of this year spanning a range of plan types, including Medicaid or commercial and our marketplace showcasing the versatility of our offerings, which include whole health plus engage and our new quality solution.
Brendan: We are enthusiastic about the tremendous progress we are making with our multiple product offerings and believe activity and our pipeline is accelerating bringing post Brexit further down the funnel and faster janesville.
Brendan: James will highlight the positive impact to our revenues of these new launches.
Brendan: Overall, our pipeline continues to build momentum as marilu will discuss in more detail existing prospects are progressing nicely through the sales cycle as we continue to build the top of the funnel as well as bring those near the bottom closer to a signature.
Brendan: The demonstrable clinical improvements and cost savings programs achieve are resonating strongly with both our existing clients and potential partners as well as the member states Sir.
Brendan: As Dan will describe shortly the opportunities at the bottom of our sales funnel represent a significant inflection in our growth going forward.
Several macro trends are driving demand for our services and can currently accurate as tailwind for <unk> growth.
Brendan: Many Medicaid plans continue to navigate elevated medical cost trends, while facing funding challenges as they deal with are followed a redetermination post pandemic.
Brendan: Our solution helps address these problems for our customers, including reducing elevated costs for members maintaining strong member engagement and retention for the health plan and obtaining new diagnoses to improve risk scoring.
Brendan: Building on this tailwind I want to highlight on track significant impact on clothing, EBIT measure gaps for our health plan partners.
Brendan: There is an increasing emphasis on quality metrics, particularly heated scores, which directly impact plan ratings and reimbursements by leveraging our AI driven engagement system, we're achieving a greater than 50% outreach success rate more than double what we believed to be the industry standard.
Brendan: Enhanced engagement and resulting gap closure has a direct impact on heated scores for our clients.
Brendan: Our current customer expansions, we are seeing firsthand, how our solutions help health plans meet and exceed their heat as targets.
Brendan: In an era, where quality metrics increasingly impact reimbursement unplanned ratings contract's ability to efficiently close heat as gaps is becoming a key differentiator.
Speaker Change: Now I'd like to turn the call over to Mary Lou Osborne, Our President and Chief Commercial officer, who will speak more about our pipeline progress.
Speaker Change: Thanks, Brandon I'm thrilled to have previously announced the signing of a new customer.
Speaker Change: A large health plan in the northeast region, representing multiple lines of business, including Medicaid PARP and commercial for whole health plus.
This new health plan customer has recently given us the green light to expand services to include on tracks quality solution to help close over 30000 heaters gaps in care.
Speaker Change: The launch of both solution is progressing well with high reach and enrollment rates that are above industry standards.
Speaker Change: With our continued focus on strategic growth and innovation as evidenced by our recent announcements.
Speaker Change: Regarding the mental health digital twin our adoption of the comprehensive health care integration framework and powered by our advanced engagement system.
Speaker Change: <unk> is poised for continued momentum.
Speaker Change: Currently we have four active prospects in the late stage of our sale cycle, which consist of two new customers and to current customer expansions.
These health plan prospects are interested in a partnership and have agreed to proceed to the next step of reviewing financial and contractual terms.
Speaker Change: One of these new customer prospects is a prominent healthcare system in the west with 80000 Medicare advantage lives to start our engagement.
Speaker Change: This prospect is verbally agreed to all major terms to move forward and we expect to receive their marked up of our statement of work by next week.
Speaker Change: With this prospect once clinical and financial outcomes are achieved for the initial population. The intent is to expand the partnership to a larger membership cohort across multiple lines of business, representing an opportunity over 1 million lives.
Speaker Change: The second new customer prospect is a large blues plan in the Midwest with over 400000, Medicaid lives and is interested in home health plus as well as our engage solution.
Speaker Change: The two current customer expansions include one for whole health plus for several new regions and the other for our engage solution for a new government line of business.
Speaker Change: Our total pipeline continues to build momentum in addition to the four opportunities I just described.
Speaker Change: We also have 26 additional active prospects representing approximately $15 million planned months.
Speaker Change: And now I'd like to turn the call over to our Chief Financial Officer James Park.
James Park: Thanks, Mary Lou.
James Park: In Q3, our revenue reached $2 6 million, reflecting a 31% decrease compared to the same period last year.
James Park: The decrease was due to the loss of a customer at the beginning of the current year.
James Park: Began the quarter with 1752 members and concluded with 2065.
James Park: Even a simple average of 1909, which includes 56 members that are part of our engage program.
James Park: Our quarterly revenue per health enrolled member per month average of approximately $449.
James Park: This represents a decrease from $463 in Q2 of 2024.
James Park: $552 in Q3 of 2023.
James Park: The primary factor contributing to this decline is due to the mix shift, resulting from your customers with different pricing structures and the inclusion of new engaged members with a lower revenue per member per month.
James Park: As discussed in prior quarters.
James Park: <unk> gained efficiencies in our operations.
James Park: I have worked with customers with flexible and value based pricing structures.
James Park: Maintaining reasonable consistent margins.
James Park: As we move through the rest of the year, we anticipate our per member per month revenue continue to decrease compared to last year.
James Park: Regarding our Q3 membership data we added 1166, new members during the quarter.
James Park: This figure contrasts with 881, new enrollments at Q2 of 2024.
1272 in Q3 of 2023.
James Park: Provided Q3, gross enrolments buyer outreach pool, which averaged 7267 for the quarter.
James Park: Annualized this to a 64% enrollment rate compared to 61% enrollment rate in Q2 of 2024 and 50% in Q3 of 2023.
The increase was due to the enrollment of new members from our new customer that we announced in August as we experienced higher enrollment rate for any new customers relaunch.
In the current quarter, our average monthly this enrollment rates stood at 11% compared to 10% in Q2 of 2024.
James Park: 1% in Q3 of 2023.
James Park: Additionally, we saw 169 years old members graduate from our program this quarter.
James Park: With graduation rate represents approximately 10% of the members enrolled at the beginning of the quarter, which was consistent with prior periods.
James Park: To account new enrollments this enrollment congratulations.
James Park: The net increase of 313 members during the quarter.
James Park: For Q3, we achieved gross margin of 62%.
James Park: This represents a decrease from 65, 6% recorded in Q2 of 2024 and 72% margin in Q3 of last year looking.
James Park: Looking ahead, we anticipate our gross margin to maintain their current levels.
However, we may experience slight decreases during periods when we initiate new customer expansions. This is due to our practice of proactively hiring member facing employees in preparation for these expansions.
Turning to the balance sheet and cash flow statement, our operating cash flow for Q3 showed a negative $1 4 million.
James Park: This compares to a negative $1 $8 million in the same.
James Park: Quarter last year and negative $4 5 million in Q2 of 2024.
James Park: As of quarter end, our cash reserves stood at $8 million.
James Park: This represents a decrease from $9 $7 million, we had on hand at the conclusion of the previous year.
James Park: During the quarter and subsequent to quarter end, we drew down a total of $3 5 million dollar demand notes, leaving $7 million available for future draws subject to approval.
James Park: In addition, subsequent to quarter end, we received cash proceeds of $1 $5 million from the exercise of warrants.
James Park: Thinking about revenues ahead, our current customers under contract now account for approximately 11 million to $13 million of annual revenue, which includes an approximate 20% increase due to the expansion announced last week.
James Park: Before opportunities at the bottom of the funnel that Mary Lou mentioned are significant and represent approximately $9 million to $12 million of additional annual revenue or a 75% to a 100% increase from our current customers under contract.
James Park: Specifically for Q4 2024, we anticipate revenues in the range of $2 9 million and $3 2 million for a 12% to 23% sequential increase as we continue launching new outreach to members of our newest customer in the northeast.
James Park: And last to engage solution expansion announced last week.
James Park: Now we will open it up for questions. Thank.
Speaker Change: Thank you.
Speaker Change: Certainly ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press star one again.
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Speaker Change: Once again Thats Star one wanted to ask a question.
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Speaker Change: And this does conclude the question and answer session of today's program I'd now like to hand, the program back to Brandon for any further remarks.
Brandon LaVerne: Alright, Thank you Jonathan and thank you all for joining us on our call today have a great afternoon.
Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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