Ontrak Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 5 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to OnTrak's 2Q23 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised.

Operator

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

Speaker 1

Thank you, operator, and thank you all for participating on today's call. Joining me today are Brandon Laverne, Chief Executive Sir and Chief Operating Officer Mary Lou Osborne, President and Chief Commercial Officer and James Park, Chief Financial Officer. Earlier today, OnTrak released financial results for the quarter ending June 30, 2023. 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.

Speaker 1

All statements in this conference call other than historical facts are forward looking statements. The words anticipate, believes, estimates, Expects, intends, 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 OnTrak's 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 ks and Form 10 Q is filed with the SEC. Therefore, actual outcomes and results may differ materially from those expressed or implied by these forward looking statements.

Speaker 1

OnTrak expressly disclaims any intent or obligation to update these forward looking statements. With that, I'd like to turn the call over to Brandon.

Speaker 2

Thanks, Ryan, and welcome, everyone. We believe the current healthcare environment continues to be favorable in driving demand for our new portfolio of behavioral health solutions. Recent trends cited by managed care payers and behavioral health providers show a 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 Biden administration, The regulatory landscape also appears to be supportive of expanding access to critical behavior healthcare services. The rule proposes to add enforcement measures of the Mental Health Parity and Addiction Equity Act, including requiring plans to improve their networks of 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.

Speaker 2

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, These specifically trained professionals engage directly with members explaining the benefits of OnTrak Health Programs, customizing effective care plans and guiding members to the most appropriate care and treatment pathways. Ours is more than a self guided app based care program. It is a sustained, integrated, high touch and digitally assisted, individually tailored program that tackles As I've mentioned on previous calls, By expanding our product offering, we have created greater opportunities to serve more members in 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 Mary Lou will describe later in our call.

Speaker 2

Our modularized product portfolio now allows customers to access Any number of OnTrak Health Solutions, depending on their specific needs and member population. Here's a reminder of the highly differentiated product offerings that we now offer. Number 1, OnTrak 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 attracted to customers with their own well Developed existing program offerings who otherwise confront challenges in identifying needs among their members. Number 2 is OnTrak Outreach, which our member enrollment specialists use evidence based outreach approaches to connect with new members identified either through OnTrak Identify or from a customer's self generated target list and enroll them either into the customer's existing offerings or into our own coaching model.

Speaker 2

This is attractive to customers facing enrollment challenges who lack the experience and highly refined approach of our enrollment team. 3rd, our OnTrak engaged coaching model includes evidence based techniques and consistent coaching sessions designed to affect desired change in a member's behavior. This can be used as a coaching only solution for low to mid acuity cohorts and a coaching and provider network solution for mid to high acuity populations. This is attractive to customers lacking highly skilled engagement and collaborative resources necessary to drive durable behavior change. And 4th, OnTrak Access, which enables customers to build out their behavioral health networks and improve access and availability.

Speaker 2

This is attractive 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 OnTrak Access, I'm proud to announce OnTrak 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. By adhering to the rigorous NCQA standards, We ensure that our customers have access to the most reliable and trustworthy healthcare solutions available, allowing them to meet their access and accreditation goals with confidence During last quarter's 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.

Speaker 2

Our virtual assistant, Eleanor, 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 and schedule calls with CareCoaches. Our previously reported 40% increase in CareCoaches caseloads driven by adding AI capabilities and operational enhancements for administrative functions continues to improve after another quarter of data. In Q2 2023, we have achieved an additional 20% increase in Care Coach Outcomes like these highlight what we feel is our unique value proposition, the proven ability to combine person centered human engagement with the latest in 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 improved member health, measurable sustained outcomes and tangible savings for our customers.

Speaker 2

I'd now like to turn the call over to Mary Lou Osborne.

Speaker 3

Thanks so much, Brandon. I'm thrilled to announce we have signed a new customer contract with a respected Medicaid health plan. This new agreement covers all adult members and includes each of our product solutions for members with high, I will briefly summarize each of our solutions being offered to this new customer. Our OnTrak WholeHealth Plus solution has 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, Our OnTrak Engage solution We'll offer a 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.

Speaker 3

In addition, We have collaborated with our new health plan customer to expand our services and further support their medical management efforts through a proactive outreach approach to their most impacted members with serious mental illness. Our new OnTrak member portal will feature curated health information delivered through our member facing stayontrack.com website to provide educational and timely content for all the health claims adult members on how to improve overall well-being. In addition, we will be supporting this health plan on Quality HEDIS measures, closing critical gaps in care, participating in clinical collaborations 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.

Speaker 3

OnTrak can serve a health plan's entire adult membership with multiple solutions across Acuity's, 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 HEDIS gaps in care, and providing additional well-being content for all members. This contract highlights Contrack's ability to provide an array of products to meet multiple customer and member needs, along with our experience to customize solutions in meeting specific customer goals without placing undue start up 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 OnTrak can effectively impact. Next, we recently secured a signed business associate agreement with a major Western Healthcare System and have just received There are 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 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 member acuity levels.

Speaker 3

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 customer's needs to be well served by our WholeHealth Plus, OnTrak Outreach, OnTrak Engage and OnTrak Access solutions, which would further prove the viability of OnTrak's new product portfolio. We also continue to market to various industry segments and have NDAs in place with 3 different premier consulting firms, where we are collaborating to determine Which of our product solutions can be integrated into their healthcare 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 customize compelling proposals to prospects. We remain optimistic about our progress and look forward to more successful engagements soon.

Speaker 3

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

Speaker 4

Thanks, Mary Lou. During the Q2, we recorded revenues of $3,000,000 a 24% year over year decrease due primarily to a decrease in total average enrolled members during the Q2 of 2023 compared to the same period in 2022, but an increase of 17% from Q1 of 2023. At the beginning of the quarter, we had 1526 enrolled members and ended with $18.89 at the end of the quarter for a simple average of 1708. That equates to a revenue of about $5.28 per health plan enrolled member per month for the quarter, same as the member per month in Q1 of 2023 and an increase from $4.90 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 compared to 825 in Q1 this year and 364 in Q2 of 2022.

Speaker 4

This is 4 consecutive quarters in a row that we have been able to steadily increase our gross enrollments. While the increases are modest, it is a result of our strong relationship with existing customers that we continue to enhance. Dividing Q2 gross enrollments by our outreach pool, which averaged 10,121 for the quarter, it annualizes to a 43% enrollment rate compared to 62% enrollment rate in Q1 of 2023 and 39% in Q2 of 2022. Our average monthly disenrollment 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 for members in the program during the quarter.

Speaker 4

This equates to about 8% of the enrolled members in the program at the beginning of the quarter. The impact of all this was a net enrollment increase of 363 members in the current quarter. Our gross margin for the Q2 was 72.8%, which increased sequentially from 66.5%, an increase from 43.5% in the Q2 of last year. The increase in our gross margin 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 Our coaching capacity has now improved by more than 60% since 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.

Speaker 4

Our cash flow from operations in the Q2 was negative $5,100,000 compared to negative $3,700,000 in the Q2 of last year and negative $5,000,000 in Q1 of 2023. This resulted in our average monthly cash burn to be around $1,700,000 per month this year so far, which is in line with our expectations. As we continue to increase our gross enrollment, enroll members and go live with the new customer discussed, we expect our cash burn rate to We ended the quarter with cash and cash equivalents of $6,100,000 down from $7,400,000 at the end of last quarter. Including restricted cash, our total cash was $10,100,000 at the end of the quarter, Down from $12,100,000 at the end of last quarter. Regarding our outlook, we're reaffirming revenue guidance of $12,000,000 to $14,000,000 for revenues from our current customer base for the year.

Speaker 4

We have not increased our revenue guidance with the signing of the new customer discussed as the go live date is expected to be in early Q4 2023 and the primary impact on revenues will be in 2024. Now, we will open it up for questions. Thank you.

Speaker 2

And thank you.

Operator

One moment for questions. This concludes today's conference call.

Speaker 2

Thank you for participating. You may now

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Key Takeaways

  • The Biden administration’s proposed rule on mental health parity and growing demand from managed care payers are creating a favorable regulatory environment to expand behavioral health access.
  • OnTrak has modularized its offerings into Identify, Outreach, Engage and Access solutions—and earned NCQA certification to reinforce its credentials verification and network-building capabilities.
  • AI-driven operational enhancements, including the virtual assistant Eleanor, have driven a 12% increase in member retention and a 20% uplift in care coach outcomes, while boosting coaching capacity by over 60%.
  • Recent wins include a full-population Medicaid health plan contract covering all adult members, alongside data agreements and nonbinding LOIs, underscoring growing pipeline momentum.
  • Q2 revenue was $3.0 million (down 24% year-over-year but up 17% sequentially), with a 72.8% gross margin and an average cash burn of $1.7 million per month, ending the quarter with $6.1 million in cash.
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Earnings Conference Call
Ontrak Q2 2023
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