Ontrak Q1 2025 Earnings Report

Ontrak EPS Results

• Actual EPS: -$1.65
• Consensus EPS: -$1.24
• Beat/Miss: Missed by -$0.41
• One Year Ago EPS: N/A

Ontrak Revenue Results

• Actual Revenue: $2.02 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Ontrak Announcement Details

• Quarter: Q1 2025
• Date: 5/20/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 20, 2025
• Conference Call Time: 4:30PM ET

Ontrak (NASDAQ:OTRK) operates as an artificial intelligence powered, telehealth-enabled, and virtualized healthcare company that provides in-person services to third-party payors in the United States. Its technology-enabled platform predicts people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages and guides them to and through the care they need. The company's technology enabled OnTrak program provides healthcare solutions to members with behavioral conditions that cause or exacerbate chronic medical conditions, such as diabetes, hypertension, coronary artery disease, chronic obstructive pulmonary disease, and congestive heart failure. The OnTrak integrates evidence-based psychosocial and medical interventions delivered in-person or via telehealth along with care coaching and in-market community care coordinators, who address the social and environmental determinants of health. The company was formerly known as Catasys, Inc. and changed its name to Ontrak, Inc. in July 2020. Ontrak, Inc. was incorporated in 2003 and is headquartered in Miami, Florida.

Ontrak Q1 2025 Earnings Call Transcript

Key Takeaways

• At the end of Q1, OnTrak had over 3,165 enrolled members, nearly double year-ago levels, including more than 1,150 in the Engage program, validating its multi-solution behavioral health approach.
• Implementations with Intermountain Health in Medicare Advantage and the Northeast Regional Plan across Medicaid, HARP and commercial lines, plus progress with a large Midwestern Medicaid plan, provide a clear path to doubling run-rate revenue in 2025.
• Q1 revenue was $2.0 million, down 25% YoY due to a lost customer and mix shift to the lower-revenue Engage program, with average revenue per member per month at $254; Q2 revenue is guided to $2.2 million–$2.6 million, an 8–22% sequential increase.
• Operational efficiencies powered by AI-driven systems have more than doubled team productivity since 2021, enabling OnTrak to serve record enrollment levels with fewer employees.
• Cash reserves were $4.1 million at quarter end, bolstered by $2 million drawn under its keep-well agreement and a new financing facility providing up to $10 million in additional funding.

Presentation

[Operator]

Thank you for standing by, and welcome to the OnTrak Health First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Ryan Halstead, Investor Relations. Please go ahead, sir.

[Ryan Halsted, Managing Director at Gilmartin Group]

Thank you, operator, and thank you all for participating in today's call. Joining the call are Brandon Laverne, Chief Executive Officer Mary Lou Osborne, President and Chief Commercial Officer and James Parr, Chief Financial Officer. Earlier today, OnTrak released financial results for the quarter ended 03/31/2025. 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.

[Ryan Halsted, Managing Director at Gilmartin Group]

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 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. OnTrak expressly disclaims any intent or obligation to update these forward looking statements.

[Ryan Halsted, Managing Director at Gilmartin Group]

With that, I'd like to turn the call over to Brandon.

[Brandon LaVerne, CEO & COO at Ontrak]

Thank you, Ryan, and thank you, everyone, for joining our call today. As we begin 2025, I'm pleased to report that OnTrak continues to build on the significant momentum we established throughout 2024. Our progress with customers is clearly demonstrated by the growth in our outreach pool, which has expanded substantially over the past year. This includes implementation with new customers, Intermountain Health for our Whole Health Plus solution in the Medicare Advantage space, and with the Northeast Regional Plan across multiple lines of business, as well as the expansion of our Engage solution with existing partners. Looking ahead, we remain optimistic about the conversion of prospective customers at the bottom of our sales funnel, particularly the large Midwestern Medicaid plan.

[Brandon LaVerne, CEO & COO at Ontrak]

We have achieved state Medicaid provider approval in order to serve this plan's members if we sign an agreement with the plan. The successful conversion of this opportunity along with successful conversions of other active opportunities provides us a path to doubling our run rate revenue in 2025 as compared to 2024. The enrollment numbers for these new implementations are already exceeding our expectations. At the end of q one, we reached a significant milestone with over 3,165 total enrolled members, including more than 1,150 members in our ENGAGE program. Total enrolled members nearly doubled year over year, serving as validation for the effectiveness of our enhanced multi solution approach.

[Brandon LaVerne, CEO & COO at Ontrak]

The success of our Engage program highlights our ability to tailor solutions that address a larger percentage of our customers' member populations. This solution has significantly expanded our market reach by enabling us to serve members who may not require our full health Whole Health Plus program but still benefit from structured behavioral health support. The substantial growth in our enrolled member base since the launch of our engaged program in the second quarter last year, paired with consistently high enrollment conversion rates among new customers since the launch, provides compelling validation that our expanded solution portfolio is addressing critical gaps in the behavioral health care landscape. I'm particularly pleased with the continued evolution of our business model supporting health plans. We've made significant progress with our provider model strategy, which offers greater flexibility to support health plans across multiple lines of business.

[Brandon LaVerne, CEO & COO at Ontrak]

As previously announced, we are enrolled as a Medicaid provider in two states, registered in several others, and working to increase our footprint to optimize our opportunities with prospects in the middle and bottom of our sales funnel. This structure gives us access to medical spend budgets rather than more restricted administrative cost pools of our payer prospects. Our recent certification by the National Committee of Quality Assurance as a credentials verification organization through April 2027 serves as a key market differentiator. This prestigious recognition achieved through a rigorous voluntary review process embodies OnTrak's commitment to trust, transparency, and operational excellence, which is particularly crucial for government programs with stringent quality standards. We are currently working towards an additional NCQA accreditation in case management, which we are targeting achievement in early twenty twenty six.

[Brandon LaVerne, CEO & COO at Ontrak]

Today, our teams are more than twice as productive as they were in 2021, the last time we reached this 3,000 plus member enrollment milestone. Our strategic investments in technology infrastructure, particularly in our AI driven advanced engagement system, has fundamentally transformed how our care teams operate by automating routine tasks, prioritizing high impact interventions through our next best action engine, and leveraging AI to summarize completed calls. The result is a workforce operating at unprecedented productivity levels while maintaining our focus on the human elements of care delivery that drive meaningful outcomes. I would now like to turn the call over to our President and Chief Commercial Officer, Mary Lou Osborne.

[Mary Louise Osborne, President & Chief Commercial Officer at Ontrak]

Thank you, Brandon. I'm pleased to provide an update on our pipeline progress. Starting with our bottom of funnel opportunities, as Brandon mentioned, we continue to work towards executing a statement of work with a large Midwestern Medicaid plan for their 300,000 Medicaid members. This represents a significant revenue opportunity and would strengthen our presence in a key regional market. We are working diligently to advance this opportunity through what we believe are the final stages of the sales process.

[Mary Louise Osborne, President & Chief Commercial Officer at Ontrak]

In addition, we are awaiting feedback on four other health plan financial proposals currently being reviewed who are located in various states in the Midwest and Southeast regions. All of these health plans have been engaged in strategic discussions and have acknowledged the critical need for more intensive behavioral health support for their Medicare Advantage, Medicaid, and commercial populations. Moving to the mid funnel, we continue to see positive momentum with several prospects. We're encouraged by the level of interest from these potential partners. And we look forward to providing more details in the coming months as these discussions progress.

[Mary Louise Osborne, President & Chief Commercial Officer at Ontrak]

The overall reaction from prospects to our enhanced solution suite has been extremely positive. Health plans are responding favorably to our AI powered advanced engagement system, and the comprehensive approach we take to address behavioral, physical, and social health needs. Our ability to demonstrate ROI and improved health outcomes is resonating strongly, particularly in today's challenging market environment where plans are seeking proven solutions that can deliver measurable value. Our partnerships with Intermountain Health for Medicare Advantage members and our Northeast Regional Plan for Medicaid, HARP, and commercial populations provide powerful reference points for prospective customers. These relationships highlight the versatility platform across different plan types and member populations.

[Mary Louise Osborne, President & Chief Commercial Officer at Ontrak]

And the early success we're seeing with these customers strengthens our value proposition. The Engage solution, which we launched last year, is proving to be an effective complement to Whole Health Plus and is allowing us to serve a broader segment of our customers' member populations. By offering a targeted approach to intervention based on member needs, we're helping plans address the full spectrum of behavioral health challenges within their populations. As we move forward, we remain focused on converting our strong pipeline into signed contracts while continuing to nurture relationships with existing customers to drive expansions. The market need for effective behavioral health solutions that can reduce medical costs and improve health outcomes has never been greater, and OnTrak is uniquely positioned to address this need.

[Mary Louise Osborne, President & Chief Commercial Officer at Ontrak]

With that, I'll turn the call over to our chief financial officer, James Park.

[James Park, CFO at Ontrak]

Thanks, Mary Lou. In q one, our revenue was $2,000,000 reflecting a 25% decrease compared to the same period last year. The decrease was due to the loss of a customer whose members disenrolled as of the end of twenty twenty four, partially offset by new customers and expansions of existing customers during the year. We began the quarter with 2,125 members and concluded with 3,165, resulting in a simple average of 2,645, which average includes 1,152 members that are part of our engaged program. The 3,165 members at the end of the quarter is the most enrolled members since q four of twenty twenty one.

[James Park, CFO at Ontrak]

We're able to serve these members with less than half the employees we had in q four of twenty twenty one, which speaks to the significant efficiencies and operational improvements we have achieved as an organization. Our quarterly revenue per health plan enrolled member per month averaged approximately $254. This represents a decrease from $500 in q four of twenty twenty four and a decrease from $504 in q one of twenty twenty four. The decrease in q one of twenty twenty five compared to q four of twenty twenty four primarily reflects the lost customer and shift in the mix of members with a larger percentage of members enrolled in our engaged program compared to the prior period. The revenue per member in our engaged program is lower than our Whole Health Plus program.

[James Park, CFO at Ontrak]

Although our revenue per enrolled member was lower in the current period, members in our engaged program represent members that did not provide revenue in the past, significantly expanding our market opportunity. Regarding our q one membership data, we added 2,039 new members during the quarter, which is the highest new members enrolled since q three of twenty twenty one. This figure contrasts with 1,641 new enrollments in q four of twenty twenty four and nine hundred and 25 in q one of twenty twenty four. Dividing q four gross enrollments by our outreach pool, which averaged 27,204 for the quarter, annualizes to a 30% enrollment rate compared to 50% enrollment rate in q four of twenty twenty four and a 8% in q one of twenty twenty four. The decrease in enrollment rate is due to the increase in our outreach pool during q one twenty twenty five, primarily driven by the Engage outreach pool.

[James Park, CFO at Ontrak]

In the current quarter, our average monthly disenrollment rates stood at 10% compared to 19% in q four of twenty twenty four and twenty two percent in q one of twenty twenty four. The disenrollment rate was lower in the current quarter compared to prior periods due to the disenrollment of members in each of those periods of the customers who gave notice not to continue our service at the December 2024 and February 2024. Additionally, we saw a 84 members graduate from our program this quarter. This graduation rate represents approximately nine percent of the members enrolled at the quarter start, slightly lower than previous periods. Taking into account new enrollments, disenrollments, and graduations, we achieved a net increase of 1,040 members during the quarter.

[James Park, CFO at Ontrak]

For q one, we reported gross margin of 37%. This represents a decrease from sixty one percent in q four of twenty twenty four and sixty three point six percent in q one of last year, primarily driven by the decrease in revenue from the lost customer and its members at the end of twenty twenty four as well as the mix shift of members in our engaged program. Looking ahead, we anticipate our gross margin to maintain at its current level and increase as a percentage of our members enrolled in our Whole Health Plus program increases from our prospects in our pipeline. Additionally, in periods when we have new customers launching, we could see decreases in margin during that period. This is due to our practice of proactively hiring member facing employees in preparation for these expansions.

[James Park, CFO at Ontrak]

Turning to the balance sheet and cash flow statement. Our cash flow from operation for q one was negative $2,700,000 This compares to negative $3,300,000 in the same period last year and a negative $4,300,000 in q four of twenty twenty four. As of quarter end, our cash reserves stood at $4,100,000 This represents a decrease from the $5,700,000 we had on hand at the end of twenty twenty four. During the quarter, we borrowed $1,500,000 under our keep well agreement, and at subsequent to quarter end, we borrowed another half a million dollars, leaving $5,000,000 available for future draws subject to discretion of the lender. This remaining 5,000,000 as well as an additional $5,000,000 has been committed in a financing agreement we announced earlier today.

[James Park, CFO at Ontrak]

In aggregate, this agreement provides for up to $10,000,000 of additional financing available to the company as needed in the short term. Thinking about revenues ahead, our current customers on their contract now account for approximately 14 to $16,000,000 of annual revenue. The opportunities at the bottom of the funnel that Mary Lee mentioned are significant, and if all are successfully converted, would represent approximately $15,000,000 of additional revenue or approximately double the revenue from our current customers. Specifically for q two twenty twenty five, we anticipate revenues in the range of $2,200,000 and $2,600,000 or a 8% to 22% sequential increase. Now we will open it up for questions. Thank you.

[Operator]

Certainly. Ladies and gentlemen, if you do have a question at this time, please press I'd like to hand the program back to Brandon for any further remarks.

[Brandon LaVerne, CEO & COO at Ontrak]

Thank you, Jonathan, and thank you, everyone, for joining on our call today. Hope you have a great afternoon. Take care.

[Operator]

Thank you, ladies and gentlemen, your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Participants

Executives

• Brandon LaVerne, CEO & COO
• Mary Louise Osborne, President & Chief Commercial Officer
• James Park, CFO

Analysts

• Ryan Halsted, Managing Director at Gilmartin Group