Ontrak Q4 2024 Earnings Report

Ontrak EPS Results

• Actual EPS: -$9.54
• Consensus EPS: -$1.35
• Beat/Miss: Missed by -$8.19
• One Year Ago EPS: -$4.32

Ontrak Revenue Results

• Actual Revenue: $3.08 million
• Expected Revenue: $3.08 million
• Beat/Miss: Met Expectations
• YoY Revenue Growth: N/A

Ontrak Announcement Details

• Quarter: Q4 2024
• Date: 4/14/2025
• Time: Before Market Opens
• Conference Call Date: Monday, April 14, 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 Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the OnTrak Health Fourth Quarter twenty twenty four 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. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your first speaker today, Ryan Holstead. Please go ahead.

[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 Park, Chief Financial Officer. Earlier today, OnTrak released financial results for the quarter ended 12/31/2024. 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 ks 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. OnTrax 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. First, I'll start with the progress we are making with our new customers. Collectively, we have now secured three new regional health plan customers and four health plan expansions in the last fourteen months, spanning a range of plan types, including Medicaid, HARP, commercial, and now Medicare Advantage, showcasing the versatility of our offerings. James will highlight the positive impact to our revenue of these new launches later in the call. I'm pleased to announce that our recent launch of our whole health plus solution with our newest customer.

[Brandon LaVerne, CEO & COO at Ontrak]

Intermountain health is going well, in a little over a month since launch, we have enrolled over three twenty five members and will continue to outreach and enroll from the 2,400 remaining Whole Health Plus eligible members that we added with this new customer. Additionally, we're also seeing strong enrollment and engagement with the members from the Northeast Regional Plan, which we announced in Q3 and launched during this quarter. Since launch, we have enrolled more than four fifty members in our Whole Health Plus program. For recent customer expansions, we secured a three year contract extension with Centara Health Plans. This agreement strengthens our long term partnership and builds upon the twenty twenty four successful expansion, which grew our outreach pool by 6x the size during the year.

[Brandon LaVerne, CEO & COO at Ontrak]

In addition, we have an existing customer who has recently expanded its geographic service area to a total of five Florida regions in February 2025, and we are in strategic discussions to potentially expand our Engage offering to include adolescents and members suffering from chronic pain conditions. Next, we're excited to share the progress we are making on our growing sales pipeline. We are in active strategic discussions with six additional health plan prospects, including a large Midwest plan that is in the late stage of our sales process. This large Midwestern plan, after sharing full member data and completing a review of fees, savings, and ROI methodology, has progressed to SOW drafting and review. Based upon our proposal that is currently in discussion, this plan could more than double on tracks run rate revenue and is reflective of stronger than expected alignment between on tracks AI driven advanced engagement system and the plans high needs population.

[Brandon LaVerne, CEO & COO at Ontrak]

As I said before, this plan has sent us their member data and I'd like to underscore that importance given OnTrak has a 100% success rate over the past several years in converting prospects to customers once data is received. One of OnTrak's core differentiators is our ability to ingest and analyze member level data and to recommend a targeted population for outreach. The traction we are gaining with our customers and prospective customers reflects our expanding value proposition to our payer partners and their members. OnTrak is also now engaging with payer partners designated as a value based provider versus a vendor, which fundamentally reshapes our economic model with an ability to provide additional value to our prospective customers. As a value based care provider, we align the quality outcomes and HEDIS measures with medical cost savings and financial incentives that we share with our payer partners.

[Brandon LaVerne, CEO & COO at Ontrak]

In addition, designation as a value based provider gives us greater access to reimbursable fees within their medical cost ratio rather than administrative vendor fees. This shift is further enabling additional pipeline opportunities and provides payers optionality and flexibility in working with us. We are very excited with the momentum we have been able to gain in 2024 and into 2025, but even more so with several opportunities we have in front of us. We see a path through the bottom of our sales funnel to double our revenue in 2025 and then through the middle of our sales funnel to double our revenue again in the following year. And now, I will turn it over to our President and Chief Commercial Officer, Mary Lou Osborne, to discuss these in detail.

[Brandon LaVerne, CEO & COO at Ontrak]

Mary Lou?

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

Thank you, Brandon. I'm thrilled to share, as previously announced, and as Brandon touched on, a new Medicare Advantage health plan partnership with Intermountain Health. Intermountain is a prominent healthcare system operating 34 hospitals and 400 clinics in The Western United States. The contract was executed December, and we successfully launched our Whole Health Plus solution mid February, twenty twenty five for Intermountain Medicare Advantage population in Nevada. Once measurable clinical and financial success has been demonstrated, Intermountain intends to explore scaling OnTrak solutions to a wider Medicare Advantage cohort and potentially extending OnTrak solutions to additional lines of business.

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

Along with this new health plan customer, we are in active strategic discussions with six additional health plan prospects who have formally requested a clinical and financial proposal to evaluate our multiple behavioral health solutions, clinical outcomes, and estimated financial savings. Starting with the bottom of the funnel, I will provide a quick summary of each of the interested prospects that are moving forward in the sales cycle, all of which have follow-up meetings scheduled with decision makers. As Brandon mentioned, we are super excited to be in late stage strategic discussions with a large Midwestern plan who is deeply interested in our Whole Health Plus solution for their 300,000 Medicaid members. We have been working very closely with the plan's leaders for over a year and received the plan's member data in March. We are responding daily to detailed questions about our solutions, clinical outcomes, estimated savings, and closing gaps in care.

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

We have provided a Whole Health Plus clinical and financial proposal, which has been positively received by the plan's team. The plan's leadership team has expressed their excitement for OnTrak's tech and AI capabilities, such as our advanced engagement system, digital twin, next best action, and the commitment of achieving a 2X guaranteed ROI. This plan has prioritized behavioral health and recognizes the value in offering on track solutions to improve member health outcomes, reduce avoidable inpatient and emergency room utilization, and produce savings. This prospect has requested for OnTrak to serve as a provider partner versus a vendor. What this means is OnTrak will build a health plan CPT codes for the Whole Health Plus services that we will provide for enrolled members.

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

A provider model is an effective and more expedient way to begin a health plan partnership. To complete and execute the provider model contract for this Medicaid plan, OnTrak applied for state Medicaid approval, and we are thrilled to announce OnTrak was approved on 04/01/2025. OnTrak and this prospect have multiple meetings scheduled to continue advancing all the final steps in the process before executing the MSA SOW. The next prospect is a rapidly expanding Medicare Advantage plan operating in three states prioritizing behavioral health support for high acuity members. Recognizing the urgency to identify external partners to provide additional behavioral health support for its members, the plan has expedited discussions, signing an NDA, and immediately sharing the member data, identifying behavioral health conditions that align with OnTrak solutions.

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

Due to our increasing momentum, we are gaining more visibility into the potential revenue conversion for prospects in the middle of the funnel. We have four interested prospects. I will provide a summary on each. A Southeastern Medicaid plan has requested a clinical and financial proposal for their Medicaid SMI members. The plan's clinical leaders are excited about our Southeast footprint, which includes serving another Medicaid plan, supporting SMI members, and having state Medicaid approval to serve members in the state.

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

This plan is interested in our Whole Health Plus program and potentially our engaged solution. Another large regional health plan located in multiple states is in active discussions with us. This plan is interested in OnTrak's behavioral health solutions and advanced engagement system for its commercial population. The plan's clinical team is fully engaged with delving deeper into OnTrak's innovative technologies, clinical programs, reporting capabilities, and outcome measurements. This plan has requested and we have provided a financial proposal to present to their leadership team.

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

Another health plan prospect, a Medicare Advantage plan owned by multiple hospital systems in the Midwest region, is exploring a partnership opportunity. This plan has requested a financial and clinical proposal. They are interested in our Whole Health Plus and Engage solutions. Another prospect, a Medi Cal health plan on the West Coast has requested a financial proposal on our quality program, supporting a few of their heated gaps in care. The plan is interested in our outreach, engagement, and support of members and assisting them with scheduling follow-up provider visits seven and thirty days after an inpatient stay and or an emergency room visit.

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

To summarize, we have had an abundance of sales prospect activity and six customer requests for financial proposals. While not all of these prospects will close, several late stage prospects are anticipated to enter the final contracting phase within the next thirty to sixty days. The remaining opportunities are still midway in the funnel and will need further strategic discussions before advancing to the next stage. Our proactive behavioral health solutions continue to gain traction, and our total pipeline momentum continues to build as you just heard, with six active prospects requesting financial and clinical proposals. We also have 20 additional prospects in the pipeline in some phase of strategic discussions, representing over 15,000,000 lives.

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

I will now turn the call over to our Chief Financial Officer, James Park.

[James Park, CFO at Ontrak]

Thanks, Mary Lou. In Q4, our revenue reached 3,100,000 reflecting an 11% decrease compared to the same period last year. The decrease was due to the loss of a customer earlier this year, slightly offset by new customers signed during 2024. We began the quarter with 2,065 members and concluded with 2,125, resulting in a simple average of 2,095, which includes 329 members that are part of our ENGAGE program. Our revenue per health plan enrolled member per month averaged approximately $500.

[James Park, CFO at Ontrak]

This represents a sequential increase from $449 in Q3 of twenty twenty four and a decrease from $546 in Q4 of twenty twenty three. The sequential increase is due to disenrolled members related to a customer termination that we previously discussed, which brought down the average members enrolled at the end of the quarter, while they contributed revenue during the full quarter. The primary factor contributing to the year over year decline in Q4 of twenty twenty four compared to Q4 of twenty twenty three is due to the mix shift resulting from newer customers with different pricing structures and the inclusion of new Engage members with lower revenue per member per month. As we move through the rest of the year, we anticipate our per member per month revenue to continue to decrease compared to last year, while overall revenues are expected to increase. Regarding our Q4 membership data, we added sixteen forty one new members during the quarter, with six fifty nine members enrolling in our engaged program.

[James Park, CFO at Ontrak]

The current quarter's total enrollment is a sequential increase compared to the eleven sixty six new enrollment in Q3 of twenty twenty four and a year over year increase from six fifty four in Q4 of twenty twenty three. Our Q4 twenty twenty four new members enrolled is the highest total enrollments in a quarter since the third quarter of twenty twenty one. Dividing q four gross enrollments by our outreach pool, which averaged 13,168 for the quarter, it annualizes to a 50% enrollment rate compared to 64% enrollment rate at Q3 of twenty twenty four and sixty three percent in Q4 of twenty twenty three. We ended the year with a total outreach pool of 25,000, which includes 20,000 for our engaged solution. And as of today, the total outreach pool is at 29,000.

[James Park, CFO at Ontrak]

In the current quarter, our average monthly disenrollment rate stood at 19% compared to 11% in Q3 of twenty twenty four and sixteen % in Q4 of twenty twenty three. The disenrollment rate was higher in the current quarter due to the disenrollment of members of the customer termination previously discussed. Without the impact of these members, our disenrollment rates for the quarter would have been slightly lower than historical disenrollment rates. Additionally, we saw two twenty six enrolled members graduate from our Whole Health Plus program this quarter. This graduation rate represents approximately 11% of the members enrolled at the beginning of the quarter, which is consistent with previous periods.

[James Park, CFO at Ontrak]

Taking into account new enrollments, disenrollments, and graduations, we achieved a net increase of 60 members during the quarter. For Q4, we reported a gross margin of 61%. This represents a slight decrease from the sixty two percent recorded in Q3 of twenty twenty four and sixty four point six percent margin in Q4 of last year. Looking ahead, we anticipate our gross margins to decrease slightly into mid fifties based on current pricing and mix of revenues between our Whole Health Plus and Engage solutions. Turning to the balance sheet and cash flow statement.

[James Park, CFO at Ontrak]

Our operating cash flow for Q4 showed a negative $4,300,000 This compares to a negative $3,600,000 in the same quarter last year and a negative $1,400,000 in Q3 of twenty twenty four. As of year end, our cash reserves stood at $5,700,000 This represents a decrease from the $9,700,000 we had on hand at the conclusion of the previous year. During the quarter, we drew down $1,000,000 and subsequent to quarter end, we drew down another $1,500,000 of demand notes, leaving $5,500,000 available for future draws subject to approval. We are currently in active discussions for financing options to access capital needed to continue to execute on our sales pipeline and our business plan. Specifically for Q1 twenty twenty five, we anticipate revenue in the range of $2,000,000 and $2,300,000 or a 36% to a 27% sequential decrease.

[James Park, CFO at Ontrak]

This sequential decrease and the revenue being lower than our annual run rate of $15,000,000 from customers under contract is due to the lost customer at the end of the fourth quarter and revenue from new customers still in the ramp up phase. While this represents a temporary step down, we have strong visibility into achieving our revenue run rate by Q2 of twenty twenty five. This confidence stems from the progress in onboarding and enrolling members from recent launches, such as our Whole Health Plus solution with Intermountain Health and the Northeast Regional Plan. We anticipate revenue contribution from these implementations to stabilize in Q2, followed by sequential growth in Q3 as programs mature and member engagement expands. The bottom of the funnel, which includes the large Midwestern plan that Mary will discuss, could add an incremental annualized revenue of 14,000,000 to $16,000,000 which would effectively double our annualized revenue.

[James Park, CFO at Ontrak]

The remaining opportunities in the middle of our sales process represent $20,000,000 to $28,000,000 of additional annualized revenue opportunities. With this progress we've made in our sales funnel, we see a path to double our revenue in 2025 and again in the next year. Now we will open up for questions. Thank you.

[Operator]

Thank you. And as a reminder, to ask a question, you will need to press 11 on your telephone and wait for a name to be announced. To address your question, please press 11 again. I see no questions in the queue. I would now like to turn the call back over to Brandon Laverne for any closing remarks.

[Brandon LaVerne, CEO & COO at Ontrak]

Alright. Thank you, Victor, and thank you everyone for joining us on our call today. I hope everyone has a great day. Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great 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