• Revenue: $2.6 million in Q3, a 31% decrease year-over-year.
• Revenue per Member per Month: Approximately $449, down from $463 in Q2 2024 and $552 in Q3 2023.
• Gross Margin: 62%, down from 65.6% in Q2 2024 and 72% in Q3 2023.
• Operating Cash Flow: Negative $1.4 million in Q3.
• Cash Reserves: $8 million at quarter end.
• New Members Added: 1,166 in Q3.
• Net Member Increase: 313 members during the quarter.
• Enrollment Rate: 64% in Q3, up from 61% in Q2 2024 and 50% in Q3 2023.
• Projected Q4 Revenue: $2.9 million to $3.2 million, a 12% to 23% sequential increase.

• Warning! GuruFocus has detected 4 Warning Signs with OTRK.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ontrak Inc (NASDAQ:OTRK) announced a new customer expansion with Sentara Health plans, offering services to approximately 20,000 members.
• The company has secured two new regional health plan customers and four health plan expansions since January, showcasing the versatility of its offerings.
• Ontrak Inc (NASDAQ:OTRK) is achieving a greater than 50% outreach success rate, more than double the industry standard, which positively impacts HEDIS scores for clients.
• The company has four active prospects in the late stage of the sales cycle, representing significant growth opportunities.
• Ontrak Inc (NASDAQ:OTRK) anticipates a 12% to 23% sequential revenue increase in Q4 2024 due to new customer launches and expansions.

Negative Points

• Q3 2024 revenue decreased by 31% compared to the same period last year, primarily due to the loss of a customer.
• The average revenue per health plan enrolled member per month decreased from $552 in Q3 2023 to $449 in Q3 2024.
• Gross margin decreased to 62% in Q3 2024 from 72% in Q3 2023, with potential for further decreases during new customer expansions.
• Operating cash flow for Q3 2024 was negative $1.4 million, although this was an improvement from previous quarters.
• Cash reserves decreased to $8 million at the end of Q3 2024, down from $9.7 million at the end of the previous year.

Q & A Highlights

Q: Can you provide more details on the new customer expansion with Sentara Health plans? A: Brandon LaVerne, Interim CEO and COO, explained that the expansion involves offering the Engage solution to approximately 20,000 members. This includes a specialized care coaching program for members with rising health risks, aiming to support their physical and behavioral health needs. The program is designed to bridge the gap for those who may not yet qualify for the more intensive WholeHealth+ intervention.

Q: How is Ontrak addressing the challenges faced by Medicaid plans post-pandemic? A: Brandon LaVerne highlighted that Ontrak's solutions help reduce elevated costs for members, maintain strong member engagement and retention, and obtain new diagnoses to improve risk scoring. This is particularly important as Medicaid plans navigate elevated medical cost trends and funding challenges.

Q: What is the significance of Ontrak's impact on HEDIS measure gaps? A: Brandon LaVerne noted that Ontrak's AI-driven engagement system achieves a greater than 50% outreach success rate, which is more than double the industry standard. This enhanced engagement directly impacts HEDIS scores, helping health plans meet and exceed their targets, which is crucial for plan ratings and reimbursements.

Q: Can you elaborate on the progress of the sales pipeline? A: Mary Osborne, President and Chief Commercial Officer, mentioned that there are four active prospects in the late stage of the sales cycle, including two new customers and two current customer expansions. These prospects represent significant opportunities, with one potential partnership involving a healthcare system in the West with 80,000 Medicare Advantage lives.

Q: What are the financial expectations for the upcoming quarter? A: James Park, CFO, stated that for Q4 2024, Ontrak anticipates revenues in the range of $2.9 million to $3.2 million, representing a 12% to 23% sequential increase. This growth is driven by new customer launches and the Engage solution expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.