Ontrak, Inc. (NASDAQ:OTRK) is an AI-powered and technology-enabled behavioral healthcare company, whose mission is to help improve the health and save the lives of as many people as possible. The company's technology-enabled platform utilizes claim-based analytics and predictive modeling to provide analytic insights throughout the delivery of its personalized care program. Ontrak's program 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 and treatment they need. By combining predictive analytics with human engagement, Ontrak delivers improved member health and validated outcomes and savings to healthcare payors.

Business Overview

Ontrak's integrated, technology-enabled solutions are designed to provide 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, which result in high medical costs. Ontrak has a unique ability to engage these members, who may not otherwise seek behavioral healthcare, leveraging proprietary enrollment capabilities built on deep insights into the drivers of care avoidance. Ontrak integrates evidence-based psychosocial and medical interventions delivered either in-person or via telehealth, along with care coaches who address the social and environmental determinants of health. The Ontrak programs seek to improve member health and deliver validated cost savings to healthcare payors.

Financials

In the first quarter of 2024, Ontrak generated revenue of $2.7 million, a 6% increase compared to the same period in 2023. This increase was primarily due to a 15% increase in total average enrolled members during the first quarter of 2024 compared to the same period in 2023. However, the company's annual revenue for 2023 was $12.7 million, with a net loss of $27.9 million and negative operating cash flow of $15.5 million.

Ontrak's gross profit margin for the first quarter of 2024 was 63.6%, which decreased slightly from 64.6% in the fourth quarter of 2023 and 66.5% in the first quarter of 2023. The company has been able to maintain its gross margins at these levels due to the efficiencies in its operational processes, but margins can fluctuate in periods where Ontrak has a large number of enrolled members, as it hires member-facing employees in advance of significant increases in enrolled members.

The company's cash flow from operations in the first quarter of 2024 was negative $3.3 million, compared to negative $5.0 million in the first quarter of 2023 and negative $3.6 million in the fourth quarter of 2023. Ontrak ended the first quarter of 2024 with $6.4 million in cash, down from $9.7 million at the end of 2023.

Recent Developments

In March 2024, Ontrak completed an amendment to its Keep Well Agreement, which gives the company access to $15 million of senior secured demand notes, with $3 million drawn down in April and May 2024. Additionally, the company received $2 million in cash proceeds from the exercise of warrants during April 2024, further strengthening its capital position to execute on its pipeline.

For the second quarter of 2024, Ontrak anticipates revenue in the range of $2.4 million to $2.8 million. The company's pipeline remains strong, with approximately 26 active prospects representing 15 million members across all lines of business. Ontrak is currently in the final contracting phase with two prominent health plans, representing over 2 million lives across all lines of business, and both health plans have expressed an intent to expand to larger membership cohorts and across other lines of business upon achieving clinical and financial outcomes.

One of Ontrak's recent successes is its partnership with Community Care Plan, a South Florida-based health plan serving the adult Medicaid population. The Florida Agency for Health Care Administration (AHCA) has approved Ontrak as a subcontractor for Community Care Plan, and Ontrak expects to initiate outreach to new eligible members of Community Care Plan in the next 30 to 60 days. This partnership is particularly significant as Community Care Plan was awarded 5 of the 9 regions in the most recent Florida statewide Medicaid managed care contract re-procurement, which extends for 6 years. This presents a significant growth opportunity for Ontrak, as the number of Medicaid members in Florida who will need to choose a new health plan in 2025 is estimated to be 1.3 million.

Ontrak has also continued to expand its relationships with existing customers, such as Sentara Health. The company has executed multiple new amendments with Sentara, including expanding its WholeHealth+ program to a broader commercial population and Sentara's Medicaid line of business. These expansions represent a 6.5x increase in the number of Sentara members eligible for the WholeHealth+ program.

Outlook

The company's WholeHealth+ program has demonstrated strong results, with a Net Promoter Score of 77, which ranks higher than the healthcare benchmark NPS score of 58. Ontrak's enrollment success consistently highlights the effectiveness of its experience interacting with members, with over 60% of enrollees in the WholeHealth+ program enrolling after only one conversation. Member retention is also a key strength, with 60% of enrollees participating in the program for at least 6 months, and an average length of enrollment of 7.6 months.

Ontrak's program has also been effective in identifying new mental health diagnoses, with 28% of behavioral health diagnoses identified during enrollment in the WholeHealth+ program not present in claims during the 12 months prior to enrollment. By addressing these undiagnosed or undertreated symptoms, Ontrak helps its health plan partners improve member health and increase reimbursement rates.

The company's WholeHealth+ program has also delivered significant health utilization outcomes, reducing emergency room visits by 32%, inpatient admissions by 62%, and overall medical costs by 43%. These improvements in health outcomes and reduced costs are particularly valuable for Medicare Advantage plans, which are facing a challenging environment.

Conclusion

In conclusion, Ontrak is well-positioned to continue delivering improved health outcomes and cost savings to its health plan partners through its innovative, technology-enabled behavioral healthcare solutions. The company's strong pipeline, expanding customer relationships, and demonstrated program results position it for future growth and success.