Ontrak, Inc. ((OTRK)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call from Ontrak, Inc. presented a balanced outlook, highlighting both promising developments and significant challenges. Ontrak’s efforts in acquiring new customers and expanding its sales pipeline were notable, yet these positives were tempered by revenue declines, decreased gross margins, increased disenrollment rates, and negative cash flow, resulting in a neutral overall sentiment.
New Customer Acquisitions and Expansions
Ontrak has successfully secured three new regional health plan customers and expanded four existing health plans over the past 14 months. This achievement underscores the versatility of Ontrak’s offerings, which cater to a variety of plan types, including Medicaid, HARP, commercial, and Medicare Advantage.
Successful Launch of WholeHealth+ Solution
The launch of WholeHealth+ with Intermountain Health has been a success, enrolling over 325 members in just over a month. This initiative aims to enroll from the 2,400 eligible members added with this new customer, showcasing Ontrak’s capacity for rapid deployment and engagement.
Strong Sales Pipeline
Ontrak is actively engaged in strategic discussions with six additional health plan prospects. Among these is a large Midwest plan that could potentially double Ontrak’s run rate revenue. The company boasts a 100% success rate in converting prospects to customers once data is received, indicating a robust sales strategy.
Record New Member Enrollments
The fourth quarter of 2024 saw record new member enrollments, with 1,641 new members, including 659 in the Engage Program. This marks a sequential increase from the third quarter of 2024 and a year-over-year increase from the fourth quarter of 2023, reflecting Ontrak’s growing market presence.
Revenue Decline
Despite these positive developments, Ontrak reported a revenue decline in the fourth quarter of 2024, with revenue dropping to $3.1 million, an 11% decrease compared to the same period last year. This decline was primarily due to the loss of a major customer.
Decreased Gross Margins
Ontrak’s gross margin for the fourth quarter of 2024 was 61%, down from 62% in the third quarter of 2024 and 64.6% in the fourth quarter of 2023. The company anticipates further decreases to the mid-50s due to current pricing and revenue mix.
Increased Disenrollment Rate
The average monthly disenrollment rate rose to 19% in the fourth quarter of 2024, compared to 11% in the third quarter of 2024 and 16% in the fourth quarter of 2023. This increase is attributed to customer termination, posing a challenge for Ontrak’s retention strategies.
Negative Cash Flow
Ontrak experienced a negative operating cash flow of $4.3 million in the fourth quarter of 2024, compared to negative $3.6 million in the previous year and negative $1.4 million in the third quarter of 2024. Cash reserves decreased to $5.7 million from $9.7 million at the end of the previous year, highlighting financial pressures.
Q1 2025 Revenue Forecast
Ontrak anticipates a revenue decrease in the first quarter of 2025 to between $2 million and $2.3 million, representing a 36% to 27% sequential decrease. This forecast is due to the loss of a customer and the ramp-up phase of new customers. However, Ontrak expects stabilization and sequential growth in subsequent quarters, driven by a strong sales pipeline and strategic expansions.
In conclusion, Ontrak’s earnings call revealed a company navigating both opportunities and challenges. While new customer acquisitions and a strong sales pipeline are promising, the company faces hurdles with revenue declines and financial pressures. The forward-looking guidance suggests potential for growth, positioning Ontrak to potentially double its revenue in the coming years.