Ontrak (OTRK) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $2.5 million, a 17% year-over-year decrease, mainly due to the loss of a major health plan customer, partially offset by a new two-year contract with a large northeast regional health plan expected to double the outreach pool and expand behavioral health solutions.

• Operating loss for Q2 2024 was $4.0 million, an improvement from $4.6 million in Q2 2023, driven by cost reductions and a 21% workforce reduction in February 2024, resulting in $2.0 million in expected annual compensation savings.

• Net loss for Q2 2024 was $10.3 million, or $(0.19) per share, compared to $6.8 million, or $(1.84) per share, in Q2 2023, impacted by $5.9 million in debt issuance costs.

• Community Care Plan launched last quarter, with new customer launch expected by end of this quarter and proven clinical and financial outcomes gaining traction.

• Formal evaluation showed $721 per member per month cost savings for a Medicaid health plan's members, and $508 per member per month for non-graduates.

Financial highlights

• Q2 2024 revenue was $2.5 million (Q2 2023: $3.0 million); gross margin was 66% (Q2 2023: 73%), and cash at June 30, 2024 was $7.3 million, down from $9.7 million at year-end.

• Revenue per enrolled member per month was $463, down from $504 in Q1 2024 and $528 in Q2 2023.

• Net cash used in operations for the first half of 2024 was $7.7 million, an improvement from $10.1 million in the prior year period.

• Operating expenses for Q2 2024 decreased 17% year-over-year to $5.7 million, reflecting lower R&D, sales and marketing, and G&A costs.

• Q2 2024 adjusted EBITDA was $(3.3) million, an 8% decline year-over-year.

Outlook and guidance

• Q3 2024 revenue is expected between $2.4 million and $2.8 million, excluding new customer contributions, which are expected to begin in early Q4 and ramp up into next year.

• Per member per month revenue is expected to remain lower year-over-year due to new pricing and member mix.

• Management expects continued net losses and negative operating cash flow due to customer terminations and ongoing investments.

• Cash on hand and committed Demand Notes are expected to cover obligations for at least the next 12 months.

• Additional capital will be needed to execute growth strategy; options include further debt or equity financing.