Ontrak, Inc. (OTRK) Q4 2021 Earnings Call Transcript

Ontrak, Inc. (OTRK 6.40%)
Q4 2021 Earnings Call
Mar 08, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ontrak fourth quarter 2021 earnings conference call. [Operator instructions]. I would now like to turn the conference over to your speaker for today, Caroline Paul, you may begin.

Caroline Paul -- Investor Relations

Thank you, and thank you all for participating in today's call. Joining me today are Jonathan Mayhew, chief executive officer; and Brandon LaVerne, chief financial officer. Earlier today, Ontrak released financial results for the fourth quarter and year-ended December 31, 2021. A copy of the press release is available on the company's website.

Before we begin, I'd like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts are forward-looking statements. The words anticipate, believes, estimates, expects, intend, 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 operating results, which include, but are not limited to, the risk factors described in the risk factors section of the Form 10-K 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. Ontrak expressly disclaims any intent or obligation to update these forward-looking statements. With that, I'd like to turn the call over to Jonathan.

Jonathan Mayhew -- Chief Executive Officer

Thanks, Caroline. Good afternoon, everyone, and thank you for joining us. In the President State of the Union address on March 1, he laid out a plan to address the nation's mental health crisis by strengthening system capacity, connecting more Americans to care, and creating a continuum of support to address mental health holistically and equitably. Anyone who's tried to navigate the behavioral healthcare system in this country knows that primary care providers, health plans, and treatment specialists struggle to communicate with each other, which has heightened anxiety for individuals who are already suffering with behavioral health issues.

They may simply give up. The launch of Ontrak's new provider integration platform helps address the challenges of system capacity access to care and the need for a continuum of support. Our provider integration platform is just one of the important steps we took during the fourth quarter of 2021 to prepare the company for accelerated growth and profitability. The new Ontrak management team has continued to expand and diversify our sales pipeline across multiple industries from higher education to hospitals, pharmaceutical, and manufacturing, we anticipate positive outcomes from our ongoing discussions with multiple national health plans, health retailers, managed behavioral health organizations, employers, and provider clinics.

We've signed a new contract with a tech-first company for LifeDojo behavioral health program, and we are in advanced discussions with the state university to serve the well-being needs of their faculty and student population. We've begun implementation of our industry-leading AI-enhanced clinical model, and we anticipate signing contracts with multiple partners very shortly to launch our own high-quality behavioral health provider network. Our advanced provider integration platform, powered by a behavioral health industry leader, Netsmart, enables us to potentially communicate with over 0.5 million behavioral health providers already on Netsmart and also with any electronic health record system anywhere in the nation. This new collaborative care platform positions us to speed up access and scale cost effectively as we meet the growing needs of our new customers.

Importantly, we also have a path to profitability that contemplates positive monthly EBITDA in the first quarter of 2023 with positive operating cash flows a quarter later. In 2022, three growth drivers will be our focus: Number one, a new capital structure, which supports our path to financial strength and profitability. Number two, a robust and diversified portfolio of current and new customers comprising health plans, employers, health retailers, managed behavioral health organizations, healthcare organizations and associations and providers. A significantly higher level of collaborative care achieved through integrated relationships with treatment professionals on our own provider network and the networks of our customers and through the simplification and automation of data exchanges between providers, Ontrak care coaches, PCPs, and members.

Brandon will share more details on our capital structure and path to profitability in a moment. So I'd like to share more with you on our customer portfolio and our road map for provider integration and collaborative care. Let's start with customers. We are deeply grateful for the ongoing partnership and support of our health plan and employer customers.

We are working with these customers to expand the markets we serve together, partnering on new government contract opportunities, helping close gaps in care, and delivering more mobile and digital solutions that reduce disparities by connecting individuals to the behavioral healthcare they need across all socioeconomic, geographical, and disease states. We are proud to have signed a three-year contract with our largest employer customer, a highly respected technology company for expanded mental health and well-being support for their employees in 39 countries. We've made steady progress on our sales pipeline since our last earnings call. We are now in active conversations with 16 health plans across the country, potentially representing millions of lives nationally.

The bulk of our sales pipeline continues to be government lines of business and over 90% of our initial meetings with prospects are resulting in follow-up meetings. No prospect has fallen out of our pipeline since the last earnings call. While every prospect will not ultimately advance to a signed contract and the speed at which customers move through the pipeline is still lower than we would like. We are encouraged by the quality of the conversations and their fit with our capabilities.

We are nearing an agreement to exchange data with a prominent multistate health plan whose total footprint covers millions of lives. We are also codeveloping a term sheet with a large provider network that needs to supplement their on-site behavioral health services through our care coaches and AI-infused interventions. The partnerships that we are now discussing with a number of health retailers and clinics are good examples of how we are finding strategic ways to bring our value proposition to new markets. We are exploring opportunities to enhance on-site clinics and retail settings with behavioral health solutions that can better support individuals with chronic disease burden.

Ontrak is well positioned to enable these organizations with large footprints to access our care coaches and behavioral health providers through our mobile app, telehealth engagement, and support in-person visits as an integrated offering to the local community. This enables us to be a strategic partner in advancing the use of on-site and telehealth solutions through new channels not tied to specific health plans. Health care associations are another new category opportunity for Ontrak. We've seen interest in our solutions with healthcare associations that serve frontline hospital employees.

To that end, we are in discussions with two associations, each representing a significant number of hospitals and have just submitted a statement of work for one of them. Another of our new category of opportunities is professional employment organizations, or PEOs. There is strong interest in our LifeDojo solution for a large PEO with 8,000 client companies serving over 4,000 employees -- 400,000 employees. We are all encouraged by the reception to Ontrak programs in the higher education industry, especially to our enhanced LifeDojo mobile well-being solutions for students and faculty.

A 2021 Mayo Clinic study notes that 44% of college students reported having symptoms of depression or anxiety and yet 75% of struggling students are reluctant to see care. We believe that LifeDojo track record of delivering high levels of user engagement and improved health habits translates well to the student populations. Our customers tell us that Ontrack health stands apart in an otherwise crowded marketplace. A 2020 Milliman study notes that 5.7% of U.S.

adults with chronic conditions have an unmet need for behavioral healthcare, accounting for 44% of the total healthcare spend. We continue to focus on this unaddressed high-acuity, high-cost complex population with significant comorbidities that drive up the cost of medical care. There are many digital solutions in the market. but they have difficulty matching our system of stratifying members to ensure that they receive the specialist care they need and reducing healthcare and equities through high-touch coaching, AI-infused interventions over sustained periods of time.

And as we indicated during the last earnings call, we are offering prospects, competitive, flexible pricing models that yield attractive ROIs. We think it's possible to sign several customers in 2022 with that revenue being realized in the second half of 2022 and more prominently in 2023. Now I'd like to share more about our road map for achieving a significantly higher level of integrated collaborative care. As I mentioned earlier, the launch of Ontrak's new provider integration platform addresses the challenges of system capacity, access to care, and the need for a continuum of support.

Our new ability to directly message primary providers and the bidirectional exchange of clinical notes means that Ontrak's board-certified care coaches can reduce the burden on treating professionals. We can stratify members so that they can be quickly referred to the right specialists. Our care coaches also provide motivational and counseling in between visits to specialists, which heightens member engagement and lessens the likelihood of missed or canceled appointments, which create strain on an already overburdened mental health system. We recently announced significant innovations in our AI capabilities that enable us to infuse machine learning into the entire member journey, not just upfront identification and eligibility.

We believe this is the first-to-market capability unmatched by any of our competitors. Ontrak will also be the first behavioral health company to use Netsmart's care router service, which speeds up timeliness of access to specialist providers. We will use machine learning to better match members with coaches and providers and natural language processing will give our engagement specialists and care coaches real-time information designed to optimize their interactions with members. AI-infused measurement feedback assures robust clinical outcomes and cost efficiencies on both an individual and a population health level.

I'd now like to turn it over to Brandon LaVerne, our chief financial officer.

Brandon LaVerne -- Chief Financial Officer

Thanks, Jonathan. During the fourth quarter, we recorded revenue of $10.3 million, a 44% year-over-year decrease due primarily to the loss of two large customers and which included the release of $4.9 million of deferred revenue associated with one of those customers. Our deferred revenue balance came down to $400,000 in the fourth quarter, down from $5.3 million in the third quarter. As a result, we expect near-term quarterly revenues from our existing customers to approximate 4.5 to $5.5 million as we look to sign and close on certain of our pipeline opportunities that we believe may increase revenues in the second half of 2022, but more fully in 2023.

During the quarter, we took steps to set ourselves up for accelerated growth and return to profitability in the near future. First, our new technology development strategy has shifted from being internally developed to working in partnerships with AI and software firms that, as Jonathan just mentioned, will help enhance our ability to engage with and coach the members throughout their behavioral health journey. This shift in strategy provides us greater flexibility in our ability to tailor treatment for more personalized care as well as better information to help effectively treat all of our members while reducing overall costs and development time. This change resulted in a onetime write-off of some of our capitalized software and other assets.

Second, with this change, additional review of our organization structure and revenue outlook in the near term, we completed a reduction in our headcount to reduce our operating costs. Third, we reduced our corporate [Inaudible] footprint as we look to sublease our former Santa Monica headquarters and moved to full remote workforce of our administrative departments with a small headquarters presence in Nevada. With this restructuring plan, we believe we have set ourselves in motion to optimize our efficiency and align with the three 2022 growth drivers that Jonathan described earlier. At the beginning of the quarter, we had 9,395 enrolled members and ended the quarter with 3,795 or a simple average of 6,595 members.

The decrease in enrolled members was driven by the completion of the transition of over 4,600 members that either graduated or disenrolled during the quarter for the two terminated clients. That equates to revenue of about $522 per enrolled member per month for the quarter, compared to $649 per enrolled member per month for Q4 2020 and $611 per enrolled member per month for Q3 of 2021. The lower revenue per involved member was partially due to the number of members disenrolled from the two terminated clients as well as new pricing models implemented as discussed last quarter. To go a bit deeper into Q4 enrollment, we enrolled a total of 1,014 members during the quarter, compared to 6,714 in Q4 last year, dividing Q4 gross enrollment by our outreach pool, which averaged approximately 7,953 for the quarter, it annualizes to a 51% enrollment rate, compared to the 55% annualized rate we saw during the first three quarters of 2021 and significantly higher than the 18% enrollment rate we had in 2020 when we are more dependent upon commercial customers.

We believe that as we move past the pandemic, utilization will begin to increase, expanding our outreach pool as new members hit the cost thresholds to qualify for the Ontrak program. Excluding the impact of the accelerated disenrollment of our terminated customers, our monthly adjusted disenrollment rate would have been approximately 7%, which is consistent with the improving trend over the past few quarters. Further, we graduated 2,095 enrolled members during the quarter, which equates to about 22% of the enrolled members in the program at the beginning of the quarter, which has also been increasing steadily throughout the year. The net impact of all that was a net enrollment decrease of 5,600 in the fourth quarter.

Our gross margin in the fourth quarter of 60.4% decreased sequentially from 68.5% but increased compared to 54.1% in the fourth quarter of last year. The sequential decrease is due to the new pricing model previously discussed, partially offset by efficiencies gained in our operations. We expected our gross margins to normalize in the low 50% in the near future. We ended the quarter with 125 team members included in cost of revenue, down 7% sequentially from 194 at the end of Q3 due to a reduction in response to the customer loss.

Turning to the balance sheet and cash flow. Our cash flow from operations in the fourth quarter was a negative $15.1 million, compared to negative $100,000 in the fourth quarter last year. We ended the quarter with cash and cash equivalents of $58.8 million, down from $86.9 million at fourth quarter end last year. Including restricted cash, total cash was $65.9 million, down from $103.2 million at fourth quarter end last year.

We are very much focused on Ontrak's capital structure to ensure we have sufficient resources and financing to bring a robust pipeline to fruition and a set of [Inaudible] up for future growth. Our board of directors thought further strategic financial flexibility that required us to amend our corporate charter, which was just approved last week at a special meeting of stockholders. This allows the board, subject to current lender consent, the ability to enter into transactions such as with strategic partners that may have been prohibited in the past. Further, we just signed an amendment today with our senior lender that provides us with the flexibility we need over the next few quarters to raise replacement capital and secure our financial future.

As of today, our debt balance with this lender has been paid down to $19.2 million. Contract management has been and continues to be actively engaged with numerous potential debt financing sources in an effort to secure additional financing to fund our growth plans. We are also in early strategic discussions with a number of healthcare-related entities regarding shareholder value-enhancing transactions. The special committee is reviewing term sheets to determine the best and most effective opportunity for Ontrak and its shareholders.

As a result, we currently expect that we have sufficient capital and access to future capital necessary to manage our operations and execute on the three growth initiatives Jonathan has outlined over the next 12 months. Regarding our outlook for 2022 and as I indicated earlier, we expect near-term quarterly revenues from our existing customer contracts to settle in the 4.5 to $5.5 million range for the first two quarters of 2022 before we begin to see pipeline revenues contribute in the second half of 2022. As a result, we expect 2022 annual revenues in the range of 25 to $30 million with a projected run rate entering 2023 more than double that amount. We believe we could hit historical revenue levels again for the full year of 2023.

We must continue to be diligent with our cost structure and expect many of the initiatives Jonathan mentioned will help contribute to greater efficiencies and scalability of our operating model. We had three quarters of positive adjusted EBITDA between Q4 2020 and Q2 2021, and we have a path to positive monthly EBITDA in the first quarter of 2023 and positive operating cash flows a quarter later. I'd now like to turn the call back to Jonathan.

Jonathan Mayhew -- Chief Executive Officer

Thanks, Brandon. I'm proud of the progress that our new management team is making to turn around our growth trajectory, which is founded on customer centricity, clinical differentiation, AI-infused interventions, and a new level of collaborative care integration with our trading partners. Our sales pipeline is progressing well with a diversified mix of prospective customers that include health plans, employers, health associations, managed behavioral health organizations, hospital networks and providers. We are constantly working to improve our execution and operations.

We feel confident that this positions us well to scale this year and beyond. With that, Tolanda, I'll turn it back over to you.

Questions & Answers:

Operator

Thank you. [Operator instructions]. Our first question comes from the line of Richard Close with Canaccord. Your line is open.

Richard Close -- Canaccord Genuity -- Analyst

Yes. Thanks for the questions. First, I was wondering maybe if you could elaborate on the strategic discussions you mentioned you're having in terms of value-enhancing transactions. Can you go into any more details on those?

Jonathan Mayhew -- Chief Executive Officer

We have had a number of -- I mean, I would say it this way, there's interest that seems to emerge in the more we develop our capabilities. And the interest has come from a number of different kinds of organizations, but they are healthcare organizations, whether that's network related or at-risk providers, I would say, is probably the best way to categorize it.

Richard Close -- Canaccord Genuity -- Analyst

OK. So is there a formal process that you're going through here in terms of -- are you just taking things sort of over the transom as they come?

Jonathan Mayhew -- Chief Executive Officer

I mean as Brandon outlined -- go ahead, Brandon.

Brandon LaVerne -- Chief Financial Officer

I'll just get -- we have a lot of discussions in the normal course as you can imagine. And we're always looking at these organizations at parallel with our services, and we like to see how to explore, how we can make the benefit from these. We don't have a formal process in that regard. And -- but ultimately, we look to all these conversations that exist in the marketplace.

And -- but as I did mention earlier, our first and foremost is to look at debt financing. It's a bridge the time between now and the time we can close on the pipeline that Jonathan laid out to really maximize shareholder value. And we signed the amendment today with our lender -- and with that, some other opportunities we're looking at, we think that gives us that -- the necessary financing in the near term to achieve all those objectives.

Richard Close -- Canaccord Genuity -- Analyst

With respect to the debt financing, I appreciate the 9.2 -- 19.2 that you mentioned. So what is the debt -- total debt level? You were at 30 -- call it, 36 at the end of the year, 36 million. What is the debt currently with the pay downs that you have done through today?

Brandon LaVerne -- Chief Financial Officer

Well, that's it. So as of today, the debt is now down to 19.2 million.

Richard Close -- Canaccord Genuity -- Analyst

OK. I just want to be clear on that. OK. And then, Jonathan, maybe just talking a little bit about -- you laid out a lot of stuff that you guys are working on and a lot of interesting items.

I'm curious just to -- this is a lot different than looking at the enrollments in terms of how you ran the business before. It sounds like these different initiatives probably have different pricing models and different flavors of contracts. Can you just go into maybe the various initiatives that you're working on, how we should think about if you land one of these, how to model it? Or how -- what's the revenue build and type of -- those type of details?

Jonathan Mayhew -- Chief Executive Officer

Sure. And, Brandon, in terms of some of the modeling, happy to have his input here. I would have you think about the majority of the opportunities that we continue to go out aggressively relative to the sales pipeline as being consistent with the traditional revenue characteristics. -- that we've gone after, right? I mean health plans continues to be a first and top priority.

As we mentioned, the government lines of business seem to have the most activity for us. The vast majority of the pipeline seems to skew toward Medicare, dual eligible with Medicaid lines of business has everything to do with, right, sort of the disease burden and the propensity with which you can and we will find people that have got unaddressed behavioral health needs and a big disease burden overall. When you didn't think about that being a primary focus, that's where the majority of the pipeline is, when you start talking about at-risk provider groups or even some of the clinic and -- and retail strategies, those are the same kinds of individuals, right? I mean you're talking about people that have largely got a government reimbursement line of business. They might be accessing care in a walk-in clinic.

They might be accessing care through a capitated at-risk provider group. And so the conversations that we're in really do have a lot of the very same coaching and therapy revenue characteristics that the traditional lines of business have had for the company. And as we've talked about, I just would separate out that primary focus, the majority of the pipeline is directed at those traditional revenue characteristics from the LifeDojo mobile platform, which, in fact, are lower PMPM types of revenue. But the vast majority of what sits in the pipeline today is the traditional revenue source that we describe it as.

Richard Close -- Canaccord Genuity -- Analyst

OK. And then as you ramp up in the second half, you -- Brandon was talking about closing some of these would contribute in the second half. Should we think about like the LifeDojo, I assume the higher ed is like LifeDojo. So this year, it's more like those tech wins, lower PMPM, like a LifeDojo and then 2023, maybe new health plans or government line of business, how we should think about it?

Jonathan Mayhew -- Chief Executive Officer

I would say this. We -- for LifeDojo, I think because of the price point, because of the calendar year of some of the higher education starting in the fall and the way they think about their business year. Those conversations are very active to be implemented in the current year. For some of the provider group and health plan conversations that we're actively in, we are moving toward those data exchange and term sheets and the things that lead us to a full statement of work and contract and we're expecting to try to advance those conversations in 2022.

And so I think whether they will land in the second quarter or whether they will end in the third quarter, it is our hope and expectation that we're going to continue to be able to drive at some of those health plan conversations in this year. And that sort of goes to the point where as we onboard and implement those in the middle part of this year, we probably won't be recognizing a ton of revenue in the third quarter or the fourth quarter, but we will be ramping toward 2023 revenue as we onboard those customers in the second and the third quarter of this year.

Richard Close -- Canaccord Genuity -- Analyst

OK. I'll jump back in the queue. Thank you for answering the questions. 

Operator

Thank you. Our next question comes from the line of Bill Sutherland with Benchmark Company. Your line is open.

Bill Sutherland -- The Benchmark Company -- Analyst

Thanks, everybody. [Technical Difficulty] you didn't guide, but you suggested that the gross margins going forward would be in the low 50% range, I think. Is that a mix -- is that a function of mix in the future that you're seeing?

Brandon LaVerne -- Chief Financial Officer

It's -- I don't know if I'd say mix as much as I'd say, just the way we're pricing now, given the efficiencies we've gained in our model and the ROIs that we want to generate for our customers, we're starting to think about how to -- how to bridge that gap and to give the best pricing and the most constructive type of price available and just where we see that with our existing customers coming off, new customers coming on and existing customers remain, that's kind of where we see it. We will continue to -- with a lot of the technology that Jonathan mentioned, we're looking to continue to improve our own efficiencies. And so I'd love to see that there's upside there, but I definitely want to give caution, I've been saying for a couple of quarters that I expected our gross margin to come down a bit, and it came down from 68 down to 60, and we do expect that with -- again, with the two customers coming off for sure that we will see a little bit of a lower number coming forward as well. The other thing to remember is as we onboard customers, so as Jonathan just mentioned, we do expect to onboard customers, new health plan customers this year.

We have to hire in advance of that. And so usually, that creates a month or a month and a half impact that comes into our gross margins in [Inaudible] but before launching the particular contracts. And so that's part of that analysis as well.

Bill Sutherland -- The Benchmark Company -- Analyst

Got it. And as far as opex and the changes that you've made in the cost structure with the fourth quarter charges. Is there a level that we should think about that you're kind of running at now for opex?

Brandon LaVerne -- Chief Financial Officer

I would definitely expect it would be still a little bit less than in the fourth quarter. I mentioned that we had made some changes in the fourth quarter. And so we'll likely be coming down from there. There's also some direct costs that come out with the -- there's some direct cost of revenue that come out for just the provider costs that nature that come out as well.

And so I would say we expect -- we would expect that the opex would come down from the fourth quarter levels and start to normalize from there.

Bill Sutherland -- The Benchmark Company -- Analyst

OK. And, Jonathan, based on the experience you've had with the two large plants that left last year and how you're beginning to work toward an SOW with new or maybe not new large health plans. What -- how have you changed your approach to being the most effective you can be with that kind of customer going forward?

Jonathan Mayhew -- Chief Executive Officer

I appreciate the question. The capabilities story has really evolved and changed, number one, our ability to think about customer stratification or the member stratification has changed and our ability to talk about an enhanced and differentiated level of ROI and then an ROI guarantee and a commitment from a performance standpoint, are all things I will tell you, have resonated and are resonating in a pretty material way with the prospect base. The only other thing I can think to sort of draw a distinction on particularly most recently is there are a number of the larger digital behavioral health programs that have been in play for a while. And whether it's at year three, maybe heading into year four, where there's been a sufficient degree of exposure to the capabilities, the shine seems to have worn off whether some of those capabilities can be expanded, right? They don't have the ability to ingest data.

They don't have the ability to model an outreach pool and they don't have the human capital to make the trained kind of professional outreaches to invite people into treatment. And I know we talk about that a lot, but if those digital platforms don't have those capabilities and there is a sort of a development schedule to expand those kinds of capabilities. I think health plans are beginning to understand that there are some limitations to some of -- some of those solutions that they've had in place. So I would tell you, it's a combination of those things.

The capabilities, the ability to stratify the population to back into an ROI with a pretty aggressive performance guarantee. And then people who've implemented some solutions are sort of prepared to look at alternative a couple of years in.

Bill Sutherland -- The Benchmark Company -- Analyst

OK. That makes sense. Thank you very much.

Jonathan Mayhew -- Chief Executive Officer

Yes.

Operator

Thank you. Our next question comes from the line of Sean Dodge with RBC Capital Markets. Your line is open.

Thomas Kelliher -- RBC Capital Markets -- Analyst

This is Thomas Kelliher on for Sean. Thanks for taking the questions. First question kind of relates to the '22 guidance. I mean I know previously, you all had talked before about saying some natural recovery in the average pool based on kind of the broader healthcare utilization.

I guess have you all seen that at all? And are there any expectations built in the guidance for the back half around that? Or should we think about that being driven primarily by new business?

Brandon LaVerne -- Chief Financial Officer

I would say, predominantly, we're looking at the forecast being driven by new business. There's some element of utilization that we would expect -- but with the pool numbers, the impact on it now versus when we had a huge commercial business in there is a lot different. And so that could have some element of an impact, but much smaller than the impact of the customers.

Thomas Kelliher -- RBC Capital Markets -- Analyst

That's helpful. And then on that three-year contract, you all mentioned there's a flat PMPM across that full employee base? Or is there any sort of enrollment or utilization-based component? And I guess, how should we think about that in terms of relative contribution to '22 and then they already at a full run rate? Or are they -- is it rolling that out in phases, given the size and sort of the geographic footprint?

Brandon LaVerne -- Chief Financial Officer

That -- it's a fixed PMPM across the entire population, and it's a new contract built off of what we've had in the past. And so the revenue contribution for 2022 would be incremental to what -- would be a little bit incremental to what we had in 2021 and so it's definitely built in and part of the forecast, but it's an existing customer that signed up with a new contract for some expansion to go along with it.

Thomas Kelliher -- RBC Capital Markets -- Analyst

Thanks. That's helpful. All right. Appreciate it.

That's all for me.

Operator

Thank you. We have a follow-up from the line of Richard Close with Canaccord. Your line is open.

Richard Close -- Canaccord Genuity -- Analyst

Jonathan, I was just curious if you could just dive into the Netsmart relationship a little bit. Just exactly what are you guys doing with them? Is it a sales channel potential for you? Just any more details on that relationship would be helpful.

Jonathan Mayhew -- Chief Executive Officer

It's a good question on the sales channel. That's not the -- I mean it's not at the moment, and that's not what we were primarily looking for out of the partnership. But I would say, first and foremost, it gives us a pretty robust, very easy platform to create collaborative care and interoperability connections pretty broadly. So the EHR that our care community will sit on gives us from a management and a reporting standpoint, just a whole lot more information to see verifiable levels of activity in our care community, right? So we get to just manage in a totally different way.

It allows us to hook up with other EHRs and create a set of interactions that we can begin to do different things with, right? We can create bidirectional information, we can share our coaches nodes with treating professionals as we make behavioral health assessments, right, determining the level of somebody's anxiety depression or substance uses were going through an intake or an ongoing coaching set of strategies with the person we can share that information with the treating professionals and let them know whether the people are progressing or regressing, right, in their level of treatment. It helps us understand the timeliness of when somebody should graduate from the program. But because of the adaptability and the other vendors that we can align to Netsmart, it gives us an increasing set of AI and machine learning of vendors that we can plug in. And so we can do additional data modeling, we can have inbound and outbound submissions around our outreach and eligibility effectiveness.

We can think about real-time integrations for provider searches, which is one of those things that I mentioned in the script, but just knowing whether our providers got availability, how much provider availability they've got knowing whether there are some geographic considerations that may really be important, so you can think about sort of geo-mapping somebody's access. But things like knowing the best time to reach out to people speech patterns and sentiment feedback can all be linked, right, these modules that we can bolt-on to the platform, just give us a real set of capabilities that to the very best of our knowledge, are just not being deployed, not that some of these vendors aren't doing this stuff for other industries. But when you link together what Netsmart can provide to us around management information and reporting information and then the ability to match up our own internal vendors, but also link up with the other EHR that these clinics, retail locations, and capitated provider groups have, it gives us a level of collaboration in the treating process that I think really will distinguish us in terms of the kind of outcomes that we can generate, but also just the convenience and support we can provide to the treating partners, right? It just would be a lot easier to do business with a company like ours. So, hopefully that [Inaudible].

Richard Close -- Canaccord Genuity -- Analyst

Yes. You're essentially licensing the CareFabric platform from Netsmart and instead of doing that in-house yourself as Brandon had said.

Jonathan Mayhew -- Chief Executive Officer

Correct.

Richard Close -- Canaccord Genuity -- Analyst

OK. Can you talk a little bit about the -- your plans on the behavioral health treatment specialist network? What exactly are you doing there? What's the cost involved with that? Is there any incremental cost? Or is that something that you have already developed? Or is that over the course of 2022?

Jonathan Mayhew -- Chief Executive Officer

It will be over the course of 2022. I would describe our network strategy maybe in two buckets. So one is enhancing the provider service capabilities, right, that we can provide. So I'll start with sort of the easy one, if you will, but enhancing our alignment with current providers.

We are going through and have been pretty rigorous and intensely going through an identification of provider groups that we can strategically partner with, right? Where can we have performance SLAs? Where can we create and use the kind of integrated capabilities that I just mentioned, so that we can align around referral patterns, data share, workflows, bidirectional treatment nodes, right? Like we want providers that have capacity and have a willingness to interact and engage around those kind of preferred dimensions. So we're working our existing network to really try to increasingly make sure we can find contracts and put some performance to teeth around those arrangements with existing providers that we already do some work with and have relationships with. The second part of it is to contract with new high-quality providers align around these collaborative care dimensions. And so whether they already have community resources that they're referring to, whether they already have primary care physicians that they were referring to, we want to make sure that we can get that same level of integration, and we want to be able to do it in a preferred proprietary access to those treating professionals.

So the contracting strategy, we've got a couple of different contracting models that we will be able to work through, but we'll be able to contract on an exclusive basis to ensure that those individuals from a treatment standpoint, are uniquely aligned to on track.

Richard Close -- Canaccord Genuity -- Analyst

OK. Thank you.

Operator

Thank you. At this time, I would like to turn the call back over to Jonathan for closing remarks.

Jonathan Mayhew -- Chief Executive Officer

Thank you very much. We appreciate everybody's time this evening and the opportunity to share with you our quarter and our optimism for what we're working on, and we are working on these opportunities with great urgency. So thanks again. Have a nice evening, everyone.

Thank you.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Caroline Paul -- Investor Relations

Jonathan Mayhew -- Chief Executive Officer

Brandon LaVerne -- Chief Financial Officer

Richard Close -- Canaccord Genuity -- Analyst

Bill Sutherland -- The Benchmark Company -- Analyst

Thomas Kelliher -- RBC Capital Markets -- Analyst

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