OTRK (formerrly CATS)

It may not be the right time given the recent Livongo drama but… OTRK, a similar idea with a subscription model, continues to show strong growth. I know this stock has been discussed here and a lot of people here didn’t like the subscription model but regardless they seem to be executing and subscriptions continue to rise (see below). Up about 30% on the day with their earnings release.

Snippets:

Revenues of at least $90 million in 2020, representing year-over-year growth of 156% from revenues for 2019.

Record Quarterly Revenue of $17.2 Million in Q2 2020, up 124% Year over Year and up 40% from Q1 2020

Record Number of Enrolled Members of 11,989, up 203% Year over Year and 39% from Q1 2020, and 13,200 as of the date of this release, up 10% since the end of Q2 2020

Record Quarterly Net New Enrollment increase of 3,389 in Q2 2020, up 309% Year over Year and up 111% from Q1 2020

Total enrolled members increased to 11,989 at the end of Q2 2020 and to 13,200 as the date of this release.

Net new enrolled members increased to 3,389 in Q2 2020. The continued increase in net new enrolled members continues to demonstrate the positive impact our Ontrak program can have to members in periods when external factors can trigger or exacerbate mental health disorders.

On June 30, 2020, the Company announced expansion of its Ontrak solution with a leading national health plan in an additional 13 states. Once launched, Ontrak will be available across our national and regional health plan customer base in 30 states as well as the nation’s capital, serving members in 82 unique local health plans across commercial, Medicare and Medicaid lines of business.

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I brought it up more recently
I like the company and I have shares
I think especially now with Livongo being bought out; investors are looking for the next similar telemedicine play.
I follow a guy on Stocktwits named healthcareguru
He specializes in these kinds of investments. He was in lvgo from $25-114
He likes otrk a lot. Another one he likes is Drio.
I’m in Drio too but it feels more speculative as they are very small and seem to have a shady past in terms of share
Dilution. That being said the Drio CEO just came from otrk.
Would love it if one of the brights here wanted to look at the financials of that one. I can try but I’m not very good with the math
Side of things

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Right now up almost 34% on 1.75 million shares.

This reply scratches the surfaces of some WHYs:

  • Why great leadership and a healthy mindset matters.
  • Why do some companies like Apple keep winning?
  • Why should we beware of Bullsh*t Bingo?

This is a bearish view. Since Management is one of the most important factors behind an investment, I focused my research on that. I do not trust OTRKs management, especially its CEO, Mr. Peizer. Here is why:

Wikipedia, bolding is mine

From 1991-92 Peizer was a director at the shoe company Millfeld Trading, of which he owned $3.5M worth of stock.
He sold 90% of his shares one day before the management admitted it had underpaid its Customs duties for many years (after which the stock price plunged). Peizer was sued, along with the management, but the case against him was later dismissed.

Between 1991 and '95 Peizer was also Chairman & CEO of Urethane Technologies, which was producing bicycle tires.
The company had been making losses since its inception in 1985, and went bankrupt in 1997.[10]

In 2003 he became CEO of Hythiam, who was marketing a drug-treatment program called “Prometa” (see section below).[2]
The company’s name was changed to Catasys in 2011, and then to Ontrak in 2020, and is now selling tele-health services.

In 2006 CT Holdings (Peizer’s holding company), merged with Xcorporeal (another shell company owned by Peizer), and then attempted to merge with National Quality Care Inc., a developer of portable dialysis machines. According to NQCI (and the arbitrator), Xcorporeal was guilty of several contract breaches during the negotiations, and had to pay $1.8M in damages to NQCI, and merger talks were aborted.[14]

In 2009 Peizer started a new investment vehicle, called Socius Capital Group, with Michael S. Wachs as an equal partner.
Wachs had been convicted of bank fraud in 1997, served a year in prison, and was barred from the banking and brokerage industries. Despite this, Peizer started a video production company, CEOcast, to promote penny stocksand was involved with Socius for several years.[15][16]
Another of Socius’s employees was Richard Josephberg, who was sentenced to 42 months in prison for evading taxes in 2012.[17] Josephberg sued Socius in 2013 for non-payment of $4.8 mio in sales commission.

In 2012 the group was renamed to Crede Capital Group.
In 2012 Peizer invested $40M into Cell Therapeutics, who was marketing a cancer drug.
Even though the company had been fined $10M in 2007, for marketing & selling an unapproved drug, they were still in the cancer business. In 2015 FINRA convicted the company’s broker, Halcyon, of securities violations during the transactions between Socius and CTIC, and barred Halcyon from trading.[18][19]

Peizer was successful in getting Hythiam listed on the NASDAQ Global Market Exchange, using a technique Peizer has used many times before and has become Wall Street’s leader in: the reverse merger or reverse public offering (RPO). Hythiam’s treatment went on to help thousands of patients end their dependence and get better.

Junk Bonds to Junk Science? Drug Treatment Program Questioned
From another article ( https://www.prisonlegalnews.org/news/2008/jun/15/junk-bonds-… ):

Hopefully the CEO of Hythiam, Terren Peizer, a former junk bond salesman and executive at Drexel Burnham Lambert during the Michael Milken scandal era, is not selling “junk science” as well. Hythiam’s stock, which has traded as high as $9.00 a share within the past year, is presently valued at less than $1.80 per share. According to MorningStar, an independent investment research firm, “Over the long haul, this company has posted some of its industry’s worst returns on assets.” Hythiam has generated a net loss each year for the past 5 years.

Only time – and independent, objective large-scale clinical testing – will tell if the Prometa treatment being pushed by Mr. Peizer is like the junk bonds he once sold: worthless.

Some Snippets from Glassdoor reviews
Glassdoor reviews might not always be accurate, since some employees might feel offended. You can read some aggressive comments about other companies like Alteyx, as well. But I do count it as a red flag if it’s about fraudulent behavior or something similar. Also this review reflects the rest of my research.

Management lies a ton or omits truth to cover themselves. The company itself used to be Hythiam Inc. This company went bankrupt in 2017 and is lying to their investors. They went from CATS to OTRK so don’t waste your stock on them. If you try to apply for any other positions within the organization, even if you have prior experience in that field, they will find any and every way to ignore you and treat you as though you never applied. There is no room for transparency because transparency requires for the truth to be told and they are not telling the truth. There is a deep rooted wickedness within the company and I think it’s as simple as Corporate Greed at the expense of the mental health of others.

Several reviews are about sexist remarks from its CEO
CEO is a wealthy playboy that makes inappropriate sexists remarks during all company meetings.

From last earnings call
While others highlighted this snippet as a strength, I count it as a red flag.
Peizer got asked about its competitor Lvgo. Instead of telling the Analyst that it is about their customers, and that success will naturally come with it, Mr. Peizer answers very extensively about how they are going to be successful on the Stock Market by comparing them to their competitor. I recommend watching a 10 minute video ( https://www.youtube.com/watch?v=KbYzF6Zy5tY ) about the Infinite Player Mindset by Simon Sinek to have an idea about what being a great leader, a great company or a great human being really is about. If you watched this video, you will be able to understand why I bolded several parts down below.

Daniel Carlson
Got you. And then last question for me. A lot of times, I’m hearing investors comparing you with Livongo, and you guys are two of the leaders in telehealth right now in the market. How do you see Catasys relative to Livongo though?

Terren Peizer
Well, we’re different companies. They’re – obviously, their main business is diabetes space. It’s a SaaS model. Most of their customers are employees. We’re the only pure behavioral health, telehealth play. And of course, we’re at the intersection of – our members have multiple chronic diseases and multiple behavioral health diseases. But as such, our member community is care and treatment-avoidant. The other telehealth and a company like Livongo are dealing with the treatment seeking. And we’re just structurally different. There’s definitely a more capital-intensive model than ours as well. I think if you look at our margins at scale, they all have a higher gross margin because we embed the cost of our care community and the cost of services provided.
But if you look at our EBITDA margin because we have significantly less marketing expense and they’re marketing straight to consumers, if you will. Our EBITDA margin should be slightly higher. But the only comparison I think you can make is we’re both in the telehealth industry. Their multiple is a lot higher than ours. But it’s interesting. If you look at their year, they reported last night. But in 2019, they did $169 million of revenue.
I think if you redo the math, and based on what I think our growth rate continues into next year, you could easily see that we could surpass that number. I’m not giving guidance yet for 2021. But you could see how we could be ahead of their 2019 number. And all last year, they traded around a $3.5 billion plus or minus market cap. This year, and last night, they reported, they should do somewhere around $296 million. And right now they have over a $5.2 billion market cap. So, I believe we’re only about a year or so behind Livongo. So, I look forward to being compared on a multiple basis, which I think we’ll get there.

Daniel Carlson
Okay. Well, I’m looking forward to that multiple expansion too.

Some red flags I would like to highlight here:

  • Changing a company’s name several times is never a good sign.
  • Stay away from reverse mergers.
  • Several people Peizer worked with and himself got sued because of several reasons.
  • OnTrakPrograms facebook fanpage ( https://www.facebook.com/OnTrakProgram/ ) does have little to zero engagement.
  • Mr. Peizers seems to primarily care about OTRKs stock price (but it should always be about their customers).

Beware of bullsh*t bingo
Not really a red flag, but a note on the inflationary use of words like “AI” nowadays, which OTRK is using as well: In 99% of all cases the magic behind AI ( https://i.ibb.co/cTBBwKn/ai.png ) is just bunch of line of codes which acts on rules the coder of a program set up, e.g. a rule based script. Companies love to use it because it makes them seem like a super modern technology company. Similar words: Machine learning, Big Data, Data Lake, Platform.
Rule of thumb: The more a company is using words which you can’t really tell what it’s about in their specific use-case, the higher the change that their technology is weak. In contrast, if a company is using simple words and can explain its technology well without bullsh*t bingo, it’s most likely a company with strong technology.

Closing thought
Let me leave you with this question: You do want to invest into the best companies in the world. Do you see the best company in the world being led by Mr. Peizer?

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Let me leave you with this question: You do want to invest into the best companies in the world. Do you see the best company in the world being led by Mr. Peizer?

^

Tigers don’t change their stripes.

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look at this youtube link the CEO is a self proclaimed gambler

https://www.youtube.com/watch?v=iSOay5XaVtQ

I stumbled over one of my older posts (if you scroll up to #85362). From time to time, it might be a good idea to look back and verify the thoughts and guesses we had.

At that time, the share price of Ontrak - the company we discussed here - was at $48 and rose further to $79. Like many companies driven by “growth all costs”, Ontrak had a nice stock price appreciation.

Today it is bouncing around $1 which is a decline of -98%. Not driven by the macro environment.

What was and still is so great about Sauls investing style: The confidence you can have with your holdings. Regardless of the macro environment, of sentiment, of trade wars etc. Because we are investing into companies which are doing very well on the trend for all meaningful metrics (revenue growth, cash flow, net income, customer growth etc.), serve large markets and have great leaders.

It’s not a question of “if” the stocks of these companies are going to skyrocket again. The question is “when”. I have no idea when this is going to happen, but nothing has changed for “our” companies - unlike for a company like Ontrak - which (most likely) will never see a new all-time-high again.

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I stumbled over one of my older posts (if you scroll up to #85362).

Small edit: I meant post #70540 (above).

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Wow, mooo, that must have taken a lot of work to compile, and it was a fun read, and kind of sad that he hasn’t suffered any consequences yet.
Saul

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