Catasys…Catching Up With Their CFO, Christopher Shirley

Last week I had the opportunity to drop in on Catasys’ offices in LA and meet up with Christopher Shirley, their CFO. Christopher has been with the Company for close to a year, having come over from GE. We discussed his background, what attracted him to Catasys, and his experience with the Company to date.

Tailwinds Research (TR) – Can you discuss your background and what brought you to Catasys?

Christopher Shirley (CS) – My background is a mix of big company and small company Operational Finance leadership experience.  I spent 5+ years at GE working to innovate and scale its Healthcare IT and Industrial Internet application businesses, my last role at GE was the CFO of the GE Intelligent Platforms software business.  When evaluating new job opportunities, I look for three things in a company; Does the company play in a big market?  Is the company innovating in the space?  Do I believe the management team can execute on the vision?  Catasys hit the mark on all three criteria!

  1. Catasys is a mission driven company that is solving a significant problem in our Healthcare system, targeting a market worth Billions in annual revenue and at the same time helping these people and their families achieve and maintain better lives.
  2. Catasys is truly an innovator, having developed a new business model that provides access to affordable and effective care that improves health and reduces the cost of care for people who suffer from the medical consequences of behavioral health conditions.
  3. The Catasys team is truly awesome, we have a mix of healthcare, clinical, innovation, financial and data science talent that is bringing a truly differentiated approach to solving these difficult problems for the health plans and their members.

TR – You’ve been with the Company for close to a year. What has surprised you the most about the Company?

CS – We deliver real, measurable financial outcomes for our health plan customers, delivering on average a 50% cost savings, that’s a 3 to 1 return on investment per enrolled member in our onTrak program!  A lot of companies make claims, but few agree upfront in contracts to the cost savings calculations and are confident enough to put portions of their fee at risk.  Catasys has a flawless track record of exceeding its performance obligations and this has helped to build real credibility with our customers. 

TR – Catasys has started giving guidance. What prompted that change? How do you feel about the prospects for 2018 and beyond? Do you see significant risk in reaching your estimates? Significant upside to numbers?

CS – For the first time in the company’s history we have built up a critical mass of members in our outreach pool that we can scale independently of possible new customer launches.  We have struggled in the past with how to accurately model the impact of new contract launches because the timing of the launch is dependent on so many factors outside of our direct control.  However, based on the critical mass of members in our outreach pool today, we feel confident in our abilities to execute on $20M of billings in 2018.  It’s also important to note that we have announced contracts with 5 of the largest 8 health plans in the country and that we hope to have 7 of the largest 8 under contract in the near future. Expansions within those contracts could provide significant top line growth for years to come.

TR – On the call you spoke to a very big October that appeared to be an upside surprise. Has this strength continued deeper through the quarter?

CS – As we mentioned on the earnings call, we billed $1.1M in October, a company record for single month billings.  I wouldn’t characterize it so much as a surprise, but rather we are starting to see the launch of our Aetna contract hit the billings number.  Given the pricing model we have with Aetna, where we collect our fee over a limited number of member provider visits, one can’t necessarily take October and extrapolate the quarter. That said, we are confident that the ramp has begun, and that we will see the significant quarterly sequential growth in billings that investors are wanting to see. 

TR – What potential catalysts should we be keeping an eye out for?

2018 is going to be an exciting year for us, it’s really a year that is focused on executing our current contracts and demonstrating significant quarter over quarter top line growth.  We are only partially through our ramps with Centene, Aetna and HCSC and as we mentioned on the earnings call, we are anticipating Humana to re-launch, existing plans to expand into new geographies and several new health plans to launch next year.  All of this adds up to a very exciting time our company’s history!

Further comments from Tailwinds…
It was a pleasure meeting Christopher. He’s a solid CFO and has brought the management skills and processes learned at GE over to Catasys. It was good to see the depth of the management team and to hear further confirmation of the exciting opportunity in front of the Company.

Shares of CATS have been under a little pressure from what appears to be tax-loss selling lately. Based on the Company’s guidance and comments like those above, it appears that 2018 will likely be a super exciting year for both the Company and shares of CATS.

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