Greetings, and welcome to Catasys 2019 Second Quarter Financial Results. [Operator Instructions]. As a reminder, this conference is being recorded. I'll now pass the floor over to representative of the company. Thank you. Please begin..

Thank you, Good afternoon, and thank you all, for joining us. Before I turn it over to management, I would 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, believe, estimate, expect, intent, guidance, confidence, target, project and some other expressions are typically used to identify forward-looking statements.

These forward-looking statements are not guarantees of future performances, but may involve and are subject to certain risks and uncertainties and other factors that may affect Catasys business, financial condition and other operating results, which include, but are not limited to, the Risk Factors described in detail 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. Catasys expressly disclaims any intent or obligation to update these forward-looking statements. With that, I'd now like to turn the call over to Mr. Terren Peizer, Chairman and CEO of Catasys. Please go ahead, Terren..

Thank you, Adam, and welcome, everyone. With me on today's call are Rick Anderson, President and Chief Operating Officer; and Christopher Shirley, our Chief Financial Officer. As the second quarter was an important 1 for us as our outreach surpassed the milestone of 100,000 eligible lives during that period.

This achievement is the culmination of hard work by all the individuals within the Catasys organization and on behalf of our leadership team, I'd like to acknowledge each and every one of them for their efforts.

We would not be here where we are today without our frontline of member engagement, the care coaches, the community care coordinators and support staff who are deeply invested in the work that we do in improving member lives.

As a result of ongoing contract expansions and new program launches, Catasys has outreached eligible members as continued its rapid ramp. We began 2019 with an eligible outreach of 41,000 as a result of a significant expansion within existing plans, our outreach pool had increased over 75,000 by the end of Q1 and 112,000 today.

We are a year ahead of expectations with this revenue leading indicator, and remain extremely confident in the significant growth potential represented by Catasys' business.

As a reminder, it takes about 12 months for new customer launches to reach an approximately 20% annual enrollment rate, one year after launch at the company generally enrolls more than 20% as an outreach for a over 12-month period.

During the 2019 second quarter, we continue to expand partnerships with existing customers, such as Cigna and Centene and established new relationships with health plans, such as Optima Health. This week, we announced expanding our business with Aetna into 6 more states making OnTrak available now in 27 states or more than half of the country.

And we once again achieved strong year-over-year growth in enrollment and revenues during the period. In just the first half of 2019, we have nearly achieved the amount of revenues reported all of 2018.

That being said, we are reiterating our revenue guidance of $35 million for 2019, which we fully expect to meet given our operational success in the first half of the year. Please also keep in mind that this guidance does not include expansions or new health plan contracts or new products that we expanded introduced in the coming months.

Our guidance only includes those contracts and expansions and products that have signed or launched. I have said in the past that we see 2019 as a transitional growth year. We believe the tremendous growth in our outreach pool over the course of this year sets us up for an even more significant growth in 2020 and beyond.

We have been working in earnest to set the foundation to support this growth in the first half of 2019, which Rick and Christopher will discuss later in the call. It's vitally important that we have the infrastructure in place to scale exponential growth. Catasys also continues to be at the forefront of health care innovation.

A few weeks ago, we announced the launch of Catasys creek. P is in products, artisan recommend and E is an engaged.

A new platform that utilizes Catasys as predictive analysis and engagement and AI capabilities to proactively deliver interventions to address care avoidant members with chronic diseases, such as cardiovascular disease, diabetes and pulmonary disease.

We believe this breakthrough approach gives us the ability to achieve in minutes, which typically takes months of manual work by highly trained healthcare data scientists. Our health plan partners encouraged us to make Catasys PRE available as soon as possible and the initial feedback on the platform has been quite positive.

We have also continued to establish partnerships that we believe increase our value propositions to our health plan partners to improve outcomes of members and reduce healthcare costs.

In June, we announced a new strategic partnership with digital therapeutics company Canary health to which Catasys is piloting Canary health Better Choices, Better Health of peer moderated online workshops. These workshops are designed to empower individuals to self manage their chronic conditions.

Major studies have shown that these types of workshops are effective in improving health outcomes and lowering health care utilization and costs.

Catasys PRE and this partnership with Canary Health as well as our previously announced initiatives and loneliness our ways in which we are expanding our focus beyond behavioral health and addressing chronic diseases directly.

As we continue to develop new technologies and forge partnerships with meeting health care companies, we look forward to improving the lives of members, while driving significant cost savings for health plan partners.

In this respect, OnTrak is a powerful application on the Catasys PRE platform that enrolls, engages and modifies the behavior of a treatment and care avoidant population who suffers of the medical consequences on untreated behavioral health. As we announced a few months ago, loneliness is an epidemic and a priority for the industry.

While we believe, we are currently effectively treating loneliness with OnTrak, we hope to add this product application to the Catasys PRE platform in the not-too-distant future.

With that, I'll turn the call over to Rick to discuss our operations and will return later to speak on the continued expansion of Catasys' leadership team and expand on our outlook for the year.

Rick?.

Thanks, Terren. Those of you that are familiar with Catasys are well aware that our growth is driven by program expansions with existing partners particularly as we have agreements with the majority of the nation's largest providers. However, another key focus of Catasys is improving the efficacy and expanding the reach of our technologies.

As a leader in health care innovation, we believe that constantly refining and improving healthcare solutions for our members is imperative. As Terren touched on earlier, we announced yesterday the expansion of OnTrak with that in 6 new states.

OnTrak-A will serve eligible members in Ohio, Tennessee, North Carolina, South Carolina, Maryland and Delaware. Maryland and Delaware and Ohio are new states for Catasys bringing the company's total reach to 27 states.

Eligible members in Ohio, Tennessee, North Carolina and South Carolina currently are able to enroll in OnTrak-A and enrollment is anticipated to commence in Maryland and Delaware before the end of Q3. During the second quarter, we announced further expansions in both geography and conditions.

Our OnTrak solution with Cigna for Medicare Advantage members extended dedicated to Alabama, Mississippi, and Florida with Alabama and Mississippi representing the 23rd and 24 states in which the OnTrak is available. And we announced that we had expanded OnTrak track with Centene in Texas to include anxiety and depression.

Centene's Texas operation is the largest Medicaid plan in the state. In April, we announced an agreement with the new customer, Optima Health. We launched the OnTrak solution for their commercial members in Virginia in July and continue to be in discussions for additional expansions and contracts with potential new customers.

These expansions and new customers are a significant driver of behind our growing outreach pool, which in turn, leads to higher enrollment. We enrolled more than 2,200 new members in OnTrak program in the second quarter, up 81% from the prior year period and 58% from the first quarter of 2019.

Throughout 2019, we have continued to grow our care teams and the underlying infrastructure to support our rapidly growing eligible member pool and enrolled members. We have more than doubled our member facing staff since the beginning of the year and continue to expand the teams to support our growth.

With improvements to our systems, we significantly reduce the time it takes to train new staff enabling them to engage with new members more quickly than previously. I'll now turn it over to Christopher for an overview of our financial results..

Thank you, Rick. Our revenues for the second quarter of 2019 increased to $7.7 million compared to $3.3 million during the same period in 2018, resulting in a year-over-year increase of 135%.

The revenue increase was driven by an increase in the number of members enrolled and our OnTrak solution during the second quarter of 2019 compared with the same period in 2018. Revenues for the first half of 2019 totaled $14.5 million compared to $5.2 million in the prior year period.

Notably, the revenues we achieved in the first 6 months of this year, nearly matched with that of all 4 quarters in 2018. I'll move now to margins, which in Catasys case reflects revenues less the cost of Healthcare Services as a percentage of revenue.

For the second quarter of 2019, our gross margins increased to 43.2% from 10.1% in the prior year period. On a quarterly basis, this number does fluctuate depending on our need to invest an additional Catasys care coaches and outreach specialists, in advance of revenue growth.

The healthcare provider claims payments to the network of physicians and psychologists and fees charged by third-party administrators for processing these claims. Gross margin was 49% for the 6 months ended June 30, 2019 compared to negative gross margin of 0.8% in the prior year period.

Our operating expenses increased in the second quarter of 2019 to $8.2 million compared to $4.5 million in the prior year period. As in Q1, we incurred higher expenses in the second quarter of 2019 due to investments in new technology, and key personnel to support future growth and the servicing of contracts compared to the prior year period.

Operating expenses in the first half of 2019 were $14.5 million compared to $8.3 million in the prior year period. On the bottom line, our net loss of was $5.5 million or $0.34 per diluted share compared to a net loss of $4.2 million or $0.26 per diluted share in the prior year period.

For the first half of 2019, our net loss was $8.4 million or $0.51 per diluted share compared to $8.4 million or $0.53 per diluted share in the prior year period. Touching briefly on our financial position.

We saw an increase in cash on June 30, 2019, as a result of more warrant and options exercises in an additional drawdown of $5 million from our financing with horizon.

We are well aware of our capital needs given the investments we are making, and will need to make to appropriately position our company ahead of significant anticipated growth in 2020 and beyond. With that, I'll turn it back over to Terren for closing remarks..

Thank you, Chris. Thank you, Christopher. We continue working to position Catasys for its future investing in development of new technologies and platforms as we onboard the necessary care coaches and support staff for a much larger enrolled member population. Operationally, we continue to build out our leadership team.

Following the addition of what Carol Murdock, as our Chief Commercial Officer to our team earlier, this year, we are pleased to welcome Daniel Prewitt as Senior Vice President of Sales with over 25 years of experience in healthcare sales and management.

We are confident that, Dan's proven track record of success with health plans as well as third party administrator health systems and accountable care organizations will translate well to his role in leading the company's sales to health plans and self-funded employers.

Michael Wain also joined our team as Senior Vice President of Member engagement and is responsible for leading Catasys' member engagement function.

He has more than 20 years of experience leading the member acquisition, engagement and contact centers that companies across diverse industries from startups to Fortune 500 enterprises and we are thrilled to have him on board. We also welcome Rob Rebak an experienced and well-respected industry veteran to Catasys' Board of Directors.

Rob spent 20 of his 30 years in the industry leading several high-growth, digital and tech-enabled companies. The relationship he has cultivated and prominence within the industry will serve us well as we embark on our accelerated growth trajectory.

We have been adding very talented people at the Senior Vice President and Vice President level across the company. We've also been rapidly adding talented people across the front line of our care community.

During the second quarter, and here in the third quarter, we have accelerated the build-out of this critical engagement piece of our business hiring and training the care coaches, outreach personnel and community care coordinators who play a key role in the success of our programs.

In fact, so far this year, we have added 200 employees, and now, total 371 teammates. We continue to develop OnTrak 2.0, which enhances the use of artificial intelligence so that human resources can focus on the importance personal interactions that make OnTrak so effective.

In doing so, Catasys will be able to address a larger population through the greater use of technology, and deliver improved member health and validated outcomes and savings to health plans all at a lower cost to Catasys.

Increasingly, the effective, efficient care optimization of larger diverse population through fingerprinting and personalized behavior modification techniques results in lower costs for us, which will in turn lower the cost of care to our health plan partners, and most importantly, result in better outcomes for more of their members.

as I said before, we anticipate at least a doubling in our eligible lives outreach pool with OnTrak 2.0 and a market improvement in our operating margins. Again, the current 112,000 eligible lives pool does not incorporate OnTrak 2.0 populations.

We are currently marketing OnTrak 2.0 and hope to share with you contract announcements and launches in the coming months. I very much look forward to our third quarter call were we will provide 2020 guidance. We are highly focused on being able to scale and achieving explosive growth.

On our last quarterly call, I laid out an example of what a 100,000 lives outreach pool run rate would look like 12 months out. The run rate in the example, was $130 million. It's important to note that not all 112,000 started outreach today.

We started the year with 41,000, reached 75,000 in March, 92,000 in May, hence you will see that the run rate curve comes in a bit. Moreover, there would be to assume that we don't continue to add to our outreach pool of eligible lives. We expect to significantly grow this metric.

In the coming months and year with the new contracts, expansions with current partners and the launching of OnTrak 2.0 and adding more applications to the Catasys PRE platform. As I said in our last call, although, we are guiding to 130% growth rate this year, a transitional year. We anticipate exponential growth in 2020.

Please keep in mind, we tell you what we know based on the current business, not we not what we expect to achieve as Catasys to develop its industry relationships and platform. That said, we do have very high expectations for our future.

To close, I'd like to thank our senior leadership team and other Senior Managers throughout the company for their intensity, focus and grip. The guiding operating values of our company. A special thanks, goes out to my partners in our mission, the front line of member engagement specialists, our care coaches and community care coordinators.

Team, thank you for the miracles you perform daily with our members. To our stakeholders, to please take the heart. I have never been more certain and confident about our future growth. I'm very excited about Catasys future as we head into the last few months of 2019.

We'll continue working to execute on our growth strategy and we remain confident that we will exceed expectations this coming year. With that, operator, we can now open up for Q&A..

[Operator Instructions]. Our first question comes from the line of Richard Close with Canaccord Genuity..

Congratulations on the outreach pool metrics. The expansion into new clients. I did want to walk through the eligible pool in the 20% enrollment ramp within a year.

And just if we look at the first quarter of '18 pool, it was 31,000, and if you multiply that by like the net revenue number of 6,500 it sort of gives you a quarterly revenue rate of about $10 million. And then if you look at fourth quarter '17 it was like 25,000 and that would imply $8.1 million.

And so we came in here a 135% growth, but below that $8.1 million coming in at $7.7 million.

So I just want to make sure I'm understanding the pool, the 20% ramp, and whether we need to tweak down some assumptions at all?.

Well, let me generally address it without going through specifics. Generally speaking, you might want to ask why does outreach pool keep expanding. We announced new expansions and contracts, et cetera. But we are not raising our guidance. The reason is, we are going through a major -- we think we achieve our guidance and hopefully outperform it.

We are going to through a rapid transformation of our whole infrastructure from everything you could imagine that goes into delivering our product from enrolling and engaging the members and modifying their behavior.

The reality is as we have slowed intentionally a lot of our business, to be able to still maintain the numbers that we promise, still provide the expansion and growth, but to be sure that we could handle what we see is the avalanche coming next year. So it's that's the easiest explanation I could give you.

I'll tell you that as far as the metric said that you use in the assumptions in our business, the changes that were going to transformation that we are going through this year will enable us to hopefully over achieve those metrics that you use. And it's stems, again, from the outreach enrollment and engagement techniques that we are implying.

That's the general answer..

Yes, so is what you're saying the Terren is that 20% you still feel good about the year after launch that you will get 20%, but right now you might be trending a little bit below that as you add people to the front line so to speak is that the general sense?.

It's more than -- so number one, as you know, as I said, we had 200 employees, so obviously most of the care coaches, outreach specialists and community care coordinators. That's part of the process. But we expect to be doing that in full throttle over the next year anyway.

But the ability to train quickly and effectively and get them out into the field associated with the enrollment and revenue is speeding up. So those numbers are going to improve. I'm confident that the metrics you're using will be -- we will outperform those metrics next year.

That's I'm very confident, because of all the transformation changes we are doing now. And imagine, we are, although we are growing more than 130% hopefully this year. And we are maintaining that growth and delivering on that promise, I can't understate how radically we are changing our overall infrastructure to accommodate next year's growth..

Okay. I think I got that. And then so as we think about the $35 million revenue guide and understand that you hope to exceed that this year, you had $7.7 million in revenue in the second quarter sort of implies $10 million in each of the next quarters.

How should we think about the ramp second quarter to third quarter to fourth quarter? Or should it be really more backend loaded to the fourth quarter?.

While the fourth quarter is going to be bigger than the third quarter for sure. And because a lot of the implementations that we are doing, most of it will be completed hopefully by the end of the third quarter.

And of course, the fourth quarter, we always have December, but I think, we are already seeing right now, our enrollment rates rapidly rising. And if you, I'll give you an example, parts to some of the new technology we are deploying that are a lot of the new technology really kicks in October and November.

So, again, it's constantly builds as I mentioned in the beginning of the year, we are investing $10 million outside of our working capital into technology and new products.

And also developing out our infrastructure, whether that be the sales and marketing and account management staff, but really invested heavily in technology, which the technology investment has borne the of OnTrak 2.0 and the Catasys PRE, and I cannot understate how that is going to propel our business.

Our customers are really excited about those 2 platforms of Catasys PRE and all the applications we are going to build on it, like, OnTrak 2.0, like loneliness and hopefully some others will be able to share with you..

Okay.

So think of the back half is sort of our states picking up with second quarter it sounds like?.

Yes, hopefully most of all the technology enhancements and transformations will be consummated around October, November. I mean, it could be earlier, but I wouldn't count on it. And the reason, we continually, I think, it's fair to say, the numbers that we are guiding still represent for the most part pilot revenues.

But we are merging from the pilot phase with most of our planned partners. So a lot of that -- the reason we still keep guidance where it is, is because there are still some things like, although, again, we tell you what we know, not what we expect, I do expect some national implementations.

How big of a scope, how many lines of businesses, how many plans come October, November, but most probably January or February. We don't know yet. So we are keeping the guidance where it is. We hopefully will activate and outperform it.

I think next year, and I can't emphasize this has been a transitional year both in terms of the growth percentage or 130%, but also in terms of building out this infrastructure to handle many multiples of the revenues we are talking about..

Okay. So my final question is. And you hit on this a little bit investing the $10 million in technology and the new products. So I'm just curious maybe this is for Christopher or whoever, but where does that show up, I mean, I don't see on the cash flow statement like anything CapEx or software development, capitalized software development.

Where is this hitting in terms of the financial statements if you can just -- are you expensing all these investments? At the get go or..

That's correct Richard. We're expensing everything to large extent, we are utilizing services, et cetera. We are not investing in a lot of equipment to do this. So it's really the people costs and the cost of the their tools to deliver the technology..

And then that is in the cost of services if it's with the care coaches and outreach and all that?.

No that's operating expense line..

[Operator Instructions]. Our next question comes from the line of Mohan Naidu with Oppenheimer..

Congrats on surprising the 100,000 target on outreach pool. Couple of questions from me. First on, Catasys PRE. This is clearly a deviation from your health focus.

Do you need additional data or clinical data focus from health plans to make this work? And any additional color in your discussions with the health plans about contracting or pilots or anything that would be useful?.

We are talking about Catasys PRE at a very senior level within some of our health plan partners. And it's guiding attention of senior executives and senior executives at this very large blue-chip companies. What we are able to do is groundbreaking in a simple world.

So if you believe that we can and we think we've established, but if you believe that we can identify members that don't present themselves as a behavioral health, metal behavioral health and a chronic disease patient, and if you believe we can identify, enroll and engage and modify their behavior by this treatment in care avoidant population, which I think are emerging from the pilot phase and getting into the national rollout phase the health plans believe it, because they a lot of analysis, actuarial analysis that prove our ROI on our value proposition.

If you believe that, which everyone does, from us to our partners, and then you could apply it to all chronic diseases, where 50% of the people in this country do not engage in our care and avoidant with their chronic disease, if you could do take the same capability as we do today and apply it generally to chronic diseases, you're starting to impact something that no one else in the country can impact.

And the producers savings that are beyond your belief. And of course, we shared on those savings. So this is, I can't emphasize enough is a major transformation of our company. It's something that we are excited about and we are even more excited to see our partners excited about it..

But when you think about how you guys are doing the current behavioral health programs, how much of your deviation is preprogram from your current work? I mean, you're anything need to change to accommodate this?.

Think of it more. Think of it this way. OnTrak 2.0 is a kind of the birth part of PRE as an application on the Pre-platform at the whole general platform, we didn't have this platform before. We just had OnTrak 1.0. Then through this Catasys pre-platform we created an application called OnTrak 2.0.

OnTrak 2.0 does many things that OnTrak 1.0 doesn't do, and it optimizes care for population. It can actually identify as we refer to it the fingerprint or phenotype of a patient population that is based on 10 years of data, billions of data points.

We know what patient would do well in our program, we know what medical expenses will impact on the patient, and we know what savings right we could titrate to the health plan to give them the ROI that they need for a much broader population, before OnTrak 1.0 was the high utilizers.

This combined both high utilizers and low utilizers and combined gives them a ROI that they're not even getting in their low utilizing population. So think of it.

We are delivering the whole population, optimizing the care, knowing uniquely, knowing the high utilizing population needs maybe less intensity of care who in the low utilizing population might need greater intensity of care because the industry things when you we think multidimensionality in a matrix and Catasys PRE fingerprint and matches the patient with the right program based on the many variations and modulations of our OnTrak solution.

So think of it as not doing anything different. We just enhanced our capabilities through this platform. And -- but now we are enhancing our capability to go into chronic disease generally. We are not -- I want to be very clear, we are not going to go out and nearly just focus on chronic disease.

Unfortunately, I can't share with you what we think we are going to be doing on OnTrak 2.0, because we tell you only what we know, not what we expect, but I hope soon I'll be able to share with you the OnTrak 2.0 contracts, launches, implementations. And then it will become a little bit more clear how important Catasys PRE in driving development..

That's very helpful. Maybe a couple more follow-up questions from Richard, I guess. On the 20% conversion, you're talking about you seem to be extremely confident on that one? Can you help us understand the resources you need to be able to support or achieve that? And you talked about adding a 200 more employees now.

Any guidance on like how much time it takes for a typical employee to be productive for you? And how fast you need to ramp those guys to achieve the 20% conversion into next year?.

So this is Rick. What we are seeing g in terms of our care coaches is about somewhere between 4 to 6 weeks in terms of them being getting to be productive given that ramp that productivity ramps up over a period of time. The faster we are growing the faster that productivity ramps up.

And our member engagement and specialists are usually, productive inside of about 4 weeks..

Thanks, Rick. I guess, if you look at 100,000 or 112,000 now and you're going to add more to the rest of the year, approximately how many more resources do you need to add? Do you have working capital now to support that or any views on your cash burn rate.

So there are a bunch of questions in there as well how should we think about your cash flow and cash needs going forward?.

As I said on the previous call, if you recall, I said, we will need more cash. We said so today. How much more, I would put it right now to get to cash flow positive state, with a comfortable margin. Our incremental amount of capital need would be about $15 million..

On top of what you got right now on the balance sheet?.

Correct. That helps me how we're going to get that, if you want that, you could ask that, but that's what your wanting to ask..

Yes. Please go ahead..

As I have said in the past and I'll continue to say, we have significant access to debt capital. And please keep in mind, when we are talking with the potential lenders, what they're seeing is they are doing deep dives into our business. They're seeing confidential information.

They're seeing, they're going to every contract, every customer, every number in our past and our future. Our cash flows and revenues are very predictable, transparent. The growth is apparent. They're very excited about partnering with us, not only what we need now, but also what our needs may be in the future given the growth that we see.

I'm confident that maybe sometime in early September, after Labor Day, when I went back from vacation, we'll be able to share with you specifically who will be our partner, but my hunch is you're going to be quite proud on who it is..

[Operator Instructions]. Our next question comes from the line of [indiscernible], Private Investor..

Welcome to analytic. Really, pretty nice quarter. [Indiscernible] pool metric come to life like it did. Could you answer one question for me.

You have relationships with virtually all the major health insurance companies in the country with 1 notable exception on the West Coast? Do you know how many insurance are covered by the insurance companies that you're currently dealing doing business with?.

It's approximately 65% of the U.S. population..

So I'm going to take that as 65% of the adult population? Or should I take that percentage as a total?.

We look at things in terms of adults because right now we are not treating minors..

Right.

So approximately 65% and around $150 million or about, again, around numbers about a $100 million insurers customers are of health care companies that you're currently doing business with correct?.

Roughly. The number is that very complicated to have they reported the numbers in terms of how the count pharmacy benefit and all different types of things go into their numbers. I'm just giving macro numbers are that are top around the industry.

Suffice we have a tremendous opportunity in front of us and we think that both the OnTrak 2.0 application and the Catasys PRE platform will keep us very busy for the next 10, 20, 30 years..

Okay, and can you give us an update about your conversations with the large healthcare insurer on the West Coast? Or anything you can..

There is nothing new to report. Nothing new to report. We don't need to get everyone, but ultimately, we think we want..

Okay. And I don't think that given the deliverables that you guys have managed that anybody will shy away from you doing equity offering at some point.

I guess [indiscernible] all your growth strictly with that?.

Let me say just about financing with that. I have a rule from thumb about -- first of all, I obviously believe the market tends to value our equity at roughly and we did it all last year and we are doing it this year roughly 10x the current year's guidance on a fully diluted treasury stock method basis.

I don't know how it does it, why it does it, it just does it. I obviously believe that our equity is not discounting anything next year. It just that has no clue, the market doesn't seem to have any clue what the numbers will look like next year.

That said, I believe, we are trading at a very low price relative to what I think, we believe will happen next year. That said, I have a rule of thumb. I'm very comfortable issuing 10% to 15% of our market value of equity and debt.

Because what that means is at any point in time, I can trend that 10% to 15% of market value of equity into equity without really disrupting the market, which I believe if we went out and did a 10% of our market value of equity, say it's whatever $35 million, we could raise $35 million of equity without too much of a problem.

And I think thought we are never going to see that 10% is going to be a very small a much smaller percentage of next year's revenue -- stock options by the way..

But you're in the mining and I'm very happy to speak about that, just reports for a lot of work..

Our next question comes from the line of Jeffrey Kobylarz with Diamond Bridge Capital..

Just curious about a couple of Catasys PRE. Terren you said at the conference last week that the OnTrak 2.0, it was, it allowed for a 25% increase in the addressable market.

And so is that all of what the PRE?.

Jeff, let me correct you. It's roughly if I understand like you're saying, OnTrak 2.0 roughly is a 100% increase. Then to 1.0..

All right. Okay.

So the 2.0 is does that capture all of the PRE or what?.

No, no. It's just an application on the PRE platform, we are going to do a lot of things with PRE. Just to think, I don't have a better to explain, but I clearly got to work on a better explanation. So it shift, think of it is OnTrak 2.0 is powered by Catasys PRE. Catasys PRE kind of power everything we do going forward.

It's transformational and its applications. It takes AI predictive analytics, predictive engagement levels to new heights..

Okay.

Just about the PRE patients here, I understand about 1.0 you have a lot of data experience of the insurers that they run a lot of emergency room bills, but these care avoidant, pre-potential patients they may not there's as much of the insurance that they will experience for you to be able to filter and do your magic of identifying -- you can identify them.

So with less data with these care avoidant cardiovascular, pulmonary, diabetic?.

Okay. We are not currently in the market with any product and product disease. We have the ability and capability to go into the market of chronic disease. Again, right now, we are focused on our immediate launches and contracts and expansions that we have with OnTrak 2.0..

Okay. All right..

Just one more thing to add to what Terren said. I remember that almost all virtually all of the numbers that we are treating in our legacy products, if you will, have chronic conditions. And you don't get members better enable to deliver the kind of results that we are delivering without being able to deal with manage the entire patients.

So while we are targeting across behavioral health conditions, we are already are making use of these chronic diseases to some extent in coordination with health funding and other partners and have data from our treatment of those as well. So this is something else to keep in mind as you think about that..

Okay. Thanks for the help there. Just on OnTrak-A, you said that you're looking forward to your customers going forward with the national rollout.

And how far away is OnTrak-A is Aetna from a national rollout? Is there something in many states that you are already?.

That's a good question. I think it's fair to say that Aetna is rolling out across the country in, but we are meeting at a very high-level with senior executives about a very big expansion and I'll it there..

Our next question comes from the line of from [indiscernible]..

Just a question on your relationship with Canary Health, because as I went to their website it seemed to be doing taking a different approach than you do. And they list Kaiser as a key client. What you have mentioned this twice.

What do you guys do form and what kind of potential goes in that relationship? [Technical Difficulty] What's your relationship with Canary and what's the potential?.

We have a close relationship the Canary, we are just highlighting it. We are learning about it. There are things about Canary that we really like. There are things we think we could incorporate and we are here to help Canary as well. It's -- too much into it..

We have reached the end of our question-and-answer session. Allow me to hand the floor back over to for closing remarks..

Thanks to all of you for your time. Please feel free to reach out to us with any additional questions. Finally, I'll continue to be proactive in speaking with our existing and potential investors. I'm scheduled to present at investor conferences over the next couple of months and have plans to be in various cities across the U.S.

to visit with investors in the coming weeks. We look forward to speaking with you, again, during our third quarter financial results call in November and sharing with you our 2020 guidance, and hopefully, you will see that this is in fact, a transitional year. Good night, everyone..

Goodbye. And this will conclude today's presentation. You may disconnect your lines at this time, and thank you for your participation..