1Life Healthcare, Inc.

Good day, and thank you for standing by. Welcome to the One Medical Fiscal 2021 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. And now, I'd like to hand the conference over to Ivy Tsang. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to One Medical's fiscal 2021 third quarter earnings call. I am joined today by Amir Dan Rubin, chair and CEO of One Medical, and Bjorn Thaler, chief financial officer of One Medical. A complete disclosure of our results can be found in our press release issued earlier today, as well as in our related form 8K, all of which are available on our website at investor.onemedical.com. As a reminder, today's call is being recorded and a replay will be available on our website. As part of our comments today, we will make forward-looking statements. These statements are based on management's current views, expectations, and assumptions, and are subject to multiple risks and uncertainties. Actual results may differ materially, and we disclaim any obligation to update any forward-looking statements or outlook. Please refer to the risk factors in our most recent annual report as updated from time to time by our other reports in filings with the SEC, including our quarterly reports. We believe that the COVID-19 pandemic continues to create particular complexity when it comes to providing a forward-looking view of the business, and we are providing our guidance on a good faith basis per recent SEC recommendations. We would like to specifically caution investors that our future performance will be harder to predict for the foreseeable future, Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, November 3rd, 2021. Information contained in today's statement should not be relied upon as representing our estimates as of any subsequent date. Of note, it is one medical policy to neither reiterate nor adjust the financial guidance provided on today's call unless it is also done through a public disclosure, such as a press release or through the filing of a Form 8K. Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A historical reconciliation to comparable GAAP metrics can be found in today's earnings release. Finally, during the call, we may offer incremental metrics to provide greater insights into the dynamic of our business. These details may be one time in nature, and we may or may not provide updates in the future. And with that, I shall turn the call over to Amir and Bjorn for their prepared remarks and to take your questions.

Thank you, everyone, for joining us. Q3 was an exciting quarter for One Medical as we welcomed in IORA and further expanded our services for the senior population and as we also launched in another new market, Raleigh-Durham, North Carolina. With that backdrop, we are pleased to share with you today results from our third quarter, and update you on how we continue to perform, innovate, and grow. We continued our strong financial performance in Q3 as our human-centered and technology-powered model continues to deliver results for a growing number of members, employers and payers, providers and partners. We ended the quarter with 715,000 members, 18,000 above the high end of our updated guidance from September 1st, up 40% year over year. Similarly, our revenue also has outperformed, coming in at $151 million, $3 million above the high end of our updated guidance from September, up 49% year over year. We also continued to show our ability to innovate, recently publicly showcasing results from our clinical programs. For example, we were delighted that New York State has recognized One Medical for the second time in three years as the number one performer in New York's HIV care continuum program, with One Medical demonstrating 100% viral load suppression among its patients with HIV. Furthermore, we continued our strong growth this quarter. We grew organically through in-market and new market growth, including opening new offices, going live with our partnership with Duke University's health system in Raleigh-Durham, North Carolina, and further growing our One Medical Now, National Digital Health Services, and our One Medical Mindset Behavioral Health Services. We also grew through the acquisition of IORA, which closed on September 1st. Our vision has always been to create the premier human-centered and technology-powered healthcare organization, and we have been consistently executing against this vision well before we went public in January 2020. Indeed, we've expanded the number of geographies we are in from eight markets at the end of 2018 to soon to be 28 markets. We have grown our membership from 397,000 members as of September 30th, 2019 to 715,000 members in two years. We've expanded our care margin for the standalone one medical business from $80 million for the first nine months of 2019 to to $153 million for the first nine months of 2020-21. We have delivered positive adjusted EBITDA for several quarters in a row. And, as we announced previously, expected to reach adjusted EBITDA break-even one year earlier than expected at the time of our IPO and prior to the addition of IORA. We have done all of this while simultaneously adding to our product portfolio. including with our One Medical for Kids pediatric services, One Medical Mindset behavioral health services, One Medical Now 24-7 virtual national service offering, and One Medical Impact chronic disease model. Moreover, we have done this while navigating a global pandemic, launching our Healthy Together services, and supporting our members with COVID-19 screening, testing, vaccination, and vaccination verification services. Our incredible team has been able to keep medical offices open and virtual services flowing to help our members and stakeholders return to their lives, jobs, and schools. We believe our operating and technology model continues to position us to consistently execute against our vision and goals. Furthermore, we are now also executing against this vision with the addition of IORA, leveraging core strengths in enrolling and engaging members, delighting and retaining members, delivering outstanding care and experiences, advancing health outcomes, and reducing the total cost of care, leveraging our proprietary technology and dedicated providers to simultaneously address the needs of multiple key stakeholders. We are further applying these competencies to now also care for seniors in an at-risk model, expanding our total addressable market to $870 billion across markets, and geographically positioning ourselves to reach nearly 40% of the U.S. population in the markets in which we'll be operating. As we've previously noted, we believe the addition of IORA creates many potential synergies, including an opportunity to serve parents and grandparents of One Medical's 683,000 consumer and enterprise members. Furthermore, we can now more seamlessly age in members as they transition from commercial insurance to Medicare, and enter into Medicare Advantage and other Medicare risk models, further extending lifetime relationships with members. The addition of IORA will allow us to further grow Medicare and Medicare risk in legacy one medical markets and also expand into consumer and enterprise services in legacy IORA markets. At the same time, we are leveraging the one medical performance system of standard operations, technology, clinical and business practices across the enlarged enterprise, leveraging approaches which have been successful in supporting our execution against our plan. We are integrating our technology system into one combined platform to deliver differentiated results from multiple key stakeholders. We will be using the One Medical brand across the enlarged business to extend growth opportunities. We are building on our aligned culture and vision to help drive effective and efficient health care for all our key stakeholders. better care and better health for our members, lower costs for payers, such as enterprise clients, managed care plans and governmental payers, a more rewarding environment in which to practice medicine for our providers and team members, and clinical and digital integration with our health network partners to deliver more coordinated care. Even though we've been a combined company for just a little over two months, we are already advancing opportunities to drive results in combination. We have launched efforts in select Legacy One medical geographies to extend our excellent care to all Medicare recipients, including those in at-risk models, such as Medicare Advantage and direct contracting, which we expect to create incremental revenue for us beginning in 2022. For example, we are already engaging with current One Medical Medicare members in these geographies who have so far overwhelmingly confirmed what we believed all along. that they look to us as their primary care provider and are voluntarily choosing to align to us as their provider in the Medicare direct contracting program. In addition to growing our at-risk member enrollment, we are also working on taking advantage of our combined care management capabilities and programs, including, for example, our modernized chronic care management model, which has demonstrated a two-point reduction in average hemoglobin A1C levels compared to baselines. As a reminder, previous studies have found that a one-point reduction in hemoglobin A1C is linked to a reduction in risk of death by 21%, heart attacks by 14%, and microvascular complications by 37%. Additionally, we are building upon IORA's proven population health and capitation management approaches to serve even more at-risk members. Even as we pursue these synergies, we continue to be pleased with IOR's standalone performance, which is in line with our overall expectations at the time of announcement of the transaction. Moreover, IOR's standalone membership, revenue, and medical cost trends have performed in line or better than announced expectations for the quarter. Turning more specifically to our overall Q3 performance, we are very pleased with the quarters. We ended Q3 with 715,000 total members, growing our membership base 40% year over year. We added 94,000 members during the quarter and have added more than 204,000 members over the past 12 months. We delivered $151 million in Q3 net revenue, which was up 49% year over year. We delivered a Q3 care margin of $46.8 million, or 31% of net revenue. We delivered Q3 adjusted EBITDA of negative $6 million. As a result of our collective performance, we are pleased today to increase our full year guidance across all our guidance metrics, membership, revenue, care margin, and adjusted EBITDA. Please note that as expected, due to the addition of IORA, Our care margin as a percent of revenue declined this quarter, and we expect it to decline further in the next quarter as Q3 only included IORA from September 1 onward. Also, as we've previously described, with the addition of new Medicare risk cohorts, as we grow members, we predictably expect the initial year of such cohorts to have higher relative third-party medical dispense ratios and those lower care margins, while more mature cohorts are expected to generate greater care margins and adjusted EBITDA in the medium and long term. As a reminder, we are targeting 17% plus adjusted EBITDA margins in the long term. Together, we believe this will enable us to deliver continued strong membership and revenue growth while achieving rising care and EBITDA margins in the long term. While we are proud of our performance, we believe our human-centered and technology-powered innovative model sits at our core. Through our model, we deliver a premier member experience and can also drive better health outcomes and lower costs with coordinated care in a better team environment. As a reminder, on average, for our consumer and enterprise members, we had 10 interactions last year, including approximately two times in person and eight times digitally. Similarly, for our senior population in Iora Health, we averaged 19 interactions per member, including three to four times in-person and about 15 to 16 times digitally. This compelling combination of in-person and digital member engagement, along with their salary providers and proprietary technology platform, further supports our ongoing innovation and clinical performance and facilitates our continued deployment to an even greater population base. For example, in Q3, as previously noted, We were pleased to highlight that New York City's Health Department's HIV Care Continuum Report has ranked One Medical as the leading HIV care provider in viral load suppression among HIV patients, achieving 100% viral load suppression among patients with HIV. These outcomes come on the heels of our Q2 announcement of a peer-reviewed published study, which highlighted how our model delivered outsized impacts in controlling diabetes. These studies, in turn, followed a peer-reviewed study published in JAMA Network Open last year that showed a 45% reduction in the cost of care for an employer. As a result of our continued performance and innovation, we also continue to grow. In Q3, we continue to see strong membership growth across our consumer and enterprise as well as senior channels. Our consumer membership continues to grow across our geographies. benefiting from increased brand awareness as we continue to invest in our marketing and advertising campaign. On the enterprise side in Q3, we began new relationships with organizations and industries across legal, financial services, manufacturing, entertainment, real estate, biotech, and consumer goods, amongst others. Our national digital health services and our increasing in-person geographic reach, soon to encompass 28 geographies, continues to be a growing competitive differentiator as larger multi-market employers look for multi-market solutions. This past quarter, we were excited to open our doors in the Raleigh-Durham, North Carolina region for consumer and enterprise members and to expand our in-person presence with new locations in a number of our existing markets. We look forward to upcoming launches of additional new markets as previously announced, including Columbus, Ohio, Houston, Texas, Milwaukee, Wisconsin, the Miami, South Florida region, and Dallas, Fort Worth, Texas. Similarly, we continue to see strong interest in our growing set of service offerings, with recent examples also including our vaccination verification program, in addition to One Medical Now, One Medical for Kids, Healthy Together Workplace Return Services, and Mindset Behavioral Health Services. Turning to our senior business, which is largely represented by our acquisition of Iora on September 1st, we believe we are off to a great start with at-risk membership of 32,000 coming in at the high end of our guidance, as well as beating our revenue guidance by $3 million. Also, as previously mentioned, we are working to deliver care through our One Medical for Seniors at-risk models in our legacy One Medical market, including launching in select markets beginning in 2022. We also continue to grow our health network partnerships, expanding with both existing and new health network partners. Additionally, as a result of IORA now being multi-payer, rather than only contracting with a single health plan, IORA over the past several months has signed several new contracts with Medicare Advantage plans, including Aetna, Centene, Cigna, Devoted, UnitedHealthcare, Blue Cross Blue Shield plans, and other plans across a variety of geographies. thereby expanding our pool of potential at-risk members. In closing, we delivered an outstanding Q3 as our team and technology helped us continue to perform, innovate, and grow. With our strong performance, we are now expecting our full-year membership to reach 728,000 to 736,000 members, our full-year revenue to reach $606 million to $615 million, and our annual adjusted EBITDA to be between minus $37 million to minus $32 million. We continue to perform, delivering impacts to our members and all our stakeholders as our multimodal model, technology platform, geographic reach, and breadth and depth of services differentiate us in the market. We continue to innovate with our model. Recently highlighting how our technology-powered and team-based approach embedding chronic care management into a member-based primary care model delivers better results for consumers, employers and payers, team members and partners. And we continue to execute across our many growth opportunities, serving more consumers and enterprise clients, expanding our footprint, aligning with premier payers and partners, and growing our service offerings. While we have seen much success to date, we believe we are just getting started in our mission to transform healthcare. We are excited to further perform, innovate, and grow with the addition of Iora Health, expanding our model to further serve the senior population, and expanding our reach to serve members of all ages and across every stage of life. As we look forward to 2022 and beyond, we will continue to invest in our service offering, our team members, our technology, our care programs, and our digital and physical presence. We look forward to keeping you updated on our progress and appreciate your engagement with us. Now, let me turn it over to our CFO, Bjorn Thaler.