Oak Street Health, Inc.

Hello and welcome to the Oak Street Health 4th Quarter 2021 Earnings Conference Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I will now hand over to your host, Sarah Cluck, Head of Investor Relations. Over to you, Sarah.

Good morning and thank you for joining us today. With me today are Mike Peikos, Chief Executive Officer, and Tim Cook, Chief Financial Officer. Please be advised that today's conference call is being recorded and that the Oak Street Health press release, webcast link, and other related materials are available on the investor relations section of Oak Street Health's website. Today's statements are made as of March 1st, 2022, and reflect management's view and expectation at this time and are subject to various risks, uncertainties, and assumptions. This call contains forward-looking statements, that is, statements related to future, not past events. In this context, forward-looking statements often address our expected future business performance and often contain words such as anticipate, believe, contemplate, continue, could, estimate, expect, intend, may, plan, potential, predict, project, should, target, will, and would, or similar expressions. Forward-looking statements, by their nature, address matters that are to different degrees uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include our ability to achieve or maintain profitability, our reliance on a limited number of customers for a substantial portion of our revenue, our expectation and management of future growth, our market opportunity, our ability to estimate the size of our target market, the effects of increased competition, as well as innovations by new and existing competitors in our market, and our ability to retain our existing customers and to increase our number of customers. Please refer to our annual report for the year ended December 31st, 2021, filed on form 10K with the Securities and Exchange Commission, where you will see a discussion of factors that could cause the company's actual results to differ materially from these statements. This call includes non-GAAP financial measures. These non-GAAP financial measures are an in addition to and not a substitute or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly titled non-GAAP financial measures differently. Refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, I'll turn the call over to our CEO, Mike Peikos. Mike?

Thank you, Sarah, and thank you to everyone for joining us this morning. Joining me on today's call, in addition to Sarah, is Tim Cook, our Chief Financial Officer. In this call, I'll start with a review of our 2021 performance, then turn it over to Tim to discuss more specifics around 2021 financial performance. We'll then turn to 2022, and I'll share more on our goals for the year, and Tim will provide guidance for Q1 and the full year of 2022. I want to first thank our team for the continued dedication and focus on our patients, our communities, and our mission. Our team continues to navigate through a challenging operating environment, including the Omicron COVID surge and the historically tight labor market, especially in healthcare. Despite these headwinds, we achieved strong results across all the major drivers of performance for the fourth quarter. We had strong revenue growth driven by new patient ads in both new and existing centers. We finished the year with 129 centers, including 50 new centers opened in 2021. Third-party medical costs, which we'll cover in more detail, were in line with expectations going into the quarter, despite significant headwinds from Omicron-driven hospitalizations, which were obviously not factored in the guidance we gave in early November. Direct cost of care and corporate costs were all in line with expectations as well. The net result is a quarter in which we exceeded the top end of our guidance range against revenue, membership, and adjusted EBITDA. The fourth quarter, we generated a record revenue of $394.1 million in the quarter, exceeding the high end of our guidance range and representing a 58% growth compared to Q4 2020. For the year, we generated $1.43 billion in revenue, representing 62% growth compared to 2020. Our revenue growth continues to be driven by our organic B2C marketing approach. This includes both central channels, such as digital marketing and our core community-based outreach team. Metal costs are trended in line with guidance we shared following Q3. This, combined with cost of care, sales and marketing, corporate costs, all in line with expectations, and higher than projected revenue growth, resulted in an adjusted EBITDA loss of $228.9 million for the year, which is favorable to the top end of our Q4 guidance. When we look back at 2021 as a whole, we exceeded our revenue, center growth, and patient growth targets. Our third-party metal costs were higher than anticipated, driven directly and indirectly by the COVID pandemic, leading to lower adjusted EBITDA performance. Tim will cover in more detail how these trends progressed across the year and their expected impact in 2022. Beyond the financial metrics, we took a big step forward in 2021 in our mission to rebuild healthcare as it should be. We made significant accomplishments across the key components of our business.