Signify Health, Inc. Class A

Ladies and gentlemen, welcome to Signify Health's second quarter 2021 earnings call. My name is Louisa and I'll be operating your call today. If you wish to ask a question after formal comments, you may do so by pressing star followed by one on your telephone keypad. I will now hand over the call to your host, Jennifer DiBerudino, Head of Investor Relations. Jennifer, please go ahead.

Good morning and welcome to Signify Health's second quarter 2021 earnings conference call. This call is being webcast live and a recording will be available on the events page of our investor website at signifyhealth.com through October 11th, 2021. Throughout the call this morning, we will be referencing the financial tables that appeared in our press release dated August 10th, 2021. On today's call, we will discuss Signify Health's business outlook, and we will make certain forward-looking statements within the meaning of the federal securities laws. Please note the cautionary language about our forward-looking statements as presented in our earnings press release and in our quarterly report on Form 10Q, which will be filed later today. That same cautionary language applies to this conference call. We will also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margins. Reconciliations to the relevant GAAP numbers for these non-GAAP measures are included in the earnings release filed on Form 8K yesterday and also on our Form 10Q, which will be filed later today. We intend to participate in industry or sell-side sponsored conferences. In lieu of issuing a press release to announce each conference, we will be posting our conference attendance on the events page calendar of our investor relations site at signifyhealth.com. I encourage you to register for alerts on the investor site so that you receive an email notification each time we add a conference, any event, or other updates to the investor relations calendar. Joining me on the call today are Kyle Armbruster, Chief Executive Officer, and Steve Seneff, President and Chief Financial Officer. Kyle will provide a business overview followed by Steve with a financial overview. We will have an operator-facilitated question and answer session after our prepared remarks. Now I will turn the call over to Kyle.

Thank you, Jennifer. Good morning. Thank you for joining us. Team Signify continues to drive significantly better outcomes for individuals across the continuum of care while supporting customers with our value-based payment platform. Our second quarter and year-to-date performance reflects the hard work we've put in and the investments we've made to deliver value for individuals, customers, and shareholders. Yesterday evening, we announced record financial results for the second quarter and first six months of 2021. In the first half of 2021, revenue grew by 50% to $392.8 million, and adjusted EBITDA increased 56% to $89 million from the six-month period a year ago. Results were driven by continued positive momentum in our home and community services segment. As we reported for episodes of care segments, We experienced COVID-19-related impacts in the recently received BPTIA reconciliation, although we delivered strong savings to customers. We remain confident that the program's size run rate will recover to pre-pandemic levels of $6 billion as we exit 2021 and that savings rates will resume the previous growth trajectory. Steve will go into further details on the reconciliation during his remarks. Our HCS and episodes businesses are highly complementary as we sit between payer and providers to help our customers measure, understand, and manage risk. Both segments serve health plans and risk-bearing entities, which enables cross-selling for existing customers. Our episode segment also serves large health systems and physician groups who are increasingly assuming risk in value-based payment programs and therefore need the capabilities of our home and community services segments. Our home and community services segment derives the majority of its revenue from Medicare Advantage and managed Medicaid health plans, who are customers and who rely on our nationwide network of over 9,000 clinicians to reach their enrolled members in their homes. These clinicians are supported by our membership engagement teams and our logistical software to conduct comprehensive in-home evaluations, which we refer to as IHEs. Our health plan clients value these evaluations because they paint the full picture of the health status and acuity of health plan members and allow appropriate triage and care coordination. Through the six months ended June 30th, 2021, we performed approximately 959,000 IHEs, an increase of nearly 60% from the same period in 2020. Virtual evaluations in the first half of this year continued to trend downward from 2020 pandemic levels and only represented about 17% of total IHEs completed. We believe virtual evaluations will continue to play a role in the second half, but we have found that health plan members prefer our in-home evaluations, which can go much deeper in their assessment, including determining social and behavioral needs and performing diagnostic tests and other preventative services. We also provide access to social services to address those needs through a network of about 200 community-based organizations and delegated social workers. Continued demand for diagnostic and preventative testing in the home also contributed to our HCS results. We offer multiple diagnostic and preventative tests through our connected device hub, and we have a strong pipeline of additional tests and devices. Signify receives an additional fee per test performed while our customers benefit from enhanced information and lower costs. We also coordinate with the member's primary care physician and provide them with additional data on their patients. Most importantly, the individual member benefits because he or she doesn't need to leave their home to visit an office or facility to obtain the same test. Our episodes of care services segment provides a comprehensive platform that serves government programs, health plans, employers, and healthcare providers. We deliver software, analytics, in-clinical, and operational services, as well as develop contracted provider networks to help these organizations in their value-based payment programs. Our episode services are critically important to the financial and operational success of the customers we serve and, more importantly, significantly improve patient outcomes. With the BPCIA program as the anchor for our episode segments, We continue to build out deep provider networks in three geographic regions represented by our current non-BPTIA payer clients to establish this business as a future growth driver. In these stages, we are gaining traction in building provider networks and having productive conversations with plans, employers, and providers beyond our three current payer contracts. As an example, along with Regence yesterday, we announced the Washington State Healthcare Authority, the state's largest purchaser, with 303,000 members during the Regent's Episodes of Care program, effective January 1, 2022. Through these episodes, we can support not only procedure-based bundles, but also conditions such as maternity, oncology, and substance abuse. From an employer perspective, conditions like these drive a significant amount of health care costs for self-insured organizations, and we can facilitate substantial savings through episode management. Our consumer engagement and assessment capabilities in our HCS segment are being leveraged to improve the performance of our episodes of care programs through higher shared savings and better patient outcomes. Our transition to home solution demonstrates our extensive capabilities in engaging patients in and around the home for our provider partners who are participating in episodes and other value-based programs. The solution is designed to reduce the clinical and financial impacts of avoidable inpatient readmissions and unnecessary emergency department visits. Hospital readmissions cost Medicare approximately $17 billion per year. An analysis of readmission results for 800,000 episodes of care managed by Signify under Medicare's value-based bundled payment program, BPCIA, shows that nearly 44% of all readmissions occur more than 30 days following discharge from the hospital. To address the risk of readmission during this critical phase, our transition to home solution provides evidence-based clinical and social care coordination services to patients. These services are provided not just during the initial 30 days following discharge, which is the market standard, but rather for a full 90 days following discharge. Early results showed this solution has statistically significant effect on reducing rehospitalization rates. We've activated our transition to home solution in 50 plus hospitals within the industry's most visionary health systems and healthcare providers, including Arden Health Services, Beaumont Health, Cape Fear Valley Health, and Premier Health. We're experiencing strong consumer interest in virtual post-discharge care coordination support with upwards of 60% of patients contacted engaging with the Signify Care team. Facilitating the timely transition to the home and extending our partners' reach beyond the hospital setting enhances patient care, experience, achieves better outcomes, and improves financial performance through the elimination of costs associated with avoidable readmissions. We are excited to see this key synergy between our divisions driving such a positive impact in industry success. while also removing barriers to recovery in the home. Our long-term vision at Signify is to drive positive outcomes for our partners as their platform for value-based care. We simplify highly complex payment programs and enable health plans and health systems to successfully transition to value-based payments. We may supplement our strong capabilities with acquisitions or partnerships with other companies, to add further functionality and innovation to our platform to drive increased value for our customers. I will now turn the call over to Steve to walk you through our second quarter and year-to-date financial results.