Signify Health, Inc. Class A

Hello everyone and welcome to the Signify Health third quarter 2021 earnings conference call. My name is Seb and I'll be the operator for your call today. There will be an opportunity to ask questions and if you wish to submit a question, please press star 1 on your telephone keypad. If you change your mind and wish to withdraw your question, please press star 2. I will now hand the floor over to Jennifer de Berendino, Head of Investor Relations and Treasurer. Please go ahead.

Good morning and welcome to Signify Health's third 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 January 10th, 2022. Throughout the call this morning, we will be referencing the financial tables that appeared in our press release dated November 9, 2021. And in addition, the third quarter earnings call summary slide presentation we have posted to the events page of the IR website. This morning, we will discuss Signify Health's business outlook, and we will also make certain statements about our future performance, including projections about our future financial performance, our anticipated growth strategies, anticipated trends in our business, and our outlook, including estimates for total gap revenue, total adjusted EBITDA, in-home evaluations, program size, and weighted average savings rate. These statements are only predictions based on our current expectations and projections about future events and constitute forward-looking statements within the meaning of the federal securities laws. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied by the forward-looking statements. Please note the cautionary language about our forward-looking statements as presented in our earnings press release and in our quarterly report on Form 10-Q, which will be filed later today. That same cautionary language applies to the statements made in this conference call. We will also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the relevant GAAP numbers for these non-GAAP measures are included in the earnings release filed on Form 8K yesterday and also in our Form 10Q, which will be filed later today. As a reminder, 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, other event, or other updates to the IRR 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 and thank you for joining us. Our third quarter and year to date performance reflects progress towards our mission of activating the home for care and enabling the shift to value based care. Our current strategic focus is expanding to as many unique homes as possible. We also build diversified service offerings that help to identify and close care gaps and drive better patient outcomes. Yesterday evening, we announced strong financial results for the third quarter and first nine months of 2021. Through September, revenue grew by 42% to $592 million, and adjusted EBITDA increased 52% to $131 million from the nine-month period a year ago, largely driven by in-home evaluation, or IHE, volume growth in our home and community services segment. In the first nine months of the year, we performed over 1.4 million IHEs, exceeding the number performed for the full year 2020. Our 2021 results to date are driving positive momentum into 2022. With continued in-home demand expected to fuel HCS growth, diversification of our services in the home, and our episode weighted average program size moving from approximately $5 billion to $6 billion next year. Given this performance, we are projecting 20% plus top line growth in 2022 and corresponding adjusted EBITDA growth, which is expected to benefit from improving operating leverage. Clients are increasingly asking us for expansion of our transition to home and analytic services for their other value-based programs, which we view as another positive trend. A testament to our value of our in-home evaluations, we've received new customer commitments for IHE volume that will continue to drive substantial growth momentum into 2022. We've seen several notable clients move and expand volume to Signify and away from legacy or in-source programs, realizing the value that we bring to their members. We remain confident in our belief that the risk of insourcing our space is low, given our unique data and analytics platform, nationwide clinical network, member density, and our strong customer relationships. As we look ahead to future years, we are very bullish about our HCS business. The value of our in-home evaluations for both our customers and Medicare Advantage members who receive IHEs at no cost has increased tremendously. We are doing more in the home than ever for our clients. by helping to connect their members back into the health system each and every day. We also have made substantial progress on the social determinants of health front, connecting members more than 390,000 times with social services in their community. We are working to connect members, many of whom have not been under the regular care of a provider, back to a primary care physician in their community, and even scheduling appointments when possible. We provide the PCP a comprehensive summary of their patients' clinical and social evaluation, highlighting issues that require attention. In fact, approximately 72% of members who receive an IHE from Signify Health return to an outpatient care setting within a year after their IHE. While our doctors and nurse practitioners are in the home, they perform various screenings to help close care gaps. We are proud to have earned the National Committee for Quality Assurance, or NCQA, Healthcare Effectiveness Data and Information, or HEDIS, certification, for several of our in-home screening services, such as diabetic eye exams, diabetic kidney disease monitoring, colorectal cancer screening, and osteoporosis management in women. Test results are also shared with the member, the plan, and the respective primary care physician to provide another data point for any identified health issues and appropriate treatment plans. We continue to successfully expand our clinician network to support our growing IHE volume despite recent concerns in other parts of the industry around the difficulty in hiring healthcare workers. While we have seen some capacity challenges in certain geographic areas, a significant benefit of our flexible network is that we credential our providers in multiple states, allowing us to deploy them wherever evaluation demand requires, including rural communities. Our model and technology make it easy for providers to do what they value most, spend quality time with patients, instead of dealing with administrative issues in a facility setting. As a result, we believe we have not experienced the same clinician staffing issues as reported by some others in the industry. Using the home as a key venue to activate the care journey, we believe coordination of care will be one of our strategic pillars going forward. Our future service expansion includes medication management, chronic condition management, remote patient monitoring, and follow-on services to improve the health and well-being of beneficiaries. Almost all of our customers are asking for this expansion of our work, realizing the value of our engagement in their members' lives while in their homes. This represents a tremendous opportunity for us to expand our in-home market share and continue to diversify into new services to drive better outcomes for the millions of lives we touch annually. We have frequent conversations with our planned customers and regulatory and legislative constituents about the current state of and the future vision for healthcare in the United States generally, and the Medicare Advantage program specifically. Medicare Advantage is an important program providing about 27 million individuals high-quality care with better benefits at a lower beneficiary cost when compared to Medicare fee-for-service. We believe that the risk adjustment process with all the appropriate checks and balances is critical to the functioning of value-based care and Medicare Advantage. Appropriate risk adjustment, including in-home evaluations, levels the playing field to provide broad and equitable access to care for the most vulnerable MA members. As I've outlined this morning, the value of our IETs to our customers and Medicare Advantage members is tremendous and is an essential service that provides insights, coordination, and critical member touchpoints, and we have a roadmap to expand our capabilities in the home as we focus on opportunities to support our clients in their efforts to address health disparities to ensure health equity moving forward. We believe there will be further adoption of value-based payment programs in Medicare, Medicaid, and across the entire health system. Currently, approximately 40% of Medicare fee-for-service payments, 30% of commercial payments, and 25% of Medicaid payments are made through some sort of value-based arrangement. As we advance value-based payment models through our excellent work in both our home and community services and episodes of care services, we expect Signify Health to be a significant part of this movement. In episodes of care, we are the largest convener in the CMS bundled payment program today, and as such, meet regularly with CMMI to provide feedback through thought leadership on the current BPCIA program and its future state. We look forward to the next iteration of the BPCIA program and believe that it will likely have a mandatory aspect. Liz Fowler, the head of CMMI, recently spoke publicly at a briefing hosted by the Alliance for Health Policy and indicated that CMMI is actively engaged in exploring bundled payments that go beyond post-acute care to move upstream to engage specialists in managing patients to avoid and or reduce acute events. This focus nicely dovetails with our non-BPCIA episodes of care where we can support not only procedure-based bundles, but also conditions such as maternity, diabetes, and substance abuse. We are continuing our focus on diversification of revenue through continued discussions related to ACO programs and other targeted models like radiation oncology. We continue to make successful inroads in our non-BTCIA business. In October, we jointly announced with our customer, the state of Connecticut, that their program was approved by CMS as an all-payer advanced alternative payment model. This is an important designation for the episodes of care payment model administered by Signify through our networks of distinction. Eligible services included in these programs could span as much as 60% of the average health plan spend and include episodes such as knee replacement, colonoscopy, cataract surgery, care-related pregnancy, and more. CMS's ongoing efforts and commitment to affordability, quality, and outcomes has been of significant benefit to patients, providers, and taxpayers alike. We are excited that the best practice from federal value-based programs will be extended to commercial health plans, and we are proud to be a part of this catalyst for continued adoption of value-based care by innovative provider organizations. In closing, we are pleased with our third quarter and year-to-date results. Our long-term vision is to drive positive outcomes for our partners and their members as their platform for value-based care. We simplify participation in highly complex payment programs and enable health plans and health systems to successfully transition to value-based payments. Over time, 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 and for patients. I will now turn the call over to Steve to walk you through the third quarter and year-to-date financial results.