Signify Health Announces Second Quarter and Six Months 2021 Results

Rhea-AI Summary

Signify Health (SGFY) reported strong financial results for Q2 2021, with total revenue increasing by 63% to $212.8 million, driven by robust Home & Community Services (HCS) revenue of $175.4 million, a 109% year-over-year rise. However, Episodes of Care Services (ECS) revenue fell 20% to $37.4 million due to COVID-19 impacts. The company posted a net loss of $0.1 million, contrasting with a net income of $7 million from last year. Full-year guidance for total revenue is revised to $745 million to $765 million.

Positive

• Total revenue for Q2 2021 increased 63% to $212.8 million.
• Home & Community Services revenue rose 109% to $175.4 million.
• Non-GAAP Adjusted EBITDA for Q2 2021 increased 55% to $54.6 million.
• 2021 total revenue guidance raised to $745 million to $765 million.

Negative

• Episodes of Care Services revenue declined 20% to $37.4 million.
• Total net loss of $0.1 million compared to net income of $7 million year-over-year.
• Six-month total net loss reached $51.8 million, up from $1.9 million last year.

Signify Health, Inc. (NYSE: SGFY), a leading healthcare platform that leverages advanced analytics, technology and nationwide healthcare networks to create and power value-based payment programs, today announced the Company’s financial results for the second quarter and six months ended June 30, 2021.

“I am proud to say that we are touching the lives of more people in their homes than ever before and helping to make recovery in the home a realization for a growing number of individuals across the country. As a result, we achieved strong financial results in the second quarter and for the six months ended June 30, 2021,” said Kyle Armbrester, Chief Executive Officer of Signify Health. "Accelerated customer demand for our comprehensive member in-home evaluations supplemented by diagnostic and preventative testing services drove strong Home & Community Services results. Additionally, we continue to gain traction in our Transition to Home solution, further demonstrating the synergies between Episodes of Care and Home & Community Services.”

Mr. Armbrester continued, “In our Episodes of Care Services segment, we have delivered strong savings to our customers and ensured superior care to individuals during their episodes despite COVID-19 headwinds. We remain on track to deliver a 2021 program size exit run rate of approximately $6 billion in our episodes business and we believe as the COVID-19 impact becomes less prevalent, savings rates will resume their previous growth trajectory.”

Second Quarter 2021 Financial Results

• Total revenue for the second quarter increased 63% to $212.8 million, up from $130.7 million in the same period a year ago. Overall growth in the second quarter of 2021 was driven by strength in Home & Community Services (HCS).
• The strong HCS revenue of $175.4 million in the second quarter, an increase of 109% over the same period a year ago, was due to record in-home evaluation (IHE) volume in the quarter of approximately 497,000 compared to approximately 298,000 in the second quarter of 2020.
• Second quarter revenue was $37.4 million for the Episodes of Care Services (ECS) segment, a 20% decrease from $46.7 million in the same period a year ago. The decline was primarily due to a decrease in program size reflecting the COVID-19 reduction in elective procedures. Based on the BPCI-A reconciliation received in the second quarter, there was a reduction in the savings rate primarily related to the impact of COVID-19 in two specific areas. The first area related to missing comorbidity diagnosis codes that did not properly reflect patient acuity, thereby impacting patient case mix adjustments and reducing episode pricing. The second area relates to patients being discharged during the pandemic from an acute care facility to inpatient rehabilitation facilities and other high-cost next sites of care when lower-cost skilled nursing facilities were facing COVID-19 outbreaks and staffing shortages.
• Second quarter total net loss was $0.1 million compared to net income of $7.0 million for the same period a year ago as an improvement in operating income was offset by the quarterly revaluation of customer Equity Appreciation Rights (EAR) of $14.5 million and a $5.0 million loss on the extinguishment of debt related to the June 2021 debt refinancing.
• Non-GAAP Adjusted EBITDA¹ for the second quarter increased 55% to $54.6 million, compared to $35.4 million for the second quarter of 2020, driven primarily by HCS revenue growth. Non-GAAP Adjusted EBITDA margin¹ for the second quarter was 25.6%.

Six Months Ended June 30, 2021 Financial Results

• Total revenue for the six months ended June 30, 2021 increased 50% to $392.8 million, up from $262.4 million in the same period a year ago. Overall growth for the six-month period ended June 30, 2021 was driven by momentum in HCS.
• HCS revenue for the six months ended June 30, 2021 was $327.8 million, a 75% increase from the six-months ended 2020, due to an increase in IHE volume to approximately 959,000 compared to approximately 601,000 in the same period of 2020.
• ECS revenue for the six months ended June 30, 2021 decreased 14% to $65.0 million due primarily to the aforementioned decrease in the BPCI-A program size.
• Total net loss for the six months ended June 30, 2021 was $51.8 million compared to a net loss of $1.9 million in the comparable period a year ago. An improvement in operating income for the period was offset by $71.3 million of other expense related to the remeasurement of the fair value of our customer EAR reflecting the Company’s post IPO valuation.
• Non-GAAP Adjusted EBITDA¹ for the six months ended June 30, 2021 increased 56% to $89.0 million, compared to $57.3 million for the same period in 2020, driven primarily by HCS revenue growth. Non-GAAP Adjusted EBITDA margin¹ for the six months ended June 30, 2021 was 22.7%.

2021 Outlook

Signify Health is raising its total revenue and adjusted EBITDA guidance ranges for 2021 as follows:

• Total GAAP revenue in the range of $745 million to $765 million; and
• Total adjusted EBITDA¹ in the range of $155 million to $165 million.

The revised financial guidance assumes that the COVID-19 situation will not worsen and negatively impact IHE volume and BPCI-A weighted average savings rate or program size for the balance of 2021.

Signify Health is also updating estimates for the following key performance indicators for the full year 2021 reflecting continued strength in HCS and the impact of COVID-19 on ECS:

• HCS segment IHEs of approximately 1.785 to 1.815 million;
• ECS segment weighted average program size of approximately $4.9 to $5.1 billion; and
• ECS segment weighted average savings rate of approximately 6.1% to 6.4%

¹Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. Refer to the reconciliation in “Non-GAAP Financial Measures.” We have not reconciled 2021 guidance for adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, and have not provided forward-looking guidance for net income (loss) because of the uncertainty around certain items that may impact net income (loss), including, among others, stock-based compensation and the fair valuation of the EARs, that are not within our control or cannot be reasonably predicted.

Conference Call Information

Signify Health will host a conference call to discuss the Company’s second quarter 2021 results on August 11, 2021 at 8:30am ET. A live audio webcast of the conference call may be accessed through the investor relations section of Signify Health’s website at investors.signifyhealth.com/events/default.aspx and will be available for replay through October 11, 2021.

About Signify Health

Signify Health is a leading healthcare platform that leverages advanced analytics, technology, and nationwide healthcare provider networks to create and power value-based payment programs. Our mission is to transform how care is paid for and delivered so that people can enjoy more healthy, happy days at home. Our solutions support value-based payment programs by aligning financial incentives around outcomes, providing tools to health plans and healthcare organizations designed to assess and manage risk and identify actionable opportunities for improved patient outcomes, coordination and cost-savings. Through our platform, we coordinate what we believe is a holistic suite of clinical, social, and behavioral services to address an individual’s healthcare needs and prevent adverse events that drive excess cost, all while shifting services towards the home.

Forward Looking Statements

This press release contains forward-looking statements. All statements other than statements of historical fact included in this press release are forward-looking statements. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business, our plan to drive better patient outcomes, our 2021 Outlook, including our 2021 estimates for total GAAP revenue, total Adjusted EBITDA, in-home evaluations, program size and weighted average savings rate improvements, , our ability to continue to gain traction in our Transition to Home solution, the ability of our Transition to Home solution to positively impact savings rates in both the BPCI-A program and on non-BPCI-A episodes, and our plan to utilize the proceeds from our IPO to expand our investment in value-based payment programs and in our product portfolio. These statements are only predictions based on our current expectations and projections about future events. 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. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include: the COVID-19 pandemic and whether the pandemic will continue to subside in 2021; our dependence upon a limited number of key customers; our dependence on certain key government programs; our failure to maintain and grow our network of high-quality providers; our failure to continue to innovate and provide services that are useful to customers and achieve and maintain market acceptance; our limited operating history with certain of our solutions; our failure to compete effectively; the length and unpredictability of our sales cycle; failure of our existing customers to continue or renew their contracts with us; failure of service providers to meet its obligations to us; seasonality that may cause fluctuations in our sales, cash flows and results of operations; our failure to achieve or maintain profitability; our revenue not growing at the rates they historically have, or at all; our failure to successfully execute on our growth initiatives, business strategies, or operating plans, including growth in our Commercial Episodes business; our failure to successfully launch new products; our failure to diversify sources of revenues and earnings; inaccurate estimates and assumptions used to determine the size of our total addressable market; changes in accounting principles applicable to us; incorrect estimates or judgments relating to our critical accounting policies; increases in our level of indebtedness; our failure to effectively adapt to changes in the healthcare industry, including changes in the rules governing Medicare or other federal healthcare programs; our failure to adhere to complex and evolving governmental laws and regulations; our failure to comply with current and future federal and state privacy, security and data protection laws, regulations or standards; our employment of and contractual relationships with our providers subjecting us to licensing or other regulatory risks, including recharacterization of our contracted providers as employees; adverse findings from inspections, reviews, audits and investigations from health plans; inadequate investment in or maintenance of our operating platform and other information technology and business systems; our ability to develop and/or enhance information technology systems and platforms to meet our changing customer needs; higher than expected investments in our business including, but not limited to, investments in our technology and operating platform, which could reduce our profitability; security breaches or incidents, loss or misuse of data, a failure in or breach of our operational or security systems or other disruptions; disruptions in our disaster recovery systems or management continuity planning; our ability to comply with, and changes to, laws, regulations and standards relating to privacy or data protection; our ability to obtain, maintain, protect and enforce our intellectual property; our dependence on distributions from Cure TopCo, LLC, our operating subsidiary, to fund dividend payments, if any, and to pay our taxes and expenses, including payments under the Tax Receivable Agreement; the control certain equity holders have over us and our status as a controlled company; our ability to realize any benefit from our organizational structure; risks associated with acquiring other businesses including our ability to effectively integrate the operations and technologies of the acquired business; risks associated with an increase in our indebtedness; and the other risk factors described under “Risk Factors” in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which are available free of charge on the SEC's website at: www.sec.gov.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this press release. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.

About Non-GAAP Financial Measures

This press release contains certain financial measures not presented in accordance with generally accepted accounting principles in the United State (“GAAP”), including Adjusted EBITDA and Adjusted EBITDA margin, which are used by management in making operating decisions, allocating financial resources, and internal planning and forecasting and for business strategy purposes. Adjusted EBITDA and Adjusted EBITDA margin are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing our financial results. Therefore, these measures should not be considered in isolation or as an alternative to GAAP measures. Our presentation of Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly-titled measures used by other companies. Management believes that such measures are commonly reported by issuers and widely used by investors as indicators of a company’s operating performance. Please refer to the reconciliations of Adjusted EBITDA and Adjusted EBITDA margin to the most directly comparable financial measures prepared in accordance with GAAP below.

Table 1 Signify Health, Inc. Consolidated Statement of Operations (unaudited)
	Three months ended June 30,								Six months ended June 30,
($ in millions)	2021				2020				2021				2020
Home & Community Services	$	175.4			$	84.0			$	327.8			$	187.1
Episodes of Care Services	37.4				46.7				65.0				75.3
Revenue	212.8				130.7				392.8				262.4
Operating expenses:
Service expense	104.1				52.7				202.6				120.0
Selling, general and administrative expense	64.9				47.0				122.2				98.1
Transaction-related expenses	1.0				1.6				6.6				4.0
Depreciation and amortization	17.3				15.7				34.0				30.2
Total operating expenses	187.3				117.0				365.4				252.3
Income from operations	25.5				13.7				27.4				10.1
Interest expense	6.5				5.9				13.3				11.1
Loss on extinguishment of debt	5.0				—				5.0				—
Other expense (income), net	14.3				0.6				71.0				0.6
Other expense, net	25.8				6.5				89.3				11.7
(Loss) income before income taxes	(0.3		)		7.2				(61.9		)		(1.6		)
Income tax (benefit) expense	(0.2		)		0.2				(10.1		)		0.3
Net (loss) income	$	(0.1	)		$	7.0			$	(51.8	)		$	(1.9	)
Net (loss) income attributable to pre-Reorganization period	—				7.0				(17.2		)		(1.9		)
Net (loss) income attributable to noncontrolling interest	(0.1		)		—				(11.4		)		—
Net (loss) income attributable to Signify Health, Inc.	$	—			$	—			$	(23.2	)		$	—
Loss per share of Class A common stock(1)
Basic	$	—			NM				$	(0.14	)		NM
Diluted	$	—			NM				$	(0.14	)		NM
Weighted average shares of Class A common stock outstanding(1)
Basic	168,003,727				NM				167,145,986				NM
Diluted	168,003,727				NM				167,145,986				NM

⁽¹⁾Basic and diluted net loss per share of Class A common stock is applicable only for the periods subsequent to February 12, 2021, which is the period following the initial public offering ("IPO") and related Reorganization Transactions.

The Company analyzed the calculation of earnings (loss) per unit for the period prior to the IPO and determined that it resulted in values that would not be meaningful to the users of these unaudited consolidated financial statements. Therefore, earnings (loss) per share information has not been presented for the three and six months ended June 30, 2020.

Table 2 Signify Health, Inc. Consolidated Balance Sheet (unaudited)
	June 30,			December 31,
($ in millions)	2021			2020
ASSETS
Current assets
Cash and cash equivalents	$	631.9		$	72.6
Accounts receivable, net	216.6			270.6
Contract assets	58.2			27.8
Restricted cash	7.1			4.4
Prepaid expenses and other current assets	16.5			13.8
Total current assets	930.3			389.2
Property and equipment, net	23.2			25.4
Goodwill	597.1			596.7
Intangible assets, net	488.6			506.9
Deferred tax assets	45.1			—
Other assets	7.7			4.1
Total assets	$	2,092.0		$	1,522.3
LIABILITIES AND STOCKHOLDERS' / MEMBERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	121.2		$	147.6
Contract liabilities	19.5			6.2
Current maturities of long-term debt	2.6			4.2
Contingent consideration	—			13.1
Deferred tax liability	—			1.9
Other current liabilities	14.5			16.6
Total current liabilities	157.8			189.6
Long-term debt	335.8			397.1
Contingent consideration	2.4			2.1
Customer EAR liability	102.7			21.6
Tax receivable agreement liability	51.3			—
Deferred tax liabilities	1.8			—
Other noncurrent liabilities	16.3			17.9
Total liabilities	668.1			628.3
Members' equity	—			894.0
Class A common stock, par value $0.01 (168,023,155 and 0 issued and outstanding at June 30, 2021 and December 31, 2020, respectively)	1.7			—
Class B common stock, par value $0.01 (57,911,222 and 0 issued and outstanding at June 30, 2021 and December 31, 2020, respectively)	0.6			—
Additional paid-in capital	1,084.2			—
Accumulated deficit	(23.2		)	—
Contingently redeemable noncontrolling interest	360.6			—
Total stockholders' / members' equity	1,423.9			894.0
Total liabilities and stockholders' / members' equity	$	2,092.0		$	1,522.3

Table 3 Signify Health, Inc. Consolidated Statement of Cash Flows (unaudited)
		Six months ended June 30,
($ in millions)		2021			2020
Operating activities
Net loss		$	(51.8	)	$	(1.9	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		34.0			30.2
Equity-based compensation		5.8			7.9
Customer equity appreciation rights		9.8			2.6
Remeasurement of customer equity appreciation rights		71.3			0.7
Amortization of deferred financing fees		1.4			0.8
Loss on extinguishment of debt		5.0			—
Remeasurement of contingent consideration		2.2			0.2
Payment of contingent consideration		(1.9		)	—
Deferred income taxes		(14.3		)	—
Other		—			0.2
Changes in operating assets and liabilities:
Accounts receivable		54.0			(66.8		)
Prepaid expenses and other current assets		(2.7		)	(2.4		)
Contract assets		(30.4		)	(12.6		)
Other assets		(0.6		)	0.3
Accounts payable and accrued expenses		(25.7		)	(20.0		)
Contract liabilities		13.3			5.1
Other current liabilities		(1.8		)	1.6
Other noncurrent liabilities		(1.6		)	7.5
Net cash provided by (used in) operating activities		66.0			(46.6		)
Investing activities
Capital expenditures - property and equipment		(1.9		)	(10.1		)
Capital expenditures - internal-use software development		(11.6		)	(10.2		)
Business combinations, net of cash acquired		(0.4		)	—
Net cash used in investing activities		(13.9		)	(20.3		)
Financing activities
Repayment of long-term debt		(412.5		)	(1.4		)
Proceeds from issuance of long-term debt		350.0			—
Repayment of borrowings under revolving credit facility		—			(15.0		)
Proceeds from borrowings under revolving credit facility		—			92.0
Repayments of borrowings under financing agreement		(0.3		)	—
Payment of contingent consideration		(13.1		)	—
Payment of debt issuance costs		(9.2		)	—
Proceeds from IPO, net		604.8			—
Member distributions		(10.4		)	(0.1		)
Refunds of taxes on behalf of New Remedy Corp		0.1			0.9
Proceeds (payments) related to the issuance of common stock under stock plans		0.5			(0.2		)
Net cash provided by financing activities		509.9			76.2
Increase in cash, cash equivalents and restricted cash		562.0			9.3
Cash, cash equivalents and restricted cash - beginning of period		77.0			50.2
Cash, cash equivalents and restricted cash - end of period		$	639.0		$	59.5

Table 4 Signify Health, Inc. Reconciliation of net loss to Adjusted EBITDA (non-GAAP) (Unaudited)
	Three months ended June 30,									Six months ended June 30,
($ in millions)	2021					2020				2021					2020
Net (loss) income	$	(0.1	)			$	7.0			$	(51.8	)			$	(1.9	)
Interest expense	6.5					5.9				13.3					11.1
Loss on extinguishment of debt	5.0					—				5.0					—
Income tax (benefit) expense	(0.2		)			0.2				(10.1		)			0.3
Depreciation and amortization	17.3					15.7				34.0					30.2
Other expense (income), net(a)	14.3					0.6				71.0					0.6
Transaction-related expenses(b)	1.0					1.6				6.6					4.0
Equity-based compensation(c)	3.3					1.9				5.8					7.9
Customer equity appreciation rights(d)	4.9					1.3				9.8					2.6
Remeasurement of contingent consideration(e)	2.0					—				2.2					0.2
SEU Expense(f)	0.3					—				1.8					—
Non-recurring expenses(g)	0.3					1.2				1.4					2.3
Adjusted EBITDA	$	54.6				$	35.4			$	89.0				$	57.3
Adjusted EBITDA Margin(h)	25.6			%		27.0		%		22.7			%		21.8			%
Segment Adjusted EBITDA:
Home & Community Services	$	55.8				$	20.5			$	96.9				$	45.0
Episodes of Care Services	(1.2		)			14.9				(7.9		)			12.3

(a)		Represents other non-operating (income) expense that consists primarily of the quarterly remeasurement of fair value of the outstanding customer EARs, as well as interest and dividends earned on cash and cash equivalents.
(b)		Represents transaction-related expenses that consist primarily of expenses incurred in connection with acquisitions and other corporate development activities, such as potential mergers and acquisitions activity, strategic investments and similar activities. Expenses incurred in connection with our IPO, which cannot be netted against proceeds, are also included in transaction-related expenses.
(c)		Represents expense related to equity incentive awards, including incentive units, stock options and restricted stock units, granted to certain employees, officers and non-employee directors as long-term incentive compensation. We recognize the related expense for these awards ratably over the vesting period or as achievement of performance criteria become probable.
(d)		Represents the reduction of revenue related to the grant date fair value of the customer EARs granted pursuant to the customer EAR agreements we entered into in December 2019 and September 2020.
(e)		Represents remeasurement of contingent consideration in 2021 related to potential payments due upon completion of certain milestone events in connection with our acquisition of PatientBlox. In 2020, represents the remeasurement of contingent consideration to the selling shareholders of Censeo Health, a business acquired in 2017, pending the resolution of an Internal Revenue Service (“IRS”) tax matter. The matter was resolved in 2020.
(f)		Represents compensation expense related to outstanding synthetic equity awards subject to time-based vesting. A limited number of synthetic equity units were granted in 2020 and 2021 at the time of the IPO; no future grants will be made. Compensation expense related to these awards is tied to the 30-trading day average price of our Class A common stock, and therefore is subject to volatility and may fluctuate from period to period until settlement occurs.
(g)		Represents certain gains and expenses incurred that are not expected to recur, including those associated with one-time costs related to the COVID-19 pandemic, the closure of certain facilities, the sale of certain assets and the early termination of certain contracts.
(h)		We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.

 

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FAQ

What were Signify Health's Q2 2021 total revenues?

Signify Health reported total revenues of $212.8 million for Q2 2021.

How much did Home & Community Services revenue increase in Q2 2021?

Home & Community Services revenue increased by 109% to $175.4 million in Q2 2021.

What is the current outlook for Signify Health's total revenue in 2021?

The company raised its total revenue guidance to between $745 million and $765 million for 2021.

Did Signify Health experience a net loss in Q2 2021?

Yes, Signify Health reported a net loss of $0.1 million in Q2 2021.

What challenges did Signify Health face in the Episodes of Care Services?

Episodes of Care Services revenue fell by 20% mainly due to COVID-19 impact on program size.