Signify Health, Inc.

Second-quarter revenue was $246 million, up 16% year over year. ACO revenue was $208 million, up 18% year over year, and total evaluation volume was approximately 624,000, with virtual visits at 15% of the mix versus 9% a year ago. Adjusted EBITDA was $62.6 million, up 15% year over year, and HCS adjusted EBITDA was $65.2 million, up 17% year over year. EPS revenue grew 3% to $39 million, Caravan contributed $16.6 million of revenue, and the net loss was $490 million, including a $520 million impairment related to winding down the episodes business. Cash and equivalents were $439 million, debt was $338 million, and operating cash flow was negative $3 million versus negative $21 million a year ago. Full-year 2022 guidance was updated to HCS revenue of $800 million to $810 million, Caravan revenue of $45 million to $48 million for the 10 months after the March 1 acquisition, and combined HCS/Caravan adjusted EBITDA margin of approximately 29% to 30%. The company raised 2022 overall IHE volume guidance to 2.42 million to 2.45 million. Management said Q3 HCS volume and revenue should be flat to slightly down sequentially, and the virtual-visit mix should rise again in Q4.

Kyle Armbrester said the company is doubling down on its faster-growing, more profitable businesses: Home and Community Services and Caravan. He framed the wind-down of Episodes of Care as a strategic move that should improve growth visibility, margins, and free cash flow, while also freeing resources for in-home services and total-cost-of-care offerings. His tone was highly upbeat throughout, emphasizing strong demand, successful client conversions from BPCI-A into MSSP, and confidence in 2023 momentum.

Steve Senneff highlighted the quarter’s financial strength, including $246 million of revenue, $62.6 million of adjusted EBITDA, and a strong balance sheet with $439 million of cash and equivalents against $338 million of debt. He said HCS revenue outlook is $800 million to $810 million and Caravan revenue is $45 million to $48 million, with combined HCS/Caravan adjusted EBITDA margin of roughly 29% to 30% before shared costs allocated to ECS. He also said operating cash flow should improve in Q3 as HCS DSOs improve, while the episodes wind-down will create one-time cash costs such as severance and contract termination expenses in the second half. He noted about $60 million of annualized shared costs are currently allocated to ECS, with $30 million to $35 million expected to be eliminated by year-end, and an exit run-rate of about $25 million to $30 million heading into 2023.

Analysts focused on IHE economics, including why IHEs and annual wellness visits can coexist, and management said IHEs are longer, more comprehensive, and better suited to home-based activation and care navigation. Questions also centered on mix effects, stranded-cost reduction, cash flow, and whether BPCI-A clients are moving into basic or enhanced MSSP tracks; management said the mix pressure on revenue per visit is mainly due to client mix and virtual visits, and that most BPCI converts are moving into enhanced because of the better shared-savings economics. Management also said a little over half of clients are already in enhanced, that the BPCI-to-MSSP conversions happened unusually quickly, and that several clients are expected to add tens of thousands of lives in 2023.