On March 2, 2022 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, reported the Company’s financial results for the fourth quarter and full year 2021, and established 2022 guidance (Press release, Signify Health, MAR 2, 2022, View Source [SID1234609383]).

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"Successful execution drove immense growth for Signify Health in 2021 as we delivered meaningful value to our clients by facilitating improved health outcomes for their patients or members. Signify’s achievements reflect the dedication and perseverance of our employees and network of over 10,000 clinicians," said Kyle Armbrester, Chief Executive Officer of Signify Health. "Our 2021 results demonstrate the strength of our business model and were driven by Home & Community Services and the value recognized by clients who significantly expanded In-Home Evaluation (IHE) volume in 2021 to 1.9 million unique visits. We also delivered substantial savings to our Episodes of Care partners and the BPCI-A program in 2021 despite the impact of COVID-19 on program size and savings rates, which we expect will lessen over time as cases continue to decline and the situation stabilizes."

Mr. Armbrester continued, "We are excited about closing our acquisition of Caravan Health, which puts Signify at the forefront of integrating value-based care programs together, expanding to broader populations and reaching a diverse array of urban, suburban, and rural communities across the country. By creating more relevancy for providers through multi-payor contracts, combined with our access to and scale within members’ homes, we are confident in our ability to accelerate the transformation of the U.S. healthcare system from fee-for-service to value-based care. We also expect Caravan Health to add to our revenue diversification this year and it is included in our 2022 guidance of 22-25% revenue growth for the combined company."

Fourth Quarter 2021 Financial Results

Total revenue for the fourth quarter was $181.4 million compared to $193.5 million in the same period a year ago, primarily reflecting the decline in ECS revenue, which was largely due to the continued impact from COVID-19.
HCS revenue in the fourth quarter of 2021 grew 5% from a year ago to $156.2 million. IHE volume in the fourth quarter of 2021 was strong at 473 thousand evaluations and reflected a more typical seasonality when compared to the fourth quarter of 2020. Fourth quarter 2020 HCS revenue was unseasonably high, due to the shift in IHE volume to the latter half of the year due to the COVID-19 pandemic shutdowns in the second quarter of 2020.
Fourth quarter 2021 ECS revenue of $25.2 million declined from $44.7 million a year ago primarily as a result of the semi-annual BPCI-A reconciliation we received during the fourth quarter of 2021, which indicated a lower than expected savings rate and program size. The savings rate was impacted primarily by COVID-19, including higher cost next site of care decisions. Program size was impacted by the ongoing COVID-19 pandemic, and the highly contagious Omicron variant in particular, as CMS excludes any episodes that have a COVID-19 diagnosis at any stage of the episode, irrespective of whether COVID-19 had any meaningful impact on the outcome of the episode itself.
Fourth quarter 2021 net income was $32.4 million compared to $0.7 million for the same period a year ago. The improvement was driven primarily by the quarterly revaluation of the customer Equity Appreciation Rights agreements, or EARs. The EARs are marked to market each quarter and this resulted in other income of $36.7 million, reflecting the lower value of Signify stock at year end.
Non-GAAP Adjusted EBITDA1 for the fourth quarter of 2021 increased 3% to $40.2 million, from $38.9 million for the fourth quarter of 2020, reflecting a decrease in operating expenses.
Non-GAAP Adjusted EBITDA margin1 for the fourth quarter of 2021 was 22.2%, a 200-basis point improvement from the comparable year ago period.
Full Year 2021 Financial Results

Total 2021 revenue for the year increased 27% to $773.4 million, compared to $610.6 million a year ago. Overall revenue growth in the year was driven by a 45% increase in HCS revenue to $653.1 million, partially offset by a 25% decrease in ECS revenue.
HCS revenue growth in 2021 was primarily driven by a 34% increase in IHEs performed, which grew to 1.920 million, up from 1.436 million in 2020. Increases in customer demand throughout 2021 drove IHE revenue, in conjunction with a reduction in the mix of virtual evaluations to 17% of total IHEs for 2021, down from 38% in 2020.
The ECS revenue decline in 2021 was driven by the ongoing impacts from COVID-19 and the corresponding decline in the weighted average bundled payment savings rate to 5.7% and the weighted average bundled payment program size to $4.6 billion for the year, compared to 7.3% and $5.2 billion, respectively, for 2020.
Total net income for 2021 improved to $9.9 million, compared to a net loss of $14.5 million in 2020. The improvement was driven by total revenue growth of 27%, partially offset by an increase in operating expenses and income tax expense now that Signify is subject to tax as a corporation.
Non-GAAP Adjusted EBITDA1 for 2021 increased 37% to $171.2 million, compared to $124.9 million for 2020, driven by the aforementioned increase in revenue.
Full year non-GAAP Adjusted EBITDA margin1 was 22.1%, a 160-basis point improvement from a year ago, driven by revenue growth and efficiencies.
"We had a very strong year for Signify Health in 2021 and we have tremendous momentum going into this year as evidenced by our 2022 guidance which includes assumptions for IHE volume in the range of 2.39 to 2.42 million evaluations," said Steven Senneff, President and Chief Financial Officer of Signify Health. "Our 2022 guidance includes growth based on Caravan Health’s anticipated greater than 500,000 lives under management, the ongoing impact of COVID-19 on our weighted average bundled payment program size that we expect to grow between $500 million and $1 billion from 2021 levels, and an improvement in the bundled payment savings rate of 25-50 basis points. As a result, we expect our ECS segment revenue to grow in the mid -20 to low-30 percent range for the full year 2022."

2022 Guidance

Signify Health estimates the following full year 2022 results, which reflect Caravan Health results for ten months of ownership in 2022:

Total GAAP revenue in the range of $948 million to $971 million; and
Total adjusted EBITDA1 in the range of $212 million to $222 million.
1Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. Refer to the reconciliation in "Non-GAAP Financial Measures." We have not reconciled 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 stock-based compensation, 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 fourth quarter and full year 2021 results on March 3, 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 May 3, 2021.