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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from     to    .
Commission File Number: 001-40028
Signify Health, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
85-3481223
(I.R.S. Employer
Identification Number)
4055 Valley View Ln, Suite 700, Dallas, TX 75244
(Address of principal executive offices)
(855) 984-5121
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Class A common stock, par value $0.01 per ShareSGFYNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yes ☐ No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
As of October 31, 2022, there were 178,468,488 outstanding shares of Class A common stock, $0.01 par value, and 57,480,342 outstanding shares of Class B common stock, $0.01 par value.






Signify Health, Inc.

Table of Contents
Page
Condensed Consolidated Statements of Operations
PART II. OTHER INFORMATION

2

PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets (unaudited, in millions, except shares)
September 30,December 31,
20222021
ASSETS
Current assets
Cash and cash equivalents$461.6 $678.5 
Accounts receivable, net181.4 217.2 
Contract assets66.7 84.3 
Restricted cash29.4 5.7 
Prepaid expenses and other current assets38.7 14.9 
Total current assets777.8 1,000.6 
Property and equipment, net23.323.7 
Goodwill370.1597.1 
Intangible assets, net426.0455.3 
Operating lease right-of-use assets23.7 
Deferred tax assets90.938.8 
Other assets9.711.7 
Total assets$1,721.5 $2,127.2 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses$116.3 $136.7 
Contract liabilities13.4 32.9 
Current maturities of long-term debt3.5 3.5 
Current Customer EAR liability252.7  
Current tax receivable agreement liability5.0  
Other current liabilities18.1 10.0 
Total current liabilities409.0183.1
Long-term debt333.6 334.9 
Contingent consideration17.9  
Customer EAR liability 48.6 
Tax receivable agreement liability53.3 56.3 
Deferred tax liabilities20.9 
Noncurrent operating lease liabilities26.9 
Other noncurrent liabilities0.8 11.4 
Total liabilities862.4634.3
Commitments and Contingencies (Note 20)
Class A common stock, par value $0.01 (178,370,055 and 170,987,365 issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
1.8 1.7 
Class B common stock, par value $0.01 (57,421,276 and 56,838,744 issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
0.6 0.6 
Additional paid-in capital1,177.2 1,101.3 
(Accumulated deficit) Retained earnings(521.1)19.7
Contingently redeemable noncontrolling interest200.6 369.6 
Total stockholders' equity859.1 1492.9
Total liabilities and stockholders' equity$1,721.5 $2,127.2 


See accompanying notes to the condensed consolidated financial statements.

3


Condensed Consolidated Statements of Operations
(unaudited, in millions, except shares and per share amounts)

Three months ended September 30,Nine months ended September 30,
 2022202120222021
Revenue$139.8 $199.2 $602.5 $592.0 
Operating expenses
Service expense (exclusive of depreciation and amortization shown below)123.3 100.4 365.5 303.0 
Selling, general and administrative expense (exclusive of depreciation and amortization, shown below)58.6 65.8 213.3 188.0 
Transaction-related expenses9.6 2.9 14.5 9.5 
Restructuring expenses16.7  16.7  
Loss on impairment3.3  523.2  
Depreciation and amortization14.7 17.6 52.8 51.6 
Total operating expenses226.2 186.7 1,186.0 552.1 
(Loss) income from operations(86.4)12.5 (583.5)39.9 
Interest expense6.0 4.2 14.6 17.5 
Loss on extinguishment of debt   5.0 
Other (income) expense181.1 (27.4)182.5 43.6 
Other (income) expense, net187.1 (23.2)197.1 66.1 
(Loss) income before income taxes(273.5)35.7 (780.6)(26.2)
Income tax (benefit) expense(48.5)6.4 (49.3)(3.7)
Net (loss) income$(225.0)$29.3 $(731.3)$(22.5)
Net loss attributable to pre-Reorganization period— — — (17.2)
Net (loss) income attributable to noncontrolling interest(66.0)9.1 (190.9)(2.3)
Net (loss) income attributable to Signify Health, Inc.$(159.0)$20.2 $(540.4)$(3.0)
Loss per share of Class A common stock
Basic$(0.90)$0.12 $(3.08)$(0.02)
Diluted$(0.90)$0.12 $(3.08)$(0.02)
Weighted average shares of Class A common stock outstanding
Basic177,419,471 169,055,078 175,527,474 167,905,136 
Diluted177,419,471 172,433,950 175,527,474 167,905,136 
See accompanying notes to the condensed consolidated financial statements.

4


Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in millions, except shares)




Class A common - SharesClass A common stockClass B common - SharesClass B common stockAdditional paid-in capitalNon-controlling interestRetained earnings (Accumulated deficit)Total stockholders' equity
Balance at June 30, 2022176,606,816 $1.8 57,568,959 $0.6 $1,165.9 $264.8 $(362.1)$1,071.0 
Equity-based compensation— — 215,895 — 5.3 8.1 — 13.4 
Vesting of restricted stock units, net of shares withheld to cover payroll taxes25,970 — (0.1)(0.1)
Proceeds from exercises of stock options1,373,691 — — — 4.4 1.3 — 5.7 
Tax payments on behalf of non-controlling interest— — — — — (5.9)— (5.9)
Exchange of LLC units363,578 — (363,578)— 1.7 (1.7)—  
Net loss— — — — — (66.0)(159.0)(225.0)
Balance at September 30, 2022178,370,055 $1.8 57,421,276 $0.6 $1,177.2 $200.6 $(521.1)$859.1 



Class A common - SharesClass A common stockClass B common - SharesClass B common stockAdditional paid-in capitalNon-controlling interestRetained earnings (Accumulated deficit)Total stockholders' equity
Balance at June 30, 2021168,023,155 $1.7 57,911,222 $0.6 $1,084.2 $360.6 $(23.2)$1,423.9 
Equity-based compensation subsequent to Reorganization Transactions— — 319,553 — 2.4 1.5 — 3.9 
Proceeds from exercises of stock options584,354 — — — 2.2 — — 2.2 
Tax payments on behalf of non-controlling interest— — — — — (0.2)— (0.2)
Exchange of LLC units1,748,451 — (1,748,451)— 10.9 (10.9)—  
Equity impact of tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges— — — — 0.4 — — 0.4 
Net income subsequent to Reorganization Transactions— — — — — 9.1 20.2 29.3 
Balance at September 30, 2021170,355,960 $1.7 56,482,324 $0.6 $1,100.1 $360.1 $(3.0)$1,459.5 








See accompanying notes to the condensed consolidated financial statements.
5


Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in millions, except shares)


Class A common - SharesClass A common stockClass B common - SharesClass B common stockAdditional paid-in capitalNon-controlling interestRetained earnings (Accumulated deficit)Total stockholders' equity
Balance at January 1, 2022170,987,365 $1.7 56,838,744 $0.6 $1,101.3 $369.6 $19.7 $1,492.9 
Adoption of new accounting standard— — — — — — (0.4)(0.4)
Equity-based compensation— — 989,946 — 14.0 21.1 — 35.1 
Vesting of restricted stock units, net of shares withheld to cover payroll taxes109,741 — — — (0.1)— — (0.1)
Proceeds from exercises of stock options1,960,088 — — — 6.1 1.9 — 8.0 
Issuance of Class A common stock under stock purchase plan143,313 — — — 1.3 0.4 — 1.7 
Tax payments on behalf of non-controlling interest— — — — — (6.7)— (6.7)
Exchange of LLC units407,414 — (407,414)— 2.0 (2.0)—  
Equity impact of tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges— — — — (0.1)— — (0.1)
Issuance of Class A common stock in connection with Caravan Health acquisition, net of tax4,762,134 0.1 — — 52.7 7.2 — 60.0 
Net loss— — — — — (190.9)(540.4)(731.3)
Balance at September 30, 2022178,370,055 $1.8 57,421,276 $0.6 $1,177.2 $200.6 $(521.1)$859.1 

See accompanying notes to the condensed consolidated financial statements.
6


Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, in millions, except shares)


Cure TopCo, LLC (Prior to Reorganization Transactions)Signify Health, Inc. Stockholders' Equity
Members' EquityClass A common - SharesClass A common stockClass B common - SharesClass B common stockAdditional paid-in capitalNon-controlling interestRetained earnings (Accumulated deficit)Total stockholders' equity
Balance at January 1, 2021$894.0  $  $ $ $ $ $894.0 
Net loss prior to Reorganization Transactions(17.2)— — — — — — — (17.2)
Equity-based compensation prior to Reorganization Transactions0.9 — — — — — — — 0.9 
Impact of Reorganization Transactions and IPO
Initial effect of the Reorganization Transactions and IPO on noncontrolling interests(877.7)140,758,464 1.4 57,613,676 0.6 620.8 254.9 —  
Contribution of New Remedy Corp to Signify Health Inc.— — — — — (26.0)— — (26.0)
Issuance of Class A common stock in IPO, net of issuance costs— 27,025,000 0.3 — — 479.3 125.3 — 604.9 
Deferred tax adjustment related to Reorganization and tax receivable agreement— — — — — 6.3 — — 6.3 
Class B subscription fee receivable — — — — — 0.6 — — 0.6 
Post- IPO activity
Equity-based compensation subsequent to Reorganization Transactions— — — 617,099 — 5.1 3.7 — 8.8 
Proceeds from exercises of stock options— 824,045 — — — 2.7 — — 2.7 
Tax payments on behalf of non-controlling interest— — — — — — (10.6)— (10.6)
Exchange of LLC units— 1,748,451 — (1,748,451)— 10.9 (10.9)— 
Equity impact of tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges— — — — — 0.4 — — 0.4 
Net loss subsequent to Reorganization Transactions— — — — — — (2.3)(3.0)(5.3)
Balance at September 30, 2021$ 170,355,960 $1.7 56,482,324 $0.6 $1,100.1 $360.1 $(3.0)$1,459.5 
See accompanying notes to the condensed consolidated financial statements.
7


Condensed Consolidated Statements of Cash Flows (unaudited, in millions)

Nine months ended September 30,
20222021
Operating activities
Net loss$(731.3)$(22.5)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 52.8 51.6 
Asset impairment523.2  
Equity-based compensation 35.1 9.7 
Customer equity appreciation rights19.5 14.8 
Remeasurement of customer equity appreciation rights184.7 44.0 
Amortization of deferred financing fees1.6 2.0 
Amortization of right-of-use assets6.1  
Loss on extinguishment of debt 5.0 
Remeasurement of contingent consideration(12.6)2.2 
Payment of contingent consideration (1.9)
Deferred income taxes(51.7)(8.8)
Changes in operating assets and liabilities:
Accounts receivable37.4 101.4 
Prepaid expenses and other current assets(22.0)(3.9)
Contract assets27.3 (66.8)
Other assets2.0 (0.2)
Accounts payable and accrued expenses (21.9)(22.2)
Contract liabilities(19.5)27.2 
Other current liabilities(0.7)(6.3)
Noncurrent operating lease liabilities(6.4) 
Other noncurrent liabilities (0.3)(1.9)
Net cash provided by operating activities23.3 123.4 
Investing activities
Capital expenditures - property and equipment(6.5)(3.7)
Capital expenditures - internal-use software development(19.0)(17.1)
Purchase of long-term investment(0.3)(5.0)
Business combinations, net of cash acquired(190.5)(0.4)
Net cash used in investing activities(216.3)(26.2)
Financing activities
Repayment of long-term debt(2.6)(412.5)
Proceeds from issuance of long-term debt 350.0 
Repayments of borrowings under financing agreement(0.5)(0.5)
Payment of contingent consideration  (13.1)
Payment of debt issuance costs (9.2)
Distributions to/on behalf of non-controlling interest members(6.7)(10.6)
Proceeds from IPO, net 604.8 
Refunds (payments) of taxes on behalf of New Remedy Corp 0.1 
Proceeds related to the issuance of common stock under stock plans9.6 2.7 
Net cash (used in) provided by financing activities(0.2)511.7 
(Decrease) increase in cash, cash equivalents and restricted cash(193.2)608.9 
Cash, cash equivalents and restricted cash - beginning of period684.2 77.0 
Cash, cash equivalents and restricted cash - end of period$491.0 $685.9 
Supplemental disclosures of cash flow information
Cash paid for interest$12.7 $16.2 
Cash payments, net of refunds, for taxes17.6 7.1 
Noncash transactions
Capital expenditures not yet paid1.5 1.0 
Purchase consideration not yet paid0.9  
Assumption of liabilities from New Remedy Corp 26.0 
Issuance of common stock related to acquisition60.0  
Items arising from LLC interest ownership exchanges:
   Establishment of liabilities under tax receivable agreement1.9 8.3 
   Deferred tax asset1.9 8.7 
See accompanying notes to the condensed consolidated financial statements.
8



Notes to the Condensed Consolidated Financial Statements (unaudited)


1.Nature of Operations

Signify Health, Inc. (referred to herein as “we”, “our”, “us”, “Signify Health” or the “Company”) was incorporated in the state of Delaware on October 1, 2020 and was formed for the purpose of completing an initial public offering (“IPO”) of its common stock and related reorganization transactions as described below. As a result of the reorganization transactions in February 2021, we control, and therefore consolidate the operations, of Cure TopCo, LLC (“Cure TopCo”) and its direct and indirect subsidiaries.

Cure TopCo is a Delaware limited liability company formed on November 3, 2017. Cure TopCo has adopted a holding company structure and is the indirect parent company of Signify Health, LLC (“Signify”), a Delaware limited liability company. Signify was formed on November 3, 2017. Operations are performed through our wholly-owned subsidiaries.

We are a healthcare platform that leverages advanced analytics, proprietary technology and datasets, and nationwide healthcare provider networks to create and power value-based payment programs. Our customers include health plans, governments, employers, health systems and physician groups. We have two operating segments, both focused on the value-based healthcare payment industry: Home & Community Services segment and the Episodes of Care Wind-down segment, which we plan to exit. See Note 19 Restructuring Activities and Note 22 Segment Reporting. 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, care 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.

On March 1, 2022, we acquired Caravan Health, Inc. (“Caravan Health”), see Note 4 Business Combinations. Caravan Health has allowed us to expand our total cost of care enablement services. Total cost of care enablement services include multiple services around the management of total cost of care payment models, such as Accountable Care Organizations (“ACOs”), where our clients take responsibility for the cost of a patient’s healthcare over the course of a year. These services include, but are not limited to, population health software, analytics, practice improvement, compliance, marketing, governance, surveys and licensing. The overall objective of the services provided is to help the customer receive shared savings.

On July 7, 2022, we announced our plans to exit our Episodes of Care business, as described in Note 19 Restructuring Activities.

On September 2, 2022, we entered into an Agreement and Plan of Merger with CVS Pharmacy, Inc., a Rhode Island corporation. See Note 3 Pending Acquisition.
Initial Public Offering
On February 16, 2021, we closed an initial public offering (“IPO”) of 27,025,000 shares of our Class A common stock at a public offering price of $24 per share, which included 3,525,000 shares issued pursuant to the full exercise of the underwriters’ over-allotment option. We received gross proceeds of $648.6 million, which resulted in net cash proceeds of $609.7 million after deducting underwriting discounts and commissions of $38.9 million and before fees and expenses incurred in connection with the IPO and paid for by Cure TopCo. We used the proceeds to purchase newly-issued membership interests from Cure TopCo at a price per interest equal to the IPO price of our Class A common stock, net of the underwriting discount and commissions.

9



Notes to the Condensed Consolidated Financial Statements (unaudited)

Reorganization Transactions
In connection with the IPO, Signify Health and Cure TopCo completed a series of transactions (“Reorganization Transactions”), the effects of which included, among other things, Signify Health becoming the controlling shareholder of Cure TopCo.

As of September 30, 2022, we owned approximately 75.6% of the economic interest in Cure TopCo. The non-controlling interest, consisting of certain pre-IPO members who retained their equity ownership in Cure TopCo subsequent to the Reorganization Transactions, owned the remaining 24.4% economic interest in Cure TopCo.
2.Significant Accounting Policies
Basis of Presentation
These Condensed Consolidated Financial Statements are unaudited and have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and following the rules and regulations of the Securities and Exchange Commission (the “SEC”). The financial statements included in this report should be read in conjunction with the Company’s audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. In our opinion, they reflect all adjustments, including normal recurring items, that are necessary to present fairly the results of interim periods. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations; however, we believe that the disclosures are adequate to make the information presented not misleading. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for future interim periods or the entire fiscal year. Our quarterly results of operations, including our revenue, income from operations, net loss and cash flows, have varied and may vary significantly in the future, and period-to-period comparisons of our results of operations may not be meaningful. Accordingly, our interim results should not be relied upon as an indication of future performance.

For the periods subsequent to the Reorganization Transactions effective February 12, 2021, the Condensed Consolidated Financial Statements represent Signify Health and our consolidated subsidiaries, including Cure TopCo. For the periods prior to the Reorganization Transactions, the condensed consolidated financial statements represent Cure TopCo and its consolidated subsidiaries, see Note 1 Nature of Operations. Signify Health was formed for the purpose of the IPO, which was effective in February 2021 and had no activities of its own prior to such date. We are a holding company and our sole material asset is a controlling ownership interest in Cure TopCo.

The Condensed Consolidated Financial Statements include the accounts and financial statements of our wholly-owned subsidiaries and variable interest entities (“VIE”s) where we are the primary beneficiary. See Note 5 Variable Interest Entities. Results of operations of VIEs are included from the dates we became the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

We have two operating segments, Home & Community Services and Episodes of Care Wind-down as described in Note 1 Nature of Operations. On July 7, 2022, we announced our plans to exit our Episodes of Care business, see Note 19 Restructuring Activities. Certain prior period amounts have been recast to conform with our segment realignment in connection with the strategic shift in the business associated with our announcement to wind down our Episodes of Care business, see Note 22 Segment Reporting.

Use of Estimates
The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions affecting the reported amounts in our Condensed Consolidated Financial Statements and accompanying notes. These estimates are based on information available as of the date of the Condensed Consolidated Financial Statements; therefore, actual results could differ from those estimates. The significant estimates underlying our Condensed Consolidated Financial Statements include revenue recognition; allowance for doubtful accounts; recoverability of long-lived assets, intangible assets and goodwill; loss contingencies; accounting for business combinations, including amounts assigned to definite and indefinite lived intangible assets and contingent consideration; customer equity appreciation rights; and equity-based compensation.

10



Notes to the Condensed Consolidated Financial Statements (unaudited)

See Note 6 Revenue Recognition for changes in estimates related to revenue recognition for the BPCI-A program in 2022.

Comprehensive Income (Loss)
We have not identified any incremental items that would be considered a component of comprehensive income (loss) and accordingly a statement of comprehensive income (loss) is not reflected in the Condensed Consolidated Financial Statements because net loss and comprehensive loss are the same.

Restricted Cash
Under our Master Agreement with the Centers for Medicare and Medicaid Services (“CMS”), we were required to place certain funds in escrow for the benefit of CMS. These amounts, known as a Secondary Repayment Source (“SRS”), were primarily based on the size of our participation in the legacy CMS Bundled Payments for Care Improvement (“BPCI”) program, the predecessor program of the Bundled Payments for Care Improvement - Advanced initiative (“BPCI-A”). These funds were available to CMS as a supplemental payment source if we failed to pay amounts owed to CMS. Under the agreement, the funds are returned to us 18 months after the conclusion of the effective period of the CMS Master Agreement, or when all financial obligations to CMS are fulfilled. As of December 31, 2021, there was $0.5 million in the SRS account included in restricted cash on the Condensed Consolidated Balance Sheets related to BPCI-A, all of which was released in the first quarter of 2022.

We also withhold a portion of shared savings to customers in a “holding pool” to cover any potential subsequent negative adjustments through CMS’s subsequent reconciliation true-up process. These funds are distributed to customers following the final true-up if there is no negative adjustment. These amounts represent consideration payable to the customer and therefore have reduced revenue in the period earned. The funds have been received by us from CMS and are held in a separate cash account, included as restricted cash on the Condensed Consolidated Balance Sheets. Since the funds are payable to the customer at the point the final CMS true-up is made or a negative adjustment is due to us, the amounts are also included in accounts payable and accrued expenses on the Condensed Consolidated Balance Sheets. As of September 30, 2022 and December 31, 2021, there was $1.8 million and $5.2 million of restricted cash in the holding pool, respectively.

In addition, as of September 30, 2022 we held $0.5 million in a separate cash account, included as restricted cash on the Condensed Consolidated Balance Sheets, in relation to an ACO owned by our subsidiary Caravan Health. This ACO is part of a risk model under the CMS Medicare Shared Savings Program (“MSSP”) where it shares in both the savings and losses. For the 2022 performance period, the ACO has a master letter of credit with CMS as the recipient where the letter of credit is used as protection against unpaid losses, should the ACO fail to remit payment in the event that losses occur. The letter of credit is collateralized by the ACO members, by either cash remitted or subordinated letters of credit. This restricted cash will only be used if an ACO member fails to remit payment in connection with a subordinated letter of credit.

For the 2023 performance period of the MSSP program, Caravan Health will secure and have sole authority over all aspects of the repayment mechanism reserve for two ACOs in exchange for a higher percentage of savings. We were required to fund the repayment mechanism for the 2023 performance period during the three months ended September 30, 2022. The cash is held in an escrow account which we have access to and authority over, and which will ultimately be returned to us if shared savings are earned across the ACO participants during the 2023 performance period. During the three months ended September 30, 2022, we funded approximately $22.1 million and the ACO members contributed an additional $5.0 million. Therefore, we held $27.1 million in an escrow account, included as restricted cash on the Condensed Consolidated Balance Sheets as of September 30, 2022.

The following table reconciles cash, cash equivalents, and restricted cash per the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets:
September 30, 2022December 31, 2021
(in millions)
Cash and cash equivalents$461.6 $678.5 
Restricted cash29.4 5.7 
Total cash, cash equivalents, and restricted cash $491.0 $684.2 

11



Notes to the Condensed Consolidated Financial Statements (unaudited)

Accounts Receivable
Accounts receivable primarily consist of amounts due from customers and CMS and are stated at their net realizable value. Management evaluates all accounts periodically and an allowance is established based on the latest information available to management. Management considers historical realization data, accounts receivable aging trends and other operational trends to estimate the collectability of receivables. After all reasonable attempts to collect a receivable have been exhausted, the receivable is written off against the allowance for doubtful accounts. As of September 30, 2022 and December 31, 2021, we had an allowance for doubtful accounts of $10.2 million and $7.9 million, respectively.

Advertising and Marketing Costs
Advertising and marketing costs are included in selling, general and administrative expenses (“SG&A”) and are expensed as incurred. Advertising and marketing costs totaled $0.2 million and $0.4 million for the three months ended September 30, 2022 and 2021, respectively, and $0.6 million and $0.9 million for the nine months ended September 30, 2022 and 2021, respectively.

Accounting for Leases
We lease various property and equipment, with the majority of our leases consisting of real estate leases. Effective January 1, 2022, we adopted ASC Topic 842 Leases (“ASC 842”). Under ASC 842, a lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Our contracts determined to be or contain a lease include explicitly or implicitly identified assets where we have the right to substantially all of the economic benefits of the assets and we have the ability to direct how and for what purpose the assets are used during the lease term. Leases are classified as either operating or financing. All of our leases meet the criteria to be classified as operating leases. For operating leases, we recognize a lease liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to certain adjustments, such as prepaid rents, initial direct costs and lease incentives received from the lessor. We use the incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate is the rate of interest that we would have to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment.

Certain of our leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses and certain non-lease components that transfer a distinct service to us, such as common area maintenance services. We have elected not to separate the accounting for lease components and non-lease components for all leased assets.

We sublease portions of our office space where we do not use the entire space for our operations. Sublease income is recorded as a reduction of lease expense.

Recent Accounting Pronouncements

Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (“ASC 842”) which requires lessees to recognize leases on the balance sheet by recording a right-of-use asset and lease liability. This guidance was effective for non-public entities for annual reporting periods beginning after December 15, 2021. We adopted this new guidance as of January 1, 2022 and applied the transition option, whereby prior comparative periods are not retrospectively presented in the consolidated financial statements. We elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and the lessee practical expedient to combine lease and non-lease components for all asset classes. We made a policy election to not recognize right-of-use assets and lease liabilities for short-term leases for all asset classes. See Note 8 Leases.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. ASU 2021-08 is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. We elected to early adopt this new
12



Notes to the Condensed Consolidated Financial Statements (unaudited)

guidance for interim periods in 2022 beginning with the Caravan Health acquisition on March 1, 2022. We measured the acquired contract assets and liabilities in accordance with Topic 606. See Note 4 Business Combinations.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance (“ASU 2021-10”) which requires annual disclosures that increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. ASU 2021-10 was effective for all entities for fiscal years beginning after December 31, 2021. We adopted this new guidance as of January 1, 2022. There was no material impact on our condensed consolidated financial statements upon adoption.

Pending Adoption

We are an “emerging growth company” under the Jumpstart Our Business Startups Act (“JOBS Act”). Pursuant to the JOBS Act, an emerging growth company has the option to adopt new or revised accounting standards that may be issued by FASB or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We intend to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies. The effective dates below are the effective dates we expect to adopt the new accounting pronouncements, which are those permitted for a company that is not an issuer.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”) which introduced the current expected credit losses methodology for estimating allowances for credit losses. ASU 2016-13 applies to all financial instruments carried at amortized cost and off-balance-sheet credit exposures not accounted for as insurance, including loan commitments, standby letters of credit, and financial guarantees. The new accounting standard does not apply to trading assets, loans held for sale, financial assets for which the fair value option has been elected, or loans and receivables between entities under common control. ASU 2016-13 is effective for non-public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We are evaluating the impact of this new guidance on our condensed consolidated financial statements.
3.Pending Acquisition

Merger Agreement

On September 2, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CVS Pharmacy, Inc., a Rhode Island corporation (“Parent”), and Noah Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which, among other things, Merger Subsidiary will merge with and into the Company and whereupon Merger Subsidiary will cease to exist and the Company will be the surviving corporation in the Merger (the “Surviving Corporation”) and will continue as a wholly-owned subsidiary of Parent (the “Merger”).

As a result of the Merger, at the effective time of the Merger (the “Effective Time”), each share of our class A common stock, par value $0.01 per share (“Class A Common Stock”) (other than (i) common stock owned by the Company, Parent or Merger Subsidiary or any subsidiary thereof and (ii) any shares of Class A Common Stock and our class B common stock, par value $0.01 per share (“Class B Common Stock”, and, together with “Class A Common Stock”, “Company Stock”) owned by stockholders who properly exercise appraisal rights under Delaware law), including each share of Class A Common Stock resulting from the exchange of LLC Units (as defined below), outstanding immediately prior to the Effective Time, shall be canceled and converted into the right to receive $30.50 per share in cash, without interest (such per-share consideration, the “Per Share Consideration” and the aggregate consideration, the “Merger Consideration”).

Pursuant to the Merger Agreement, immediately prior to the Effective Time, in accordance with the Merger Agreement, the Third Amended and Restated Limited Liability Company Agreement of Cure TopCo LLC (“Cure
13



Notes to the Condensed Consolidated Financial Statements (unaudited)

TopCo”), dated as of February 12, 2021 (the “Cure TopCo Amended LLC Agreement”) and our certificate of incorporation, (i) we will require each member of Cure TopCo (excluding the Company and the Company Holding Subsidiary (as defined in the Merger Agreement), but including Cure Aggregator, LLC) to effectuate a redemption of all of such Cure TopCo member’s LLC Units (as defined in the Cure TopCo Amended LLC Agreement) (“LLC Units”), pursuant to which such LLC Units will be exchanged for shares of Class A Common Stock on a one-for-one basis in accordance with the provisions of the Cure TopCo Amended LLC Agreement and the Merger Agreement and (ii) each share of Class B Common Stock shall automatically be canceled immediately upon the consummation of such redemptions, such that no shares of Class B Common Stock will remain outstanding immediately prior to the Effective Time.

Consummation of the Merger is subject to certain conditions, including, but not limited to, (i) our receipt of the approval of the Merger Agreement by stockholders holding a majority of the voting power of the outstanding shares of Company Stock, (ii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (iii) the absence of any law or order prohibiting or making illegal the consummation of the Merger, (iv) the absence of any Material Adverse Effect (as defined in the Merger Agreement) on the Company and (v) the TRA Amendment (as defined below) being in full force and effect in accordance with its terms and not having been amended, repudiated, rescinded, or modified. On October 31, 2022, stockholders holding a majority of the voting power of the outstanding shares of Company Stock approved the Merger Agreement.

On September 19, 2022, each of the Company and Parent filed its respective Notification and Report Form with the U.S. Department of Justice (the “DOJ”) and the U.S. Federal Trade Commission (collectively, the “Agencies”) under the HSR Act. On October 19, 2022, the Company and Parent each received a request for additional information and documentary materials (collectively, the “Second Request”) from the DOJ in connection with the DOJ’s review of the Merger. The effect of the Second Request is to extend the waiting period imposed under the HSR Act until the 30th day after substantial compliance by the Company and Parent with the Second Request, unless the waiting period is terminated earlier by the DOJ or extended by the parties to the Merger.

The Company has made customary representations and warranties in the Merger Agreement and has agreed to customary covenants regarding the operation of the business of the Company and its subsidiaries prior to the Effective Time.

The Merger Agreement contains certain termination rights for each of the Company and Parent. Upon termination of the Merger Agreement in accordance with its terms, under certain specified circumstances, the Company will be required to pay Parent a termination fee in an amount equal to $228.0 million, including if the Merger Agreement is terminated due to the Company accepting a superior proposal or due to the Company’s Board of Directors (the “Board”) changing its recommendation to the Company’s stockholders to vote to approve the Merger Agreement.

The Merger Agreement further provides that Parent will be required to pay the Company a termination fee in an amount equal to $380.0 million in the event the Merger Agreement is terminated under certain specified circumstances and receipt of antitrust approval has not been obtained by such time.

If the Merger is consummated, the Company will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent, and our common stock will be delisted from the NYSE and deregistered under the Exchange Act.

We recorded approximately $9.2 million of transaction-related costs associated with the pending merger primarily related to banker fees, professional services fees and employee retention bonuses as transaction-related expenses in our Consolidated Statement of Operations during the nine months ended September 30, 2022. See Note 18 Transaction-related Expenses.

The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement.

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Notes to the Condensed Consolidated Financial Statements (unaudited)

Voting Agreement

In connection with the Merger Agreement, certain affiliates of New Mountain Capital, L.L.C. ( “New Mountain”) entered into a voting agreement (the “Voting Agreement”) with Parent pursuant to which, among other things, New Mountain has agreed to vote its shares in favor of obtaining the Company Stockholder Approval (as defined in the Merger Agreement) and the Transactions, including the approval and adoption of the Merger, the Merger Agreement or any related action reasonably required in furtherance thereof, and against any acquisition proposal or any action that would reasonably be expected to prevent, materially delay or materially impair the consummation of the Merger or the Transactions. As of the date of the Merger Agreement, New Mountain collectively owned approximately 54.4% of the total outstanding Class A Common Stock and 74.7% of the total outstanding Class B Common Stock, or approximately 59.4% of the total voting power of the Company Stock.

New Mountain’s obligations under the Voting Agreement terminate upon the earliest to occur of (i) an Adverse Recommendation Change (as defined in the Merger Agreement), (ii) termination of the Merger Agreement and (iii) the Effective Time.

The foregoing description of the Voting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Voting Agreement.

Amendment to Tax Receivable Agreement

The Company, Cure TopCo and certain other parties thereto have entered into a Tax Receivable Agreement and LLC Agreement Amendment, dated as of September 2, 2022 (the “TRA Amendment”) which (i) amends (x) the Tax Receivable Agreement among the Company, Cure TopCo and certain other parties thereto (the “TRA”) and (y) the Cure TopCo Amended LLC Agreement and (ii) provides for certain covenants regarding tax reporting and tax-related actions.

The TRA Amendment provides for (i) the termination of all payments under the TRA from and after the Effective Time, (ii) the payment of any amounts due under the TRA prior to the Effective Time (other than payments resulting from an action taken by any party to the TRA after the date of the TRA Amendment, which will be suspended), in accordance with the terms of the TRA, which payments will be paid no earlier than 185 days following the filing of the U.S. federal income tax return of the Company, (iii) a prohibition on the Company terminating the TRA or accelerating obligations under the TRA after the date of the TRA Amendment and (iv) the termination of the TRA effective as of immediately prior to and contingent upon the occurrence of the Effective Time (including termination of all of the Company’s obligations thereunder and the obligation to make any of the foregoing suspended payments). The TRA Amendment also includes agreements among the parties thereto regarding the preparation of tax returns and limits actions that may be taken by the Company, Cure TopCo and certain of their controlled affiliates after the Effective Time.

The TRA Amendment also (i) suspends all tax distributions under the Cure TopCo Amended LLC Agreement from and after the Effective Time, and (ii) provides that from and after the Effective Time, no person or entity shall have any further payment or other obligation under the TRA or any obligation to make or pay tax distributions under the Cure TopCo Amended LLC Agreement.

In the event the Merger Agreement is terminated in accordance with its terms, (i) the TRA Amendment will become null and void ab initio (provided that any payment