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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 June 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)
800 Connecticut Avenue, Norwalk, CT 06854
(Address of principal executive offices)
(203) 541-4600
(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 July 31, 2022, there were 176,809,527 outstanding shares of Class A common stock, $0.01 par value, and 57,631,046 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)

June 30,December 31,
20222021
ASSETS
Current assets
Cash and cash equivalents$439.4 $678.5 
Accounts receivable, net217.9 217.2 
Contract assets172.6 84.3 
Restricted cash2.3 5.7 
Prepaid expenses and other current assets18.2 14.9 
Total current assets850.41000.6
Property and equipment, net23.423.7 
Goodwill369.7597.1 
Intangible assets, net436.6455.3 
Operating lease right-of-use assets24.8 
Deferred tax assets52.738.8 
Other assets10.411.7 
Total assets$1,768.0 $2,127.2 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses$86.0 $136.7 
Contract liabilities52.5 32.9 
Current maturities of long-term debt3.5 3.5 
Current tax receivable agreement liability5.0  
Other current liabilities15.6 10.0 
Total current liabilities162.6183.1
Long-term debt334.0 334.9 
Contingent consideration35.4  
Customer EAR liability63.6 48.6 
Tax receivable agreement liability51.4 56.3 
Deferred tax liabilities20.5 
Noncurrent operating lease liabilities28.4 
Other noncurrent liabilities1.1 11.4 
Total liabilities697.0634.3
Commitments and Contingencies (Note 19)
Class A common stock, par value $0.01 (176,606,816 and 170,987,365 issued and outstanding at June 30, 2022 and December 31, 2021, respectively)
1.8 1.7 
Class B common stock, par value $0.01 (57,568,959 and 56,838,744 issued and outstanding at June 30, 2022 and December 31, 2021, respectively)
0.6 0.6 
Additional paid-in capital1,165.9 1,101.3 
(Accumulated deficit) Retained earnings(362.1)19.7
Contingently redeemable noncontrolling interest264.8 369.6 
Total stockholders' equity1,071.0 1492.9
Total liabilities and stockholders' equity$1,768.0 $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 June 30,Six months ended June 30,
 2022202120222021
Revenue$246.2 $212.8 $462.7 $392.8 
Operating expenses
Service expense (exclusive of depreciation and amortization shown below)127.7 104.1 242.2 202.6 
Selling, general and administrative expense (exclusive of depreciation and amortization, shown below)84.4 64.9 154.7 122.2 
Transaction-related expenses1.7 1.0 4.9 6.6 
Loss on impairment519.9  519.9  
Depreciation and amortization20.1 17.3 38.1 34.0 
Total operating expenses753.8 187.3 959.8 365.4 
(Loss) income from operations(507.6)25.5 (497.1)27.4 
Interest expense4.6 6.5 8.6 13.3 
Loss on extinguishment of debt 5.0  5.0 
Other (income) expense(27.4)14.3 1.4 71.0 
Other (income) expense, net(22.8)25.8 10.0 89.3 
Loss before income taxes(484.8)(0.3)(507.1)(61.9)
Income tax expense (benefit)5.2 (0.2)(0.8)(10.1)
Net loss$(490.0)$(0.1)$(506.3)$(51.8)
Net loss attributable to pre-Reorganization period— — — (17.2)
Net loss attributable to noncontrolling interest(119.5)(0.1)(124.9)(11.4)
Net loss attributable to Signify Health, Inc.$(370.5)$ $(381.4)$(23.2)
Loss per share of Class A common stock
Basic$(2.10)$ $(2.19)$(0.14)
Diluted$(2.10)$ $(2.19)$(0.14)
Weighted average shares of Class A common stock outstanding
Basic176,350,100 168,003,727 174,565,795 167,145,986 
Diluted176,350,100 168,003,727 174,565,795 167,145,986 
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 March 31, 2022176,232,513 $1.8 57,313,051 $0.6 $1,160.0 $375.1 $8.4 $1,545.9 
Equity-based compensation— — 281,668 — 5.8 9.3 — 15.1 
Vesting of restricted stock units26,120 — (0.1)(0.1)
Proceeds from exercises of stock options179,110 — — — 0.5 0.2 — 0.7 
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— — — — — (0.5)— (0.5)
Exchange of LLC units25,760 — (25,760)— 0.2 (0.2)—  
Issuance of Class A common stock in connection with Caravan Health acquisition, net of tax— — — — (1.8)— — (1.8)
Net loss— — — — — (119.5)(370.5)(490.0)
Balance at June 30, 2022176,606,816 $1.8 57,568,959 $0.6 $1,165.9 $264.8 $(362.1)$1,071.0 



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 March 31, 2021167,967,856 $1.7 57,622,302 $0.6 $1,082.3 $369.6 $(23.2)$1,431.0 
Equity-based compensation subsequent to Reorganization Transactions— — 288,920 — 1.8 1.5 — 3.3 
Proceeds from exercises of stock options55,299 — — — 0.1 — — 0.1 
Tax payments on behalf of non-controlling interest— — — — — (10.4)— (10.4)
Net loss subsequent to Reorganization Transactions— — — — — (0.1)— (0.1)
Balance at June 30, 2021168,023,155 $1.7 57,911,222 $0.6 $1,084.2 $360.6 $(23.2)$1,423.9 








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— — 774,051 — 8.7 13.0 — 21.7 
Vesting of restricted stock units83,771 — — — (0.1)— — (0.1)
Proceeds from exercises of stock options586,397 — — — 1.7 0.6 — 2.3 
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— — — — — (0.8)— (0.8)
Exchange of LLC units43,836 — (43,836)— 0.3 (0.3)—  
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— — — — — (124.9)(381.4)(506.3)
Balance at June 30, 2022176,606,816 $1.8 57,568,959 $0.6 $1,165.9 $264.8 $(362.1)$1,071.0 

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  $  $ $ $ $ $894.0 
Net loss prior to Reorganization Transactions(17.2)— — — — — — — (17.2)
Equity-based compensation prior to Reorganization Transactions0.9 — — — — — — — 0.9 
Impact of Reorganization Transactions and IPO
Initial effect of the Reorganization Transactions and IPO on noncontrolling interests(877.7)140,758,464 1.4 57,613,676 0.6 620.8 254.9 —  
Contribution of New Remedy Corp to Signify Health Inc.— — — — — (26.0)— — (26.0)
Issuance of Class A common stock in IPO, net of issuance costs— 27,025,000 0.3 — — 479.3 125.3 — 604.9 
Deferred tax adjustment related to Reorganization and tax receivable agreement— — — — — 6.3 — — 6.3 
Class B subscription fee receivable — — — — — 0.6 — — 0.6 
Post- IPO activity
Equity-based compensation subsequent to Reorganization Transactions— — — 297,546 — 2.7 2.2 — 4.9 
Proceeds from exercises of stock options— 239,691 — — — 0.5 — — 0.5 
Tax payments on behalf of non-controlling interest— — — — — — (10.4)— (10.4)
Net loss subsequent to Reorganization Transactions— — — — — — (11.4)(23.2)(34.6)
Balance at June 30, 2021$ 168,023,155 $1.7 57,911,222 $0.6 $1,084.2 $360.6 $(23.2)$1,423.9 
See accompanying notes to the condensed consolidated financial statements.
6


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

Six months ended June 30,
20222021
Operating activities
Net loss$(506.3)$(51.8)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 38.1 34.0 
Asset impairment519.9  
Equity-based compensation 21.7 5.8 
Customer equity appreciation rights13.0 9.8 
Remeasurement of customer equity appreciation rights2.0 71.3 
Amortization of deferred financing fees1.1 1.4 
Amortization of right-of-use assets3.5  
Loss on extinguishment of debt 5.0 
Remeasurement of contingent consideration4.9 2.2 
Payment of contingent consideration (1.9)
Deferred income taxes(15.7)(14.3)
Changes in operating assets and liabilities:
Accounts receivable0.9 54.0 
Prepaid expenses and other current assets(1.3)(2.7)
Contract assets(79.2)(30.4)
Other assets1.3 (0.6)
Accounts payable and accrued expenses (51.8)(25.7)
Contract liabilities19.6 13.3 
Other current liabilities(3.4)(1.8)
Noncurrent operating lease liabilities(3.8) 
Other noncurrent liabilities  (1.6)
Net cash (used in) provided by operating activities(35.5)66.0 
Investing activities
Capital expenditures - property and equipment(3.8)(1.9)
Capital expenditures - internal-use software development(14.3)(11.6)
Purchase of long-term investment(0.3) 
Business combinations, net of cash acquired(189.6)(0.4)
Net cash used in investing activities(208.0)(13.9)
Financing activities
Repayment of long-term debt(1.8)(412.5)
Proceeds from issuance of long-term debt 350.0 
Repayments of borrowings under financing agreement(0.3)(0.3)
Payment of contingent consideration  (13.1)
Payment of debt issuance costs (9.2)
Distributions to/on behalf of non-controlling interest members(0.8)(10.4)
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 plans3.9 0.5 
Net cash provided by financing activities1.0 509.9 
(Decrease) increase in cash, cash equivalents and restricted cash(242.5)562.0 
Cash, cash equivalents and restricted cash - beginning of period684.2 77.0 
Cash, cash equivalents and restricted cash - end of period$441.7 $639.0 
Supplemental disclosures of cash flow information
Cash paid for interest$7.3 $12.6 
Cash payments, net of refunds, for taxes15.7 3.7 
Noncash transactions
Capital expenditures not yet paid2.6 0.8 
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 agreement(0.1) 
See accompanying notes to the condensed consolidated financial statements.
7



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. To date, we have operated in two segments of the value-based healthcare payment industry: in-home health evaluations (“IHE”), or the Home & Community Services segment, and payment models based on individual episodes of care, or the Episodes of Care Services segment. IHEs are health evaluations performed by a clinician in the home to support payors’ participation in Medicare Advantage and other government-run managed care plans. Payment models based on individual episodes of care organize or bundle payments for all, or a substantial portion of, services received by a patient in connection with an episode of care, such as a surgical procedure, particular condition or other reason for a hospital stay. 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. With this combination, we now provide a broader range of value-based and shared savings models from advanced primary care to specialty care bundles to total cost of care programs. 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 Services business, as described in Note 24 Subsequent Events.
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.

8



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 June 30, 2022, we owned approximately 75.4% 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 24.6% 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 Services as described in Note 1 Nature of Operations. On July 7, 2022, we announced our plans to exit our Episodes of Care business, as described in Note 24. Subsequent Events.

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.

As of June 30, 2022, the COVID-19 pandemic continues to evolve and impact our Episodes of Care Services segment due to the passage of time between episode initiation and the performance and subsequent recognition of revenue for our services; see Note 3 The COVID-19 Pandemic. As a result, many of our estimates and assumptions
9



Notes to the Condensed Consolidated Financial Statements (unaudited)

have required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in the future.

See Note 6 Revenue Recognition for changes in estimates related to revenue recognition for the BPCI-A program in the second quarter of 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 June 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 June 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. 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.

The following table reconciles cash, cash equivalents, and restricted cash per the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets:
June 30, 2022December 31, 2021
(in millions)
Cash and cash equivalents$439.4 $678.5 
Restricted cash2.3 5.7 
Total cash, cash equivalents, and restricted cash $441.7 $684.2 

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.
10



Notes to the Condensed Consolidated Financial Statements (unaudited)

As of June 30, 2022 and December 31, 2021, we had an allowance for doubtful accounts of $10.1 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 $0.2 million for the three months ended June 30, 2022 and 2021, respectively, and $0.4 million and $0.6 million for the six months ended June 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 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
11



Notes to the Condensed Consolidated Financial Statements (unaudited)

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.The COVID-19 Pandemic

Our operations in our Home & Community Services segment were significantly affected by the COVID-19 pandemic early in 2020. However, as the COVID-19 pandemic has evolved, we have been able to pivot and flex the volume of virtual IHEs (“vIHEs”) if needed, in particular when there are spikes in COVID-19 case rates as new variants emerge, and as a result we have not experienced a material impact to our results of operation in our Home & Community Services segment as a result of the ongoing pandemic since the second quarter of 2020.

Our Episodes of Care Services segment has experienced a prolonged negative impact related to the pandemic. At certain times during the pandemic, governmental authorities recommended, and in certain cases required, that elective, specialty and other procedures and appointments, including certain acute and post-acute care services, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with the COVID-19 virus. In the third quarter of 2020, CMS announced that all episodes with a COVID-19 diagnosis, irrespective of the impact on the outcome of the episode, would be excluded from reconciliations, and this exclusion has extended into 2022, resulting in a negative impact to our program size. Further, beginning with the reconciliation results received from CMS during the second quarter of 2021, we saw a negative impact on our savings rate, primarily related to the under-diagnosis of co-morbidities and the use of higher cost next site of care facilities, both of which drove costs higher and, in turn, lowered our savings rates. Due to the nature of the BPCI-A program, there is a significant lag between when the episodes are initiated and when CMS reconciles those services and we recognize revenue over a 13 month period encompassing both of those points in time. The specific impact of the lower volumes and higher costs on our program size and revenues has resulted in a decline in weighted average program size and savings rates since the COVID-19 pandemic began in 2020.

Due to the passage of time between when we perform our services and the confirmation of results and subsequent cash settlement by CMS, COVID-19 and the aforementioned negative impacts have also negatively impacted our semiannual cash flows related to the BPCI-A program.

We continue to monitor trends related to COVID-19, including the ongoing dynamic created by new variants, changes in CDC recommendations and their impact on results of operations and financial condition on both of our operating segments.
12



Notes to the Condensed Consolidated Financial Statements (unaudited)

4.Business Combinations

Caravan Health Acquisition

On February 9, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Caravan Health, pursuant to which we acquired Caravan Health on March 1, 2022. Caravan Health is a leader in assisting ACOs to excel in population health management and value-based payment programs. The initial purchase price was approximately $250.0 million, subject to certain customary adjustments, and included approximately $190.0 million in cash and approximately $60.0 million in our Class A common stock, comprised of 4,726,134 shares at $12.5993 per share, which represents the volume-weighted average price per share of our common stock for the five trading days ending three business days prior to March 1, 2022. In connection and concurrently with entry into the Merger Agreement, we entered into support agreements with certain shareholders of Caravan Health, pursuant to which such shareholders agreed that, other than according to the terms of its respective support agreement, it will not, subject to certain limited exceptions, transfer, sell or otherwise dispose of any of the Signify shares acquired for a period of up to five years following closing of the merger.

In addition to the initial purchase price, the transaction included contingent additional payments of up to $50.0 million based on certain future performance criteria of Caravan Health, which if conditions are met, may be paid in the second half of 2023. The preliminary fair value of the contingent consideration as of the acquisition date was estimated to be approximately $30.5 million, which was estimated using a Black-Scholes option pricing model. We will remeasure the fair value of the contingent consideration at each reporting date until it is ultimately forfeited or settled. Changes in the estimated fair value compared to the initial estimated fair value at the acquisition date are included in SG&A expense on our Condensed Consolidated Statement of Operations. See Note 13 Fair Value Measurements. Therefore, the total purchase consideration of the transaction was determined to be $287.4 million, which consisted of cash consideration, stock consideration, and potential contingent consideration.

We allocated the purchase price to the identifiable net assets acquired, based on the estimated fair values at the date of acquisition. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities was recorded as goodwill. Goodwill represents the value of the acquired assembled workforce and specialized processes and procedures and operating synergies, none of which qualified as separate intangible assets. All of the goodwill was assigned to our Episodes of Care Services segment. None of the goodwill is expected to be deductible for tax purposes.

We estimated the fair value of intangible assets acquired using estimates of future discounted cash flows to be generated by the business over the expected duration of those cash flows. We based the estimated cash flows on projections of future revenue, operating expenses, capital expenditures, working capital needs and tax rates. We estimated the duration of the cash flows based on the projected useful lives of the assets acquired. The discount rate was determined based on specific business risk, cost of capital and other factors.

The purchase price allocation is preliminary, primarily due to final tax information being pending, and subject to change up to one year after the date of acquisition and could result in changes to the amounts recorded below. The
13



Notes to the Condensed Consolidated Financial Statements (unaudited)

preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of the acquisition was as follows:

Cash$6.8 
Restricted cash0.5 
Accounts receivable1.6 
Contract assets9.1 
Prepaid expenses and other current assets1.7 
Property and equipment0.3 
Intangible assets93.9 
Other assets0.1 
Total identifiable assets acquired114.0 
Accounts payable and accrued liabilities2.9 
Other current liabilities0.6 
Deferred tax liabilities22.4 
Total liabilities assumed25.9 
Net identifiable assets acquired88.1 
Goodwill199.3 
Total of assets acquired and liabilities assumed$287.4 

The $93.9 million of acquired intangible assets consists of customer relationships of $69.8 million (10-year useful life), acquired technology of $23.4 million (5-year useful life) and a tradename of $0.7 million (3-year useful life).

The acquisition was not material to our Condensed Consolidated Statements of Operations. Therefore, pro forma results of operations related to this acquisition have not been presented. The financial results of Caravan Health have been included in our Condensed Consolidated Financial Statements since the date of the acquisition.
5.Variable Interest Entities

We consolidate our affiliates when we are the primary beneficiary. The primary beneficiary of a VIE is the party that has both the decision-making authority to direct the activities that most significantly impact the VIE’s economic performance and the right to absorb losses or receive benefits that could potentially be significant to the VIE.

Consolidated VIEs at June 30, 2022 and December 31, 2021 include seven physician practices that require an individual physician to legally own the equity interests as certain state laws and regulations prohibit non-physician owned business entities from practicing medicine or employing licensed healthcare providers. We have determined we are the primary beneficiary of these VIEs as we have the obligation to absorb the losses from and direct activities of these operations. As a result, these VIEs are consolidated and any non-controlling interest is not presented. Recourse of creditors to these VIEs is limited to the assets of the VIE entities, which totaled $31.9 million and $25.2 million at June 30, 2022 and December 31, 2021, respectively.

14



Notes to the Condensed Consolidated Financial Statements (unaudited)

The carrying amount and classification of the VIEs’ assets and liabilities included in the Condensed Consolidated Balance Sheets, net of intercompany amounts, are as follows:

June 30, 2022December 31, 2021
(in millions)
ASSETS
Current assets
Cash and cash equivalents$6.7 $10.6 
Accounts receivable, net 25.2 14.6 
Total current assets31.9 25.2 
Total assets$31.9 $25.2 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses$ $3.4 
Contract liabilities0.6  
Total current liabilities0.6 3.4 
Total liabilities0.6 3.4 
Company capital40.2 29.3 
Accumulated deficit(8.9)(7.5)
Total equity31.3 21.8 
Total liabilities and equity$31.9 $