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Oak Street Health Reports First Quarter 2021 Financial Results

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Oak Street Health, Inc. (NYSE: OSH, or the "Company"), a network of value-based primary care centers for adults on Medicare, today reported financial results for its quarter ended March 31, 2021.

"We were pleased with another strong quarter of results. Most importantly, we are proud of the impact we made on our patients and our communities, including continuing to provide them with outstanding care while also administering over 150,000 vaccine doses, predominantly to older adults from underserved communities," said Mike Pykosz, Chief Executive Officer of Oak Street Health. "In the first quarter we generated revenue growth of 47%. Our execution was further highlighted by the opening of seven new centers, including four new markets, during the quarter. As of March 31, we operated 86 clinics across 20 markets in 13 states. Our patient growth in the first quarter demonstrated the continued demand for Oak Street Health’s innovative model in all our markets. We are encouraged by our early traction with the CMS Direct Contracting program as we enrolled approximately 6,500 participants for the April 1st launch and are optimistic about the opportunity this program represents over the coming years. We remain committed to our mission and are excited about our growth opportunities."

First Quarter 2021 Financial Highlights

  • Total revenue was $296.7 million, up 47% year over year

  • Capitated revenue totaled $291.2 million, up 48% year over year

  • The Company cared for approximately 75,500 risk-based patients, representing 69% of its total patients

  • Loss from operations1 was ($63.8) million, compared to ($13.0) million in the first quarter of 2020

  • Platform contribution2 was $36.7 million, up 43% year over year

  • Net loss was ($64.0)1 million, compared to ($15.4) million in the first quarter of 2020

  • Adjusted EBITDA3 was ($17.4) million, compared to ($8.7) million in the first quarter of 2020

  • As of March 31, 2021, the Company operated 86 centers, compared to 54 centers as of March 31, 2020

__________________

(1)

Includes stock based and unit-based compensation of $42.3 million and $1.8 million as of the first quarter of 2021 and 2020, respectively. The majority of the increase is due to the modification of vesting terms related to the equity converted as part of the IPO and not incremental grants of equity.

(2)

Platform contribution is a non-GAAP financial measure that is presented as supplemental disclosure, defined as total revenues less the sum of (i) medical claims expense and (ii) cost of care, excluding depreciation and amortization. This measure is reconciled to loss from operations as the most directly comparable GAAP measure as set forth in the accompanying "Platform Contribution Reconciliation" section.

(3)

Adjusted EBITDA is a non-GAAP financial measure that is presented as supplemental disclosure and is reconciled to net loss as the most directly comparable GAAP measure as set forth in the accompanying "Adjusted EBITDA Reconciliation" section. We define adjusted EBITDA as net loss, excluding other income (expense), taxes, depreciation and amortization, stock-based and unit-based compensation and transaction/ offering related costs.

Outlook for Second Quarter and Fiscal Year 2021

Three Months Ending

Twelve Months Ending

June 30, 2021

December 31, 2021

Low

High

Low

High

(dollars in millions)

Centers

93

94

117

121

At risk patients

86,000

87,500

107,000

112,000

Revenue

$315

$320

$1,300

$1,340

Adjusted EBITDA

($40)

($35)

($205)

($165)

We have not reconciled guidance for Adjusted EBITDA to net loss, the most directly comparable GAAP measure, and have not provided forward-looking guidance for net loss, because of the uncertainty around certain items that may impact net loss, including stock- based and unit-based compensation, that are not within our control or cannot be reasonably predicted. However, for fiscal year 2021, depreciation and amortization is expected to be $15.0 million.

Webcast and Conference Call

The Company will conduct a conference call Tuesday, May 11, 2021 at 8:00 AM Eastern Time to discuss these results and management’s outlook for future financial and operational performance. The conference call can be accessed by webcast or by dialing (833) 529-0224 for U.S. participants, or +1 (236) 389-2153 for international participants, and referencing participant code 6951068. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call at https://investors.oakstreethealth.com.

About Oak Street Health

Founded in 2012, Oak Street Health is a network of value-based primary care centers for adults on Medicare. With a mission of rebuilding healthcare as it should be, the company operates an innovative healthcare model focused on quality of care over volume of services, and assumes the full financial risk of its patients. Oak Street Health currently operates more than 80 centers across 13 states. To learn more about Oak Street Health’s proven approach to care, visit oakstreethealth.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding our future growth and our financial outlook for the second quarter and fiscal year 2021. Forward-looking statements are subject to risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance.

Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) changes in laws and regulations applicable to our business model; (ii) changes in market or industry conditions, regulatory environment and receptivity to our technology and services; (iii) results of litigation or a security incident; (iv) the loss of one or more key customers or partners; (v) the impact of COVID-19 on our business and results of operation; and (vi) changes to our abilities to recruit and retain qualified team members. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to the final Registration Statement filed with the SEC on August 5, 2020 and the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 10, 2021. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

Condensed Consolidated Balance Sheets

(in millions)

As of
March 31, 2021
(unaudited)

As of
December 31, 2020

Assets

Current assets:

Cash

$

1,146.4

$

409.3

Restricted cash

10.4

10.4

Other patient receivables, net

1.1

7.6

Capitated accounts receivable

293.6

248.9

Prepaid expenses

6.0

6.8

Other current assets

5.1

4.2

Total current assets

1,462.6

687.2

Long-term assets:

Property and equipment, net

84.1

78.8

Security deposits

1.4

1.3

Operating lease right-of-use assets

112.6

-

Goodwill

11.4

9.6

Intangible assets, net

2.9

3.0

Other long-term assets

1.0

1.1

Total assets

$

1,676.0

$

781.0

LIABILITIES AND STOCKHOLDERS' EQUITY/MEMBERS' EQUITY

Current liabilities:

Accounts payable

$

11.5

$

8.8

Accrued compensation and benefits

39.2

32.0

Liability for unpaid claims

274.6

262.1

Other liabilities

30.3

12.6

Current portion of long-term debt

-

-

Total current liabilities

355.6

315.5

Long-term liabilities:

Long-term operating lease liabilities

118.3

-

Deferred rent expense

-

13.5

Other long-term liabilities

26.0

28.8

Long-term debt, net of current portion

898.1

-

Total liabilities

1,398.0

357.8

Stockholders' equity/members' deficit:

Members' capital

-

-

Common stock

0.2

0.2

Additional paid-in capital

891.7

971.8

Accumulated deficit

(619.2

)

(555.8

)

Total stockholders' equity/members' deficit allocated to the Company

272.7

416.2

Non-controlling interests

5.3

7.0

Total stockholders' equity/members' deficit

278.0

423.2

Total liabilities and stockholders' equity/members' deficit

$

1,676.0

$

781.0

Condensed Consolidated Statements of Operations

(in millions, except per share data)

Three Months Ended
(unaudited)

March 31,
2021

March 31,
2020

Revenues

Capitated revenue

$

291.2

$

196.6

Other patient service revenue

5.5

5.2

Total revenues

296.7

201.8

Operating expenses

Medical claims expense

199.7

132.3

Cost of care, excluding depreciation and amortization

60.3

43.8

Sales and marketing

24.1

11.9

Corporate, general and administrative expenses

73.1

24.3

Depreciation and amortization

3.3

2.5

Total operating expenses

360.5

214.8

Loss from operations

(63.8

)

(13.0

)

Other (expense)/ income

Interest expense, net

(0.2

)

(2.5

)

Other

-

0.1

Total other (expense)/ income, net

(0.2

)

(2.4

)

Net loss

(64.0

)

(15.4

)

Net loss attributable to non-controlling interests

0.6

0.4

Net loss attributable to the Company

$

(63.4

)

$

(15.0

)

Undeclared and deemed dividends

$

-

$

(9.6

)

Net loss attributable to common stock/unitholders

(63.4

)

(24.6

)

Weighted average common stock outstanding - basic and diluted

220,736,845

N/A

Net loss per share – basic and diluted

$

(0.29

)

N/A

Condensed Consolidated Statements of Cash Flows

(in millions, unaudited)

Three Months Ended

March 31,
2021

March 31,
2020

Cash flows from operating activities:

Net loss

$

(64.0

)

$

(15.4

)

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of discount on debt and related issuance costs

0.2

0.4

Depreciation and amortization

3.3

2.5

Non-cash operating lease costs

3.5

-

Stock and unit-based compensation, net of forfeitures

42.3

1.8

Change in fair value of bifurcated derivative

-

(0.1

)

Change in operating assets and liabilities, net of impact of acquisitions:

Accounts receivable

(38.2

)

(58.3

)

Prepaid expenses and other current assets

(1.0

)

3.7

Security deposits and other long-term assets

0.1

0.1

Accounts payable

1.7

(0.3

)

Accrued compensation and benefits

7.2

(13.0

)

Liability for unpaid claims

12.5

41.0

Operating lease liabilities

(3.0

)

-

Other current liabilities

4.3

0.2

Other long-term liabilities

2.3

0.4

Deferred rent expense

-

0.1

Net cash used in operating activities

(28.8

)

(36.9

)

Cash flows from investing activities:

Purchase of business

(1.0

)

-

Purchases of property and equipment

(7.8

)

(3.4

)

Net cash used in investing activities

(8.8

)

(3.4

)

Cash flows from financing activities:

Proceeds from borrowings on convertible senior notes, net

898.2

-

Purchase of capped calls

(123.6

)

-

Proceeds from issuance of redeemable investor units

-

224.4

Capital distributions to minority interest partners

(1.1

)

-

Proceeds from exercise of options

1.2

-

Net cash provided by financing activities

774.7

224.4

Net change in cash, cash equivalents and restricted cash

737.1

184.1

Cash, cash equivalents and restricted cash, beginning of period

419.7

42.3

Cash, cash equivalents and restricted cash, end of period

$

1,156.8

$

226.4

Non-GAAP Financial Measures

Certain of these financial measures are considered "non-GAAP" financial measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC. We believe that non-GAAP financial measures provide an additional way of viewing aspects of our operations that, when viewed with the GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business. These non-GAAP financial measures are also used by our management to evaluate financial results and to plan and forecast future periods. However, non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may differ from the non-GAAP measures used by other companies, including our competitors. To supplement our consolidated financial statements presented on a GAAP basis, we disclose the following Non-GAAP measures: patient contribution, platform contribution and Adjusted EBITDA as these are performance measures that our management uses to assess our operating performance. Because patient contribution, platform contribution and Adjusted EBITDA facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes and in evaluating acquisition opportunities.

Patient Contribution Reconciliation

Patient Contribution is a non-GAAP financial measure that we define as capitated revenue less medical claims expense. The following is a reconciliation of our loss from operations, the most directly comparable GAAP financial measure, to Patient Contribution, for the three months ended March 31, 2021 and 2020.

Three Months Ended

(dollars in thousands), (unaudited)

March 31,
2021

March 31,
2020

Loss from operations

$

(63.8

)

$

(13.0

)

Other patient service revenue

(5.5

)

(5.2

)

Cost of care, excluding depreciation and amortization

60.3

43.8

Sales and marketing

24.1

11.9

Corporate, general and administrative expenses

73.1

24.3

Depreciation and amortization

3.3

2.5

Patient contribution

$

91.5

$

64.3

Platform Contribution Reconciliation

Platform Contribution is a non-GAAP financial measure that we define as total revenues less the sum of medical claims expense and cost of care, excluding depreciation and amortization. The following is a reconciliation of our loss from operations, the most directly comparable GAAP financial measure, to Platform Contribution, for the three months ended March 31, 2021 and 2020.

Three Months Ended

(dollars in thousands), (unaudited)

March 31, 2021

March 31, 2020

Loss from operations

$

(63.8

)

$

(13.0

)

Depreciation and amortization

3.3

2.5

Corporate, general and administrative

73.1

24.3

Sales and marketing

24.1

11.9

Platform contribution

$

36.7

$

25.7

Adjusted EBITDA Reconciliation

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net loss adjusted to exclude (i) stock and unit-based compensation expense, (ii) depreciation and amortization, (iii) other income, net and (iv) transaction and offering costs. Our management team uses Adjusted EBITDA as a performance measure in order to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes and in evaluating acquisition opportunities. The following is a reconciliation of our net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA, for the three months ended March 31, 2021 and 2020.

Three Months Ended

(dollars in thousands), (unaudited)

March 31,
2021

March 31,
2020

Net loss

$

(64.0

)

$

(15.4

)

Interest expense and other income

0.2

2.4

Depreciation and amortization

3.3

2.5

Stock and unit-based compensation

42.3

1.8

Transaction / offering related costs

0.8

-

Adjusted EBITDA

$

(17.4

)

$

(8.7

)

Source: Oak Street Health

View source version on businesswire.com: https://www.businesswire.com/news/home/20210510005799/en/

Contacts

Media:
Erica Frank
Vice President of Public Relations
(330) 990-5026
Erica.Frank@oakstreethealth.com

Investors:
Kevin Ellich
(443) 450-4186
kevin.ellich@westwicke.com