ONEM 1Life Healthcare Inc

1Life Healthcare, Inc. (One Medical) (Nasdaq: ONEM) today announced financial results for the third quarter ended September 30, 2022.

“Through our human-centered and technology-powered model, we continue to perform, innovate, and grow to delight more members with better health, better care, and lower costs, in a better team environment,” said Amir Dan Rubin, Chair & CEO of One Medical. “Our One Medical model continues to deliver longitudinal care across digital and in-person settings to members of all ages.”

Financial Highlights for the Third Quarter 2022

All comparisons are to the three months ended September 30, 2021. Unless otherwise noted, our results of operations in this press release include the activity of Iora Health, Inc. ("Iora") beginning from the close of our acquisition on September 1, 2021.

• Total membership count as of quarter-end was 815,000 compared to 715,000, a 14% increase; Consumer and Enterprise membership count of 775,000 and At-Risk membership count of 40,000 as of quarter-end.
• Net Revenue was $261.4 million compared to $151.3 million, a 73% increase.
• Medical Claims Expense Ratio was 78%.
• Loss from Operations was $117.3 million, or 45% of Net Revenue; Net Loss was $112.0 million, or 43% of Net Revenue.
• Care Margin was $48.5 million, or 19% of Net Revenue.
• Adjusted EBITDA was a loss of $39.8 million, or 15% of Net Revenue.
• Cash and marketable securities of $267.2 million as of September 30, 2022.

Due to the company's pending transaction with Amazon, One Medical will not be providing guidance for the fourth quarter 2022 and is suspending its financial guidance for the full fiscal year 2022.

In addition, as is customary during the pendency of an acquisition, One Medical will not be hosting a conference call in conjunction with its third quarter 2022 earnings release. For further details and discussion of our financial performance please refer to our quarterly report on Form 10-Q for the quarter ended September 30, 2022.

Key Metrics and Non-GAAP Financial Measures

Members: Members include both Consumer and Enterprise members as well as At-Risk members as defined below. Our number of members depends, in part, on our ability to successfully market our services directly to consumers including Medicare-eligible as well as non-Medicare eligible individuals, to Medicare Advantage health plans and Medicare Advantage enrollees, to employers that are not yet enterprise clients, as well as our activation rate within existing enterprise clients. We define estimated activation rate for any enterprise client at a given time as the percentage of eligible lives enrolled as members. While growth in the number of members is an important indicator of expected revenue growth, it also informs our management of the areas of our business that will require further investment to support expected future member growth. Member numbers as of the end of each period are rounded to the thousands.

Consumer and Enterprise Members: A Consumer and Enterprise member is a person who has registered with us and has paid for membership for a period of at least one year or whose membership has been sponsored by an enterprise or other third party under an agreement having a term of at least one year. Consumer and Enterprise members do not include trial memberships, our virtual only One Medical Now users, or any temporary users. Our number of Consumer and Enterprise members depends, in part, on our ability to successfully market our services directly to consumers and to employers that are not yet enterprise clients and our activation rate within existing clients. Consumer and Enterprise members may include individuals who are: (i) Medicare-eligible and (ii) have paid for a membership or whose membership has been sponsored by an enterprise or other third party. Consumer and Enterprise members do not include any At-Risk members as defined below. Consumer and Enterprise members help drive commercial revenue.

At-Risk Members: An At-Risk member is a person for whom we are responsible for managing a range of healthcare services and associated costs. At-Risk members help drive Medicare revenue.

Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

Medical Claims Expense Ratio: We define Medical Claims Expense Ratio as medical claims expense divided by Capitated Revenue. The nature of our contracting with Medicare Advantage payers and CMS requires us to be financially responsible for a range of healthcare services of our At-Risk members. Our care model focuses on leveraging the primary care setting as a means of reducing unnecessary or avoidable health care costs and balancing our cost of care with the impact of our service levels on medical claims expense. We are liable for potentially large medical claims should we not effectively manage our At-Risk members’ health. We therefore consider the Medical Claims Expense Ratio to be an important measure to monitor our performance. As we sign up new At-Risk members or open new offices to serve these members, our Medical Claims Expense Ratio is likely to increase initially due to a potential increase in medical claims expense from a lag in improvement in health outcomes with member tenure. Similarly, there may be a lag in adequately documenting the health status of our members, resulting in different Capitated Revenue compared to what is indicated by the health status of an At-Risk member. We believe that the Medical Claims Expense Ratio for a given set of At-Risk members can improve over time as we help improve their health outcomes relative to their underlying health conditions, though the ratio may fluctuate for any given customers or cohort of customers depending on future outbreaks or variants of COVID-19 and associated increases in medical claims expense.

Care Margin: We define Care Margin as income or loss from operations excluding depreciation and amortization, general and administrative expense and sales and marketing expense. We consider Care Margin to be an important measure to monitor our performance, specific to the direct costs of delivering care. We believe this margin is useful to both us and investors to measure whether we are effectively pricing our services and managing the health care and associated costs, including medical claims expense and cost of care, of our At-Risk members successfully. We have provided below a reconciliation of historical Care Margin to loss from operations, its most directly comparable GAAP financial measure.

Adjusted EBITDA: We define Adjusted EBITDA as net income or loss excluding interest income, interest and other income (expense), depreciation and amortization, stock-based compensation, provision for (benefit from) income taxes, certain legal or advisory costs, and acquisition and integration costs that we do not consider to be expenses incurred in the normal operation of the business. Such legal or advisory costs may include but are not limited to expenses with respect to evaluating potential business combinations, legal investigations, or settlements. Acquisition and integration costs include expenses incurred in connection with the closing and integration of acquisitions, which may vary significantly and are unique to each acquisition. We started to exclude prospectively from our presentation certain legal or advisory costs from the first quarter of 2021 and acquisition and integration costs from the second quarter of 2021, because amounts incurred in the prior periods were insignificant relative to our consolidated operations. We include Adjusted EBITDA because it is an important measure upon which our management assesses and believes investors should assess our operating performance. We consider Adjusted EBITDA to be an important measure to both management and investors because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We have provided below a reconciliation of historical Adjusted EBITDA to net loss, its most directly comparable GAAP financial measure.

Available Information

One Medical intends to use its Company website (including its Investor Relations website) as well as its Facebook, Twitter and LinkedIn accounts as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Forward-Looking Statements

This press release contains forward-looking statements about us and our industry that involve substantial risks and uncertainties and are based on our beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts contained in this press release, including statements regarding our proposed transactions with Amazon, future results of operations, financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions only as of the date of this press release and information contained in this press release should not be relied upon as representing our estimates as of any subsequent date. These statements, and related risks, uncertainties, factors and assumptions, include, but are not limited to: our ability to consummate the proposed transactions with Amazon in a timely manner or at all and potential delays in consummating such proposed transactions; the satisfaction (or waiver) of closing conditions to the consummation of the proposed transactions with Amazon; timely and successful integration of Iora with our company and our ability to timely and successfully achieve the anticipated benefits and potential synergies of such transaction; the strength of the One Medical brand; member satisfaction with our services and support; the effects of the COVID-19 pandemic, including any new outbreaks and emerging variant strains of the virus, and related self-isolation and quarantine measures on our business, revenue, future growth and results of operations; anticipated membership growth and revenue potential from our members; our ability to retain members; our ability to successfully introduce and drive adoption of new products; changes in the pricing we offer our members; our relationships with our health network partners and enterprise clients and any changes to, accommodations in or terminations of our contracts with the health network partners or enterprise clients; our ability to improve cost of care and margins, including timing and expenses of new office openings and entry into new geographies; our ability to improve our medical claims expense ratio; changes in laws or regulations; our involvement in existing and potential litigation, including medical malpractice claims and consumer class actions; any governmental investigations or inquiries, including those related to COVID-19 vaccine administration or challenges to our relationships with the One Medical PCs under the administrative services agreements; our strategic plan; the impact of new laws and regulations on our industry, including Medicare, general economic and market conditions; our financial outlook; our focus areas for investment and our investments; announcements by us, our health network partners or our competitors of business or strategic developments; and our overall business trajectory. These risks are not exhaustive. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed or will file with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022. These filings, when available, are available on the investor relations section of our website at investor.onemedical.com and on the SEC’s website at www.sec.gov. 

About One Medical

One Medical is a U.S. national human-centered and technology-powered primary care organization with seamless digital health and inviting in-office care, convenient to where people work, shop, live, and click. One Medical’s vision is to delight millions of members with better health and better care while reducing costs, within a better team environment. One Medical’s mission is to transform health care for all through a human-centered, technology-powered model. Headquartered in San Francisco, 1Life Healthcare, Inc. is the administrative and managerial services company for the affiliated One Medical physician-owned professional corporations that deliver medical services in-office and virtually. 1Life and the One Medical entities do business under the "One Medical" brand.

Media Contact:Breanna Shirk, One MedicalExternal Communicationspress@onemedical.com 

Investor Contact:Ken Goff, One MedicalInvestor Relationsinvestor@onemedical.com 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share amounts)(unaudited) 

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net revenue:
Medicare revenue	$	133,291			$	30,462			$	392,307			$	30,462
Commercial revenue		128,078				120,871				379,003				362,639
Total net revenue		261,369				151,333				771,310				393,101
Operating expenses:
Medical claims expense		102,216				26,085				316,082				26,085
Cost of care, exclusive of depreciation and amortization shown separately below		110,654				78,443				318,979				216,457
Sales and marketing (1)		26,382				14,380				72,034				37,639
General and administrative (1)		116,081				93,070				305,539				234,611
Depreciation and amortization		23,314				12,045				65,990				25,944
Total operating expenses		378,647				224,023				1,078,624				540,736
Loss from operations		(117,278	)			(72,690	)			(307,314	)			(147,635	)
Other income (expense), net:
Interest income		630				535				1,151				719
Interest and other income (expense)		76				(4,464	)			(8,725	)			(10,149	)
Total other income (expense), net		706				(3,929	)			(7,574	)			(9,430	)
Loss before income taxes		(116,572	)			(76,619	)			(314,888	)			(157,065	)
Provision for (benefit from) income taxes		(4,535	)			1,984				(18,183	)			2,143
Net loss	$	(112,037	)		$	(78,603	)		$	(296,705	)		$	(159,208	)
Net loss per share — basic and diluted	$	(0.57	)		$	(0.51	)		$	(1.53	)		$	(1.11	)
Weighted average common shares outstanding — basic and diluted		195,624				153,700				194,412				142,990

(1) Includes stock-based compensation, as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Sales and marketing	$	1,706		$	884		$	3,974		$	2,871
General and administrative		36,790			27,650			103,777			78,323
Total	$	38,496		$	28,534		$	107,751		$	81,194

Components of Net Revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net revenue:
Capitated revenue	$	130,811		$	29,872		$	383,962		$	29,872
Fee-for-service and other revenue		2,480			590			8,345			590
Total Medicare revenue		133,291			30,462			392,307			30,462
Partnership revenue		66,173			54,547			190,509			165,604
Net fee-for-service revenue		35,797			44,835			113,051			132,713
Membership revenue		26,108			21,489			75,443			62,559
Grant income		—			—			—			1,763
Total commercial revenue		128,078			120,871			379,003			362,639
Total net revenue	$	261,369		$	151,333		$	771,310		$	393,101

Statements of Operations Data as a Percentage of Net Revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net revenue:
Medicare revenue	51	%		20	%		51	%		8	%
Commercial revenue	49	%		80	%		49	%		92	%
Total net revenue	100	%		100	%		100	%		100	%
Operating expenses:
Medical claims expense	39	%		17	%		41	%		7	%
Cost of care, exclusive of depreciation and amortization shown separately below	42	%		52	%		41	%		55	%
Sales and marketing (1)	10	%		10	%		9	%		10	%
General and administrative (1)	44	%		62	%		40	%		60	%
Depreciation and amortization	9	%		8	%		9	%		7	%
Total operating expenses	145	%		148	%		140	%		138	%
Loss from operations	(45)%			(48)%			(40)%			(38)%
Other income (expense), net:
Interest income	—	%		—	%		—	%		—	%
Interest and other income (expense)	—	%		(3)%			(1)%			(3)%
Total other income (expense), net	—	%		(3)%			(1)%			(2)%
Loss before income taxes	(45)%			(51)%			(41)%			(40)%
Provision for (benefit from) income taxes	(2)%			1	%		(2)%			1	%
Net loss	(43)%			(52)%			(38)%			(41)%

(1) Includes stock-based compensation, as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Sales and marketing	1	%		1	%		1	%		1	%
General and administrative	14	%		18	%		13	%		20	%
Total	15	%		19	%		14	%		21	%

Components of Net Revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net revenue:
Capitated revenue	50	%		20	%		50	%		8	%
Fee-for-service and other revenue	1	%		0.4	%		1	%		0.2	%
Total Medicare revenue	51	%		20	%		51	%		8	%
Partnership revenue	25	%		36	%		25	%		42	%
Net fee-for-service revenue	14	%		30	%		15	%		34	%
Membership revenue	10	%		14	%		10	%		16	%
Grant income	—	%		—	%		—	%		0.4	%
Total commercial revenue	49	%		80	%		49	%		92	%
Total net revenue	100	%		100	%		100	%		100	%

*Percentages may not sum due to rounding.

CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands, except par value amounts)(unaudited)

	September 30,				December 31,
		2022				2021
Assets
Current assets:
Cash and cash equivalents	$	139,506			$	341,971
Short-term marketable securities		127,700				111,671
Accounts receivable, net		189,279				103,498
Inventories		7,772				6,065
Prepaid expenses		28,315				28,055
Other current assets		26,225				21,767
Total current assets		518,797				613,027
Long-term marketable securities		—				48,296
Restricted cash		4,258				3,801
Property and equipment, net		212,128				193,716
Right-of-use assets		277,191				256,293
Intangible assets, net		323,251				352,158
Goodwill		1,157,308				1,147,464
Other assets		9,839				12,277
Total assets	$	2,502,772			$	2,627,032
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	22,843			$	18,725
Accrued expenses		97,284				72,672
Deferred revenue, current		55,330				47,928
Operating lease liabilities, current		38,995				31,152
Other current liabilities		33,226				31,632
Total current liabilities		247,678				202,109
Operating lease liabilities, non-current		295,044				269,641
Convertible senior notes		311,250				309,844
Deferred income taxes		57,241				73,875
Deferred revenue, non-current		23,173				29,317
Other non-current liabilities		11,887				13,663
Total liabilities		946,273				898,449
Commitments and contingencies
Stockholders' Equity:
Common stock, $0.001 par value, 1,000,000 and 1,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; 196,233 and 191,722 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		196				193
Additional paid-in capital		2,472,547				2,346,781
Accumulated deficit		(914,903	)			(618,198	)
Accumulated other comprehensive income		(1,341	)			(193	)
Total stockholders' equity		1,556,499				1,728,583
Total liabilities and stockholders' equity	$	2,502,772			$	2,627,032

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands)(unaudited)

	Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities:
Net loss	$	(296,705	)		$	(159,208	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for bad debts		(346	)			551
Depreciation and amortization		65,990				25,944
Amortization of debt discount and issuance costs		1,406				1,406
Accretion of discounts and amortization of premiums on marketable securities, net		1,025				802
Reduction of operating lease right-of-use assets		24,942				14,312
Stock-based compensation		107,751				81,194
Deferred income taxes		(16,634	)			2,143
Other non-cash items		827				692
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		(85,079	)			(10,639	)
Inventories		(1,682	)			398
Prepaid expenses and other current assets		3,606				(19,833	)
Other assets		1,471				1,293
Accounts payable		7,049				144
Accrued expenses		25,232				31,560
Deferred revenue		877				6,261
Operating lease liabilities		(21,776	)			(14,193	)
Other liabilities		2,364				21,841
Net cash used in operating activities		(179,682	)			(15,332	)
Cash flows from investing activities:
Purchases of property and equipment, net		(54,801	)			(43,893	)
Purchases of marketable securities		(54,906	)			(79,984	)
Proceeds from sales and maturities of marketable securities		85,000				528,965
Acquisitions of businesses, net of cash and restricted cash acquired		(10,360	)			(23,257	)
Issuance of note receivable		—				(30,000	)
Net cash (used in) provided by investing activities		(35,067	)			351,831
Cash flows from financing activities:
Proceeds from the exercise of stock options		10,818				19,463
Proceeds from employee stock purchase plan		1,659				2,972
Payment of principal portion of finance lease liability		(38	)			(43	)
Payment received from acquisition related contingently returnable consideration		500				—
Net cash provided by financing activities		12,939				22,392
Net (decrease) increase in cash, cash equivalents and restricted cash		(201,810	)			358,891
Cash, cash equivalents and restricted cash at beginning of period		346,054				115,005
Cash, cash equivalents and restricted cash at end of period	$	144,244			$	473,896
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses	$	6,690			$	8,860
Equity consideration for business acquisition	$	5,541			$	1,361,955

Select Metrics (As of Period End)

		September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020
Consumer and Enterprise members		775,000		750,000		728,000		703,000		683,000		621,000		598,000		549,000
At-Risk members		40,000		40,000		39,000		33,000		32,000		—		—		—
Offices		214		204		188		182		177		124		110		107

MEDICAL CLAIMS EXPENSE RATIO

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
	(in thousands)
Medical claims expense	$	102,216			$	26,085			$	316,082			$	26,085
Capitated Revenue	$	130,811			$	29,872			$	383,962			$	29,872
Medical Claims Expense Ratio		78	%			87	%			82	%			87	%

RECONCILIATION OF LOSS FROM OPERATIONS TO CARE MARGIN

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
	(in thousands)
Loss from operations	$	(117,278	)		$	(72,690	)		$	(307,314	)		$	(147,635	)
Sales and marketing*		26,382				14,380				72,034				37,639
General and administrative*		116,081				93,070				305,539				234,611
Depreciation and amortization		23,314				12,045				65,990				25,944
Care Margin	$	48,499			$	46,805			$	136,249			$	150,559
Care Margin as a percentage of net revenue		19	%			31	%			18	%			38	%

* Includes stock-based compensation

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
	(in thousands)
Net loss	$	(112,037	)		$	(78,603	)		$	(296,705	)		$	(159,208	)
Interest income		(630	)			(535	)			(1,151	)			(719	)
Interest and other income (expense)		(76	)			4,464				8,725				10,149
Depreciation and amortization		23,314				12,045				65,990				25,944
Stock-based compensation		38,496				28,534				107,751				81,194
Provision for (benefit from) income taxes		(4,535	)			1,984				(18,183	)			2,143
Legal or advisory costs (1)		—				521				547				16,088
Acquisition and integration costs		15,713				25,516				25,792				30,113
Adjusted EBITDA	$	(39,755	)		$	(6,074	)		$	(107,234	)		$	5,704

(1

)

Approximately $5.6 million of the legal or advisory costs relate to a legal settlement during the nine months ended September 30, 2021.