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Bright Health Group Reports Second Quarter 2023 Results

  • Q2’23 Revenue from Continuing Business of $298.0 million, up 100% year over year
  • Value-Based Consumers served of 371,000, an increase of 214% on a comparable basis from last year on strong growth in Care Delivery
  • Q2’23 Net Loss from Continuing Business of $31.7 million; Positive Adjusted EBITDA of $6.4 million in Q2’23, positive Operating Income in Care Delivery and Care Solutions segments
  • Maintaining expectation for 2023 consolidated Adjusted EBITDA profitability

Bright Health Group, Inc. (“Bright Health” or the “Company”) (NYSE: BHG), the technology enabled, value-driven healthcare company serving aging and underserved consumers with unmet clinical needs, today reported financial results for its second quarter ended June 30, 2023.

“Bright Health showed continued strong performance in the Second Quarter, including reporting our first quarter with positive Adjusted EBITDA. Our Care Delivery and Care Solutions operating segments both performed well, with each generating positive Operating Income in the quarter,” said Mike Mikan, President and CEO of Bright Health. “Additionally, we expect the sale of our California Medicare Advantage announced at the end of the Second Quarter will bolster our Balance Sheet to continue on our path to long-term profitable growth.”

Key Metrics

 

As of June 30,

 

2023

 

2022

Consumer and Patient Metrics

 

 

 

Value-Based Consumers served1

371,000

 

118,000

1The value-based care consumers at June 30, 2022 have been recast for comparability to exclude approximately 384,000 consumers attributable to our Bright HealthCare- Commercial business that we exited beginning in 2023.

 

Three Months Ended

 

Six Months Ended

($ in thousands)

June 30

 

June 30

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Financial Metrics

 

 

 

 

 

 

 

Revenue

$

297,982

 

 

$

149,340

 

 

$

598,532

 

$

330,104

 

Net Loss from Continuing Operations

$

(31,692

)

 

$

(74,762

)

 

$

(85,610

)

$

(196,340

)

Adjusted EBITDA (non-GAAP)

$

6,413

 

 

$

(23,277

)

 

$

670

 

 

$

(44,758

)

See the table at the end of this release for additional information and a reconciliation of the non-GAAP measures used in the table above.

Financial Outlook

For full year 2023, Bright Health is providing the following guidance and commentary:

Bright Health is revising its 2023 financial outlook to reflect the movement of our California Medicare Advantage business to Held for Sale accounting.

  • Bright Health’s Enterprise Revenue is expected to be between $1.15 billion and $1.2 billion
  • On a segment basis, Care Solutions Revenue is expected to be between $900 million and $925 million, while Care Delivery Revenue is expected to be between $250 million and $275 million
  • Enterprise Adjusted Operating Cost Ratio is expected to be between 17.5% and 18.5%
  • Bright Health expects to be Adjusted EBITDA profitable in 2023

Reconciliations of projected Adjusted EBITDA and projected Adjusted Operating Cost Ratio to the most directly comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. With respect to Adjusted EBITDA, these GAAP measures may include the impact of such items as interest expense, income tax expense, transaction costs, depreciation and amortization, share-based compensation expense, impairment of goodwill or intangible assets, restructuring costs, contract termination costs, changes in the fair value of contingent consideration, changes in the fair value of equity securities; and the tax effect of all such items. Historically, the Company has excluded these items from non-GAAP financial measures. With respect to Adjusted Operating Cost Ratio, these GAAP measures may include the impact of such items as share-based compensation and the impact of investment income. The Company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments, such as a decision to exit part of the business, are inherently unpredictable as to if or when they may occur. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

Earnings Conference Call

As previously announced, Bright Health Group will discuss the Company’s results, strategy, and outlook on a conference call with investors at 8:00 a.m. Eastern Time today. Bright Health Group will host a live webcast of this conference call which can be accessed from the Investor Relations page of the company’s website (investors.brighthealthgroup.com). Following the call, a webcast replay will be available on the same site. This earnings release and the Form 8-K filed August 9, 2023 can be accessed on the Investor Relations page of the Company’s website. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website. Accordingly, investors should monitor this portion of our website, in addition to following our press releases, U.S. Securities and Exchange Commission (“SEC”) filings and public conference calls and webcasts.

About Bright Health Group

Bright Health Group is a technology enabled, value-driven healthcare company that organizes and operates networks of affiliate care providers to be successful at managing population risk. We focus on serving aging and underserved consumers that have unmet clinical needs through our Fully Aligned Care Model in Florida, Texas and California, some of the largest markets in healthcare where 26% of the U.S. aging population call home. We believe everyone should have access to personal, affordable, and high-quality healthcare. Our mission is to Make healthcare right. Together. For more information, visit www.brighthealthgroup.com.

Forward-Looking Statements

Statements made in this release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipate,” “expect,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “projections,” “outlook,” “ensure,” and other similar expressions. These forward-looking statements include any statements regarding our plans and expectations with respect to Bright Health Group, Inc. Such forward-looking statements are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Factors that might materially affect such forward-looking statements include: our ability to continue as a going concern; our ability to comply with the terms of our credit facilities, including financial covenants, both during and after any applicable waiver period, and/or obtain any additional waivers of any terms of our credit facilities to the extent required; our ability to sell our Medicare Advantage business in California on acceptable terms, including our ability to receive the proceeds thereof in a manner that would alleviate our current financial position; the failure to satisfy or obtain any waiver, if applicable, of any closing condition in our agreement to sell our Medicare Advantage business in California to Molina (the “Purchase Agreement”); our ability to comply with the terms of the Purchase Agreement; whether our new credit facility will satisfy our working capital needs pending the closing of our sale of our Medicare Advantage business in California; our ability to obtain any additional short or long term debt or equity financing needed to operate our business; our ability to quickly and efficiently wind down our IFP businesses and MA businesses outside of California, including by satisfying liabilities of those businesses when due and payable; ; potential disruptions to our business due to our corporate restructuring and resulting headcount reduction; our ability to accurately estimate and effectively manage the costs relating to changes in our businesses offerings and models; a delay or inability to withdraw regulated capital from our subsidiaries; a lack of acceptance or slow adoption of our business model; our ability to retain existing consumers and add new consumers; our and our Care Partner’s abilities to obtain and accurately assess, code, and report risk adjustment factor scores; our ability to contract with care providers and arrange for the provision of quality care; our ability to accurately estimate our medical expenses, effectively manage our costs and claims liabilities or appropriately price our products and charge premiums; our ability to obtain claims information timely and accurately; the impact of the ongoing COVID-19 pandemic on our business and results of operations; the risks associated with our reliance on third-party providers to operate our business; the impact of modifications or changes to the U.S. health insurance markets; our ability to manage the growth of our business; our ability to operate, update or implement our technology platform and other information technology systems; our ability to retain key executives; our ability to successfully pursue acquisitions and integrate acquired businesses; the occurrence of severe weather events, catastrophic health events, natural or man-made disasters, and social and political conditions or civil unrest; our ability to prevent and contain data security incidents and the impact of data security incidents on our members, patients, employees and financial results; our ability to comply with requirements to maintain effective internal controls; our ability to adapt to the new risks associated with our expansion into ACO REACH; and the other factors set forth under the heading “Risk Factors” in the Company’s reports on Form 10-K, Form 10-Q, and Form 8-K (including all amendments to those reports) and our other filings with the SEC. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or changes in our expectations.

Bright Health Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

June 30,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

107,660

 

 

$

217,006

 

Short-term investments

$

156

 

 

 

869

 

Accounts receivable, net of allowance of $7,653 and $6,098, respectively

$

27,633

 

 

 

19,576

 

ACO REACH performance year receivable

$

623,609

 

 

 

99,181

 

Current assets of discontinued operations (Note 14)

$

3,030,870

 

 

 

3,187,464

 

Prepaids and other current assets

 

61,198

 

 

 

46,538

 

Total current assets

 

3,851,126

 

 

 

3,570,634

 

Other assets:

 

 

Long-term investments

$

344

 

 

 

5,401

 

Property, equipment and capitalized software, net

$

18,474

 

 

 

21,298

 

Goodwill

$

401,385

 

 

 

401,385

 

Intangible assets, net

$

99,084

 

 

 

104,952

 

Long-term assets of discontinued operations (Note 14)

$

 

 

 

529,117

 

Other non-current assets

 

22,740

 

 

 

32,265

 

Total other assets

 

542,027

 

 

 

1,094,418

 

Total assets

$

4,393,153

 

 

$

4,665,052

 

Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)

 

 

Current liabilities:

 

 

Medical costs payable

$

179,855

 

 

$

116,021

 

Accounts payable

$

18,476

 

 

 

18,714

 

ACO REACH performance year obligation

$

474,700

 

 

 

 

Short-term borrowings

$

303,947

 

 

 

303,947

 

Current liabilities of discontinued operations (Note 14)

$

2,584,890

 

 

 

3,157,236

 

Other current liabilities

 

73,221

 

 

 

97,241

 

Total current liabilities

 

3,635,089

 

 

 

3,693,159

 

Other liabilities

 

28,792

 

 

 

32,208

 

Total liabilities

 

3,663,881

 

 

 

3,725,367

 

Commitments and contingencies (Note 9)

 

Redeemable noncontrolling interests

$

244,561

 

 

 

219,758

 

Redeemable Series A preferred stock, $0.0001 par value;750,000 shares authorized in 2023 and 2022; 750,000 shares issued and outstanding in 2023 and 2022

$

747,481

 

 

 

747,481

 

Redeemable Series B preferred stock, $0.0001 par value; 175,000 shares authorized in 2023 and 2022; 175,000 shares issued and outstanding in 2023 and 2022

$

172,936

 

 

 

172,936

 

Shareholders’ equity (deficit):

 

 

 

Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2023 and 2022; 7,972,033 and 7,878,394 shares issued and outstanding in 2023 and 2022*, respectively

$

1

 

 

 

1

 

Additional paid-in capital

$

3,021,430

 

 

 

2,972,333

 

Accumulated deficit

$

(3,444,238

)

 

 

(3,156,395

)

Accumulated other comprehensive loss

$

(899

)

 

 

(4,429

)

Treasury Stock, at cost, 31,526 shares at June 30, 2023, and December 31, 2022*, respectively

 

(12,000

)

 

 

(12,000

)

Total shareholders’ equity (deficit)

 

(435,706

)

 

 

(200,490

)

Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)

$

4,393,153

 

 

$

4,665,052

 

*Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 80 reverse stock split

Bright Health Group, Inc. and Subsidiaries

Consolidated Statements of Income (Loss)

(in thousands, except share and per share data)

(Unaudited)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue:

 

 

 

 

 

Capitated revenue

$

49,764

 

 

$

17,641

 

 

$

99,312

 

 

$

46,289

 

ACO REACH revenue

 

236,994

 

 

 

137,205

 

 

 

476,801

 

 

 

320,002

 

Service revenue

 

11,222

 

 

 

10,732

 

 

 

22,409

 

 

 

20,962

 

Investment income (loss)

 

2

 

 

 

(16,238

)

 

 

10

 

 

 

(57,149

)

Total revenue

 

297,982

 

 

 

149,340

 

 

 

598,532

 

 

 

330,104

 

Operating expenses:

 

 

 

 

Medical costs

 

245,160

 

 

 

130,793

 

 

 

505,280

 

 

 

310,249

 

Operating costs

 

70,280

 

 

 

78,997

 

 

 

149,798

 

 

 

175,785

 

Restructuring charges

 

1,285

 

 

 

2,793

 

 

 

1,586

 

 

 

9,657

 

Depreciation and amortization

 

4,671

 

 

 

8,276

 

 

 

10,154

 

 

 

16,336

 

Total operating expenses

 

321,396

 

 

 

220,859

 

 

 

666,818

 

 

 

512,027

 

Operating loss

 

(23,414

)

 

 

(71,519

)

 

 

(68,286

)

 

 

(181,923

)

Interest expense

 

9,170

 

 

 

337

 

 

 

16,957

 

 

 

1,530

 

Other income

 

 

 

 

2

 

 

 

 

 

 

2

 

Loss from continuing operations before income taxes

 

(32,584

)

 

 

(71,858

)

 

 

(85,243

)

 

 

(183,455

)

Income tax expense

 

(892

)

 

 

2,904

 

 

 

367

 

 

 

12,885

 

Net loss from continuing operations

 

(31,692

)

 

 

(74,762

)

 

 

(85,610

)

 

 

(196,340

)

Loss from discontinued operations, net of tax (Note 14)

 

(56,935

)

 

 

(176,568

)

 

 

(172,478

)

 

 

(235,619

)

Net Loss

 

(88,627

)

 

 

(251,330

)

 

 

(258,088

)

 

 

(431,959

)

Net earnings from continuing operations attributable to noncontrolling interests

 

(24,205

)

 

 

(23,336

)

 

 

(29,755

)

 

 

(37,941

)

Series A preferred stock dividend accrued

 

(9,942

)

 

 

(9,461

)

 

 

(19,656

)

 

 

(18,399

)

Series B preferred stock dividend accrued

 

(2,231

)

 

 

 

 

 

(4,411

)

 

 

 

Net loss attributable to Bright Health Group, Inc. common shareholders

$

(125,005

)

 

$

(284,127

)

 

$

(311,910

)

 

$

(488,299

)

 

 

 

 

 

 

 

 

Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders

 

 

 

 

 

 

 

Continuing operations

$

(8.55

)

 

$

(13.68

)

 

$

(17.59

)

 

$

(32.14

)

Discontinued operations

 

(7.15

)

 

 

(22.45

)

 

 

(21.76

)

 

 

(29.97

)

Basic and diluted loss per share

 

(15.70

)

 

 

(36.13

)

 

 

(39.35

)

 

 

(62.11

)

 

 

 

 

 

 

 

 

Basic and diluted weighted-average common shares outstanding*

 

7,962

 

 

 

7,865

 

 

 

7,928

 

 

 

7,862

 

*Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 80 reverse stock split

Bright Health Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Six Months Ended June 30,

 

2023

 

 

 

2022

 

Cash flows from operating activities:

Net loss

$

(258,088

)

 

$

(431,959

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

16,026

 

 

 

26,270

 

Impairment of intangible assets

 

 

 

 

6,720

 

Share-based compensation

 

49,095

 

 

 

53,141

 

Deferred income taxes

 

873

 

 

 

1,154

 

Unrealized loss on equity securities

 

 

 

 

57,151

 

Amortization of investments

 

(14,173

)

 

 

2,748

 

Other, net

 

3,891

 

 

 

1,834

 

Changes in assets and liabilities, net of acquired assets and liabilities:

 

 

 

Accounts receivable

 

6,284

 

 

 

(31,404

)

ACO REACH performance year receivable

 

(524,428

)

 

 

(396,104

)

Other assets

 

57,846

 

 

 

(60,991

)

Medical cost payable

 

(567,932

)

 

 

231,899

 

Risk adjustment payable

 

10,925

 

 

 

916,713

 

Accounts payable and other liabilities

 

(111,174

)

 

 

35,312

 

Unearned revenue

 

132,129

 

 

 

3,577

 

ACO REACH performance year obligation

 

474,700

 

 

 

310,603

 

Net cash (used in) provided by operating activities

 

(724,026

)

 

 

726,664

 

Cash flows from investing activities:

 

 

 

Purchases of investments

 

(828,546

)

 

 

(1,140,896

)

Proceeds from sales, paydown, and maturities of investments

 

988,749

 

 

 

204,775

 

Purchases of property and equipment

 

(2,394

)

 

 

(15,154

)

Business divestitures, net of cash disposed of

 

(682

)

 

 

 

Business acquisitions, net of cash acquired

 

 

 

 

(310

)

Net cash provided by (used in) investing activities

 

157,127

 

 

 

(951,585

)

Cash flows from financing activities:

 

 

Repayments of short-term borrowings

 

 

 

 

(155,000

)

Proceeds from issuance of preferred stock

 

 

 

 

747,481

 

Proceeds from issuance of common stock

 

2

 

 

 

672

 

Distributions to noncontrolling interest holders

 

(4,952

)

 

 

(1,894

)

Net cash (used in) provided by financing activities

 

(4,950

)

 

 

591,259

 

Net increase (decrease) in cash and cash equivalents

 

(571,849

)

 

 

366,338

 

Cash and cash equivalents – beginning of year

 

1,932,290

 

 

 

1,061,179

 

Cash and cash equivalents – end of period

$

1,360,441

 

 

$

1,427,517

 

Supplemental disclosures of cash flow information:

 

 

 

Changes in unrealized loss on available-for-sale securities in OCI

$

3,530

 

 

$

(47,051

)

Cash paid for interest

 

7,700

 

 

 

1,168

 

Bright Health Group, Inc. and Subsidiaries

Segment Information

(in thousands)

(Unaudited)

Care Delivery

 

 

 

 

 

 

 

($ in thousands)

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Statement of income (loss) and operating data:

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

Capitated revenue

$

49,764

 

$

17,641

 

 

$

99,312

 

$

46,289

 

Service revenue

 

10,530

 

 

10,691

 

 

 

21,466

 

 

20,910

 

Total unaffiliated revenue

 

60,294

 

 

28,332

 

 

 

120,778

 

 

67,199

 

Affiliated revenue

 

5,774

 

 

204,271

 

 

 

7,969

 

 

572,391

 

Total segment revenue

 

66,068

 

 

232,603

 

 

 

128,747

 

 

639,590

 

Operating expenses

 

 

 

 

 

 

 

Medical Costs

 

19,720

 

 

194,531

 

 

 

43,442

 

 

585,998

 

Operating Costs

 

32,139

 

 

32,401

 

 

 

61,328

 

 

63,596

 

Depreciation and amortization

 

3,178

 

 

6,369

 

 

 

6,310

 

 

12,745

 

Total operating expenses

 

55,037

 

 

233,301

 

 

 

111,080

 

 

662,339

 

Operating Income (Loss)

$

11,031

 

$

(698

)

 

$

17,667

 

$

(22,749

)

Care Solutions

 

 

 

 

 

 

 

($ in thousands)

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Statement of income (loss) and operating data:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

ACO REACH Revenue

 

236,994

 

 

137,205

 

 

476,801

 

 

320,002

Service revenue

 

692

 

 

41

 

 

943

 

 

52

Total segment revenue

 

237,686

 

 

137,246

 

 

477,744

 

 

320,054

Operating expenses

 

 

 

 

 

 

 

Medical Costs

 

231,279

 

 

134,274

 

 

469,874

 

 

310,908

Operating Costs

 

3,411

 

 

2,147

 

 

6,383

 

 

4,157

Total operating expenses

 

234,690

 

 

136,421

 

 

476,257

 

 

315,065

Operating Income

$

2,996

 

$

825

 

$

1,487

 

$

4,989

Bright Health Group, Inc. and Subsidiaries

Historical Financials

Recast Income Statement(1)

(in thousands)

($ in thousands)

 

 

 

 

 

Three Months Ended

 

 

Year Ended

Consolidated Statements of Income (loss) and operating data:

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

December 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

Capitated revenue

$

28,648

 

 

$

17,641

 

 

$

33,006

 

 

$

33,609

 

 

 

$

112,904

 

ACO REACH revenue

 

182,797

 

 

 

137,205

 

 

 

145,433

 

 

 

188,652

 

 

 

 

654,087

 

Service revenue

 

10,230

 

 

 

10,732

 

 

 

10,076

 

 

 

8,563

 

 

 

 

39,601

 

Investment income (loss)

 

(40,911

)

 

 

(16,238

)

 

 

4,848

 

 

 

(3,128

)

 

 

 

(55,429

)

Total revenue

 

180,764

 

 

 

149,340

 

 

 

193,363

 

 

 

227,696

 

 

 

 

751,163

 

Operating costs

 

 

 

 

 

 

 

 

 

 

Medical costs

 

179,456

 

 

 

130,793

 

 

 

152,150

 

 

 

200,573

 

 

 

 

662,972

 

Operating costs

 

96,788

 

 

 

78,997

 

 

 

85,577

 

 

 

93,044

 

 

 

 

354,406

 

Restructuring charges

 

6,864

 

 

 

2,793

 

 

 

5

 

 

 

19,559

 

 

 

 

29,221

 

Intangibles impairment

 

 

 

 

 

 

 

42,611

 

 

 

 

 

 

 

42,611

 

Depreciation and amortization

 

8,060

 

 

 

8,276

 

 

 

8,947

 

 

 

5,427

 

 

 

 

30,710

 

Total operating costs

 

291,168

 

 

 

220,859

 

 

 

289,290

 

 

 

318,603

 

 

 

 

1,119,920

 

Operating Income (Loss)

 

(110,404

)

 

 

(71,519

)

 

 

(95,927

)

 

 

(90,907

)

 

 

 

(368,757

)

Interest expense

 

1,193

 

 

 

337

 

 

 

4,905

 

 

 

6,387

 

 

 

 

12,822

 

Other income

 

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(111,597

)

 

 

(71,858

)

 

 

(100,830

)

 

 

(97,294

)

 

 

 

(381,579

)

Income tax expense (benefit)

 

9,981

 

 

 

2,904

 

 

 

3,401

 

 

 

(12,622

)

 

 

 

3,664

 

Net loss from continuing operations

 

(121,578

)

 

 

(74,762

)

 

 

(104,231

)

 

 

(84,672

)

 

 

 

(385,243

)

Loss from discontinued operations, net of tax (Note 2)

 

(59,051

)

 

 

(176,568

)

 

 

(155,129

)

 

 

(583,890

)

 

 

 

(974,638

)

Net loss

 

(180,629

)

 

 

(251,330

)

 

 

(259,360

)

 

 

(668,562

)

 

 

 

(1,359,881

)

Net earnings from continuing operations attributable to noncontrolling interests

 

(14,605

)

 

 

(23,336

)

 

 

(46,711

)

 

 

(11,012

)

 

 

 

(95,664

)

Series A preferred stock dividend accrued

 

(8,938

)

 

 

(9,461

)

 

 

(9,684

)

 

 

(9,806

)

 

 

 

(37,889

)

Series B preferred stock dividend accrued

 

 

 

 

 

 

 

 

 

 

(1,798

)

 

 

 

(1,798

)

Net loss attributable to Bright Health

Group, Inc. common shareholders

$

(204,172

)

 

$

(284,127

)

 

$

(315,755

)

 

$

(691,178

)

 

 

$

(1,495,232

)

 

 

 

 

 

 

 

 

 

 

 

Operating Cost Ratio

 

53.5

%

 

 

52.9

%

 

 

44.3

%

 

 

40.9

%

 

 

 

47.2

%

(1)The 2022 quarterly Statements of Income (Loss) have been recast to reflect the move of the IFP, MA Legacy and California MA business to discontinued operations as well as to correct the accounting for gross versus net revenue recognition conclusion from certain value-based care arrangements and an error identified in the data to account for our risk adjustment factor.

Bright Health Group, Inc. and Subsidiaries

Historical Financials

Recast Income Statement(1)

(in thousands)

($ in thousands)

 

 

 

 

Three Months Ended

Consolidated Statements of Income (loss) and operating data:

March 31,

 

June 30,

 

2023

 

 

 

2023

 

Revenue:

 

 

 

Capitated revenue

$

49,548

 

 

$

49,764

 

ACO REACH revenue

 

239,807

 

 

 

236,994

 

Service revenue

 

11,187

 

 

 

11,222

 

Investment income

 

8

 

 

 

2

 

Total revenue

 

300,550

 

 

 

297,982

 

Operating costs

 

 

 

Medical costs

 

260,120

 

 

 

245,160

 

Operating costs

 

79,518

 

 

 

70,280

 

Restructuring charges

 

301

 

 

 

1,285

 

Depreciation and amortization

 

5,483

 

 

 

4,671

 

Total operating costs

 

345,422

 

 

 

321,396

 

Operating Income (Loss)

 

(44,872

)

 

 

(23,414

)

Interest expense

 

7,787

 

 

 

9,170

 

Loss from continuing operations before income taxes

 

(52,659

)

 

 

(32,584

)

Income tax expense (benefit)

 

1,259

 

 

 

(892

)

Net loss from continuing operations

 

(53,918

)

 

 

(31,692

)

Loss from discontinued operations, net of tax

 

(115,543

)

 

 

(56,935

)

Net loss

 

(169,461

)

 

 

(88,627

)

Net earnings from continuing operations attributable to noncontrolling interests

 

(5,550

)

 

 

(24,205

)

Series A preferred stock dividend accrued

 

(9,714

)

 

 

(9,942

)

Series B preferred stock dividend accrued

 

(2,180

)

 

 

(2,231

)

Net loss attributable to Bright Health

Group, Inc. common shareholders

$

(186,905

)

 

$

(125,005

)

 

 

 

 

Operating Cost Ratio

 

26.5

%

 

 

23.6

%

(1)The 2023 quarterly Statement of Income (Loss) have been recast to reflect the move of the IFP, MA Legacy and California MA business to discontinued operations as well as to correct the accounting for gross versus net revenue recognition conclusion from certain value-based care arrangements and an error identified in the data to account for our risk adjustment factor.

Bright Health Group, Inc. and Subsidiaries

Historical Financials

Recast Segment Information (1)

(in thousands)

(Unaudited)

Care Delivery

 

 

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Year Ended

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

December 31,

Statement of income (loss) and operating data:

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

Capitated revenue

$

28,648

 

 

$

17,641

 

 

$

33,006

 

 

$

33,609

 

 

 

$

112,904

 

Service revenue

 

10,219

 

 

 

10,691

 

 

 

10,050

 

 

 

8,527

 

 

 

 

39,487

 

Total unaffiliated revenue

 

38,867

 

 

 

28,332

 

 

 

43,056

 

 

 

42,136

 

 

 

 

152,391

 

Affiliated revenue

 

368,120

 

 

 

204,271

 

 

 

257,707

 

 

 

209,522

 

 

 

 

1,039,620

 

Total segment revenue

 

406,987

 

 

 

232,603

 

 

 

300,763

 

 

 

251,658

 

 

 

 

1,192,011

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Medical Costs

 

391,467

 

 

 

194,531

 

 

 

264,013

 

 

 

367,731

 

 

 

 

1,217,742

 

Operating Costs

 

31,195

 

 

 

32,401

 

 

 

30,392

 

 

 

30,797

 

 

 

 

124,785

 

Intangible Asset Impairment

 

 

 

 

 

 

 

42,611

 

 

 

 

 

 

 

42,611

 

Depreciation and amortization

 

6,376

 

 

 

6,369

 

 

 

6,374

 

 

 

3,115

 

 

 

 

22,234

 

Total operating expenses

 

429,038

 

 

 

233,301

 

 

 

343,390

 

 

 

401,643

 

 

 

 

1,407,372

 

Operating loss

$

(22,051

)

 

$

(698

)

 

$

(42,627

)

 

$

(149,985

)

 

 

$

(215,361

)

Care Delivery

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

March 31,

 

June 30,

 

 

 

 

 

 

 

Statement of income (loss) and operating data:

 

2023

 

 

2023

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

Capitated revenue

$

49,548

 

$

49,764

 

 

 

 

 

 

 

Service revenue

 

10,936

 

 

10,530

 

 

 

 

 

 

 

Total unaffiliated revenue

 

60,484

 

 

60,294

 

 

 

 

 

 

 

Affiliated revenue

 

2,195

 

 

5,774

 

 

 

 

 

 

 

Total segment revenue

 

62,679

 

 

66,068

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Medical Costs

 

23,722

 

 

19,720

 

 

 

 

 

 

 

Operating Costs

 

29,189

 

 

32,139

 

 

 

 

 

 

 

Depreciation and amortization

 

3,132

 

 

3,178

 

 

 

 

 

 

 

Total operating expenses

 

56,043

 

 

55,037

 

 

 

 

 

 

 

Operating income

$

6,636

 

$

11,031

 

 

 

 

 

 

 

(1)The segment financials have been recast to reflect the change in our reportable segments and the move of the IFP, MA Legacy and California MA business to discontinued operations as well as to correct the accounting for gross versus net revenue recognition conclusion from certain value-based care arrangements.

Bright Health Group, Inc. and Subsidiaries

Historical Financials

Recast Segment Information (1)

(in thousands)

(Unaudited)

Care Solutions

 

 

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Year Ended

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

December 31,

Statement of income (loss) and operating data:

 

2022

 

 

2022

 

 

2022

 

 

 

2022

 

 

 

 

2022

Revenue:

 

 

 

 

 

 

 

 

 

 

ACO REACH Revenue

 

182,797

 

 

137,205

 

 

145,433

 

 

 

188,652

 

 

 

 

654,087

Service revenue

 

11

 

 

41

 

 

26

 

 

 

36

 

 

 

 

114

Total segment revenue

 

182,808

 

 

137,246

 

 

145,459

 

 

 

188,688

 

 

 

 

654,201

Operating expenses

 

 

 

 

 

 

 

 

 

 

Medical Costs

 

176,634

 

 

134,274

 

 

146,253

 

 

 

187,108

 

 

 

 

644,269

Operating Costs

 

2,010

 

 

2,147

 

 

2,321

 

 

 

2,030

 

 

 

 

8,508

Total operating expenses

 

178,644

 

 

136,421

 

 

148,574

 

 

 

189,138

 

 

 

 

652,777

Operating income (loss)

$

4,164

 

$

825

 

$

(3,115

)

 

$

(450

)

 

 

$

1,424

Care Solutions

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

March 31,

 

June 30,

 

 

 

 

 

 

 

Statement of income (loss) and operating data:

 

2022

 

 

 

2023

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

ACO REACH Revenue

 

239,807

 

 

 

236,994

 

 

 

 

 

 

 

Service revenue

 

251

 

 

 

692

 

 

 

 

 

 

 

Total segment revenue

 

240,058

 

 

 

237,686

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Medical Costs

 

238,595

 

 

 

231,279

 

 

 

 

 

 

 

Operating Costs

 

2,972

 

 

 

3,411

 

 

 

 

 

 

 

Total operating expenses

 

241,567

 

 

 

234,690

 

 

 

 

 

 

 

Operating income (loss)

$

(1,509

)

 

$

2,996

 

 

 

 

 

 

 

(1)The segment financials have been recast to reflect the change in our reportable segments and the move of the IFP, MA Legacy and California MA business to discontinued operations as well as to correct the accounting for gross versus net revenue recognition conclusion from certain value-based care arrangements.

Non-GAAP Financial Measures

We use the non-GAAP financial measures Adjusted EBITDA and Adjusted Operating Cost Ratio. We define Adjusted EBITDA as Net Loss excluding loss from discontinued operations, interest expense, income taxes, transaction costs, depreciation and amortization, share-based compensation expense, restructuring costs, contract termination costs, changes in the fair value of contingent consideration, and changes in the fair value of equity securities. We define Adjusted Operating Cost Ratio as Operating Cost Ratio excluding share-based compensation expense. These non-GAAP measures have been presented in this quarterly Earnings Release as supplemental measures of financial performance that are not required by or presented in accordance with GAAP because we believe they assist management and investors in comparing our operating performance across reporting periods on a consistent basis by excluding and including items that we do not believe are indicative of our core operating performance. Management believes these measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management uses Adjusted EBITDA and Adjusted Operating Cost Ratio to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA is not a recognized term under GAAP and should not be considered as an alternative to Net Income (Loss) as a measure of financial performance or any other performance measure derived in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentation of Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentation of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

Adjusted Operating Cost Ratio is not a recognized term under GAAP and should not be considered as an alternative to Operating Cost Ratio as a measure of financial performance or any other performance measure derived in accordance with GAAP. The presentation of Adjusted Operating Cost Ratio has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentation of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

The following table provides a reconciliation of net loss to Adjusted EBITDA for the periods presented:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

($ in thousands)

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net loss

$

(88,627

)

 

$

(251,330

)

 

$

(258,088

)

 

$

(431,959

)

Loss from Discontinued Operations (a)

 

56,935

 

 

 

176,568

 

 

 

172,478

 

 

 

235,619

 

EBITDA adjustments from continuing operations

 

 

 

 

 

 

 

Interest expense

 

9,170

 

 

 

337

 

 

 

16,957

 

 

 

1,530

 

Income tax benefit (expense)

 

(892

)

 

 

2,904

 

 

 

367

 

 

 

12,885

 

Transaction costs (b)

 

8,096

 

 

 

271

 

 

 

9,948

 

 

 

382

 

Depreciation and amortization

 

4,671

 

 

 

8,276

 

 

 

10,154

 

 

 

16,336

 

Share-based compensation expense (c)

 

15,775

 

 

 

20,220

 

 

 

49,095

 

 

 

53,141

 

Restructuring costs (d)

 

1,285

 

 

 

2,793

 

 

 

1,586

 

 

 

9,657

 

Contract termination costs (e)

 

 

 

 

500

 

 

 

 

 

 

500

 

Change in fair value of contingent consideration (f)

 

 

 

 

 

 

 

(1,827

)

 

 

 

Change in fair value of equity securities

 

 

 

 

16,184

 

 

 

 

 

 

57,151

 

EBITDA adjustments from continuing operations

$

38,105

 

 

$

51,485

 

 

$

86,280

 

 

$

151,582

 

Adjusted EBITDA

$

6,413

 

 

$

(23,277

)

 

$

670

 

 

$

(44,758

)

(a)

 

Beginning in the fourth quarter of 2022, Adjusted EBITDA excludes the impact of discontinued operations. The comparable period in 2022 has been recast to exclude these impacts. Represents losses associated with the Commercial business segment and MA Legacy operations that we exited at the end of 2022 and the California Medicare Advantage business classified as held for sale.

(b)

 

Transaction costs include accounting, tax, valuation, consulting, legal and investment banking fees directly relating to financing initiatives. These costs can vary from period to period and impact comparability, and we do not believe such transaction costs reflect the ongoing performance of our business.

(c)

 

Represents non-cash compensation expense related to stock option and restricted stock unit award grants, which can vary from period to period based on a number of factors, including the timing, quantity and grant date fair value of the awards.

(d)

 

Restructuring costs represent severance costs as part of a workforce reduction and impairment of certain long-lived assets relating to our decision to exit the Commercial business for the 2023 plan year.

(e)

 

Represents amounts paid for early termination of existing vendor contracts and leases. Beginning in the second quarter of 2023, this amount excludes the impact of MA legacy operations that we exited at the end of 2022 as these amounts are now included in the Loss from Discontinued Operations. The adjustment in the comparable period in 2022 has been recast to include these impacts.

(f)

 

Represents the non-cash change in fair value of contingent consideration from business combinations, which is remeasured at fair value each reporting period.

 

 

The following table provides a reconciliation of Adjusted Operating Cost Ratio for the periods presented:

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2023

 

2022

 

2023

 

2022

Operating Cost Ratio

23.6%

 

52.9%

 

25.0%

 

53.3%

Impact of share-based compensation expense (a)

(5.3)%

 

(13.5)%

 

(8.2)%

 

(16.1)%

Adjusted Operating Cost Ratio (b)

18.3%

 

39.4%

 

16.8%

 

37.2%

(a)

 

Represents non-cash compensation expense related to stock option and restricted stock unit award grants, which can vary from period to period based on a number of factors, including the timing, quantity and grant date fair value of the awards.

(b)

 

The Three Months Ended June 30 and the Six Months Ended June 30 are higher by 3.9% and 5.5%, respectively, due to the impacts of income (loss) driven from unrealized gains and losses on equity securities and realized gains and losses on sales of investments

 

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