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Bright Health Group Reports First Quarter 2022 Results

  • Revenue of $1.8 billion, up 109.9% from Q1'21, Adjusted EBITDA loss of $74.8 million, GAAP Net Loss of $180.6 million.
  • Enterprise Medical Cost Ratio of 84.8%, Bright HealthCare Medical Cost Ratio of 83.1%.
  • Bright Health Group has achieved significant scale, serving 1.16 million Bright HealthCare members, with over 530,000 NeueHealth value-based patients.
  • Reaffirming full year 2022 guidance metrics.

Bright Health Group, Inc. (“Bright Health Group” or the “Company”) (NYSE: BHG), the first technology-enabled, Fully Aligned system of care built for healthcare's consumer retail market, today reported financial results for its first quarter ended March 31, 2022.

“Bright Health Group had a strong start to the year, demonstrating solid performance in the First Quarter,” said Mike Mikan, President and CEO of Bright Health Group. “We are seeing the results from Bright HealthCare getting to scale and the emergence of our NeueHealth business. Bright Health Group is focused on optimizing the business, driving performance through investments in our integrated technology platform, and delivering differentiated value for consumers.”

Key Metrics

 

As of March 31,

 

2022

 

2021

Consumer and Patient Metrics

 

 

 

Bright HealthCare Commercial Consumers

1,040,000

 

480,000

Bright HealthCare Medicare Advantage Consumers

120,000

 

60,000

NeueHealth Value-Based Patients

530,000

 

30,000

 

Three Months Ended

($ in thousands)

March 31,

 

 

2022

 

 

 

2021

 

Financial Metrics

 

 

 

Revenue

$

1,835,575

 

$

874,558

 

Medical Cost Ratio (1)

 

84.8

%

 

 

79.5

%

Operating Cost Ratio

 

22.8

%

 

 

23.8

%

GAAP Net Loss

$

(180,629

)

$

(24,545

)

Adjusted EBITDA (non-GAAP)

$

(74,830

)

 

$

(13,827

)

(1)

Medical Cost Ratio for the three months ended March 31, 2022, includes a 310 basis point unfavorable impact from COVID-19 related costs. This is compared to 2021, which included a 410 basis point unfavorable impact from COVID-19 costs.

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

Financial Outlook

For full year 2022, Bright Health Group is providing the following guidance and commentary:

  • Bright Health Group’s total Revenue is expected to be $6.8 billion to $7.1 billion with an expected enterprise Medical Cost Ratio between 90% and 94%.
  • On a segment basis, Bright HealthCare end-of-year membership is expected to be approximately 1,000,000, while NeueHealth Revenue is expected to be approximately $2.3 billion.
  • Intercompany Revenue elimination, comprised of payments from Bright HealthCare to NeueHealth for managing patient care and for network services, is expected to be approximately $1.2 to $1.4 billion.
  • Adjusted EBITDA for 2022 is expected to be a loss of between $500.0 and $800.0 million.

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 dated May 4, 2022, 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 the first technology-enabled, Fully Aligned system of care built for healthcare's consumer retail market. Our differentiated approach aligns care delivery with the financing of care to drive better outcomes, lower costs, and enhance the consumer experience. We have two market-facing businesses: NeueHealth and Bright HealthCare. NeueHealth provides care delivery and value-based enablement services to over 500,000 value-based patients through our owned and affiliated clinics. Bright HealthCare offers Commercial and Medicare health plan products to over 1.1 million consumers across the nation. 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.

Notes

A reconciliation of the projected Adjusted EBITDA, which is a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measures, is not provided because the Company is unable to provide such reconciliation 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. These GAAP measures may include the impact of such items as interest expense, income tax expense, depreciation and amortization, impairment of intangible assets, share-based compensation expense, transaction costs, changes in the fair value of contingent consideration, changes in the fair value of equity securities, contract termination costs, restructuring costs; and the tax effect of all such items. Historically, the Company has excluded these items from non-GAAP financial measures. 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.

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,” 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: a lack of acceptance or slow adoption of our business model; our ability to retain existing consumers and expand consumer enrollment; our ability to obtain and accurately assess, code, and report Individual and Family Plan and Medicare Advantage risk adjustment factor scores for consumers; 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 Direct Contracting; and the other factors set forth under the heading “Risk Factors” in the Company’s reports on Form 10-K, 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

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

March 31,

2022

 

December 31,

2021

Assets

Current assets:

Cash and cash equivalents

$

1,505,547

 

$

1,061,179

 

Short-term investments

 

692,472

 

 

193,835

 

Accounts receivable, net of allowance of $5,172 and $4,074, respectively

 

142,695

 

 

113,474

 

Direct contracting performance year receivable

 

638,641

 

 

 

 

Prepaids and other current assets

 

315,422

 

 

291,712

 

Total current assets

 

3,294,777

 

 

1,660,200

 

Other assets:

Long-term investments

 

733,465

 

 

675,192

 

Property, equipment and capitalized software, net

 

41,279

 

 

38,344

 

Goodwill

 

835,450

 

 

835,140

 

Intangible assets, net

 

326,617

 

 

343,860

 

Other non-current assets

 

43,438

 

 

45,603

 

Total other assets

 

1,980,249

 

 

1,938,139

 

Total assets

$

5,275,026

 

$

3,598,339

 

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

Current liabilities:

Medical costs payable

$

1,155,155

 

$

817,975

 

Accounts payable

 

128,407

 

 

118,140

 

Unearned revenue

 

34,893

 

 

53,295

 

Risk adjustment payable

 

1,285,446

 

 

931,170

 

Direct contracting performance year obligation

 

533,537

 

 

 

 

Short-term borrowings

 

 

 

 

155,000

 

Other current liabilities

 

251,523

 

 

207,238

 

Total current liabilities

 

3,388,961

 

 

2,282,818

 

Other liabilities

 

38,849

 

 

41,994

 

Total liabilities

 

3,427,810

 

 

2,324,812

 

Commitments and contingencies (Note 10)

Redeemable noncontrolling interests

 

143,011

 

 

128,407

 

Series A redeemable preferred stock, $0.0001 par value; 100,000,000 shares authorized in 2022 and 2021; 750,000 and — shares issued and outstanding in 2022 and 2021, respectively

 

747,481

 

 

 

Shareholders’ equity (deficit):

 

 

Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2022 and 2021; 628,992,422 and 628,622,872 shares issued and outstanding in 2022 and 2021, respectively

 

63

 

 

63

 

Additional paid-in capital

 

2,894,421

 

 

2,861,243

 

Accumulated deficit

 

(1,896,085

)

 

(1,700,851

)

Accumulated other comprehensive income

 

(29,675

)

 

(3,335

)

Treasury stock, at cost, 2,522,148 shares at March 31, 2022 and December 31, 2021, respectively

 

(12,000

)

 

(12,000

)

Total shareholders’ equity (deficit)

 

956,724

 

 

1,145,120

 

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

$

5,275,026

 

$

3,598,339

 

 

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss)

(in thousands, except per share data)

(Unaudited)

 

Three Months Ended March 31,

 

2022

 

 

2021

 

Revenue:

Premium revenue

$

1,680,450

 

$

860,631

 

Direct contracting revenue

 

182,797

 

 

 

 

Service revenue

 

12,428

 

 

8,438

 

Investment income (loss)

 

(40,100

)

 

5,489

 

Total revenue

 

1,835,575

 

 

874,558

 

Operating expenses:

 

 

 

Medical costs

 

1,580,596

 

 

684,570

 

Operating costs

 

418,918

 

 

208,240

 

Depreciation and amortization

 

13,041

 

 

4,581

 

Total operating expenses

 

2,012,555

 

 

897,391

 

Operating loss

 

(176,980

)

 

(22,833

)

Interest expense

 

1,193

 

 

546

 

Other income

 

(784

)

 

 

 

Loss before income taxes

 

(177,389

)

 

(23,379

)

Income tax expense

 

3,240

 

 

1,166

 

Net loss

 

(180,629

)

 

(24,545

)

Net earnings attributable to noncontrolling interests

 

(14,605

)

 

(617

)

Series A preferred stock dividend accrued

 

(8,938

)

 

 

 

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

$

(204,172

)

$

(25,162

)

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

$

(0.32

)

$

(0.18

)

Basic and diluted weighted-average common shares outstanding

 

628,765

 

 

140,175

 

 

Bright Health Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

Three Months Ended March 31,

 

2022

 

 

 

2021

 

Cash flows from operating activities:

Net loss

$

(180,629

)

$

(25,162

)

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

 

 

 

Depreciation and amortization

 

13,041

 

 

4,581

 

Impairment of intangible assets

 

6,720

 

 

 

 

Share-based compensation

 

32,921

 

 

5,176

 

Deferred income taxes

 

717

 

 

1,166

 

Unrealized loss on equity securities

 

40,968

 

 

 

 

Other, net

 

2,378

 

 

2,694

 

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

 

 

Accounts receivable

 

(29,221

)

 

(23,188

)

Direct contracting performance year receivable

 

(638,641

)

 

 

 

Other assets

 

(22,270

)

 

(15,707

)

Medical cost payable

 

337,180

 

 

225,814

 

Risk adjustment payable

 

354,276

 

 

137,215

 

Accounts payable and other liabilities

 

52,182

 

 

30,096

 

Unearned revenue

 

(18,402

)

 

918

 

Direct contracting performance year obligation

 

533,537

 

 

 

 

Net cash provided by operating activities

 

484,757

 

 

343,603

 

Cash flows from investing activities:

 

 

 

Purchases of investments

 

(782,091

)

 

(298,957

)

Proceeds from sales, paydown, and maturities of investments

 

154,765

 

 

265,521

 

Purchases of property and equipment

 

(5,491

)

 

(4,215

)

Business acquisitions, net of cash acquired

 

(310

)

 

(18,624

)

Net cash used in investing activities

 

(633,127

)

 

(56,275

)

Cash flows from financing activities:

Proceeds from issuance of preferred stock

 

747,481

 

 

 

 

Proceeds from issuance of common stock

 

257

 

 

4,893

 

Net proceeds from short-term borrowings

 

(155,000

)

 

 

200,000

 

Payments for debt issuance costs

 

 

 

 

(3,391

)

Payments for IPO offering costs

 

 

 

(1,268

)

Net cash provided by financing activities

 

592,738

 

 

200,234

 

Net increase in cash and cash equivalents

 

444,368

 

 

487,562

 

Cash and cash equivalents – beginning of year

 

1,061,179

 

 

488,371

 

Cash and cash equivalents – end of period

$

1,505,547

 

$

975,933

 

 

Bright Health Group, Inc. and Subsidiaries

Segment Information

(in thousands)

(Unaudited)

 

Bright HealthCare

Three Months Ended

(in thousands)

March 31,

Statements of income (loss) and operating data:

 

2022

 

 

 

2021

 

 

 

 

 

Bright HealthCare:

 

 

 

Revenue:

 

 

 

Commercial revenue

$

1,163,224

 

 

$

621,056

 

Medicare Advantage revenue

 

430,313

 

 

 

220,869

 

Investment income

 

868

 

 

 

1,246

 

Total revenue

 

1,594,405

 

 

 

843,171

 

Operating expenses:

 

 

 

Medical costs

 

1,323,724

 

 

 

675,056

 

Operating costs

 

371,664

 

 

 

189,973

 

Depreciation and amortization

 

6,039

 

 

 

2,357

 

Total operating expenses

 

1,701,427

 

 

 

867,386

 

Operating loss

$

(107,022

)

 

$

(24,215

)

 

 

 

 

Medical Cost Ratio (MCR)

 

83.1

%

 

 

80.2

%

NeueHealth

Three Months Ended

($ in thousands)

March 31,

Statements of income (loss) data:

 

2022

 

 

 

2021

 

 

 

 

 

NeueHealth:

 

 

 

Revenue:

 

 

 

Premium revenue

$

455,002

 

 

$

28,674

 

Direct contracting revenue

 

182,797

 

 

 

 

Service revenue

 

24,121

 

 

 

15,622

 

Investment income (loss)

 

(40,968

)

 

 

4,243

 

Total revenue

 

620,952

 

 

 

48,539

 

Operating expenses

 

 

 

Medical costs

 

624,994

 

 

 

19,482

 

Operating costs

 

58,914

 

 

 

25,451

 

Depreciation and amortization

 

7,002

 

 

 

2,224

 

Total operating expenses

 

690,910

 

 

 

47,157

 

Operating income (loss)

$

(69,958

)

 

$

1,382

 

 

 

 

 

Medical Cost Ratio (MCR)

 

98.0

%

 

 

67.9

%

Non-GAAP Financial Measures

We use the non-GAAP financial measure Adjusted EBITDA. We define Adjusted EBITDA as Net Loss excluding Interest Expense, Income Taxes, Depreciation and Amortization, adjusted for the impact of impairment of intangible assets, acquisition and financing-related transaction costs, share-based compensation, changes in the fair value of contingent consideration, changes in the fair value of equity securities, contract termination costs and restructuring costs. This non-GAAP measure has been presented in this quarterly Earnings Release as a supplemental measure of financial performance that is not required by or presented in accordance with GAAP because we believe it assists 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 this measure is 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 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 analytical tools 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

March 31,

($ in thousands)

 

2022

 

 

 

2021

 

Net loss

$

(180,629

)

 

$

(24,545

)

Interest expense

 

1,193

 

 

 

546

 

Income tax expense (benefit)

 

3,240

 

 

 

1,166

 

Depreciation and amortization

 

13,041

 

 

 

4,581

 

Impairment of intangible assets

 

6,720

 

 

 

 

Transaction costs (a)

 

111

 

 

 

2,020

 

Share-based compensation expense (b)

 

32,921

 

 

 

5,176

 

Change in fair value of equity securities (c)

 

40,968

 

 

 

(4,243

)

Change in fair value of contingent consideration (d)

 

 

 

 

1,472

 

Contract termination costs (e)

 

741

 

 

 

 

Restructuring costs (f)

 

6,864

 

 

 

 

Adjusted EBITDA

$

(74,830

)

 

$

(13,827

)

(a)

Transaction costs include accounting, tax, valuation, consulting, legal and investment banking fees directly relating to business combinations and certain costs associated with our initial public offering. 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.

(b)

Represents non-cash compensation expense related to stock option and restricted stock 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.

(c)

Beginning in 2022, Adjusted EBITDA excludes the impact of changes in unrealized gains and losses on equity securities. The comparable period in 2021 has been recast to exclude changes in unrealized gains and losses on equity securities.

(d)

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

(e)

Represents amounts paid for early termination of an existing vendor contracts.

(f)

Restructuring costs represents severance costs as part of a workforce reduction in 2022.

 

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