Bright Health Group Reports First Quarter 2023 Results

  • Q1’23 Revenue from Continuing Business of $756.3 million, up 23% year over year on strong growth in Consumer Care external value-based consumers served
  • Q1’23 Net Loss from Continuing Business of $94.8 million, Adjusted EBITDA Loss of $35.1 million
  • Consumer Care segment generated positive Operating Income in Q1’23
  • Q1’23 California MCR was 89.0% excluding prior period Medical Costs, consistent with seasonal expectations
  • Maintaining expectation for 2023 consolidated Adjusted EBITDA profitability

MINNEAPOLIS--()--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 first quarter ended March 31, 2023.

“Bright Health had a strong start to the year in the First Quarter. The Consumer Care segment generated positive Operating Income, and the Medical Cost Ratio in our Medicare Advantage business was in-line with our expectations after adjusting for prior period costs and given normal seasonality patterns,” said Mike Mikan, President and CEO of Bright Health. “Our Consumer Care business continued to add value-based care consumers in the First Quarter, and along with strength in our REACH ACO business, we believe that the segment is positioned well for long-term profitable growth.”

Key Metrics

 

As of March 31,

 

2023

 

2022

Consumer and Patient Metrics

 

 

 

Bright HealthCare Consumers

123,000

 

120,000

Consumer Care Value-Based Consumers

373,000

 

530,000

 

Three Months Ended

($ in thousands)

March 31

 

 

2023

 

 

 

2022

 

Financial Metrics

 

 

 

Revenue

$

756,341

 

 

$

613,263

 

Medical Cost Ratio - Bright HealthCare1

 

95.0

%

 

 

96.7

%

Net Loss from Continuing Operations

$

(94,792

)

 

$

(163,514

)

Adjusted EBITDA (non-GAAP)

$

(35,053

)

 

$

(59,089

)

 

1 Bright HealthCare Medical Cost Ratio includes $27.5 million in prior period medical costs (608bps) in the three months ended March 31, 2023, and $2.1 million in prior period medical costs (49bps) in the three months ended March 31, 2022.

 

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’s 2023 Revenue and Adjusted EBITDA profitability expectations are unchanged, while Adjusted Operating Cost Ratio now forecast for the high end of the prior range.

  • Bright Health’s Enterprise Revenue is expected to be between $2.9 billion and $3.1 billion
  • On a segment basis, Bright HealthCare Revenue is expected to be greater than $1.8 billion, while Consumer Care Revenue is expected to be between $1.1 billion and $1.3 billion
  • Enterprise Adjusted Operating Cost Ratio is expected to be approximately 14%
  • 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, depreciation and amortization, impairment of goodwill or intangible assets, transaction costs, share-based compensation expense, changes in the fair value of equity securities, changes in the fair value of contingent consideration, 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. With respect to Adjusted Operating Cost Ratio, these GAAP measures may include the impact of such items as stock-based compensation, changes in the fair value of contingent consideration, contract termination costs, and depreciation and amortization. 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 May 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 facility, including financial covenants, both during and after any waiver period, and/or obtain any additional waivers of any terms of our credit facility 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; our ability to quickly and efficiently wind down our IFP businesses and MA businesses outside of California; 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 expand consumer enrollment; 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)

 

 

March 31,
2023

 

December 31,
2022

Assets

Current assets:

Cash and cash equivalents

$

382,506

 

 

$

466,325

 

Short-term investments

 

12,112

 

 

 

13,206

 

Accounts receivable, net of allowance of $6,513 and $6,098, respectively

 

125,241

 

 

 

73,605

 

ACO REACH performance year receivable

 

882,884

 

 

 

99,181

 

Current assets of discontinued operations

 

2,225,739

 

 

 

2,783,474

 

Prepaids and other current assets

 

142,932

 

 

 

134,843

 

Total current assets

 

3,771,414

 

 

3,570,634

 

Other assets:

Long-term investments

 

3,816

 

 

 

5,401

 

Property, equipment and capitalized software, net

 

40,747

 

 

 

42,596

 

Goodwill

 

760,078

 

 

 

760,078

 

Intangible assets, net

 

242,286

 

 

 

249,083

 

Other non-current assets

 

29,664

 

 

 

37,260

 

Total other assets

 

1,076,591

 

 

1,094,418

 

Total assets

 

4,848,005

 

 

4,665,052

 

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

 

 

 

Current liabilities:

 

 

 

Medical costs payable

$

458,465

 

$

411,753

 

Accounts payable

 

33,638

 

 

67,854

 

Unearned revenue

 

139,416

 

 

242

 

ACO REACH performance year obligation

 

719,420

 

 

 

 

Short-term borrowings

 

303,947

 

 

 

303,947

 

Current liabilities of discontinued operations

 

2,225,739

 

 

 

2,783,474

 

Other current liabilities

 

131,256

 

 

121,424

 

Total current liabilities

 

4,011,881

 

 

3,688,694

 

Other liabilities

 

32,191

 

 

36,673

 

Total liabilities

 

4,044,072

 

 

3,725,367

 

 

Redeemable noncontrolling interests

 

223,503

 

 

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; 636,142,597 and 630,271,508 shares issued and outstanding in 2023 and 2022, respectively

 

63

 

 

63

 

Additional paid-in capital

 

3,005,592

 

 

2,972,271

 

Accumulated deficit

 

(3,331,406

)

 

(3,156,395

)

Accumulated other comprehensive loss

 

(2,236

)

 

(4,429

)

Treasury Stock, at cost, 2,522,148 shares at March 31, 2023, and December 31, 2022, respectively

 

(12,000

)

 

(12,000

)

Total shareholders’ equity (deficit)

 

(339,987

)

 

(200,490

)

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

$

4,848,005

 

$

4,665,052

 

Bright Health Group, Inc. and Subsidiaries

Consolidated Statements of Income (Loss)

(in thousands, except share and per share data)

(Unaudited)

 

Three Months Ended March 31,

 

2023

 

 

2022

 

Revenue:

 

Premium revenue

$

502,918

 

 

$

458,962

 

ACO REACH revenue

 

239,807

 

 

 

182,797

 

Service revenue

 

13,570

 

 

 

12,392

 

Investment income (loss)

 

46

 

 

 

(40,888

)

Total revenue

 

756,341

 

 

 

613,263

 

Operating expenses:

 

Medical costs

 

688,515

 

 

 

594,248

 

Operating costs

 

140,324

 

 

 

159,117

 

Restructuring charges

 

3,357

 

 

 

6,864

 

Depreciation and amortization

 

9,891

 

 

 

12,897

 

Total operating expenses

 

842,087

 

 

 

773,126

 

Operating loss

 

(85,746

)

 

 

(159,863

)

Interest expense

 

7,787

 

 

 

1,193

 

Other income

 

 

 

 

(784

)

Loss from continuing operations before income taxes

 

(93,533

)

 

 

(160,272

)

Income tax expense

 

1,259

 

 

 

3,242

 

Net loss from continuing operations

 

(94,792

)

 

 

(163,514

)

Loss from discontinued operations, net of tax

 

(74,669

)

 

 

(17,115

)

Net Loss

 

(169,461

)

 

 

(180,629

)

Net earnings from continuing operations attributable to noncontrolling interests

 

(5,550

)

 

 

(14,605

)

Series A preferred stock dividend accrued

 

(9,714

)

 

 

(8,938

)

Series B preferred stock dividend accrued

 

(2,180

)

 

 

 

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

$

(186,905

)

 

$

(204,172

)

 

 

 

 

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

 

 

 

Continuing operations

$

(0.18

)

 

$

(0.30

)

Discontinued operations

 

(0.12

)

 

 

(0.02

)

Basic and diluted loss per share

 

(0.30

)

 

 

(0.32

)

 

 

 

 

Basic and diluted weighted-average common shares outstanding

 

631,534

 

 

 

628,765

 

Bright Health Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

Three Months Ended March 31,

 

2023

 

 

 

2022

 

Cash flows from operating activities:

Net loss

$

(169,461

)

$

(180,629

)

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

 

 

 

Depreciation and amortization

 

9,891

 

 

13,041

 

Impairment of intangible assets

 

 

 

 

6,720

 

Share-based compensation

 

33,320

 

 

32,921

 

Deferred income taxes

 

436

 

 

717

 

Unrealized loss on equity securities

 

 

 

 

40,968

 

Other, net

 

(2,807

)

 

2,378

 

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

 

 

Accounts receivable

 

(43,409

)

 

(29,221

)

ACO REACH performance year receivable

 

(783,703

)

 

 

(638,641

)

Other assets

 

22,448

 

 

(22,270

)

Medical cost payable

 

(423,459

)

 

337,180

 

Risk adjustment payable

 

4,153

 

 

354,276

 

Accounts payable and other liabilities

 

(119,416

)

 

52,182

 

Unearned revenue

 

137,563

 

 

(18,402

)

ACO REACH performance year obligation

 

719,420

 

 

 

533,537

 

Net cash (used in) provided by operating activities

 

(615,024

)

 

484,757

 

Cash flows from investing activities:

 

 

 

Purchases of investments

 

(2,880

)

 

(782,091

)

Proceeds from sales, paydown, and maturities of investments

 

690,161

 

 

154,765

 

Purchases of property and equipment

 

(1,863

)

 

(5,491

)

Business divestitures, net of cash disposed of

 

1,370

 

 

 

Business acquisitions, net of cash acquired

 

 

 

(310

)

Net cash provided by (used in) investing activities

 

686,788

 

 

(633,127

)

Cash flows from financing activities:

Net proceeds from short-term borrowings

 

 

 

 

(155,000

)

Proceeds from issuance of preferred stock

 

 

 

747,481

 

Proceeds from issuance of common stock

 

1

 

 

257

 

Distributions to noncontrolling interest holders

 

(1,805

)

 

 

 

Net cash (used in) provided by financing activities

 

(1,804

)

 

592,738

 

Net increase in cash and cash equivalents

 

69,960

 

 

444,368

 

Cash and cash equivalents – beginning of year

 

1,932,290

 

 

1,061,179

 

Cash and cash equivalents – end of period

$

2,002,250

 

$

1,505,547

 

Supplemental disclosures of cash flow information:

 

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

$

2,193

 

$

(26,340

)

Cash paid for interest

 

7,157

 

 

1,168

 

Bright Health Group, Inc. and Subsidiaries

Segment Information

(in thousands)

(Unaudited)

 

Bright HealthCare

 

 

 

($ in thousands)

Three Months Ended
March 31,

Statement of income (loss) and operating data:

 

2023

 

 

 

2022

 

 

 

 

 

Revenue:

 

 

 

Premium revenue

$

453,370

 

 

$

430,313

 

Investment income (loss)

 

46

 

 

 

80

 

Total revenue

 

453,416

 

 

 

430,393

 

Operating expenses

 

 

 

Medical costs

 

430,928

 

 

 

416,200

 

Operating costs

 

49,453

 

 

 

41,117

 

Depreciation and amortization

 

4,408

 

 

 

4,459

 

Total operating expenses

 

484,789

 

 

 

461,776

 

Operating loss

$

(31,373

)

 

$

(31,383

)

Medical Cost Ratio (MCR)(1)

 

95.0

%

 

 

96.7

%

 

(1) Bright HealthCare medical cost ratio includes $27.5 million in prior period medical costs (608bps) in the three months ended March 31, 2023, and $2.1 million in prior period medical costs (49bps) in the three months ended March 31, 2022.

Consumer Care

 

 

 

($ in thousands)

Three Months Ended
March 31,

Statement of income (loss) and operating data:

2023

 

 

2022

 

 

 

 

 

Revenue:

 

 

 

Premium revenue

$

49,548

 

$

28,649

 

Affiliated revenue

 

 

 

368,053

 

ACO REACH revenue

 

239,807

 

 

182,797

 

Service revenue

 

13,570

 

 

12,392

 

Investment income (loss)

 

 

 

(40,968

)

Total revenue

 

302,925

 

 

550,923

 

Operating expenses

 

 

 

Medical costs

 

257,587

 

 

566,694

 

Operating costs

 

37,814

 

 

47,281

 

Depreciation and amortization

 

3,132

 

 

7,002

 

Total operating expenses

 

298,533

 

 

620,977

 

Operating income (loss)

$

4,392

 

$

(70,054

)

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,

 

September 30,

 

December 31,

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

Premium revenue

$

458,962

 

 

$

437,234

 

 

$

423,995

 

 

$

444,758

 

ACO REACH revenue

 

182,797

 

 

 

137,205

 

 

 

145,433

 

 

 

188,652

 

Service revenue

 

12,392

 

 

 

12,811

 

 

 

12,079

 

 

 

10,731

 

Investment income (loss)

 

(40,888

)

 

 

(16,213

)

 

 

4,882

 

 

 

(2,800

)

Total revenue

 

613,263

 

 

 

571,037

 

 

 

586,389

 

 

 

641,341

 

Operating costs

 

 

 

 

 

 

 

Medical costs

 

594,248

 

 

 

507,322

 

 

 

506,235

 

 

 

598,438

 

Operating costs

 

159,117

 

 

 

140,650

 

 

 

146,532

 

 

 

185,731

 

Restructuring charges

 

6,864

 

 

 

2,791

 

 

 

1,215

 

 

 

20,869

 

Goodwill impairment

 

 

 

 

 

 

 

70,017

 

 

 

1,208

 

Intangibles impairment

 

 

 

 

 

 

 

42,611

 

 

 

 

Depreciation and amortization

 

12,897

 

 

 

13,227

 

 

 

13,904

 

 

 

10,402

 

Total operating costs

 

773,126

 

 

 

663,990

 

 

 

780,514

 

 

 

816,648

 

Operating loss

 

(159,863

)

 

 

(92,953

)

 

 

(194,125

)

 

 

(175,307

)

Interest expense

 

1,193

 

 

 

337

 

 

 

4,905

 

 

 

6,386

 

Other income

 

(784

)

 

 

2

 

 

 

(2

)

 

 

 

Loss from continuing operations before income taxes

 

(160,272

)

 

 

(93,292

)

 

 

(199,028

)

 

 

(181,693

)

Income tax expense (benefit)

 

3,242

 

 

 

2,904

 

 

 

1,762

 

 

 

(4,228

)

Net loss from continuing operations

 

(163,514

)

 

 

(96,196

)

 

 

(200,790

)

 

 

(177,465

)

Loss from discontinued operations, net of tax

 

(17,115

)

 

 

(155,134

)

 

 

(69,339

)

 

 

(480,327

)

Net loss

 

(180,629

)

 

 

(251,330

)

 

 

(270,129

)

 

 

(657,792

)

Net earnings from continuing operations attributable to noncontrolling interests

 

(14,605

)

 

 

(23,336

)

 

 

(46,711

)

 

 

(11,012

)

Series A preferred stock dividend accrued

 

(8,938

)

 

 

(9,461

)

 

 

(9,684

)

 

 

(9,806

)

Series B preferred stock dividend accrued

 

 

 

 

 

 

 

 

 

 

(1,798

)

Net loss attributable to Bright Health

Group, Inc. common shareholders

$

(204,172

)

 

$

(284,127

)

 

$

(326,524

)

 

$

(680,408

)

Operating Cost Ratio

 

25.9

%

 

 

24.6

%

 

 

25.0

%

 

 

29.0

%

 

(1)The 2022 quarterly Statements of Income (Loss) have been recast to reflect the move of the IFP 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)

 

Bright HealthCare

Recast 2022 Segment Information

($ in thousands)

 

 

 

 

 

 

Three Months Ended

 

March 31,

 

June 30,

 

September 30,

 

December 31,

Statement of income (loss) and operating data:

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

Premium revenue

$

430,313

 

 

$

419,594

 

 

$

390,989

 

 

$

411,149

 

Investment income (loss)

 

80

 

 

 

(29

)

 

 

36

 

 

 

323

 

Total revenue

 

430,393

 

 

 

419,565

 

 

 

391,025

 

 

 

411,472

 

Operating expenses

 

 

 

 

 

 

 

Medical costs

 

416,200

 

 

 

378,801

 

 

 

355,347

 

 

 

400,586

 

Operating costs

 

41,117

 

 

 

43,513

 

 

 

43,291

 

 

 

59,715

 

Goodwill impairment

 

 

 

 

 

 

 

70,017

 

 

 

 

Depreciation and amortization

 

4,459

 

 

 

4,416

 

 

 

4,416

 

 

 

4,411

 

Total operating expenses

 

461,776

 

 

 

426,730

 

 

 

473,071

 

 

 

464,712

 

Operating loss

$

(31,383

)

 

$

(7,165

)

 

$

(82,046

)

 

$

(53,240

)

Medical Cost Ratio (MCR)

 

96.7

%

 

 

90.3

%

 

 

90.9

%

 

 

97.4

%

Consumer Care

Recast 2022 Segment Information

($ in thousands)

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

 

June 30,

 

September 30,

 

December 31,

Statement of income (loss) and operating data:

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

Premium revenue

$

28,649

 

 

$

17,640

 

 

$

33,006

 

 

$

33,609

 

Affiliated revenue

 

368,053

 

 

 

203,965

 

 

 

250,594

 

 

 

206,421

 

ACO REACH revenue

 

182,797

 

 

 

137,205

 

 

 

145,433

 

 

 

188,652

 

Service revenue

 

12,392

 

 

 

12,811

 

 

 

12,079

 

 

 

10,731

 

Investment income (loss)

 

(40,968

)

 

 

(16,184

)

 

 

4,846

 

 

 

(3,123

)

Total revenue

 

550,923

 

 

 

355,437

 

 

 

445,958

 

 

 

436,290

 

Operating expenses

 

 

 

 

 

 

 

Medical costs

 

566,694

 

 

 

326,532

 

 

 

403,069

 

 

 

548,283

 

Operating costs

 

47,281

 

 

 

40,320

 

 

 

46,302

 

 

 

57,799

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

1,208

 

Intangible assets impairment

 

 

 

 

 

 

 

42,611

 

 

 

 

Depreciation and amortization

 

7,002

 

 

 

7,195

 

 

 

6,375

 

 

 

3,680

 

Total operating expenses

 

620,977

 

 

 

374,047

 

 

 

498,357

 

 

 

610,970

 

Operating loss

$

(70,054

)

 

$

(18,610

)

 

$

(52,399

)

 

$

(174,680

)

 

(1)The 2022 segment financials have been recast to reflect the move of the IFP 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.

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, Depreciation and Amortization, adjusted for the impact of impairment of goodwill or 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 and other exit costs and restructuring costs. We define Adjusted Operating Cost Ratio as Operating Cost Ration excluding share-based compensation. 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
March 31,

($ in thousands)

 

2023

 

 

 

2022

 

Net loss

$

(169,461

)

 

$

(180,629

)

Loss from discontinued operations (a)

 

74,669

 

 

 

17,115

 

EBITDA adjustments from continuing operations:

 

 

 

Interest expense

 

7,787

 

 

 

1,193

 

Income tax expense (benefit)

 

1,259

 

 

 

3,242

 

Depreciation and amortization

 

9,891

 

 

 

12,897

 

Transaction costs (b)

 

1,849

 

 

 

852

 

Share-based compensation expense (c)

 

33,320

 

 

 

32,921

 

Change in fair value of equity securities

 

 

 

 

40,968

 

Change in fair value of contingent consideration (d)

 

(1,827

)

 

 

 

Termination and other exit costs (e)

 

4,157

 

 

 

5,488

 

Restructuring costs (f)

 

3,303

 

 

 

6,864

 

EBITDA adjustments from continuing operations

$

59,739

 

 

$

104,425

 

Adjusted EBITDA

$

(35,053

)

 

$

(59,089

)

(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 that we exited at the end of 2022.

(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)

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 existing vendor contracts and, beginning in 2023, includes the impact of our MA legacy operations that we exited at the end of 2022. The adjustment in the comparable period in 2022 has been recast to include these impacts.

(f)

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.

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

 

Three Months Ended
March 31,

($ in thousands)

2023

 

2022

Operating Cost Ratio

18.6%

 

25.9%

Impact of Share-based compensation expense

(4.4)%

 

(5.4)%

Adjusted Operating Cost Ratio

14.1%

 

20.6%

 

Contacts

Investor Contact:
Stephen Hagan
IR@brighthealthgroup.com

Media Contact:
media@brighthealthgroup.com

Contacts

Investor Contact:
Stephen Hagan
IR@brighthealthgroup.com

Media Contact:
media@brighthealthgroup.com