- Bright Health Group continues to produce significant growth,
with total GAAP Revenues of $1,079 million, up 206% from
Q3’20.
- Bright HealthCare end-of-year Membership guidance raised to
700,000, up nearly 8% from previous guidance, driving Bright Health
Group 2021 Revenue guidance to the top of prior range, now between
$4.1 and $4.2 Billion.
- Year-to-date Bright Health Group Medical Cost Ratio of 90.3%
inclusive of 420 bps of Covid impact.
- NeueHealth’s fully aligned model continues to drive
differentiated performance in key markets.
Bright Health Group, Inc. (“Bright Health” or the “Company”)
(NYSE: BHG), a diversified healthcare services company building a
technology-enabled, fully-aligned, national Integrated System of
Care personalized for consumers, today reported financial results
for its third quarter ended September 30, 2021.
“I am pleased with our continued growth and overall performance
in the face of a uniquely challenging year, but more importantly,
on our prospects for the future,” said Mike Mikan, President and
CEO of Bright Health Group. “We are seeing proof points that
highlight the power of our fully aligned model within local
Integrated Systems of Care. For example, in Florida, we saw a 22%
lower medical cost ratio and reduction in inpatient and ED
admission rates for IFP members attributed to our owned and
affiliated clinics. As we look to 2022, we are well positioned to
expand this model to new markets, such as North Carolina and Texas,
building on our strong growth and performance to date.”
Third Quarter 2021 Financial
Highlights
Bright Health Group’s total revenue of $1,079 million in the
third quarter of 2021 increased by $727 million, or 206.3%,
compared to the prior-year period. Revenue was primarily driven by
organic membership growth in Bright HealthCare during the 2020 Open
Enrollment Period and the 2021 Special Enrollment Period for our
Commercial business that began on February 15, 2021, and NeueHealth
organic and inorganic growth. The Company also experienced an
increase in investment income due to a $46 million unrealized gain
on equity securities.
Bright Health Group’s medical cost ratio (“MCR”) for the
third quarter of 2021 was 103.0%, which includes a 540 basis
point unfavorable impact from COVID-19 related costs and a 900
basis point unfavorable impact primarily from a cumulative
reduction in premium revenue due to an inability to capture risk
adjustment on newly added lives. Our MCR in the third quarter of
2020 was 90.1%, which included a 390 basis point unfavorable impact
from COVID-19 costs and a 530 basis point favorable impact from
non-COVID prior period developments.
The Company’s GAAP net loss was $296.7 million in the third
quarter of 2021, an increase of $237.5 million compared to the
prior-year period. The Company’s non-GAAP Adjusted EBITDA was a
loss of $245.9 million in the third quarter of 2021, an increase of
$191.8 million compared to the prior-year period.
“Our year-to-date 2021 MCR of 90.3% represents solid
performance, especially given the remarkable growth and unique
factors we have experienced this year. As a company still building
to scale, we expect to see some quarterly variation in performance
from time to time. Overall, we believe matching payment to
population health status is needed to align incentives and drive
performance in the direct-to-consumer market. However, with a
predominately new and rapidly growing business, population health
risk is difficult to estimate in the near-term but is expected to
improve as our markets and populations mature, setting us up well
for 2022,” said Cathy Smith, Chief Financial and Administrative
Officer. “Our focus continues to be on generating long-term value
for the business and our shareholders through relentless pursuit of
our mission.”
Key Metrics
As of September 30,
2021
2020
Consumer and Patient Metrics
Bright HealthCare Commercial Consumers
606,594
149,794
Bright HealthCare Medicare Advantage
Consumers
114,094
57,751
NeueHealth Value-Based Patients
170,211
19,141
Three Months Ended
Nine Months Ended
($ in thousands)
September 30,
September 30,
2021
2020
2021
2020
Financial Metrics
Revenue
$
1,078,657
$
352,120
$
3,067,055
$
847,542
Medical Cost Ratio
103.0
%
90.1
%
90.3
%
81.6
%
Operating Cost Ratio
28.7
%
27.7
%
25.4
%
30.8
%
GAAP Net Loss
$
(296,722
)
$
(59,256
)
$
(364,990
)
$
(84,610
)
Adjusted EBITDA (non-GAAP)
$
(245,918
)
$
(54,084
)
$
(290,757
)
$
(81,188
)
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 2021, Bright Health Group is providing the
following guidance and commentary:
- Bright Health Group’s revenue is expected to be $4.1 billion to
$4.2 billion with an expected enterprise medical cost ratio of
approximately 92.5% plus or minus 50 bps.
- On a segment basis, Bright HealthCare end-of-year membership is
expected to be approximately 700,000, while NeueHealth revenue is
expected to be approximately $575 million, or approximately $475
million excluding investment income.
- Intercompany revenue elimination, comprised of payments from
Bright HealthCare to NeueHealth for managing patient care and for
network services, is expected to be approximately $(350)
million.
- Introducing Adjusted EBITDA guidance for 2021 of between $(550)
and $(600) million(1).
About Bright Health Group
Bright Health Group is built upon the belief that by aligning
the best local resources in healthcare delivery with the financing
of care we can drive a superior consumer experience, optimize
clinical outcomes, reduce systemic waste, and lower costs. We are a
healthcare company building a national Integrated System of Care in
close partnership with our Care Partners. Our differentiated
approach is built on alignment, focused on the consumer, and
powered by technology. We have two market facing businesses:
NeueHealth and Bright HealthCare. Through NeueHealth, we deliver
high-quality virtual and in-person clinical care to over 170,000
patients under value-based contracts through our 131 owned and
affiliated primary care clinics. Through Bright HealthCare, we
offer Commercial and Medicare health plan products to over 720,000
consumers in 14 states and 99 markets. We are making healthcare
right. Together. For more information, visit
www.brighthealthgroup.com.
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 using the access code
627744. This earnings release and the Form 8-K dated November 12,
2021, 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, Securities and
Exchange filings and public conference calls and webcasts.
Notes
(1) 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, share-based compensation
expense; transaction costs, changes in the fair value of contingent
consideration, contract termination 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 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; the impact of the 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; and the other factors set forth under the
heading “Risk Factors” in Bright Health Group’s prospectus filed
pursuant to Rule 424(b)(4) on June 25, 2021, and our other filings
with the U.S. Securities and Exchange Commission. 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)
September 30,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents
$
956,189
$
488,371
Short-term investments
331,719
499,928
Accounts receivable, net of allowance of
$5,701 and $2,602, respectively
99,216
60,522
Prepaids and other current assets
240,545
130,986
Total current assets
1,627,669
1,179,807
Other assets:
Long-term investments
681,923
175,176
Property, equipment and capitalized
software, net
30,932
12,264
Goodwill
842,301
263,035
Intangible assets, net
351,519
152,211
Other non-current assets
40,751
28,309
Total other assets
1,947,426
630,995
Total assets
$
3,575,095
$
1,810,802
Liabilities, Redeemable Noncontrolling
Interest, Redeemable Preferred Stock and Shareholders’ Equity
(Deficit)
Current liabilities:
Medical costs payable
$
685,045
$
249,777
Accounts payable
95,161
57,252
Unearned revenue
34,917
34,628
Risk adjustment payable
548,352
187,777
Other current liabilities
88,133
35,847
Total current liabilities
1,451,608
565,281
Other liabilities
56,254
28,578
Total liabilities
1,507,862
593,859
Redeemable noncontrolling interests
130,029
39,600
Redeemable preferred stock, $0.0001 par
value; 100,000,000 and 166,307,087 shares authorized in 2021 and
2020, respectively; 0 and 164,244,893 shares issued and outstanding
in 2021 and 2020, respectively
—
1,681,015
Shareholders’ equity (deficit):
Common stock, $0.0001 par value;
3,000,000,000 and 658,993,725 shares authorized in 2021 and 2020,
respectively; 628,133,782 and 137,662,698 shares issued and
outstanding in 2021 and 2020, respectively
63
14
Additional paid-in capital
2,823,244
9,877
Accumulated deficit
(886,333
)
(515,989
)
Accumulated other comprehensive income
230
2,426
Total shareholders’ equity
(deficit)
1,937,204
(503,672
)
Total liabilities, redeemable
noncontrolling interests, redeemable preferred stock and
shareholders’ equity (deficit)
$
3,575,095
$
1,810,802
Bright Health Group, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Income (Loss)
(in thousands, except share and
per share data)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Revenue:
Premium revenue
$
1,020,233
$
345,426
$
2,922,950
$
827,135
Service revenue
11,079
4,920
31,602
13,344
Investment income
47,345
1,774
112,503
7,063
Total revenue
1,078,657
352,120
3,067,055
847,542
Operating expenses:
Medical costs
1,050,943
311,319
2,640,143
675,114
Operating costs
309,790
97,379
779,090
260,650
Depreciation and amortization
14,205
2,678
25,981
5,550
Total operating expenses
1,374,938
411,376
3,445,214
941,314
Operating loss
(296,281
)
(59,256
)
(378,159
)
(93,772
)
Interest expense
1,594
—
6,282
—
Other income
(1,226
)
—
—
—
(1,226
)
—
—
Loss before income taxes
(296,649
)
(59,256
)
(383,215
)
(93,772
)
Income tax (benefit) expense
73
—
(18,225
)
(9,162
)
Net loss
(296,722
)
(59,256
)
(364,990
)
(84,610
)
Net earnings attributable to
noncontrolling interests
(3,942
)
—
(5,354
)
—
Net loss attributable to Bright Health
Group, Inc. common shareholders
$
(300,664
)
$
(59,256
)
$
(370,344
)
$
(84,610
)
Basic and diluted loss per share
attributable to Bright Health Group, Inc. common
shareholders
$
(0.48
)
$
(0.43
)
$
(1.19
)
$
(0.62
)
Basic and diluted weighted-average common
shares outstanding
630,378
136,337
312,294
135,926
Bright Health Group, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September
30,
2021
2020
Cash flows from operating activities:
Net loss
$
(370,344
)
$
(84,610
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
25,981
5,550
Share-based compensation
43,234
3,722
Deferred income taxes
(17,946
)
—
Unrealized gains on equity securities
(109,012
)
—
Other, net
14,555
1,022
Changes in assets and liabilities, net of
acquired assets and liabilities:
Accounts receivable
(18,683
)
27,508
Other assets
(86,836
)
(24,980
)
Medical cost payable
342,531
35,458
Risk adjustment payable
359,257
68,186
Accounts payable and other liabilities
53,853
(22,015
)
Unearned revenue
(3,476
)
1,498
Net cash provided by operating
activities
233,114
11,339
Cash flows from investing activities:
Purchases of investments
(736,838
)
(702,672
)
Proceeds from sales, paydown, and
maturities of investments
536,110
349,113
Purchases of property and equipment
(20,682
)
(1,181
)
Business acquisitions, net of cash
acquired
(431,718
)
(174,090
)
Net cash used in investing
activities
(653,128
)
(528,830
)
Cash flows from financing activities:
Proceeds from issuance of preferred
stock
—
686,840
Proceeds from issuance of common stock
10,581
874
Payments for debt issuance costs
(3,391
)
—
Proceeds from IPO
887,328
—
Payments for IPO offering costs
(6,686
)
—
Net cash provided by financing
activities
887,832
687,714
Net increase in cash and cash
equivalents
467,818
170,223
Cash and cash equivalents – beginning of
year
488,371
522,910
Cash and cash equivalents – end of
period
$
956,189
$
693,133
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
acquisition and financing-related transaction costs, share-based
compensation and changes in the fair value of contingent
consideration. 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
September 30,
Nine Months Ended
September 30,
($ in thousands)
2021
2020
2021
2020
Net loss
$
(296,722
)
$
(59,256
)
$
(364,990
)
$
(84,610
)
Interest expense
1,594
—
6,282
—
Income tax (benefit) expense
73
—
(18,225
)
(9,162
)
Depreciation and amortization
14,205
2,678
25,981
5,550
Transaction costs (a)
448
965
5,598
3,312
Share-based compensation expense (b)
24,180
1,529
43,234
3,722
Change in fair value of contingent
consideration (c)
304
—
1,363
—
Contract termination costs (d)
10,000
—
10,000
—
Adjusted EBITDA
$
(245,918
)
$
(54,084
)
$
(290,757
)
$
(81,188
)
(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)
Represents the non-cash change in fair
value of contingent consideration from business combinations, which
is remeasured at fair value each reporting period. There was no
material activity for periods prior to the first quarter of
2021.
(d)
Represents amount paid for early
termination of an existing vendor contract.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211111005503/en/
Investor Contact: IR@brighthealthgroup.com
Media Contact: Kris Patrow 651.492.1556
Kris.Patrow@padillaco.com
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