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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Bright Health Group Inc | NYSE:BHG | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 16.35 | 0 | 01:00:00 |
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.
† 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
View source version on businesswire.com: https://www.businesswire.com/news/home/20230809707967/en/
Investor Contact: Stephen Hagan IR@brighthealthgroup.com
Media Contact: media@brighthealthgroup.com
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