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Bright Health Group Reports Second Quarter 2021 Results

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·16 min read
In this article:
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  • Total GAAP Revenues of $1,114 million grew 275% from $297 million in Q2’20

  • Bright HealthCare Membership of 662,825, up 220% from 207,224 in Q2’20

  • NeueHealth Value-Based Patients of 42,305, up 118% from Q2’20, with further growth to 169,983 after adjusting for the acquisition of Centrum Medical Holdings, which closed on July 1, 2021

MINNEAPOLIS, August 03, 2021--(BUSINESS WIRE)--Bright Health Group, Inc. (NYSE: BHG, or the "Company"), a diversified healthcare services provider building a national Integrated System of Care, today reported financial results for its second quarter ended June 30, 2021.

"We began our journey as a public company with strong second quarter results, demonstrating significant growth across both NeueHealth, our personalized care delivery business, and Bright HealthCare, our healthcare financing and distribution business," said Mike Mikan, President and CEO of Bright Health Group. "We are focused on changing healthcare in America for consumers and our Care Partners through our alignment model which has shown to make healthcare more personal, simple, and affordable. Bright Health remains focused on growing and diversifying our business and is excited to continue to bring our differentiated model to more communities across the country."

Bright Health Group’s total revenue of $1,114 million in the second quarter of 2021 increased by $817 million, or 275%, compared to the prior-year period. These results were driven primarily by organic membership growth in Bright HealthCare during the 2020 open enrollment period and special enrollment period for the commercial business that began on February 15, 2021, and both organic and inorganic growth at NeueHealth. The Company also experienced an increase in investment income due to a $58.5 million unrealized gain on equity securities.

Bright Health Group’s medical cost ratio ("MCR") for the second quarter of 2021 was 86.8% on a reported basis and 82.0% on an adjusted basis. This is an improvement over last year’s second quarter adjusted MCR of 82.7%. "As we step back and look at year-to-date 2021 compared to the first half of 2020, our growth and ability to demonstrate performance is truly remarkable. Our first half revenue has more than quadrupled since last year, all while maintaining a consistent adjusted MCR below 80%," said Cathy Smith, Chief Financial and Administrative Officer. In addition, the Company continues to leverage operating costs as the business scales with an operating cost ratio of 23.4% for the second quarter, an improvement of 6.5 percentage points over the same period last year.

The Company’s GAAP net loss was ($43.7) million in the second quarter of 2021, an increase in net loss of $25.6 million compared to the prior-year period. The Company’s non-GAAP adjusted EBITDA was a loss of ($35.3) million in the second quarter of 2021, compared to a loss of ($23.2) million in the prior-year period.

Key Metrics

($ in thousands)

Three Months Ended June 30

2021

2020

Consumer and Patient Metrics

Bright HealthCare Commercial Consumers

552,759

153,083

Bright HealthCare Medicare Advantage Consumers

110,066

54,141

NeueHealth Value-Based Patients

42,305

19,419

Financial Metrics

Revenue

$

1,113,840

$

296,856

Adjusted Medical Cost Ratio(1)

82.0

%

82.7

%

Operating Cost Ratio

23.4

%

29.9

%

GAAP Net Loss

$

(43,723

)

$

(18,074

)

Adjusted EBITDA(1)

$

(35,255

)

$

(23,248

)

(1) Adjusted Medical Cost Ratio and Adjusted EBITDA are non-GAAP financial measures. See the tables at the end of this release for additional information and a reconciliation of these non-GAAP measures.

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 $4.0 billion to $4.2 billion with an expected enterprise medical cost ratio of approximately 86% plus or minus 200 bps. On a segment basis, Bright HealthCare end-of-year membership is expected to be approximately 650,000, while NeueHealth revenue is expected to be approximately $425 million. Finally, intercompany revenue elimination, comprised of payments from Bright HealthCare to NeueHealth for managing patient care and for network services, is expected to be approximately ($275) million.

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 nearly 170,000 patients under value-based contracts through our 44 owned primary care clinics and support 87 additional affiliated clinics. Through Bright HealthCare, we offer Commercial and Medicare health plan products to approximately 663,000 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 142113. This earnings release and the Form 8-K dated August 3, 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.

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; 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. 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.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

June 30,

2021

December 31,

2020

Assets

Current assets:

Cash and cash equivalents

$

1,506,319

$

488,371

Short-term investments

283,337

499,928

Accounts receivable, net of allowance of $4,535 and $2,602, respectively

93,086

60,522

Prepaids and other current assets

208,693

130,986

Total current assets

2,091,435

1,179,807

Other assets:

Long-term investments

633,029

175,176

Property, equipment and capitalized software, net

19,101

12,264

Goodwill

565,020

263,035

Intangible assets, net

262,420

152,211

Other non-current assets

28,773

28,309

Total other assets

1,508,343

630,995

Total assets

$

3,599,778

$

1,810,802

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

Current liabilities:

Medical costs payable

$

565,620

$

249,777

Accounts payable

86,527

57,252

Unearned revenue

38,060

34,628

Risk adjustment payable

507,853

187,777

Other current liabilities

166,227

35,847

Total current liabilities

1,364,287

565,281

Other liabilities

44,453

28,578

Total liabilities

1,408,740

593,859

Redeemable noncontrolling interests

41,012

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’ deficit:

Common stock, $0.0001 par value; 3,000,000,000 and 658,993,725 shares authorized in 2021 and 2020,

respectively; 625,691,448 and 137,662,698 shares issued and outstanding in 2021 and 2020, respectively

63

14

Additional paid-in capital

2,735,099

9,877

Accumulated deficit

(585,669)

(515,989)

Accumulated other comprehensive income

533

2,426

Total shareholders’ equity (deficit)

2,150,026

(503,672)

Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’

equity (deficit)

$

3,599,778

$

1,810,802

Condensed Consolidated Statements of Income (Loss)

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenue:

Premium revenue

$

1,042,086

$

290,972

$

1,902,717

$

481,709

Service revenue

12,085

3,604

20,523

8,424

Investment income

59,669

2,280

65,158

5,289

Total revenue

1,113,840

296,856

1,988,398

495,422

Operating expenses:

Medical costs

904,630

233,180

1,589,200

363,795

Operating costs

261,060

88,827

469,300

163,271

Depreciation and amortization

7,195

2,085

11,776

2,872

Total operating expenses

1,172,885

324,092

2,070,276

529,938

Operating loss

(59,045)

(27,236)

(81,878)

(34,516)

Interest expense

4,142

4,688

Loss before income taxes

(63,187)

(27,236)

(86,566)

(34,516)

Income tax (benefit) expense

(19,464)

(9,162)

(18,298)

(9,162)

Net loss

(43,723)

(18,074)

(68,268)

(25,354)

Net earnings attributable to noncontrolling interests

(795)

(1,412)

Net loss attributable to Bright Health Group, Inc. common

shareholders

$

(44,518)

$

(18,074)

$

(69,680)

$

(25,354)

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

$

(0.28)

$

(0.13)

$

(0.46)

$

(0.19)

Basic and diluted weighted-average common shares outstanding

160,942

135,801

150,616

135,719

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Six Months Ended June 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(69,680)

$

(25,354)

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

Depreciation and amortization

11,776

2,872

Share-based compensation

19,054

2,193

Deferred income taxes

(18,018)

Unrealized gains on equity securities

(62,754)

Other, net

8,681

486

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

Accounts receivable

(14,427)

23,681

Other assets

(39,883)

(3,844)

Medical cost payable

223,125

21,739

Risk adjustment payable

318,758

108,787

Accounts payable and other liabilities

120,847

(46,376)

Unearned revenue

(333)

2,860

Net cash provided by operating activities

497,146

87,044

Cash flows from investing activities:

Purchases of investments

(596,811)

(486,873)

Proceeds from sales, paydown, and maturities of investments

449,636

209,155

Purchases of property and equipment

(10,554)

(319)

Business acquisition, net of cash acquired

(210,492)

(174,090)

Net cash used in investing activities

(368,221)

(452,127)

Cash flows from financing activities:

Proceeds from issuance of preferred stock

211,200

Proceeds from issuance of common stock

9,616

131

Payments for debt issuance costs

(3,391)

Proceeds from IPO

887,328

Payments for IPO offering costs

(4,530)

Net cash provided by financing activities

889,023

211,331

Net increase (decrease) in cash and cash equivalents

1,017,948

(153,752)

Cash and cash equivalents – beginning of year

488,371

522,910

Cash and cash equivalents – end of period

$

1,506,319

$

369,158

Non-GAAP Financial Measures

We use the non-GAAP financial measures Adjusted EBITDA and Adjusted MCR in this release. 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. We define Adjusted Medical Cost Ratio ("Adjusted MCR") as reported Medical Cost Ratio ("MCR"), excluding both the impact of COVID-related medical costs and prior period divergence from estimates and including an estimate for the impact of deferred utilization. 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 (and with respect to Adjusted MCR, are helpful to investors to understand the Company’s financial performance and operations without the temporary distortion caused by the COVID-19 pandemic and prior period developments). 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 these measures 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 and Adjusted MCR are not recognized terms under GAAP and should not be considered as alternatives to Net Income (Loss) or Reported MCR as measures 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 these measures 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 June 30,

Six Months Ended June 30,

($ in thousands)

2021

2020

2021

2020

Net loss

$

(43,723)

$

(18,074)

$

(68,268)

$

(25,354)

Interest expense

4,142

4,688

Income tax (benefit) expense

(19,464)

(9,162)

(18,298)

(9,162)

Depreciation and Amortization

7,195

2,085

11,776

2,872

Transaction Costs (a)

3,130

653

5,150

2,347

Share-based Compensation expense (b)

13,878

1,250

19,054

2,193

Change in Fair Value of Contingent Consideration (c)

(413)

1,059

Adjusted EBITDA

$

(35,255)

$

(23,248)

$

(44,839)

$

(27,104)

The following table provides a reconciliation of Reported Medical Cost Ratio to Adjusted Medical Cost Ratio for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Reported Medical Cost Ratio

86.8

%

80.1

%

83.5

%

75.5

%

Non-COVID prior-period developments(a)

(1.6)

%

0.3

%

(0.9)

%

0.3

%

COVID impact(b)

(3.2)

%

(2.2)

%

(3.6)

%

(1.3)

%

Deferred utilization(c)

%

4.4

%

%

2.6

%

Adjusted Medical Cost Ratio

82.0

%

82.7

%

79.1

%

77.1

%

Note: Totals above may not sum due to rounding

View source version on businesswire.com: https://www.businesswire.com/news/home/20210803005382/en/

Contacts

Investor Contact:
IR@brighthealthgroup.com

Media Contact:
Kris Patrow 651.492.1556
Kris.Patrow@padillaco.com