Bright Health Group Reports Third Quarter 2022 Results

Rhea-AI Summary

Bright Health Group reported a Q3 2022 revenue of $1.6 billion, a 51.3% increase from Q3 2021. Despite a GAAP net loss of $259.4 million, the company improved its Enterprise Medical Cost Ratio to 90.6%, down from 103.0% the previous year. Adjusted EBITDA loss was $82.9 million. The company revised its 2022 guidance, reducing the expected cost ratio to 90%-92% and adjusting EBITDA loss to $550-$700 million. Bright Health Group aims for Adjusted EBITDA profitability in 2023.

Positive

• Revenue increased to $1.6 billion, up 51.3% year-over-year.
• Enterprise Medical Cost Ratio improved to 90.6% from 103.0%.
• Adjusted EBITDA loss guidance revised positively to $550-$700 million.

Negative

• GAAP net loss of $259.4 million includes $116.8 million in goodwill and intangible asset impairments.
• Continued Adjusted EBITDA loss of $82.9 million.

• Revenue of $1.6 billion, up 51.3% from Q3'21, GAAP Net Loss of $259.4 million, Adjusted EBITDA Loss of $82.9 million

• Q2’22 Enterprise Medical Cost Ratio of 90.6%, a strong improvement from the prior year

• Lowering Full Year 2022 Enterprise Medical Cost Ratio guidance range to 90% to 92%

• Positively revising Full Year 2022 Adjusted EBITDA loss guidance range to $550 to $700 million

MINNEAPOLIS--(BUSINESS WIRE)-- Bright Health Group, Inc. (“Bright Health Group” 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 third quarter ended September 30, 2022.

“Bright Health Group continued to deliver against our financial targets in the Third Quarter and we have confidence in our improved guidance for the year,” said Mike Mikan, President and CEO of Bright Health Group. “Our Medicare Advantage and NeueHealth businesses continued to outperform our expectations in the quarter. With our strengthened capital position and transition to a more focused business model, we expect to reach Adjusted EBITDA profitability in 2023 and continue to drive our differentiated Fully Aligned Care Model.”

Key Metrics

	As of September 30,
	2022		2021
Consumer and Patient Metrics
Bright HealthCare Commercial Consumers	1,025,000		600,000
Medicare Advantage Consumers	125,000		110,000
NeueHealth Value-Based Patients	520,000		170,000

	Three Months Ended								Nine Months Ended
($ in thousands)	September 30,								September 30,
	2022				2021				2022				2021
Financial Metrics
Revenue	$	1,632,292			$	1,078,657			$	5,044,495			$	3,067,055
Medical Cost Ratio (1)		90.6	%			103.0	%			87.9	%			90.3	%
Operating Cost Ratio		18.2	%			28.7	%			22.3	%			25.4	%
GAAP Net Loss (2)	$	(259,361	)		$	(296,722	)		$	(691,320	)		$	(364,990	)
Adjusted EBITDA (non-GAAP)	$	(82,929	)		$	(292,176	)		$	(352,620	)		$	(399,769	)

(1)		Medical Cost Ratio for the three months ended September 30, 2022 and 2021, include a 140 basis point and 540 basis point, respectively, unfavorable impact from COVID-19 related costs. Medical Cost Ratio for the six months ended September 30, 2022 and 2021, include a 200 basis point and 420 basis point, respectively, unfavorable impact from COVID-19 related costs.
(2)		GAAP Net Loss for the three months ended September 30, 2022 includes Goodwill impairment of $74.2 million and Intangibles Assets impairment of $42.6 million. GAAP Net Loss for the nine months ended September 30, 2022 includes Goodwill impairment of $74.2 million and Intangibles Assets impairment of $49.3 million. The Goodwill and Intangible Assets impairments are primarily due to macro and strategic factors.
See the table at the end of this release for additional information and a reconciliation of the non-GAAP measure used in the table above.

Financial Outlook

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

• Bright Health Group’s total Revenue is expected to be $6.8 billion with an expected enterprise Medical Cost Ratio between 90% and 92%.
• On a segment basis, Bright HealthCare combined Commercial and Medicare Advantage end-of-year membership is expected to be over 1,000,000, while NeueHealth Revenue is expected to be approximately $2.2 billion.
• Intercompany Revenue elimination, comprised of payments from Bright HealthCare to NeueHealth for managing patient care and for network services, is expected to be approximately $1.2 billion.
• Adjusted EBITDA for 2022 is expected to be a loss of between $500.0 million and $700.0 million^†.

Earnings Conference Call

As previously announced, Bright Health Group will discuss the Company’s results, strategy, and outlook on a conference call with investors at 8:00 a.m. Eastern Time today. Bright Health Group will host a live webcast of this conference call which can be accessed from the Investor Relations page of the company’s website (investors.brighthealthgroup.com). Following the call, a webcast replay will be available on the same site. This earnings release and the Form 8-K filed November 9, 2022, can be accessed on the Investor Relations page of the Company’s website. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website. Accordingly, investors should monitor this portion of our website, in addition to following our press releases, U.S. Securities and Exchange Commission (“SEC”) filings and public conference calls and webcasts.

About Bright Health Group

Bright Health Group is 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.

Notes

^† A reconciliation of the projected Adjusted EBITDA, which is a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measures, is not provided because the Company is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. These GAAP measures may include the impact of such items as interest expense, income tax expense, depreciation and amortization, impairment of goodwill or intangible assets, share-based compensation expense, transaction costs, changes in the fair value of contingent consideration, changes in the fair value of equity securities, contract termination costs, restructuring costs; and the tax effect of all such items. Historically, the Company has excluded these items from non-GAAP financial measures. The Company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments, such as a decision to exit part of the business, are inherently unpredictable as to if or when they may occur. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

Forward-Looking Statements

Statements made in this release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipate,” “expect,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “projections,” “outlook,” 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 quickly and efficiently wind down our IFP businesses and MA businesses outside of California; 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 ability to obtain and accurately assess, code, and report Individual and Family Plan and Medicare Advantage risk adjustment factor scores for consumers; our ability to contract with care providers and arrange for the provision of quality care; our ability to accurately estimate our medical expenses, effectively manage our costs and claims liabilities or appropriately price our products and charge premiums; our ability to obtain claims information timely and accurately; the impact of the ongoing COVID-19 pandemic on our business and results of operations; the risks associated with our reliance on third-party providers to operate our business; the impact of modifications or changes to the U.S. health insurance markets; our ability to manage the growth of our business; our ability to operate, update or implement our technology platform and other information technology systems; our ability to retain key executives; our ability to successfully pursue acquisitions and integrate acquired businesses; the occurrence of severe weather events, catastrophic health events, natural or man-made disasters, and social and political conditions or civil unrest; our ability to prevent and contain data security incidents and the impact of data security incidents on our members, patients, employees and financial results; our ability to comply with requirements to maintain effective internal controls; our ability to adapt to the new risks associated with our expansion into Direct Contracting; and the other factors set forth under the heading “Risk Factors” in the Company’s reports on Form 10-K, 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 Condensed Consolidated Balance Sheets (in thousands, except share and per share data) (Unaudited)
	September 30, 2022				December 31, 2021
Assets	​			​	​
Current assets:	​			​	​
Cash and cash equivalents	$	1,605,525			$	1,061,179
Short-term investments		299,897				193,835
Accounts receivable, net of allowance of $7,129 and $4,074, respectively		120,489				113,474
Direct contracting performance year receivable		234,776				—
Prepaids and other current assets		377,214				291,712
Total current assets		2,637,901		​		1,660,200
Other assets:	​			​	​
Long-term investments		865,677				675,192
Property, equipment and capitalized software, net		47,938				38,344
Goodwill		761,285				835,140
Intangible assets, net		263,265				343,860
Other non-current assets		36,061				45,603
Total other assets		1,974,226		​		1,938,139
Total assets	$	4,612,127		​	$	3,598,339
Liabilities, Redeemable Noncontrolling Interest, Redeemable Preferred Stock and Shareholders’ Equity (Deficit)	​			​	​
Current liabilities:	​			​	​
Medical costs payable	$	975,126		​	$	817,975
Accounts payable		111,272		​		118,140
Unearned revenue		195,892		​		53,295
Risk adjustment payable		1,308,959		​		931,170
Direct contracting performance year obligation		155,145				—
Short-term borrowings		303,947				155,000
Other current liabilities		201,014		​		207,238
Total current liabilities		3,251,355		​		2,282,818
Other liabilities		33,121		​		41,994
Total liabilities		3,284,476		​		2,324,812
Commitments and contingencies (Note 11)	​			​	​
Redeemable noncontrolling interests		211,026		​		128,407
Series A redeemable preferred stock, $0.0001 par value; 100,000,000 shares authorized in 2022 and 2021; 750,000 and — shares issued and outstanding in 2022 and 2021, respectively		747,481		​		—
Shareholders’ equity (deficit):				​
Common stock, $0.0001 par value; 3,000,000,000 shares authorized in 2022 and 2021; 629,915,081 and 628,622,872 shares issued and outstanding in 2022 and 2021, respectively		63		​		63
Additional paid-in capital		2,939,820		​		2,861,243
Accumulated deficit		(2,476,822	)	​		(1,700,851	)
Accumulated other comprehensive loss		(81,917	)	​		(3,335	)
Treasury Stock		(12,000	)	​		(12,000	)
Total shareholders’ equity (deficit)		369,144		​		1,145,120
Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit)	$	4,612,127		​	$	3,598,339

 

Bright Health Group, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Loss) (in thousands, except per share data) (Unaudited)
​	Three Months Ended September 30,								Nine Months Ended September 30,
​	2022			​	2021				2022			​	2021
Revenue:	​			​	​							​
Premium revenue	$	1,463,011			$	1,020,233			$	4,580,790			$	2,922,950
Direct contracting revenue		145,433				—				465,435				—
Service revenue		12,117				11,079				37,390				31,602
Investment income (loss)		11,731				47,345				(39,120	)			112,503
Total revenue		1,632,292		​		1,078,657				5,044,495		​		3,067,055
Operating expenses:	​			​	​				​			​	​
Medical costs		1,456,862				1,050,943				4,435,624				2,640,143
Operating costs		297,445				309,790				1,122,964				779,090
Goodwill impairment		74,165				—				74,165				—
Intangible assets impairment		42,611				—				49,331				—
Depreciation and amortization		13,904				14,205				40,173				25,981
Total operating expenses		1,884,987		​		1,374,938				5,722,257		​		3,445,214
Operating loss		(252,695	)	​		(296,281	)			(677,762	)	​		(378,159	)
Interest expense		4,905				1,594				6,435				6,282
Other income		(2	)			(1,226	)			(784	)			(1,226	)
Loss before income taxes		(257,598	)	​		(296,649	)			(683,413	)	​		(383,215	)
Income tax (benefit) expense		1,763				73				7,907				(18,225	)
Net loss		(259,361	)	​		(296,722	)			(691,320	)	​		(364,990	)
Net earnings attributable to noncontrolling interests		(46,710	)			(3,942	)			(84,651	)			(5,354	)
Series A preferred stock dividend accrued		(9,684	)			—				(28,083	)			—
Net loss attributable to Bright Health Group, Inc. common shareholders	$	(315,755	)	​	$	(300,664	)		$	(804,054	)	​	$	(370,344	)
Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders	$	(0.50	)		$	(0.48	)		$	(1.28	)		$	(1.19	)
Basic and diluted weighted-average common shares outstanding		629,718				630,378				629,231				312,294

 

Bright Health Group, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
​	Nine Months Ended September 30,
​	2022				2021
Cash flows from operating activities:	​			​	​
Net loss	$	(691,320	)	​	$	(370,344	)
Adjustments to reconcile net loss to net cash provided by operating activities:	​			​	​
Depreciation and amortization		40,173				25,981
Impairment of intangible assets		49,331				—
Impairment of goodwill		74,165				—
Share-based compensation		77,263				43,234
Deferred income taxes		1,590				(17,946	)
Unrealized gains on equity securities		58,821				(109,012	)
Other, net		9,612				14,555
Changes in assets and liabilities, net of acquired assets and liabilities:
Accounts receivable		(7,015	)			(18,683	)
Direct contracting performance year receivable		(234,776	)			—
Other assets		(77,551	)			(86,836	)
Medical cost payable		157,151				342,531
Risk adjustment payable		377,789				359,257
Accounts payable and other liabilities		(21,188	)			53,853
Unearned revenue		142,597				(3,476	)
Direct contracting performance year obligation		155,145				—
Net cash provided by operating activities		111,787		​		233,114
Cash flows from investing activities:	​			​	​
Purchases of investments		(1,422,025	)			(736,838	)
Proceeds from sales, paydown, and maturities of investments		980,763				536,110
Purchases of property and equipment		(21,579	)			(20,682	)
Business acquisitions, net of cash acquired		(310	)			(431,718	)
Net cash used in investing activities		(463,151	)	​		(653,128	)
Cash flows from financing activities:	​			​	​
Net proceeds from short-term borrowings		148,947				—
Proceeds from issuance of preferred stock		747,481				—
Proceeds from issuance of common stock		1,314				10,581
Distributions to noncontrolling interest holders		(2,032	)			—
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		895,710		​		887,832
Net increase in cash and cash equivalents		544,346		​		467,818
Cash and cash equivalents – beginning of year	$	1,061,179		​	$	488,371

 

Bright Health Group, Inc. and Subsidiaries Segment Information (in thousands) (Unaudited)
Bright HealthCare - Commercial	Three Months Ended								Nine months ended
($ in thousands)	September 30,								September 30,
Statements of income (loss) data:	2022				2021				2022				2021
Revenue:
Premium revenue	$	976,568			$	625,926			$	3,085,066			$	1,930,925
Investment income		6,849				1,058				13,103				3,386
Total revenue		983,417				626,984				3,098,169				1,934,311
Operating costs
Medical costs		896,645				673,679				2,646,265				1,682,380
Operating costs		161,913				181,808				701,374				465,680
Goodwill impairment		4,148				—				4,148				—
Intangible assets impairment		—				—				6,720				—
Depreciation and amortization		—				145				145				290
Total operating costs		1,062,706				855,632				3,358,652				2,148,350
Operating loss	$	(79,289	)		$	(228,648	)		$	(260,483	)		$	(214,039	)
Medical Cost Ratio (MCR)		91.8	%			107.6	%			85.8	%			87.1	%

Medicare Advantage	Three Months Ended								Nine months ended
(in thousands)	September 30,								September 30,
Statements of income (loss) and operating data:	2022				2021				2022				2021
Revenue:
Premium revenue	$	408,939			$	368,599			$	1,258,846			$	929,374
Investment income		36				29				83				105
Total revenue		408,975				368,628				1,258,929				929,479
Operating costs
Medical costs		362,527				345,402				1,157,528				905,816
Operating costs		43,291				50,434				127,986				119,111
Goodwill impairment		70,017				—				70,017				—
Depreciation and amortization		4,416				3,781				13,291				9,903
Total operating costs		480,251				399,617				1,368,822				1,034,830
Operating loss	$	(71,276	)		$	(30,989	)		$	(109,893	)		$	(105,351	)
Medical Cost Ratio (MCR)		88.7	%			93.7	%			92.0	%			97.5	%

NeueHealth	Three Months Ended								Nine months ended
(in thousands)	September 30,								September 30,
Statements of income (loss) and operating data:	2022				2021				2022				2021
Revenue:
Premium revenue	$	328,135			$	156,990			$	1,059,597			$	221,836
Direct Contracting revenue		145,433				—				465,435				—
Service revenue		23,615				19,556				72,387				54,809
Investment income (loss)		4,846				46,258				(52,306	)			109,012
Total revenue		502,029				222,804				1,545,113				385,657
Operating costs
Medical costs		447,604				163,279				1,453,985				211,176
Operating costs		42,448				38,650				133,926				86,008
Intangible assets impairment		42,611				—				42,611				—
Depreciation and amortization		6,913				9,563				20,572				14,362
Total operating costs		539,576				211,492				1,651,094				311,546
Operating loss	$	(37,547	)		$	11,312			$	(105,981	)		$	74,111
Medical Cost Ratio (MCR)		94.5	%			104.0	%			95.3	%			95.2	%

Non-GAAP Financial Measures

We use the non-GAAP financial measure Adjusted EBITDA. We define Adjusted EBITDA as Net Loss excluding Interest Expense, Income Taxes, Depreciation and Amortization, adjusted for the impact of impairment of 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 costs and restructuring costs. This non-GAAP measure has been presented in this quarterly Earnings Release as a supplemental measure of financial performance that is not required by or presented in accordance with GAAP because we believe it assists management and investors in comparing our operating performance across reporting periods on a consistent basis by excluding and including items that we do not believe are indicative of our core operating performance. Management believes this measure is useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management uses Adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA is not a recognized term under GAAP and should not be considered as an alternative to Net Income (Loss) as a measure of financial performance or any other performance measure derived in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentation of Adjusted EBITDA has limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentation of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

The following table provides a reconciliation of net loss to Adjusted EBITDA for the periods presented:

	Three Months Ended September 30,								Nine Months Ended September 30,
($ in thousands)	2022				2021				2022				2021
Net loss	$	(259,361	)		$	(296,722	)		$	(691,320	)		$	(364,990	)
Interest expense		4,905				1,594				6,435				6,282
Income tax (benefit) expense		1,763				73				7,907				(18,225	)
Depreciation and amortization		13,904				14,205				40,173				25,981
Goodwill impairment		74,165				—				74,165				—
Intangible assets impairment		42,611				—				49,331				—
Transaction costs (a)		7				448				417				5,598
Share-based compensation expense (b)		24,122				24,180				77,263				43,234
Change in fair value of equity securities (c)		12,189				(46,258	)			69,340				(109,012	)
Change in fair value of contingent consideration (d)		—				304				—				1,363
Contract termination costs (e)		—				10,000				1,241				10,000
Restructuring costs (f)		2,766				—				12,428				—
Adjusted EBITDA	$	(82,929	)		$	(292,176	)		$	(352,620	)		$	(399,769	)

(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 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.
(c)		Beginning in 2022, Adjusted EBITDA excludes the impact of changes in unrealized gains and losses on equity securities. The comparable period in 2021 has been recast to exclude changes in unrealized gains and losses on equity securities.
(d)		Represents the non-cash change in fair value of contingent consideration from business combinations, which is remeasured at fair value each reporting period.
(e)		Represents amounts paid for early termination of existing vendor contracts.
(f)		Restructuring costs represents severance costs as part of a workforce reduction in 2022 and impairment of capitalized software as a result of our decision to exit the Commercial business for the 2023 plan year.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221109005305/en/

Investor Contact:

Stephen Hagan

IR@brighthealthgroup.com

Media Contact:

media@brighthealthgroup.com

Source: Bright Health Group, Inc.

FAQ

What were Bright Health Group's revenue figures for Q3 2022?

Bright Health Group reported revenue of $1.6 billion for Q3 2022.

How much was Bright Health Group's net loss in Q3 2022?

The company reported a GAAP net loss of $259.4 million for Q3 2022.

What is the adjusted EBITDA loss for Bright Health Group in Q3 2022?

The adjusted EBITDA loss for Q3 2022 was $82.9 million.

What is Bright Health Group's 2022 revenue guidance?

The company expects total revenue of $6.8 billion for the full year 2022.

What is the expected Enterprise Medical Cost Ratio for 2022?

Bright Health Group expects the Enterprise Medical Cost Ratio to be between 90% and 92% for 2022.