Sign in

You're signed outSign in or to get full access.

BH

Babylon Holdings Ltd (BBLNF)·Q1 2023 Earnings Summary

Executive Summary

  • Q1 revenue grew 16.8% year over year to $311.1M on 17% VBC growth, while Adjusted EBITDA loss improved to $(45.8)M with margin improving to (14.7)% from (31.0)% a year ago .
  • Mix shift accelerated: Babylon exited two Medicaid contracts and launched its digital-first Ambetter Commercial Exchange product Jan 1; ~60% of VBC revenue now comes from non‑Medicaid members .
  • Guidance withdrawn and earnings call canceled due to interim financing and a proposed take‑private led by AlbaCore; liquidity dominated the narrative (cash and equivalents $77.7M including $52.1M held for sale) .
  • Net loss was $(63.2)M (net loss margin (20.3)%) vs $(29.1)M ((10.9)%) in Q1’22, in part because Q1’22 included a $78.8M gain related to going public; sequentially, loss narrowed vs Q4’22’s $(100.1)M .

What Went Well and What Went Wrong

What Went Well

  • Revenue and mix: Total revenue rose to $311.1M (+$44.7M YoY), driven by VBC revenue up 17% to $287.5M; non‑Medicaid mix reached ~60% after exiting two Medicaid contracts and launching Ambetter .
  • Profitability metrics improved: Adjusted EBITDA loss narrowed to $(45.8)M with margin improving to (14.7)% vs (31.0)% in Q1’22; Medical Loss Ratio improved to 98.8% (Medical Margin 1.2%); COCD margin turned positive at 3.5% vs (1.9)% a year ago .
  • Commercial traction: Ambetter outperformed early with 38% YTD membership growth, 12x faster registration, and 8x engagement vs other cohorts; U.K. Private delivered 186K appointments (+83% YoY) .
    • Management context from prior quarter: “We grew our revenue by 3.5 fold and achieved COCD or Medical Margin profitability improvements across our business lines… expect Adjusted EBITDA profitability in mid‑2024” — CEO Ali Parsa .

What Went Wrong

  • Liquidity and strategic uncertainty: Company withdrew FY23 guidance and canceled its call amid interim financing and take‑private discussions with AlbaCore, increasing uncertainty on forward outlook .
  • GAAP losses remain material: Net loss margin was (20.3)% (vs (10.9)% in Q1’22), with Q1’22 benefitting from a $78.8M going‑public related gain; interest expense also increased YoY .
  • Balance sheet strain: Stockholders’ equity stood at $(315.1)M; loans and borrowings were $295.4M, underscoring leverage and financing risk heading into the take‑private process .

Financial Results

Consolidated P&L vs prior year and prior quarter

MetricQ1 2022Q4 2022Q1 2023
Revenue ($USD Millions)$266.4 $289.0 $311.1
Net Loss ($USD Millions)$(29.1) $(100.1) $(63.2)
GAAP EPS (Basic & Diluted)$(1.71) $(4.50) $(2.53)
Adjusted EBITDA ($USD Millions)$(82.6) $(48.9) $(45.8)
Net Loss Margin (%)(10.9)% (34.6)% (20.3)%
Adjusted EBITDA Margin (%)(31.0)% (16.9)% (14.7)%

Segment revenue breakdown (YoY)

Segment Revenue ($USD Millions)Q1 2022Q1 2023
Value‑based care$246.6 $287.5
Clinical services$12.1 $17.1
Software licensing$7.8 $6.5
Total Revenue$266.4 $311.1

Operating KPIs and margins

KPI / MetricQ1 2022Q4 2022Q1 2023
Medical Loss Ratio (MLR)100.4% 99.4% 98.8%
Medical Margin(0.4)% 0.6% 1.2%
Cost of Care Delivery (COCD) Margin(1.9)% 2.1% 3.5%
Cash & equivalents (incl. held‑for‑sale cash)——$77.7M ($25.6M cash + $52.1M held for sale)
Ambetter Commercial Exchange digital‑first metrics—Launched Jan ’23 across 6 states 38% YTD membership growth; 12x faster registration; 8x engagement
U.K. Private appointments—U.K. COCD profitable in 2022 186K appointments (+83% YoY)

Guidance Changes

MetricPeriodPrevious Guidance (3/9/23)Current (5/10/23)Change
RevenueFY 2023>$1.1B Withdrawn Withdrawn
Adjusted EBITDAFY 2023$(120)M to $(100)M Withdrawn Withdrawn
Adjusted EBITDA profitability timingCompanyMid‑2024 Withdrawn Withdrawn

Earnings Call Themes & Trends

Note: Company canceled the Q1’23 call; themes reflect press releases and prior‑quarter disclosures.

TopicQ3 2022 (previous)Q4 2022 (previous)Q1 2023 (current)Trend
VBC mix shift (Medicaid → Commercial/Medicare)Proactive diversification toward Medicare/Commercial; ~44% VBC rev from Medicare/Commercial in Q3’22 ~49% Medicare/Commercial contribution in Q4’22 Exited two Medicaid contracts; Ambetter live; ~60% of VBC revenue non‑Medicaid Improving mix toward higher‑value populations
Cost actions and margin trajectoryAdj. EBITDA margin ~ (19)% in Q3’22; cost savings program in place ~$125M annualized cost reductions executed; U.K. COCD profitable Adj. EBITDA margin (14.7)%; COCD margin 3.5% Gradual improvement
Capital structure/strategic alternativesExpect IPA sale proceeds to fund profitability Working capital facility up to $30M with AlbaCore Interim financing and proposed take‑private with AlbaCore; guidance withdrawn; call canceled Escalating financing actions
Technology/engagementAI‑led platform; >50% interactions via tech; 85% virtual Newer cohorts show 8x faster engagement Ambetter: 12x faster registration; 8x engagement; 38% YTD membership growth Engagement strengthening
U.K. operationsLarge virtual network; at‑scale delivery U.K. COCD profitability achieved 186K U.K. Private appointments (+83% YoY) Strong volume growth

Management Commentary

  • Strategic focus (CEO, prior quarter): “We grew our revenue by 3.5 fold and achieved COCD or Medical Margin profitability improvements across our business lines… The cumulative result… we now expect Adjusted EBITDA profitability in mid‑2024, significantly ahead of previous guidance.” — Ali Parsa, CEO .
  • Financial discipline (CFO, prior quarter): “We continue to shift revenue mix away from Medicaid members… successfully executing nearly $125 million in annualized cost reductions.” — David Humphreys, CFO .
  • Q1 disclosure context: Company withdrew FY23 revenue/Adjusted EBITDA guidance and the mid‑2024 Adjusted EBITDA profitability target in connection with interim financing and a proposed take‑private, and canceled the Q1 results call .

Q&A Highlights

  • No Q1’23 earnings call or Q&A was held; the company canceled its previously announced call on May 10, 2023 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1’23 was unavailable for this ticker at the time of analysis; as a result, we could not benchmark reported results vs estimates.
  • Given the withdrawal of guidance, we expect models to remove prior FY23 revenue >$1.1B and $(120)–$(100)M Adjusted EBITDA targets and incorporate higher uncertainty related to financing and potential take‑private .

Key Takeaways for Investors

  • Operations improving but overshadowed by capital structure: Adjusted EBITDA margin improved to (14.7)% and MLR dipped below 100%, yet guidance withdrawal and take‑private process shift focus to liquidity and deal path .
  • Mix shift is real and accelerating: Non‑Medicaid share of VBC is ~60% post Medicaid exits and Ambetter launch, which should support margin quality if sustained .
  • Commercial digital‑first momentum: Ambetter’s faster registration and higher engagement are encouraging leading indicators of care management leverage .
  • U.K. remains a bright spot: COCD profitability (achieved in 2022) and strong U.K. Private appointment growth underpin platform leverage outside U.S. VBC volatility .
  • Modeling implications: Remove prior FY23 guidance and mid‑2024 profitability target; stress‑test scenarios for financing, asset sales, or take‑private outcomes; consider reduced Medicaid exposure and improved COCD/MLR trajectories in mid‑case .
  • Near‑term trading setup: Headlines around financing and the proposed take‑private likely drive the stock; absent guidance and Q&A, incremental datapoints may come from strategic process updates and any asset sale progress .

Appendix: Additional Financial Detail

  • Balance sheet snapshot: Cash and equivalents $25.6M (plus $52.1M cash held for sale), loans/borrowings $295.4M, stockholders’ equity $(315.1)M as of Mar 31, 2023 .
  • Cash flow: Net cash used in operating activities improved to $(38.4)M vs $(78.5)M in Q1’22; financing inflows of $18.9M in Q1’23 .