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NeueHealth, Inc. (BHG)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 delivered mixed but improving fundamentals: revenue declined year over year on lower ACO REACH aligned beneficiaries, but the company generated positive net income from continuing operations and positive Adjusted EBITDA as restructuring and financing actions flowed through results .
  • Revenue was $245.1M, Net Income from Continuing Operations was $5.7M, and Adjusted EBITDA was $2.5M; management maintained full-year 2024 guidance including Adjusted EBITDA of $15–$25M and revenue of ~$1.0B .
  • NeueCare continued to perform well with higher revenue and operating income year over year; NeueSolutions revenue fell year over year alongside ACO REACH revenue, though losses narrowed versus Q4 2023 .
  • Potential stock catalysts: execution against 2024 profitability targets, stabilization of ACO REACH economics and aligned lives, and further proof points on operating cost ratio discipline (company highlighted adjusted operating cost ratio framework for 2024) .

What Went Well and What Went Wrong

  • What Went Well

    • Positive continuing operations profitability and positive Adjusted EBITDA: Net Income from Continuing Operations of $5.7M vs. $(53.9)M in Q1’23; Adjusted EBITDA of $2.5M vs. $(5.7)M in Q1’23 .
    • NeueCare segment strength: revenue grew to $73.6M (from $62.7M) and operating income rose to $9.8M (from $6.6M) year over year .
    • Management tone on execution: “We had a strong start to the year… expand[ed] our operations in Central Florida… well-positioned to build on our First Quarter results” — Mike Mikan, CEO .

  • What Went Wrong

    • Top-line pressure: total revenue declined 18% year over year to $245.1M, with ACO REACH revenue down to $171.8M from $239.8M .
    • Cost ratio step-up: Adjusted Operating Cost Ratio increased to 19.7% from 15.4% in Q1’23, driven by revenue decline from fewer ACO REACH aligned beneficiaries outweighing operating cost reductions .
    • NeueSolutions softness: segment revenue fell to $173.9M from $240.1M year over year, and while operating loss narrowed sequentially, it remained negative at $(2.9)M .

Financial Results

MetricQ1 2023Q4 2023Q1 2024
Revenue ($USD Millions)$300.6 $292.9 $245.1
Net Income (Loss) from Continuing Operations ($USD Millions)$(53.9) $(62.8) $5.7
Basic & Diluted EPS – Continuing Ops ($)$(9.04) $19.54 $(2.31)
Operating Income (Loss) ($USD Millions)$(44.9) $(45.9) $(23.1)
Adjusted EBITDA ($USD Millions)$(5.7) $(10.4) $2.5
Operating Cost Ratio (%)26.5% 22.3% 27.3%
Adjusted Operating Cost Ratio (%)15.4% 16.1% 19.7%
Wall St. Consensus (Rev/EPS)Unavailable via S&P Global (see Estimates Context)Unavailable via S&P Global (see Estimates Context)Unavailable via S&P Global (see Estimates Context)

Segment breakdown:

SegmentQ1 2023Q4 2023Q1 2024
NeueCare Revenue ($USD Millions)$62.7 $71.3 $73.6
NeueCare Operating Income ($USD Millions)$6.6 $3.7 $9.8
NeueSolutions Revenue ($USD Millions)$240.1 $220.9 $173.9
NeueSolutions Operating Income (Loss) ($USD Millions)$(1.5) $(14.6) $(2.9)

KPIs:

KPIQ1 2023 (as of Mar 31, 2023)Q4 2023 (as of Dec 31, 2023)Q1 2024 (as of Mar 31, 2024)
Value-Based Consumers Served373,000 355,000 360,000
Enablement Services Lives27,000 106,000 109,000

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2023 release)Current Guidance (Q1 2024 release)Change
Enterprise RevenueFY 2024~ $1.0B ~ $1.0B Maintained
NeueCare RevenueFY 2024$310M–$320M $310M–$320M Maintained
NeueSolutions RevenueFY 2024$690M–$700M $690M–$700M Maintained
Adjusted Operating Cost RatioFY 202415%–16% (enterprise) 15%–16% excluding corporate; 19%–20% including corporate Methodology clarified; target maintained
Adjusted EBITDAFY 2024$15M–$25M $15M–$25M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
Portfolio focus/strategic transitionEmphasized wind-down of ACA insurance and pending sale of CA MA; focus on value-driven care; second consecutive positive Adjusted EBITDA Sale completed; focus on NeueHealth care delivery and enablement; confidence in 2024 profitability targets “Strong start,” expansion in Central Florida; continued focus on provider/payor partnerships and consumer-centric care Transition substantially executed; operating focus sharpening
ACO REACH performance/exposureSignificant ACO REACH revenue; recognized care partner bankruptcy impact in adjustments ACO REACH remained core; segment losses at year end, cost actions ongoing ACO REACH revenue down YoY; higher adjusted cost ratio partly due to fewer aligned beneficiaries Stabilization required; monitoring aligned beneficiaries and partner dynamics
Cost structure/adjusted cost ratioAdjusted Operating Cost Ratio improved YoY (20.8% vs. 31.8%) Further improvement to 16.1% in Q4 Increased to 19.7% given revenue decline; 2024 target reiterated (methodology clarified) Mixed near-term; long-term target reiterated
Consumer footprintValue-based consumers 355k (+209% YoY comparable) 355k at YE; enablement lives 106k 360k value-based consumers; enablement lives 109k Gradual growth post-portfolio rationalization
Profitability trajectoryPositive Adj. EBITDA in Q3 FY24 Adj. EBITDA target $15–$25M Q1 Adj. EBITDA positive; FY24 target maintained On track if execution continues

Management Commentary

  • “We had a strong start to the year… We expanded our operations in Central Florida and continue to focus on proactive consumer engagement as we deliver a more coordinated, personalized care experience. We believe we are well-positioned to build on our First Quarter results and expect to continue to drive long-term, sustainable growth in both our NeueCare and NeueSolutions segments this year.” — Mike Mikan, President & CEO .
  • “We achieved significant milestones as a company this past year, completing the sale of our California Medicare Advantage business and fully focusing on where we have proven to have the greatest impact - through our care delivery and provider enablement business.” — Mike Mikan .
  • “Bright Health’s solid 2023 performance continued in the Third Quarter, with our second consecutive quarter of positive Adjusted EBITDA.” — Mike Mikan (Q3 2023) .

Q&A Highlights

  • Full Q1 2024 call transcript was not available in our internal document set. An external transcript is referenced here for further review: https://finance.yahoo.com/news/neuehealth-inc-nyse-neue-q1-124149614.html
  • Based on the company’s disclosures, key areas likely discussed/clarified on the call include: 2024 Adjusted EBITDA bridge and sustainability, dynamics in ACO REACH aligned beneficiaries and loss performance, Central Florida expansion ramp, and adjusted operating cost ratio methodology and targets .
  • For verbatim Q&A, please refer to the external transcript link above and the company’s webcast archive: https://investors.neuehealth.com/events-and-presentations/events/event-details/2024/NeueHealth-Q1-2024-Earnings-Call/default.aspx

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q1 2024 revenue and EPS; data were unavailable via our interface for this ticker at this time. As a result, we cannot present vs-consensus comparisons for Q1 2024. We will update once S&P Global mapping/access issues are resolved.
  • All comparisons in this report are to reported actuals from company filings/press releases .

Key Takeaways for Investors

  • Early proof points on profitability: Q1 positive Net Income from Continuing Operations and positive Adjusted EBITDA signal progress post-portfolio rationalization; maintaining FY24 $15–$25M Adjusted EBITDA target is supportive .
  • Segment divergence remains the swing factor: NeueCare is performing well with growing revenue/operating income; NeueSolutions requires stabilization of ACO REACH volumes and economics to sustain consolidated profitability .
  • Cost discipline is necessary but not sufficient: Adjusted Operating Cost Ratio rose to 19.7% on revenue pressure; 2024 targets (15–16% excl. corporate; 19–20% incl.) will likely hinge on aligned lives trends and execution on operating efficiencies .
  • Watch ACO REACH aligned beneficiaries and partner health: management cited the impact of fewer aligned beneficiaries; prior periods show adjustments related to a care partner bankruptcy — vigilance on counterparty and attribution trends is warranted .
  • 2024 revenue mix/trajectory: Full-year revenue guide (~$1.0B) and segment ranges were maintained; tracking quarterly cadence vs. ranges (NeueCare $310–$320M; NeueSolutions $690–$700M) will be key for confidence in the FY outlook .
  • Narrative catalysts: consistent delivery vs. reiterated FY24 guidance, clarity on cost ratio pathway, and continued growth in enablement lives could drive sentiment; any incremental color on ACO REACH performance should be closely monitored .

Supporting documents:

  • Q1 2024 8-K and press release, including full financials, non-GAAP reconciliations, KPIs, and guidance .
  • Q4 2023 8-K and press release for prior-period comparisons and 2024 initial guidance .
  • Q3 2023 8-K and press release for earlier trend context .