NeueHealth - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $232.64M, essentially flat sequentially (vs $232.93M in Q3) and down year over year (vs $292.87M), while Adjusted EBITDA remained positive at $5.48M for the fourth straight quarter; diluted EPS improved to $(1.94) from $(8.51) in Q3 and $(30.47) in Q4 2023.
• Segment mix improved: NeueCare delivered $79.25M revenue and $9.23M operating income, while NeueSolutions posted $157.07M revenue and $3.10M operating income, a notable turn from a loss in Q3 and Q4 2023.
• For FY 2024, revenue was $936.66M (vs prior guidance of ~$950M), and Adjusted EBITDA was $22.50M, near the high end of the $15–$25M guidance range; management highlighted continued momentum with 717,000 consumers served to start 2025.
• Strategic overlay: the company agreed on Dec 23, 2024 to be acquired by an NEA affiliate; closing targeted for Q2 2025, with external legal PRs citing $7.33 per share in cash—deal timing and closing risk likely drive near-term stock reaction more than fundamentals.

What Went Well and What Went Wrong

• What Went Well

  • Four consecutive quarters of positive Adjusted EBITDA in 2024, with Q4 Adjusted EBITDA of $5.48M and FY 2024 at $22.50M; management called 2024 “our strongest financial performance to date”.
  • Segment profitability improvement: NeueSolutions swung to $3.10M operating income in Q4 from losses in Q3 and prior-year, while NeueCare delivered $9.23M operating income in Q4.
  • Strong demand signals into 2025: consumers served reached 717,000 to start 2025; management emphasized payer/provider relationships and expanding into MSSP as growth vectors (“We are building on this momentum... serving 717,000 consumers.” — CEO Mike Mikan).

• What Went Wrong

  • ACO REACH revenue remained a headwind year over year: Q4 ACO REACH revenue of $154.25M vs $219.66M in Q4 2023, pressuring consolidated revenue YoY.
  • GAAP profitability still negative on continuing operations: Q4 net loss from continuing operations was $(42.48)M despite improvements, reflecting ongoing interest expense and operating costs.
  • Operating cost intensity remained elevated on a GAAP basis: Q4 Operating Cost Ratio was 31.3% (Adjusted Operating Cost Ratio 18.4%), indicating continued need for cost discipline, even as Adjusted metrics improved.

Transcript

Operator (participant)

Good morning, and thank you for joining us for the NeueHealth Q4 2024 earnings conference call. My name is Carly, and I'll be coordinating the call today. I'd like to hand over to your host, Emily Lombardi. The floor is yours.

Emily Lombardi (AVP of Enterprise Strategy, Marketing and Communication)

Good morning, and welcome to NeueHealth's Q4 2024 earnings conference call. As a reminder, this call is being recorded. Leading the call today are NeueHealth's President and CEO, Mike Mikan, and CFO, Jay Matushak. Before we begin, we want to remind you that this call may contain forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the risk factors in our current and periodic reports we file with the SEC. Except as required by law, we undertake no obligation to revise or update any forward-looking statements or information. This call will also reference non-GAAP amounts and measures.

A reconciliation of the non-GAAP to GAAP measures is available in the company's Q4 earnings release, available on the company's investor relations page at investors.neuehealth.com. Information presented on this call is contained in such earnings release that we issued this morning in our Form 8-K dated March 20, 2025, and in the related presentation, each of which may be accessed from the investor relations page of the company's website. With that, I will now turn the conference over to NeueHealth Chief Executive Officer, Mike Mikan.

Mike Mikan (President and CEO)

Good morning, everyone, and thank you for joining NeueHealth's Q4 2024 earnings call. Today, we are pleased to report that we delivered our strongest year of financial performance to date in 2024, providing a solid foundation for NeueHealth to continue to grow the consumers we serve, expand the relationships we've built with payer and provider partners, and advance our care model in 2025 and beyond. Since NeueHealth was founded in 2020, we have maintained a relentless focus on making high-quality healthcare accessible and affordable for all populations. With this focus, we believe we have created and refined a care model that aligns with the industry's continued shift towards value-based care. Our model is compelling. We believe it's a strong alternative to episodic transactional care that has defined the healthcare industry for decades.

In contrast, our model is grounded in the power of long-standing, trusted relationships in the local communities we serve. Through our relationship-based approach, we prioritize a few fundamental elements that we believe create a truly personalized and coordinated healthcare experience that serves consumers throughout their lifetime. First, we are committed to placing the consumer at the center of everything we do, developing a holistic and deep understanding of every person we serve, and becoming their ongoing, trusted partner in care throughout their lifetime. Second, we focus on proactively managing care through key consumer engagement and care management initiatives to drive better health outcomes and, importantly, empower consumers to take an active role in their health. Finally, through our relationship-based approach, we develop strong partnerships with providers and payers across the industry, with a focus on aligning interests to create a better healthcare experience for all.

In 2024, we served 483,000 consumers, representing a compound annual growth rate of 123% in our NeueCare and NeueSolutions segments since 2020. We are building on this momentum and have already generated significant growth to start 2025, serving 717,000 consumers. Compared to 2024, we have grown the consumers we serve through our existing payer relationships by 31%. In our recently expanded markets, we have grown the consumers we serve by 97%. In addition, to start the year, we have secured new payer partnerships and expanded into new product verticals, including MSSP. We believe that this growth demonstrates the momentum we are driving to start the year and positions us for continued success in 2025 and beyond. On December 23, 2024, we announced that we entered into a definitive agreement to be acquired by an affiliate of one of our largest investors, NEA.

Upon completion of this transaction, NeueHealth will become a privately held company. We believe that this transaction places NeueHealth in a strong position for continued growth, providing the company with the flexibility and resources to build on our success as a leader in value-based care. We anticipate the transaction closing in the Q2 of 2025, assuming satisfaction of the necessary closing conditions. For additional information regarding the proposed transaction, please consult our filings with the SEC. I'll now hand it over to Jay to provide additional details on our Q4 and full year performance.

Jay Matushak (CFO)

Thank you, Mike, and good morning, everyone. I'll now discuss our Q4 performance and full year results for our continuing consolidated NeueHealth business, as well as each of our continuing NeueCare and NeueSolutions segments. Then I'll review our balance sheet. GAAP financials are included in our press release and will be included in our 10-K once it is filed and contain the results that include our discontinued operations. NeueHealth consolidated revenue for the Q4 was $232.6 million. Full year consolidated revenue was $936.7 million. Our Q4 gross margin was $47.7 million and $194.5 million for the full year. For the fourth consecutive quarter in 2024, we achieved adjusted EBITDA profitability, driving $5.5 million of adjusted EBITDA in the Q4 and $22.5 million of adjusted EBITDA for the full year.

As Mike mentioned, in 2024, we continued to grow the number of consumers we served across our NeueCare and NeueSolutions segments, serving 483,000 consumers across the ACA marketplace, Medicare, and Medicaid, and we continue to see strong strategic growth opportunities in 2025. In our NeueCare segment, revenue was $79.3 million in the Q4 and $313.7 million for the full year. Q4 operating income was $9.2 million, with full year operating income of $29.6 million. Through our clinics in 2024, we served 318,000 value-based consumers. As you recall, we expanded our operations in Central Florida earlier this year, leveraging existing relationships to grow our footprint and the consumers we serve. We are continuing to evaluate similar market expansion opportunities in 2025 and beyond. Turning now to our NeueSolutions segment.

In 2024, we continue to drive growth through our provider enablement business, which includes our suite of population health tools and capabilities, as well as our ACO REACH business. NeueSolutions revenue was $157.1 million in the Q4 and $635.1 million for the full year. The NeueSolutions segment operating income was $3.1 million for the Q4, with operating loss of $5.3 million for the full year. In our provider enablement business, we grew the consumers we served to 123,000 in 2024, reflecting the strong relationships we have established with provider groups and our ability to help them succeed in performance-based arrangements. In 2025, we are building on our experience participating in innovative government programs. In addition to ACO REACH, we will also be participating in MSSP this year. Now looking at our balance sheet.

As of December 31, 2024, we had $202.8 million in total cash and investments, including amounts in our regulated entities. Our non-regulated cash and short-term investments were $93.2 million at the end of the Q4, including $36.3 million of restricted cash and investments. I'll now turn it over to Mike for some closing comments.

Mike Mikan (President and CEO)

Thank you, Jay. 2024 was a transformative year for NeueHealth. We devoted our full focus on where we have proven to have the greatest impact: our care delivery and provider enablement business segments. We advanced and grew our value-driven, consumer-centric care model to serve 483,000 consumers, and we delivered $22.5 million of adjusted EBITDA, our strongest financial performance to date. In 2025, we are focused on continuing to create a better healthcare experience for all as we look to drive strategic growth across our business, prioritizing a few key areas. First, we will look to continue to bring high-quality, affordable healthcare to more consumers, with a focus on diversifying the populations we serve across product categories. Second, we expect to continue to deepen our presence in the local communities we serve, as well as expand into new geographies, bringing our care model and local approach to more growing markets.

Third, we will look to continue to grow alongside our payer partners through the strong, trusted relationships we have built, in addition to prioritizing growth with new payer groups. Finally, we intend to continue to build on our strong partnerships with providers, meeting them where they are on their path to participating in performance-based arrangements and enabling them to deliver the highest quality personalized care. Overall, we feel our relationship-based approach and the trusted partnerships we have established with consumers, providers, and payers across the industry gives us a strong platform to drive long-term sustainable growth this year and beyond. I'm excited for our future, and I believe we are entering 2025 in a very strong position. I've never been more confident in our ability to drive change across the healthcare industry and create an experience that is seamless and more coordinated for consumers, providers, and payers alike.

Thank you to the entire NeueHealth team for your continued commitment to making the healthcare experience better for all. I'm looking forward to all we will achieve together in 2025 and beyond. That concludes today's call. Thank you for joining and for your interest in NeueHealth.