Q3 2024 NeueHealth Inc Earnings Call
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Kenneth: Ladies and gentlemen, welcome to the new health for quarter 2024. My name is Kenneth and I'll be coordinating your call today. I'll now hand you over to your host Emily Lombardi to begin. Please go ahead.
Emily Lombardi: Good morning and welcome to Newhouse third quarter 2024 earnings conference call. As a reminder, this call is being recorded. Leading the call today are Newhouse president and CEO Mike Mikan and CFO Jay Matushak.
Emily Lombardi: 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.
Emily Lombardi: 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.
Emily Lombardi: Accept 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 third quarter earnings release.
available on the company's investor relations page at investors.newhealth.com
Emily Lombardi: Information presented on this call is contained in such earnings release that we issued this morning in our Form 8K dated November 7, 2024, and in the related presentation, each of which may be accessed from the Investor Relations page of the company's website.
Speaker Change: With that, I will now turn the conference over to New Health Chief Executive Officer Mike Mikan.
Mike Mikan: Good morning, everyone, and thank you for joining New Health's third quarter 2024 earnings call.
Emily Lombardi: We are pleased to report that New Health delivered its strongest financial performance to date in the third quarter, positioning the company to build on its positive momentum as we finish the year and enter 2025.
Emily Lombardi: For three consecutive quarters, New Health has driven adjusted EBITDA profitability, generating $9.4 million of adjusted EBITDA in the third quarter.
Emily Lombardi: Through the first three quarters of 2024, New Health achieved adjusted EBITDA of $17 million, placing the company within our full-year guidance range of between $15 million and $25 million.
Emily Lombardi: This quarter, we grew the number of consumers we served across our new care and new solutions segments.
Emily Lombardi: serving approximately 509,000 consumers in total, which is slightly above our guidance range for the full year. Overall, we believe we are well positioned to finish 2024 on a strong note.
Emily Lombardi: Looking ahead, we believe our performance through the third quarter positions us for continued success and growth in 2025. I'll briefly comment on a few strategic growth areas we're focused on next year and beyond.
Emily Lombardi: First, we are focused on continuing to diversify and grow our consumer base across all product categories, including the ACA marketplace, Medicare, and Medicaid.
Emily Lombardi: We believe our ability to serve all populations in performance-based arrangements is differentiated and allows us to pursue a variety of growth channels while limiting the adverse impact market dynamics might have on any one product category.
Emily Lombardi: Of note, we see an opportunity to grow the Medicaid population we serve in partnership with federally qualified health centers and other provider groups as we focus on increasing access to high quality, affordable health care for all consumers.
Emily Lombardi: Second, we are looking to drive capital efficient growth in existing and new markets by leveraging the strong relationships we have formed with our payer partners.
Emily Lombardi: As we mentioned on our prior call, we expanded our footprint in Central Florida earlier this year, growing the number of consumers we serve across our owned and affiliated clinics.
Emily Lombardi: This expansion was made possible by long-standing trusted relationship we built with our payer partner and the value they see in our ability to deliver high-quality personalized care to their members.
Emily Lombardi: As we continue to build ongoing relationships with payers across the industry, we will look for additional opportunities to grow alongside our partners as we work together to create a seamless, more coordinated care experience for all.
Emily Lombardi: And finally, we are focused on growing our relationships with a diverse set of providers, no matter where they are on their path to participating in performance-based arrangements.
Emily Lombardi: We tailor our suite of population health tools and capabilities to serve a provider's unique need or situation.
Emily Lombardi: to help them capture the full benefits of value-based care, whether that's through our care delivery and provider enablement businesses or our participation in CMS programs such as ACO REACH.
Emily Lombardi: This gives us the flexibility to grow with a wide variety of provider partners as well as explore opportunities to expand our participation in innovative programs like ACO REACH and MSSP in the future.
Emily Lombardi: Overall, we are pleased to report another strong quarter, and we look forward to continuing to explore opportunities to advance our care model, grow with our partners, and bring a seamless, more coordinated care experience to more consumers.
Emily Lombardi: Before I turn it over to Jay, I want to briefly touch on an update we provided last week. On October 30th, we announced that we acquired full ownership of Centrum Health, one of our value-driven clinic brands.
Emily Lombardi: This simplifies our corporate structure, streamlining operations to support our ongoing focus on advancing our value-driven, consumer-centric care model.
Emily Lombardi: This transaction further underscores our belief in our Centrum Health Clinics and our ability to create a seamless, more coordinated healthcare experience for all consumers.
Speaker Change: I'll now hand it over to Jay to provide additional details on our third quarter financial results.
Speaker Change: Thank you Mike and good morning everyone. I'll start by reviewing our third quarter financial performance for our consolidated new health business as well as each of our new care and new solution segments.
Speaker Change: Then I'll provide a brief update on the wind-down of our ACA insurance business and go over our balance sheet. Finally, I'll review our 2024 outlook.
Speaker Change: As a reminder, I will be focusing on the 2024 financial results of our continuing new health business and each of our new care and new solution segments. Gap financials are included in our earnings release and contain results that include our discontinued operations.
Speaker Change: NewHealth consolidated revenue for the third quarter was $232.9 million, with gross margin of $50.2 million. As Mike mentioned, NewHealth delivered adjusted EBITDA of $9.4 million in the third quarter, exceeding our expectations.
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Speaker Change: This is the company's best quarterly financial performance, underscoring the value we continue to deliver to our partners across the industry.
Speaker Change: We expect positive momentum to continue through the end of the year. And as we noted earlier, we are already within our full year guidance range, achieving adjusted EBITDA of 17 million through the first three quarters this year.
Speaker Change: In the third quarter we served approximately 509,000 consumers across our New Care New Solutions business segment.
Speaker Change: which exceeds our full year guidance range and represents growth of more than 30% over 2023 third quarter. This demonstrates our ability to attract and retain consumers across a variety of markets.
Turning now to our new care segment.
Speaker Change: We continue to drive strong performance through our care delivery business as we focus on making high-quality, coordinated care accessible to all our consumers across the ACA marketplace, Medicare and Medicaid.
Speaker Change: In the third quarter, New Care delivered revenue of $83.9 million, with medical costs and operating costs approximately in line with expectations for the quarter.
NewCare operating income was $16.4 million in the third quarter.
Speaker Change: We served approximately 347,000 value-based consumers across our clinics, which is above our full year guidance range.
Speaker Change: We expect to continue to build on these results in the fourth quarter, setting us up to drive continued growth in this segment in 2025.
Speaker Change: I'll now walk through our New Solutions financial results. As a reminder, our New Solutions segment consists of our Provider Enablement business as well as ACO REACH.
Speaker Change: Overall, new solutions segment generated $152 million of revenue in the third quarter.
Speaker Change: Third quarter operating costs were in line with expectations with medical costs moderately lower. New solutions segment operating loss was 5.8 million for third quarter. This includes payments we made to our new care segment resulting from our own clinic participation in ACO REACH.
Speaker Change: On the provider enablement side of new solutions, we are continuing to deliver solid results as we steadily grow the number of consumers we serve quarter over quarter.
Speaker Change: The third quarter was no exception as growth accelerated and we finished the quarter serving approximately 119,000 consumers.
Speaker Change: They succeeded our expectations and contributed to strong revenue in the quarter.
Speaker Change: We are pleased to report continued solid results in our ACO REACH business in the third quarter, serving approximately 43,000 Medicare beneficiaries.
Speaker Change: We continue to closely collaborate with our provider partners on care management and patient engagement initiatives focused on preventing avoidable readmissions, optimizing site-of-service, and proactively identifying high-risk and rising-risk beneficiaries.
Speaker Change: We look forward to finishing the year in a strong position as we continue to bring high-quality, consumer-centric care to the Medicare beneficiaries we manage through the program.
Speaker Change: The wind-down of our ACA insurance business is continuing as planned in the third quarter. At the end of the third quarter, our ACA insurance business had approximately $123 million in cash to fund remaining medical costs and other wind-down expenses, not including risk adjustment obligations due under our repayment agreements with CMS.
Speaker Change: As we've mentioned, we continue to retrieve capital from our discontinued entities.
Speaker Change: As we've seen throughout the year, our remaining liability associated with our AC insurance business continues to steadily decline, placing our business in a strong position to continue to focus on driving results through our goal forward, care delivery and provider enablement business in 2025 and beyond.
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Speaker Change: Now I'll provide a quick review of our balance sheet. As of September 30, 2024, we had $242.3 million in total cash and investments, including amounts in our regulated entities.
Speaker Change: Our non-regulated cash and short-term investments were $119.2 million at the end of the third quarter, including $42.5 million of restricted cash and investments.
Speaker Change: Turning now to our 2024 outlook. In 2024, we are confirming our expectations for enterprise adjusted EBITDA to be between 15 million and 25 million.
We continue to expect consolidated revenue of approximately $950 million.
Speaker Change: Specifically, we expect approximately $320 million from our new care segment and approximately $640 million from our new solution segment.
Speaker Change: We are confirming our expectations to serve between 475,000 and 500,000 consumers across both our new care and new solution segments, and we anticipate ending the year at or above the high end of this range.
Speaker Change: We expect to finish the year serving between 330,000 and 345,000 value-based consumers in our clinics and between 145,000 and 155,000 consumers in new solutions, including approximately 45,000 through ACO reach.
Speaker Change: We expect to be at the high end of both of these ranges at the end of the year.
George Mikan, Joshua Raskin, Jay Matushak, NeueHealth
Speaker Change: Finally, we expect our adjusted operating cost ratio to be between 15% and 16% excluding corporate costs.
Speaker Change: When you include corporate costs, this is 19 to 20 percent, and we expect to be at the low end of this range at the end of the year.
Speaker Change: To conclude, a strong third quarter financial results represent continued momentum in both our new care and new solutions business segments, and we believe we are well positioned to build on our success in 2025 and beyond.
Speaker Change: I'll now turn it back over to Mike for some closing remarks.
Thank you, Jay.
Mike Mikan: I am proud of our performance in the third quarter, and I am excited about the future of our company and how well we are positioned for continued success.
Speaker Change: As you've heard, this quarter we delivered our strongest financial performance to date, which is a testament to the value we are driving for consumers, providers, and payers across the industry.
Speaker Change: As we look ahead, our 2025 outlook is strong. As a company, we have never been better positioned to advance our model and drive strategic growth.
Speaker Change: In our existing geographies, we have built strong, trusted relationships with our payer partners, who are well positioned in the markets we serve, leading to significant opportunities to grow alongside them in the future.
Speaker Change: In addition, we have developed longstanding relationships with our consumers, who trust us to care for them over their lifetime, and we continue to diversify the populations we serve across product categories.
Speaker Change: In the future, we expect to build on these relationships and grow in new markets as we continue to bring a better healthcare experience to all.
Speaker Change: We're excited for the future but remain focused on continuing our positive momentum through the end of the year. I would like to share my sincere gratitude for the entire NeueHealth team.
Speaker Change: We would not be where we are today without each of you. And I look forward to continuing to work together to build on our success this year and beyond.
Speaker Change: That concludes today's call. Thank you for joining and for your interest in New Health.
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