NeueHealth Q3 2024 Earnings Call Transcript

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November 7, 2024

There are 4 speakers on the call.

Operator

Ladies and gentlemen, welcome to the NU Health First Quarter 2024 Earnings Call. My name is Kenneth, and I will be coordinating your call today. I will now hand you over to your host, Amelia Ambadi, to begin. Please go ahead.

Speaker 1

Good morning, and welcome to NueHealth's Q3 2024 Earnings Conference Call. As a reminder, this call is being recorded. Leading the call today are Newhouse's President and CEO, Mike Mikan and CFO, Jay Matusiak. Before we begin, we want to remind you that this call may contain forward looking statements under U. S.

Speaker 1

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.

Speaker 1

A reconciliation of the non GAAP to GAAP measures is available in the company's 3rd quarter earnings release, available on the company's Investor Relations page at investors. Newhealth.com. Information presented on this call is contained in such earnings release that we issued this morning in our Form 8 ks 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. With that, I will now turn the conference over to NueHealth's Chief Executive Officer, Mike Mikan.

Speaker 2

Good morning, everyone, and thank you for joining NueHealth's Q3 2024 earnings call. We are pleased to report that NueHealth delivered its strongest financial performance to date in the 3rd quarter, positioning the company to build on its positive momentum as we finish the year and enter 2025. For 3 consecutive quarters, NueHealth has driven adjusted EBITDA profitability, generating $9,400,000 of adjusted EBITDA in the Q3. Through the 1st 3 quarters of 2024, NuHealth achieved adjusted EBITDA of $17,000,000 placing the company within our full year guidance range of between $15,000,000 $25,000,000 This quarter, we grew the number of consumers we served across our new care and new solutions segments, 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.

Speaker 2

Looking ahead, we believe our performance through the Q3 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. First, we are focused on continuing to diversify and grow our consumer base across all product categories, including the ACA marketplace, Medicare and Medicaid. 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. 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 healthcare for all consumers.

Speaker 2

2nd, 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. 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. 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. 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. And finally, we are focused on growing our relationships with the diverse set of providers, no matter where they are on their path to participating in performance based arrangements.

Speaker 2

We tailor our suite of population health tools and capabilities to serve a provider's unique need or situation 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. 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. 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. Before I turn it over to Jay, I want to briefly touch on an update we provided last week. On October 30, we announced that we acquired full ownership of Centrum Health, one of our value driven clinic brands.

Speaker 2

This simplifies our corporate structure, streamlining operations to support our ongoing focus on advancing our value driven consumer centric care model. This transaction further underscores our belief in our Centrum Health clinics and our ability to create a seamless, more coordinated health care experience for all consumers. I'll now hand it over to Jay to provide additional details on our Q3 financial results.

Speaker 3

Thank you, Mike, and good morning, everyone. I'll start by reviewing our Q3 financial performance for our consolidated new health business as well as each of our new care and new solution segments. 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. As a reminder, I will be focusing on the 2024 financial results of our continuing new health business in each of our new care and new solution segments.

Speaker 3

GAAP financials are included in our earnings release and contain results that include our discontinued operations. New health consolidated revenue for the Q3 was 232,900,000 with gross margin of $50,200,000 As Mike mentioned, NueHealth delivered adjusted EBITDA of $9,400,000 in the 3rd quarter, exceeding our expectations. This is the company's best quarterly financial performance, underscoring the value we continue to deliver to our partners across the industry. 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 $17,000,000 through the 1st 3 quarters this year. In the Q3, we served approximately 509,000 consumers across our new care and new solutions business segments, which exceeds our full year guidance range and represents growth of more than 30% over 2023 Q3.

Speaker 3

This demonstrates our ability to attract and retain consumers across a variety of markets. Turning now to our Nucare segment. 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. In the Q3, Nucare delivered revenue of $83,900,000 with medical costs and operating costs approximately in line with expectations for the quarter. Nucare operating income was $16,400,000 in the 3rd quarter.

Speaker 3

We served approximately 247,000 value based consumers across our clinics, which is above our full year guidance range. We expect to continue to build on these results in the Q4, setting us up to drive continued growth in this segment in 2025. 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. Overall, new solutions segment generated $152,000,000 of revenue in the 3rd quarter.

Speaker 3

3rd quarter operating costs were in line with expectations with medical costs moderately lower. New solutions segment operating loss was $5,800,000 for the 3rd quarter. This includes payments we made to our new care segment resulting from our own clinic participation in ACL Reach. 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. The Q3 was no exception as growth accelerated and we finished the quarter serving approximately 119,000 consumers.

Speaker 3

This exceeded our expectations and contributed to strong revenue in the quarter. We are pleased to report continued solid results in our ACO Reach business in the Q3, serving approximately 43,000 Medicare beneficiaries. 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. 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. The wind down of our ACA insurance business is continuing as planned in the Q3.

Speaker 3

At the end of the Q3, our ACA Insurance business had approximately $123,000,000 in cash to fund remaining medical costs and other wind down expenses, not including risk adjustment obligations due under our repayment agreements with CMS. As we've mentioned, we continue to retrieve capital from our discontinued entities. 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 go forward care delivery and provider enablement business in 2025 and beyond. Now I'll provide a quick review of our balance sheet. As of September 30, 2024, we had $242,300,000 in total cash and investments, including amounts in our regulated entities.

Speaker 3

Our non regulated cash and short term investments were $119,200,000 at the end of the 3rd quarter, including $42,500,000 of restricted cash and investments. Turning now to our 2024 outlook. In 2024, we are confirming our expectations for enterprise adjusted EBITDA to be between $15,000,000 $25,000,000 We continue to expect consolidated revenue of approximately 950,000,000 dollars Specifically, we expect approximately $320,000,000 from our new care segment and approximately $640,000,000 from our new solutions segment. We are confirming our expectations to serve between 475,500,000 consumers across both our new care and new solutions segments and we anticipate ending the year at or above the high end of this range. 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 3

We expect to be at the high end of both of these ranges at the end of the year. Finally, we expect our adjusted operating cost ratio to be between 15% 16% excluding corporate costs. When you include corporate costs, this is 19% to 20% and we expect to be at the low end of this range at the end of the year. To conclude, our strong Q3 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. I'll now turn it back over to Mike for some closing remarks.

Speaker 2

Thank you, Jay. I am proud of our performance in the Q3, and I am excited about the future of our company and how well we are positioned for continued success. 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. 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 2

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. In addition, we have developed long standing 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. 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. 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 New Health team.

Speaker 2

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. That concludes today's call. Thank you for joining and for your interest in NewHealth.

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