NeueHealth (NEUE) Q4 2024 Earnings Call March 20, 2025 01:16 PM ET Company Participants Emily Lombardi - AVP - Enterprise StrategyMike Mikan - President & CEOJay Matushak - Chief Financial Officer Operator Good morning and thank you for joining us for the NUHealth Q4 twenty twenty four 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 Good morning, and welcome to NU Health's fourth quarte ...

Consumer Base Growth - In 2024, NeueHealth served 360,000 value-based consumers, an increase from 355,000 in 2023[3] - As of the start of 2025, NeueHealth reported serving 717,000 consumers, marking a 48% increase compared to 2024[5] Financial Performance - Revenue for the fourth quarter of 2024 was $232,638,000, compared to $292,871,000 in the same quarter of 2023, representing a decrease of approximately 20.6%[3] - Total revenue for the year ended December 31, 2024, was $936.657 million, a decrease of 19.3% from $1,160.802 million in 2023[17] - Net income for the fourth quarter of 2024 was $2,523,000, a significant improvement from a net loss of $460,572,000 in the fourth quarter of 2023[3] - Operating loss for the year ended December 31, 2024, was $107.410 million, compared to a loss of $576.996 million in 2023, showing improvement[17] - Net loss attributable to common shareholders for the year ended December 31, 2024, was $186.330 million, a reduction from $1,200.599 million in 2023[17] Revenue Breakdown - Capitated revenue increased to $259.881 million for the year ended December 31, 2024, up 18.3% from $219.774 million in 2023[17] - ACO REACH revenue decreased significantly to $625.339 million in 2024, down 30.3% from $896.504 million in 2023[17] - ACO REACH revenue for Q4 2024 was $154,249,000, down 29.7% from $219,659,000 in Q4 2023[22] - Total segment revenue decreased to $157,072,000 in Q4 2024 from $220,862,000 in Q4 2023, representing a decline of 29%[22] Cost Management - Medical costs for the year ended December 31, 2024, were $742.140 million, a decrease of 25.6% from $996.582 million in 2023[17] - Medical costs for Q4 2024 were $149,926,000, down from $231,095,000 in Q4 2023, a decrease of 35%[22] - Total operating expenses decreased to $153,968,000 in Q4 2024 from $235,494,000 in Q4 2023, a reduction of 34.6%[22] Operational Metrics - Adjusted EBITDA for the fourth quarter of 2024 was $5,482,000, compared to a loss of $10,356,000 in the same quarter of 2023[3] - Adjusted EBITDA for Q4 2024 was $5,482,000, a significant improvement from a loss of $10,356,000 in Q4 2023[26] - Operating income for Q4 2024 was $3,104,000, compared to a loss of $14,632,000 in Q4 2023[22] - The Operating Cost Ratio increased to 31.3% in Q4 2024 from 22.3% in Q4 2023[27] - Adjusted Operating Cost Ratio improved to 18.4% in Q4 2024, up from 11.1% in Q4 2023[27] Strategic Initiatives - The company has established a strong foundation for strategic growth in 2025, focusing on expanding its consumer base in new and existing markets[2] - NeueHealth is pursuing a merger agreement with NH Holdings 2025, Inc., which will make the company a wholly owned subsidiary of Parent[8] - The company aims to enhance its technology and services to support independent providers and medical groups in performance-based arrangements[7] - The company has filed a preliminary proxy statement with the SEC regarding the merger transaction, urging investors to review the relevant documents carefully[9] Cash and Liabilities - Cash and cash equivalents at the end of the period decreased to $185.405 million from $375.280 million at the beginning of the year[19] - Total current liabilities decreased to $710.228 million in 2024, down from $1,391.257 million in 2023[17] - Total assets decreased to $544.383 million in 2024 from $1,225.480 million in 2023[17] - The company reported a net cash used in operating activities of $123.217 million for the year ended December 31, 2024, compared to $2,726.546 million in 2023[19] Transaction Costs - The company incurred $16,122,000 in transaction-related costs in Q4 2024, compared to $4,363,000 in Q4 2023[26]

Core Viewpoint - An investigation has been initiated by Levi & Korsinsky, LLP regarding potential breaches of fiduciary duty by the board of directors of NeueHealth Inc. (NEUE) [1][2] Group 1 - The investigation focuses on whether the NEUE board of directors has violated its fiduciary duties to the company's stockholders [2] - Levi & Korsinsky, LLP is a nationally recognized law firm with expertise in prosecuting securities litigation and has successfully recovered hundreds of millions of dollars for shareholders [3]

Group 1 - Halper Sadeh LLC is investigating potential violations of federal securities laws and breaches of fiduciary duties related to the sale of NeueHealth, Inc. to an affiliate of New Enterprise Associates for $7.33 per share in cash [1] - ESSA Bancorp, Inc. is being sold to CNB Financial Corporation for 0.8547 shares of CNB common stock for each share of ESSA common stock [2] - Liberty TripAdvisor Holdings, Inc. is being sold to Tripadvisor, Inc. [2] Group 2 - Halper Sadeh LLC may seek increased consideration for shareholders, additional disclosures, and other relief on behalf of shareholders [3] - Shareholders are encouraged to contact Halper Sadeh LLC to discuss their legal rights and options [4] - The firm represents investors globally who have been victims of securities fraud and corporate misconduct, recovering millions on behalf of defrauded investors [4]

Core Viewpoint - NeueHealth, Inc. is under investigation for potential violations of securities laws, prompting affected investors to reach out to the Schall Law Firm for assistance [1] Group 1 - The investigation into NeueHealth, Inc. suggests possible misconduct related to securities regulations [1] - Affected investors are encouraged to contact legal representation to explore their options [1]

Group 1 - The Schall Law Firm is inviting shareholders who have incurred losses to participate in an inquiry regarding NeueHealth, Inc. for potential securities fraud [1] - The inquiry aims to investigate the circumstances surrounding the alleged fraud and its impact on shareholders [1] - Shareholders are encouraged to reach out to the law firm to discuss their losses and the potential for legal action [1] Group 2 - The inquiry reflects growing concerns about corporate governance and transparency within the healthcare sector, particularly regarding NeueHealth, Inc. [1] - This situation may lead to increased scrutiny of similar companies in the industry, as investors seek to protect their interests [1] - The outcome of the inquiry could have implications for investor confidence in healthcare stocks, especially those with similar business models [1]

Core Viewpoint - NeueHealth, Inc. is under investigation for potential violations of securities laws, prompting affected investors to reach out to the Schall Law Firm for assistance [1] Group 1 - The investigation into NeueHealth, Inc. suggests serious concerns regarding its compliance with securities regulations [1] - Investors impacted by the situation are encouraged to contact legal representation to explore their options [1]

Core Points - NeueHealth, Inc. is conducting its Q3 2024 earnings conference call on November 7, 2024, at 8:00 AM ET [1][2] - The call is led by President and CEO Mike Mikan and CFO Jay Matushak [2] Financial Reporting - The earnings call will reference non-GAAP amounts and measures, with reconciliations available in the company's earnings release [4] - Information presented during the call is based on the earnings release issued in Form 8-K dated November 7, 2024 [5]

Financial Data and Key Metrics Changes - NeueHealth reported consolidated revenue of $232.9 million for Q3 2024, with an adjusted EBITDA of $9.4 million, marking the company's best quarterly financial performance to date [16][6] - Year-to-date adjusted EBITDA reached $17 million, aligning with the full-year guidance range of $15 million to $25 million [7][23] - The company served approximately 509,000 consumers in total, exceeding the full-year guidance range and representing over 30% growth compared to Q3 2023 [17][7] Business Line Data and Key Metrics Changes - In the NeueCare segment, revenue was $83.9 million with an operating income of $16.4 million, serving approximately 347,000 value-based consumers [18][19] - The NeueSolutions segment generated $152 million in revenue, with an operating loss of $5.8 million, which included payments to the NeueCare segment [19][20] - The ACO Reach business served approximately 43,000 Medicare beneficiaries, focusing on care management and patient engagement initiatives [21] Market Data and Key Metrics Changes - The company is expanding its footprint in Central Florida, increasing the number of consumers served across owned and affiliated clinics [10] - There is a focus on growing the Medicaid population served in partnership with federally qualified health centers [9] Company Strategy and Development Direction - The company aims to diversify and grow its consumer base across all product categories, including the ACA Marketplace, Medicare, and Medicaid [8] - Plans include driving capital-efficient growth in existing and new markets by leveraging relationships with payer partners [9] - The acquisition of Centrum Health aims to simplify corporate structure and enhance the value-driven consumer-centric care model [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued success and growth in 2025, supported by strong relationships with payer partners and a diversified consumer base [8][28] - The company is well-positioned to advance its model and drive strategic growth, with expectations to finish the year strong [27][29] Other Important Information - The wind down of the ACA insurance business is proceeding as planned, with approximately $123 million in cash available for remaining medical costs [22] - Total cash and investments as of September 30, 2024, were $242.3 million, with nonregulated cash at $119.2 million [23] Q&A Session Summary Question: What is the outlook for the ACA insurance business? - The wind down is continuing as planned, with capital retrieval from discontinued entities ongoing [22] Question: How does the company plan to grow in new markets? - The company will leverage strong relationships with payer partners to explore growth opportunities [9][28] Question: What are the expectations for consumer growth in 2024? - The company anticipates serving between 475,000 and 500,000 consumers across both segments, aiming for the high end of this range [24]

Consumer Base and Services - As of September 30, 2024, NeueCare served approximately 404,000 consumers, including 347,000 value-based consumers and 57,000 fee-for-service consumers[198] - NeueSolutions had approximately 43,000 value-based care consumers attributed to its REACH ACOs and 119,000 enablement services lives as of September 30, 2024[199] - Year-over-year, value-based care consumers increased by approximately 35,000, driven by a rise of 55,000 through third-party payor relationships[208] - Enablement services lives grew to approximately 119,000, up from 31,000 in the previous year, indicating a substantial expansion in this segment[207] - NeueHealth aims to diversify and grow its consumer base across all product categories, including ACA Marketplace, Medicare, and Medicaid[202] Financial Performance - The company reported an Adjusted EBITDA of $9.396 million for the three months ended September 30, 2024, compared to $3.431 million for the same period in 2023, marking a significant increase[210] - As of September 30, 2024, the net loss was $40.365 million, a significant improvement from a net loss of $547.148 million for the same period in 2023[214] - Total revenue decreased by $36.5 million, or 13.5%, for the three months ended September 30, 2024, and $163.9 million, or 18.9%, for the nine months ended September 30, 2024, compared to the same periods in 2023[219] - ACO REACH revenue decreased by $50.6 million and $205.8 million for the three and nine months ended September 30, 2024, respectively, primarily due to a decrease of approximately 20,000 beneficiaries aligned to the REACH ACOs[219] - Capitated revenue increased by $11.0 million, or 18.2%, for the three months ended September 30, 2024, and $37.1 million, or 23.2%, for the nine months ended September 30, 2024, driven by increased membership through third-party payor contracts[230] Costs and Expenses - Medical costs decreased by $43.7 million, or 19.3%, for the three months ended September 30, 2024, and $174.5 million, or 23.8%, for the nine months ended September 30, 2024, primarily due to a decrease in beneficiaries aligned to the REACH ACOs[220] - Operating costs decreased by $8.5 million, or 11.7%, for the three months ended September 30, 2024, and $20.6 million, or 9.3%, for the nine months ended September 30, 2024, primarily due to a reduction in professional fees[221] - The operating cost ratio increased to 27.5% and 28.6% for the three and nine months ended September 30, 2024, respectively, reflecting a 60 and 310 basis points increase compared to the same periods in 2023[222] - Interest expense decreased by $4.6 million and $14.5 million for the three and nine months ended September 30, 2024, respectively, due to the payoff of the 2021 Credit Agreement in January 2024[225] - Loss from discontinued operations decreased by $53.5 million and $197.7 million for the three and nine months ended September 30, 2024, primarily due to the sale of the California Medicare Advantage business[229] Asset Management and Financing - The company recognized $11.4 million in impairments of intangible assets for the nine months ended September 30, 2024, related to classifying AMD as held-for-sale[223] - The company declared $28.2 million in dividends from regulated insurance entities during the nine months ended September 30, 2024, compared to no dividends in the same period of 2023[249] - As of September 30, 2024, the company was out of compliance with minimum risk-based capital and surplus levels for certain regulated insurance entities[250] - The company had $86.4 million in long-term borrowings under the Amended 2023 Credit Agreement as of September 30, 2024[260] - The Company has a term loan Tranche 2 of up to $25,000,000 available from November 10 to December 31, 2024, contingent on achieving specific funding milestones[263] Cash Flow and Investments - As of September 30, 2024, the Company had $226.4 million in cash and cash equivalents and $15.8 million in short-term investments[273] - The net cash used in operating activities for the nine months ended September 30, 2024, was $(98,823) thousand, a decrease of $2.3 billion compared to the same period in 2023[278] - Net cash provided by investing activities for the nine months ended September 30, 2024, was $189,230 thousand, a decrease of $956.2 million compared to the prior year[279] - The Company had net cash used in financing activities of $(239,274) thousand for the nine months ended September 30, 2024, an increase of $280.3 million compared to the same period in 2023[280] - As of September 30, 2024, the Company had letters of credit of $16.5 million and surety bonds of $19.7 million, with $33.7 million of cash and cash equivalents restricted as collateral[269] Shareholder Equity - The Centrum Promissory Note issued on October 29, 2024, has a principal of $64.0 million, due on October 29, 2028, with a cash interest rate of 6% per annum[270] - The Company issued 750,000 shares of Series A Preferred Stock for $750.0 million and 175,000 shares of Series B Preferred Stock for $175.0 million in previous financing rounds[271] - As of September 30, 2024, the Company had non-regulated cash and cash equivalents of $110.3 million, with $33.7 million restricted as collateral[274]