Bright Health Group(BHG) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Bright Health Group's unaudited Q2 2021 consolidated financial statements, notes, management's discussion, market risk, and controls Item 1. Financial Statements This item presents the unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements with notes Condensed Consolidated Balance Sheets (Unaudited) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Balance Sheet Highlights (in thousands): | Metric | June 30, 2021 | December 31, 2020 | | :-------------------- | :------------ | :---------------- | | Total Assets | $3,599,778 | $1,810,802 | | Cash and Cash Equivalents | $1,506,319 | $488,371 | | Total Liabilities | $1,408,740 | $593,859 | | Total Shareholders' Equity (Deficit) | $2,150,026 | $(503,672) | - Total Assets increased by 98.8% from $1,810,802 thousand at December 31, 2020, to $3,599,778 thousand at June 30, 2021[7] - Total Shareholders' Equity (Deficit) shifted from a deficit of $(503,672) thousand to an equity of $2,150,026 thousand, primarily due to the IPO and preferred stock conversion[7] Condensed Consolidated Statements of Income (Loss) (Unaudited) This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net income or loss Income Statement Highlights (in thousands, except per share data): | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $1,113,840 | $296,856 | $1,988,398 | $495,422 | | Operating Loss | $(59,045) | $(27,236) | $(81,878) | $(34,516) | | Net Loss | $(43,723) | $(18,074) | $(68,268) | $(25,354) | | Basic and Diluted Loss Per Share | $(0.28) | $(0.13) | $(0.46) | $(0.19) | - Total Revenue for the three months ended June 30, 2021, increased by 275.2% to $1,113,840 thousand from $296,856 thousand in the prior-year period[9] - Net Loss for the three months ended June 30, 2021, increased by 141.9% to $(43,723) thousand from $(18,074) thousand in the prior-year period[9] Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) This section details the company's comprehensive income or loss, including net loss and other comprehensive income or loss components Comprehensive Income (Loss) Highlights (in thousands): | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(43,723) | $(18,074) | $(68,268) | $(25,354) | | Other Comprehensive (Loss) Income | $(851) | $2,384 | $(1,893) | $3,335 | | Comprehensive Loss | $(44,574) | $(15,690) | $(70,161) | $(22,019) | - Comprehensive Loss for the three months ended June 30, 2021, increased to $(44,574) thousand from $(15,690) thousand in the prior-year period[12] - Other Comprehensive (Loss) Income shifted from an income of $2,384 thousand in Q2 2020 to a loss of $(851) thousand in Q2 2021[12] Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) This section outlines changes in the company's stockholders' equity or deficit, reflecting transactions with owners and comprehensive income Shareholders' Equity (Deficit) Changes (in thousands): | Metric | Balance at January 1, 2021 | Balance at June 30, 2021 | | :-------------------- | :------------------------- | :----------------------- | | Redeemable Preferred Stock Amount | $1,681,015 | $0 | | Common Stock Amount | $14 | $63 | | Additional Paid-In Capital | $9,877 | $2,735,099 | | Accumulated Deficit | $(515,989) | $(585,669) | | Total Shareholders' Equity (Deficit) | $(503,672) | $2,150,026 | - Total Shareholders' Equity (Deficit) significantly increased from a deficit of $(503,672) thousand at January 1, 2021, to an equity of $2,150,026 thousand at June 30, 2021[14] - The conversion of preferred stock to common stock resulted in a reclassification of $1,815,959 thousand from redeemable preferred stock to common stock and additional paid-in capital[14] Condensed Consolidated Statements of Cash Flows (Unaudited) This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Highlights (in thousands): | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $497,146 | $87,044 | | Net Cash Used in Investing Activities | $(368,221) | $(452,127) | | Net Cash Provided by Financing Activities | $889,023 | $211,331 | | Net Increase (Decrease) in Cash and Cash Equivalents | $1,017,948 | $(153,752) | | Cash and Cash Equivalents at End of Period | $1,506,319 | $369,158 | - Net cash provided by operating activities increased by $410.1 million for the six months ended June 30, 2021, compared to the prior-year period[18] - Net cash provided by financing activities increased significantly by $677.7 million, primarily driven by $887.3 million in IPO proceeds[18] Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the figures presented in the condensed consolidated financial statements, covering significant accounting policies, business combinations, investments, and other financial details NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION This note details the company's mission, recent corporate actions like a stock split and IPO, preferred stock conversion, and financial statement preparation basis - Effected a 1-for-3 stock split on June 2, 2021, retroactively adjusting all share and per share amounts[21] - Completed an Initial Public Offering (IPO) on June 28, 2021, issuing 51,350,000 shares at $18.00 per share, generating $887.3 million in net proceeds[22] - All outstanding preferred stock converted into 427,897,381 shares of common stock immediately prior to the IPO closing[24] NOTE 2. BUSINESS COMBINATIONS This note details significant acquisitions like Centrum, CHP, THNM, and Zipnosis, outlining purchase consideration, asset/liability allocation, and strategic rationale - Acquired 75% of Centrum Medical Holdings, LLC on July 1, 2021, for $306.2 million (cash and common stock), recognizing $233.0 million in goodwill[28][31] - Acquired Central Health Plan of California, Inc. (CHP) on April 1, 2021, for $271.7 million (cash and Series E preferred stock), recognizing $236.0 million in goodwill[34][37] - Acquired True Health New Mexico, Inc. (THNM) and Zipnosis, Inc. on March 31, 2021, for $3.4 million and $70.3 million respectively, recognizing goodwill of $4.7 million for THNM and $62.8 million for Zipnosis[39][42] NOTE 3. INVESTMENTS This note summarizes the company's investment securities, including fixed maturity and equity, detailing amortized cost, fair value, and unrealized gains/losses Investment Securities (in thousands) as of June 30, 2021: | Security Type | Amortized Cost | Carrying Value | | :-------------------------------- | :------------- | :------------- | | Cash equivalents | $344,084 | $344,084 | | Total available-for-sale securities | $804,280 | $805,312 | | Total held-to-maturity securities | $8,168 | $8,168 | | Total investments | $1,156,532 | $1,157,564 | - As of June 30, 2021, 705 investment positions were in an unrealized loss position, primarily due to interest rate increases, which are deemed temporary[55] - Recognized an unrealized gain of $58.5 million (Q2 2021) and $62.8 million (YTD 2021) in investment income from equity securities purchased on April 1, 2021[58] NOTE 4. FAIR VALUE MEASUREMENTS This note describes fair value measurements for assets and liabilities, categorized by input observability (Level 1, 2, 3), and details contingent consideration changes Fair Value Measurements (in thousands) as of June 30, 2021: | Asset/Liability | Level 1 | Level 2 | Level 3 | Total | | :----------------------------------------- | :------ | :------ | :------ | :------ | | Total assets at fair value | $469,203 | $438,995 | $0 | $908,198 | | Contingent consideration | $0 | $0 | $6,775 | $6,775 | - The contingent consideration liability of $6,775 thousand is measured using Level 3 inputs based on a formulaic multiple of forecasted 2023 EBITDA[63][65] - The fair value of the contingent consideration liability increased by $1,059 thousand for the six months ended June 30, 2021[65] NOTE 5. GOODWILL AND INTANGIBLE ASSETS This note details changes in goodwill by segment and summarizes definite-lived intangible assets, including their gross carrying amount, accumulated amortization, and useful lives - Goodwill increased to $565,020 thousand at June 30, 2021, from $263,035 thousand at December 31, 2020, primarily due to acquisitions[7][67] Goodwill by Segment (in thousands): | Segment | Balance at December 31, 2020 | Acquisitions | Balance at June 30, 2021 | | :-------------------- | :--------------------------- | :----------- | :----------------------- | | Bright HealthCare | $197,886 | $240,776 | $437,044 | | NeueHealth | $65,149 | $62,827 | $127,976 | | Total | $263,035 | $303,603 | $565,020 | - Amortization expense relating to intangible assets for the six months ended June 30, 2021, was $10.0 million, up from $1.8 million in the prior-year period[70] NOTE 6. MEDICAL COSTS PAYABLE This note details changes in medical costs payable, including amounts incurred and paid for current and prior years, and breaks down components like unpaid claims and IBNR Medical Costs Payable Activity (in thousands): | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Medical costs payable - January 1 | $249,777 | $44,804 | | Total incurred | $1,604,806 | $365,744 | | Total paid | $1,381,681 | $343,260 | | Medical costs payable - June 30 | $565,620 | $185,950 | - Medical costs payable increased to $565,620 thousand at June 30, 2021, from $249,777 thousand at January 1, 2021[72] - Incurred but not reported (IBNR) claims accounted for $468,409 thousand of total medical costs payable at June 30, 2021[74] NOTE 7. SHORT-TERM BORROWINGS This note describes the company's $350.0 million revolving credit agreement, its amendment, maturity extension, and the repayment of outstanding borrowings using IPO proceeds - Entered into a $350.0 million revolving credit agreement on March 1, 2021[75] - The Credit Agreement was amended on August 2, 2021, to adjust the Qualified IPO proceeds requirement and debt to capitalization ratio, and its maturity date was extended to February 28, 2024, on August 4, 2021[75][177] - The $200.0 million principal balance outstanding under the revolving credit agreement was repaid using IPO proceeds, resulting in no outstanding borrowings as of June 30, 2021[75] NOTE 8. SHARE-BASED COMPENSATION This note details the company's share-based compensation plans, including the 2016 Incentive Plan and the new 2021 Omnibus Plan, and reports on stock option and PSU activity and expense - The 2021 Omnibus Incentive Plan was adopted in May 2021, authorizing 42.0 million shares, with 27.3 million available for future issuance as of June 30, 2021[77] - Share-based compensation expense for the six months ended June 30, 2021, was $19.1 million, significantly up from $2.2 million in the prior-year period[78] - 14.7 million Performance-based Restricted Stock Units (PSUs) were granted to executive leadership, with $116.9 million of unrecognized compensation expense expected to be recognized over three years[82][83] NOTE 9. NET LOSS PER SHARE This note presents the computation of basic and diluted net loss per share attributable to common stockholders, and lists potentially dilutive securities excluded due to their anti-dilutive effect Net Loss Per Share (in thousands, except per share amounts): | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------------------------------------------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to Bright Health Group, Inc. common shareholders | $(44,518) | $(18,074) | $(69,680) | $(25,354) | | Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted | 160,942 | 135,801 | 150,616 | 135,719 | | Net loss per share attributable to common stockholders, basic and diluted | $(0.28) | $(0.13) | $(0.46) | $(0.19) | - Basic and diluted net loss per share attributable to common shareholders for the six months ended June 30, 2021, was $(0.46), compared to $(0.19) in the prior-year period[84] - 72,219 thousand stock options were excluded from the computation of diluted net loss per share for the six months ended June 30, 2021, due to their anti-dilutive effect[85] NOTE 10. COMMITMENTS AND CONTINGENCIES This note states that as of June 30, 2021, there were no material known contingent liabilities or legal proceedings that would have a material adverse effect on the company's business - No material known contingent liabilities existed as of June 30, 2021, and December 31, 2020[86] - The company is not a party to any litigation whose outcomes would individually or collectively have a material adverse effect on its business, operating results, cash flows, or financial condition[196] NOTE 11. SEGMENTS AND GEOGRAPHIC INFORMATION This note provides financial information for the company's two reportable segments, Bright HealthCare and NeueHealth, detailing their revenue and operating income (loss) Segment Revenue (in thousands): | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Bright HealthCare | $1,025,007 | $291,260 | $1,868,178 | $483,002 | | NeueHealth | $114,314 | $8,338 | $162,853 | $17,869 | | Consolidated Total | $1,113,840 | $296,856 | $1,988,398 | $495,422 | Segment Operating Income (Loss) (in thousands): | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Bright HealthCare | $(115,964) | $(25,054) | $(140,179) | $(31,164) | | NeueHealth | $56,919 | $(2,182) | $58,301 | $(3,352) | | Consolidated Total | $(59,045) | $(27,236) | $(81,878) | $(34,516) | - NeueHealth's operating income shifted from a loss of $(2,182) thousand in Q2 2020 to an income of $56,919 thousand in Q2 2021[88] NOTE 12. INCOME TAXES This note explains the income tax benefit recognized, primarily due to the release of valuation allowance from new deferred tax liabilities related to intangible assets acquired in business combinations - Income tax benefit was $19.5 million for the three months ended June 30, 2021, and $18.3 million for the six months ended June 30, 2021[93] - The benefit was primarily attributable to the release of valuation allowance in connection with new deferred tax liabilities recorded on identifiable intangibles as part of business combination accounting[93] - A valuation allowance is recorded for deferred tax assets to the extent they cannot be supported by reversals of existing cumulative temporary differences, limiting the net effect of 2021 losses on the income tax provision[94] NOTE 13. REDEEMABLE NONCONTROLLING INTEREST This note details the activity in redeemable noncontrolling interest for the six months ended June 30, 2021, including earnings attributable to noncontrolling interest and measurement adjustments - Redeemable noncontrolling interest increased to $41,012 thousand at June 30, 2021, from $39,600 thousand at January 1, 2021[95] - Earnings attributable to noncontrolling interest for the six months ended June 30, 2021, totaled $928 thousand[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operations, liquidity, and capital resources, covering business segments, performance drivers, IPO, acquisitions, and COVID-19 impact Business Overview Bright Health Group transforms healthcare by integrating care delivery, financing, and optimization through NeueHealth and Bright HealthCare, focusing on consumer experience - Bright Health Group's mission is 'Making Healthcare Right. Together.' by connecting local healthcare delivery resources with care financing[97] - NeueHealth, the healthcare enablement and technology segment, works with over 235,000 care provider partners and serves over 200,000 unique patients (nearly 170,000 value-based) through 44 owned primary care clinics[99] - Bright HealthCare, the healthcare financing and distribution segment, serves approximately 663,000 consumers across commercial (553,000) and Medicare Advantage (110,000) plans in 14 states and 99 markets[103][104] Key Factors Affecting Our Performance Performance is driven by Bright HealthCare's membership growth, risk adjustment, and medical cost management, plus NeueHealth's value-based care and operating efficiencies - Bright HealthCare's revenue growth is dependent on its ability to grow membership and retain consumers, particularly during annual and special enrollment periods[106] - Accurate capture of risk adjustment data is critical for premium revenue from IFP products and MA plans, as determined by CMS models[108] - Effective management of medical costs and Medical Cost Ratio (MCR) relies on driving in-network utilization through Care Partners and managing seasonal medical expense patterns[109][110] - NeueHealth's performance is tied to its ability to identify and align with high-performing care delivery partners and to effectively deliver and enable high-quality, value-based care[111][112] Components of Our Results of Operations This section details revenue sources (premiums, service, investment income) and operating costs (medical, operating, depreciation & amortization), explaining their contribution to financial results - Revenue is generated from premiums (Bright HealthCare IFP/MA, NeueHealth value-based), service revenue (NeueHealth fee-for-service, network services), and investment income[115][116][118][120][121][122] - Operating costs include medical costs (provider reimbursements, drugs, benefits, reinsurance, quality incentives) and operating costs (employee compensation, vendor fees, marketing, regulatory costs)[123][124] - Operating costs are expected to increase in absolute amounts but decrease as a percentage of revenue in the long-term due to scaling efficiencies[124] Initial Public Offering The company completed its IPO on June 28, 2021, selling 51,350,000 shares at $18.00 per share, generating $887.3 million in net proceeds, used to repay debt, fund the Centrum acquisition, and for general corporate purposes - IPO closed on June 28, 2021, with 51,350,000 common shares sold at $18.00 per share, yielding $887.3 million in net proceeds[127] - Net proceeds were used to repay a $200.0 million revolving credit facility, fund the Centrum acquisition, and for general corporate purposes[128] - Immediately prior to the IPO, all 167,731,830 outstanding preferred shares converted into 427,897,381 common shares, reclassifying $1.8 billion from redeemable preferred stock to common stock and additional paid-in capital[127] COVID-19 Update COVID-19 impacted the business, initially decreasing utilization then increasing medical costs due to longer stays and variants, raising MCR by 320 basis points in Q2 2021 and 360 basis points in H1 2021 - Initially experienced decreased medical utilization in Q2 2020 due to deferred care, but utilization returned to normal levels with adverse financial impacts from increased average length of stays[131] COVID-19 Impact on Medical Cost Ratio (MCR): | Period | MCR Increase (basis points) | Medical Costs Increase (in millions) | | :----- | :-------------------------- | :----------------------------------- | | Q2 2021 | 320 | $33.6 | | Q2 2020 | 220 | $6.4 | | H1 2021 | 360 | $68.4 | | H1 2020 | 130 | $6.4 | - The duration and severity of the pandemic, including the emergence of new variants, continue to pose uncertainty for business disruption and financial impact[132] Business Update Bright Health Group reported strong Q2 2021 results, demonstrating significant growth in both Bright HealthCare consumers (up 220% to 663,000) and NeueHealth value-based care patients (up 700% to 170,000), with total revenue increasing by 275.2% to $1.1 billion - Total revenue for Q2 2021 was $1.1 billion, an increase of $817.0 million (275.2%) compared to the prior-year period, driven by organic membership growth and acquisitions[135] - Bright HealthCare served nearly 663,000 consumers at the end of Q2 2021, a 220.0% increase from approximately 207,000 members at year-end 2020[136] - NeueHealth directly manages care for approximately 170,000 value-based care patients through 44 owned primary care clinics, representing over 700% growth from Q2 2020[137] - The company is building a single technology platform, DocSquad, to connect consumers and patients to personalized care teams, and plans to expand Bright HealthCare products into four new states in 2022[137] Key Metrics and Non-GAAP Financial Measures The company tracks key metrics like Bright HealthCare Consumers Served and NeueHealth Value-based Care Patients, and uses Adjusted EBITDA as a non-GAAP measure to assess core operating performance Key Metrics as of June 30: | Metric | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Bright HealthCare Consumers Served | | | | Commercial | 552,759 | 153,083 | | Medicare Advantage | 110,066 | 54,141 | | NeueHealth Value-based Care Patient Lives | 42,305 | 19,419 | Adjusted EBITDA Reconciliation (in thousands): | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(43,723) | $(18,074) | $(68,268) | $(25,354) | | Adjusted EBITDA | $(35,255) | $(23,248) | $(44,839) | $(27,104) | - Adjusted EBITDA is defined as net loss excluding interest expense, income taxes, depreciation and amortization, acquisition/financing-related transaction costs, share-based compensation, and changes in the fair value of contingent consideration[142] Results of Operations The company experienced substantial revenue growth in Q2 and H1 2021, driven by increased Bright HealthCare consumers and acquisitions, but medical costs also rose significantly, leading to an increased Medical Cost Ratio (MCR) Consolidated Financial Performance (in thousands): | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $1,113,840 | $296,856 | $1,988,398 | $495,422 | | Medical Costs | $904,630 | $233,180 | $1,589,200 | $363,795 | | Operating Costs | $261,060 | $88,827 | $469,300 | $163,271 | | Medical Cost Ratio | 86.8% | 80.1% | 83.5% | 75.5% | | Operating Cost Ratio | 23.4% | 29.9% | 23.6% | 33.0% | - Total revenues increased by $817.0 million (275.2%) for the three months ended June 30, 2021, driven by a 219.6% increase in Bright HealthCare consumers and $203.6 million from acquisitions[149] - Medical costs increased by $671.5 million (288.0%) for the three months ended June 30, 2021, due to consumer growth, acquisitions, and COVID-19 impacts (320 basis points unfavorable MCR)[151][152] - Operating costs increased by $172.2 million (193.9%) for the three months ended June 30, 2021, but the operating cost ratio improved by 650 basis points to 23.4% due to leverage from increased premium revenues[154][155] Liquidity and Capital Resources The company's liquidity is supported by existing cash, a $350.0 million revolving credit agreement (now repaid with IPO proceeds), and $887.3 million from its recent IPO, with management expecting sufficient resources for the next twelve months despite anticipated operating losses - As of June 30, 2021, the company had $1.5 billion in cash and cash equivalents, $283.3 million in short-term investments, and $633.0 million in long-term investments[181] - The $887.3 million net proceeds from the June 2021 IPO were used to repay the $200.0 million revolving credit facility and fund the Centrum acquisition[173][177] - Net cash provided by operating activities increased by $410.1 million for the six months ended June 30, 2021, compared to the prior-year period[185] - Management expects to incur operating losses and negative cash flows from operations for the foreseeable future due to expansion but believes existing cash and IPO proceeds are sufficient for the next twelve months[175] Critical Accounting Policies and Estimates This section refers to critical accounting policies and estimates from the Prospectus, confirming no material changes have occurred - There have been no material changes to the critical accounting policies and estimates as compared to those disclosed in the Prospectus[188] Recently Adopted Accounting Pronouncements No recently issued or adopted accounting pronouncements had, or are expected to have, a material impact on the company's financial position, operations, or cash flows - No recently issued and not yet adopted or adopted accounting pronouncements had, or are expected to have, a material impact on the consolidated financial position, results of operations, or cash flows[27][189] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risk from changes in interest rates, which affect investment income and interest expense, with a net unrealized gain position of $1.0 million at June 30, 2021 - The company's pretax earnings are subject to market risk due to changes in interest rates, impacting investment income and interest expense[190] - Net unrealized gain position was $1.0 million at June 30, 2021, compared to $2.4 million at December 31, 2020[190] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2021, due to a previously reported material weakness in Brand New Day's internal control over financial reporting, with remediation efforts underway - Disclosure controls and procedures were not effective as of June 30, 2021, due to a material weakness in internal control over financial reporting[192] - A material weakness was identified in Brand New Day's internal control over financial reporting[193] - Remediation steps include centralizing accounting, enhancing controls, hiring additional resources, and migrating Brand New Day's financial activities to Bright Health's ERP system in Q3 2021[194] - Despite the material weakness, the condensed consolidated financial statements fairly present the company's financial position, results of operations, and cash flows[192] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity security sales, IPO proceeds, and a list of exhibits Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, operating results, cash flows, or financial condition - The company is not a party to any litigation that would individually or collectively have a material adverse effect on its business, operating results, cash flows, or financial condition[196] Item 1A. Risk Factors This section refers to previously disclosed risk factors in the company's Prospectus, confirming no material changes - There have been no material changes to the risk factors disclosed under the heading 'Risk Factors' in the company's Prospectus[197] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds This item details the unregistered sales of various series of preferred stock and common stock options, as well as the use of proceeds from the company's initial public offering (IPO), which generated $880.6 million in net proceeds - The company granted or issued various unregistered securities, including Series C, D, and E preferred stock to accredited investors, and stock options/common stock under the 2016 Equity Plan[198] - On June 28, 2021, 427,897,381 shares of common stock were issued upon conversion of all outstanding preferred stock[200] - The IPO generated $880.6 million in net proceeds from the sale of 51,350,000 common shares, which were used to repay a $200.0 million revolving credit facility and fund the $232.4 million Centrum acquisition[202][204] Item 3. Defaults upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[206] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[206] Item 5. Other Information The company reported no other information - No other information was reported[206] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, incentive plans, and certifications - Exhibits include the Ninth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, 2021 Omnibus Incentive Plan, and Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[207]