Document
Unaudited Pro Forma Financial Information
The accompanying unaudited pro forma consolidated financial statements of Bright Health Group, Inc., a Delaware corporation (the “Company”) were derived from the Company’s historical consolidated financial statements. The unaudited pro forma balance sheet as of September 30, 2023 was adjusted to reflect the sale of the California Medicare Advantage business to Molina Healthcare, Inc., a Delaware corporation (“Molina”) for a gross purchase price of $500.0 million in cash (the "Transaction"), subject to certain purchase price adjustments, which closed on January 1, 2024, as though the disposition occurred on September 30, 2023.
The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2023, and the year ended December 31, 2022, were prepared as though the disposition occurred on January 1, 2022, the first day of the Company’s fiscal year 2022.
The pro forma adjustments to the statements of operations for all periods presented do not include:
•The non-recurring net gain or net loss directly attributable to the sale of the California Medicare Advantage business.
•The non-recurring gain of approximately $30.0 million in connection with the extinguishment of our revolving credit facility in connection with the closing of the Transaction.
•Non-cash goodwill impairment charges ranging from $0.0 million to $150.0 million, in connection with the change in purchase price disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2023. This will be included in our results for the year ended December 31, 2023.
•Certain non-recurring transaction costs of the sale, estimated to be approximately $2.1 million.
The unaudited pro forma consolidated financial statements are being provided for informational purposes only and do not purport to reflect the Company’s financial position and results of operations had the Transaction occurred on the dates indicated above. Further, these financial statements are not necessarily indicative of the Company’s future financial position and future results of operations and should be read in conjunction with the historical financial statements of the Company included in its Annual Report for the year ended December 31, 2022 and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023.
Bright Health Group, Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheets
As of September 30, 2023
(in thousands)
(Unaudited)
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As Reported |
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Pro Forma Adjustments |
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As Adjusted |
| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ |
113,430 |
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$ |
31,580 |
(a) |
$ |
145,010 |
| Short-term investments |
156 |
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156 |
| Accounts receivable, net of allowance |
32,663 |
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32,663 |
| ACO REACH performance year receivable |
350,478 |
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350,478 |
| Contingent consideration receivable |
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110,000 |
(a) |
110,000 |
| Current assets of discontinued operations |
1,368,694 |
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(1,059,301) |
(b) |
309,393 |
| Prepaids and other current assets |
46,542 |
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24,100 |
(a) |
70,642 |
| Total current assets |
$ |
1,911,963 |
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$ |
(893,621) |
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$ |
1,018,342 |
| Other assets: |
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| Long-term investments |
$ |
344 |
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$ |
344 |
| Property, equipment and capitalized software, net |
17,517 |
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17,517 |
| Goodwill |
— |
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— |
| Intangible assets, net |
96,150 |
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96,150 |
| Other non-current assets |
29,792 |
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29,792 |
| Total other assets |
$ |
143,803 |
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$ |
143,803 |
| Total assets |
$ |
2,055,766 |
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$ |
(893,621) |
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$ |
1,162,145 |
| Liabilities and Shareholders’ Equity (Deficit) |
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| Current liabilities: |
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| Medical costs payable |
$ |
169,778 |
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$ |
169,778 |
| Accounts payable |
10,687 |
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10,687 |
| ACO REACH performance year obligation |
224,908 |
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224,908 |
| Short-term borrowings |
353,947 |
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(303,947) |
(c) |
50,000 |
| Current liabilities of discontinued operations |
974,502 |
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(476,826) |
(b) |
497,676 |
| Warrant liability |
9,874 |
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9,874 |
| Other current liabilities |
86,806 |
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(1,547) |
(c) |
85,259 |
| Total current liabilities |
$ |
1,830,502 |
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$ |
(782,320) |
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$ |
1,048,182 |
| Other liabilities |
$ |
30,655 |
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$ |
30,655 |
| Total liabilities |
$ |
1,861,157 |
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$ |
(782,320) |
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$ |
1,078,837 |
| Commitments and contingencies |
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| Redeemable noncontrolling interests |
$ |
327,263 |
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$ |
327,263 |
| Redeemable Series A preferred stock, $0.0001 par value; 750,000 shares authorized; 750,000 shares issued and outstanding |
747,481 |
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747,481 |
| Redeemable Series B preferred stock, $0.0001 par value; 175,000 shares authorized; 175,000 shares issued and outstanding |
172,936 |
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172,936 |
| Shareholders’ equity (deficit): |
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| Common stock, $0.0001 par value; 3,000,000,000 shares authorized; 7,981,802 shares issued and outstanding |
1 |
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1 |
| Additional paid-in capital |
3,037,946 |
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3,037,946 |
| Accumulated deficit |
(4,078,133) |
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(111,301) |
(d) |
(4,189,434) |
| Accumulated other comprehensive loss |
(885) |
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(885) |
| Treasury Stock, at cost, 31,526 shares at September 30, 2023 |
(12,000) |
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(12,000) |
| Total shareholders’ equity (deficit) |
(1,053,071) |
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(1,053,071) |
| Total liabilities, redeemable noncontrolling interests, redeemable preferred stock and shareholders’ equity (deficit) |
$ |
2,055,766 |
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$ |
(893,621) |
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$ |
1,162,145 |
The accompanying notes are an integral part of these proforma combined financial statements.
Bright Health Group, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Income (Loss)
For the nine months ended September 30, 2023
(in thousands, except per share data)
(Unaudited)
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As Reported |
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Pro Forma Adjustments |
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As Adjusted |
| Revenue: |
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Capitated revenue |
$ |
159,683 |
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$ |
159,683 |
| ACO REACH revenue |
676,845 |
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676,845 |
Service revenue |
31,387 |
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31,387 |
Investment income (loss) |
16 |
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16 |
Total revenue |
867,931 |
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867,931 |
| Operating expenses: |
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Medical costs |
731,718 |
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731,718 |
Operating costs |
221,697 |
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221,697 |
| Goodwill impairment |
401,385 |
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401,385 |
| Intangible assets impairment |
— |
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— |
| Bad debt expense |
23,054 |
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23,054 |
| Restructuring charges |
6,867 |
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6,867 |
Depreciation and amortization |
14,271 |
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14,271 |
Total operating expenses |
1,398,992 |
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1,398,992 |
Operating loss |
(531,061) |
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(531,061) |
| Interest expense (income) |
26,998 |
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(24,552) |
(c) |
2,446 |
| Warrant expense |
9,874 |
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9,874 |
| Other income |
— |
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— |
| Loss from continuing operations before income taxes |
(567,933) |
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(543,381) |
| Income tax (benefit) expense |
(3,018) |
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(3,018) |
| Net loss from continuing operations |
(564,915) |
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(540,363) |
| Loss from discontinued operations, net of tax |
(240,321) |
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62,262 |
(e) |
(178,059) |
| Net Loss |
(805,236) |
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86,814 |
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(718,422) |
| Net earnings from continuing operations attributable to noncontrolling interests |
(116,502) |
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(116,502) |
| Series A preferred stock dividend accrued |
(29,834) |
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(29,834) |
| Series B preferred stock dividend accrued |
(6,695) |
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(6,695) |
| Net loss attributable to Bright Health Group, Inc. common shareholders |
$ |
(958,267) |
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$ |
86,814 |
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$ |
(871,453) |
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| Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders |
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| Continuing operations - Basic and diluted loss per share |
$ |
(90.36) |
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$ |
(87.27) |
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| Basic and diluted weighted-average common shares outstanding* |
7,945 |
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7,945 |
*Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 80 reverse stock split
The accompanying notes are an integral part of these proforma combined financial statements.
Bright Health Group, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Income (Loss)
For the year ended December 31, 2022
(in thousands, except per share data)
(Unaudited)
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As Reported |
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Pro Forma Adjustments |
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Other Adjustments |
† |
As Adjusted |
| Revenue: |
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| Premium revenue |
$ |
1,764,949 |
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$ |
(1,586,548) |
(e) |
$ |
(65,497) |
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(f) |
$ |
112,904 |
| ACO REACH revenue |
654,087 |
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654,087 |
Service revenue |
48,013 |
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(8,412) |
(f) |
39,601 |
Investment income (loss) |
(55,019) |
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(410) |
(e) |
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(55,429) |
Total revenue |
2,412,030 |
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(1,586,958) |
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(73,909) |
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751,163 |
| Operating expenses: |
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Medical costs |
2,206,243 |
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(1,475,683) |
(e) |
(75,236) |
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(f) |
655,324 |
Operating costs |
632,030 |
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(190,743) |
(e) |
(81,306) |
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(f) |
359,981 |
| Restructuring charges |
31,739 |
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(445) |
(e) |
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31,294 |
| Goodwill impairment |
71,225 |
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(70,017) |
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(e) |
(1,208) |
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(f) |
— |
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| Intangible assets impairment |
42,611 |
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— |
Depreciation and amortization |
50,430 |
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(17,702) |
(e) |
(2,018) |
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(f) |
30,710 |
Total operating expenses |
3,034,278 |
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(1,754,590) |
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(159,768) |
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1,119,920 |
Operating income (loss) |
(622,248) |
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167,632 |
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85,859 |
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(368,757) |
| Interest expense (income) |
12,821 |
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(14,339) |
(c) |
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(1,518) |
| Other income |
(784) |
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— |
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784 |
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(f) |
— |
| Net income (loss) from continuing operations before income taxes |
(634,285) |
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181,971 |
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85,075 |
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(367,239) |
| Income tax (benefit) expense |
3,680 |
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(3) |
(e) |
(13) |
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(f) |
3,664 |
| Net income (loss) from continuing operations after income tax (benefit) expense |
(637,965) |
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181,974 |
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85,088 |
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(370,903) |
| Loss from discontinued operations, net of tax |
(721,915) |
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(85,088) |
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(807,003) |
| Net Loss |
(1,359,880) |
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181,974 |
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— |
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(1,177,906) |
| Net earnings from continuing operations attributable to noncontrolling interests |
(95,664) |
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(95,664) |
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| Series A preferred stock dividend accrued |
(37,889) |
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(37,889) |
| Series B preferred stock dividend accrued |
(1,798) |
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(1,798) |
| Net loss attributable to Bright Health Group, Inc. common shareholders |
$ |
(1,495,231) |
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$ |
181,974 |
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$ |
— |
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$ |
(1,313,257) |
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| Basic and diluted loss per share attributable to Bright Health Group, Inc. common shareholders |
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| Continuing operations - Basic and diluted loss per share |
$ |
(98.29) |
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$ |
(64.34) |
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| Basic and diluted weighted-average common shares outstanding* |
7,868 |
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7,868 |
†The Other Adjustments to the Bright Health Group Consolidated Statements of Income (Loss) for the year ended December 31, 2022 are to update the presentation of our DocSquad and MA Legacy businesses to be classified as discontinued operations.
*Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 80 reverse stock split
The accompanying notes are an integral part of these proforma combined financial statements.
Bright Health Group, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Consolidated Financial Statement
(in thousands, except per share data)
(Unaudited)
Note 1: Pro Forma Adjustments
The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma as adjusted financial information:
Unaudited Pro Forma Consolidated Balance Sheets
“As Reported” represents the historical consolidated balance sheet of Bright Health Group as of September 30, 2023. Adjustments presented in the pro forma consolidated balance sheet give effect to the transaction as if it had occurred on September 30, 2023 but using the preliminary purchase price at which the transaction was actually consummated on January 1, 2024. See additional explanations in the footnotes below.
Explanatory footnotes to these proforma adjustments are as follows:
(a) The cash and cash equivalent adjustment represents the proceeds from the aggregate purchase price of $500.0 million reduced by the amounts held in escrow as contingent consideration, used in the repayment of our short-term borrowings, and used in the payment of our existing letters of credit.
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| Calculation of Cash Adjustment |
| Aggregate purchase price |
$ |
500,000 |
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| Tangible net equity estimated adjustment |
(57,326) |
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(1) |
| Transaction costs |
(2,123) |
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| Contingent consideration receivable |
(110,000) |
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(2) |
| Repayment of short-term debt and related interest and fees |
(274,871) |
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| Cash collateralization of existing letters |
(24,100) |
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| Cash and cash equivalents adjustment |
$ |
31,580 |
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(1) The tangible net equity (“TNE”) estimated adjustment is an estimate of the TNE shortage BND and CHP will have as of December 31, 2023. This adjustment is likely to fluctuate as the yearend accounting is completed and certain post-closing adjustments are determined, including the final reconciliation of TNE.
(2) As disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2023, the release of the contingent consideration receivable held in escrow to the Company is conditioned upon either (i) a successful consolidation of BND into CHP or (ii) receipt by BND of a Part D Summary Rating for its Part D operations for contract year 2025 of at least 3 Stars from the Centers for Medicare and Medicaid Services, subject to certain purchase price adjustments, as described in the Amendment. At this time we expect to receive the entire $110.0 million; we will update this assessment at each reporting period.
(b) Reflects the sale of the California Medicare Advantage business, which was previously classified as a discontinued operation.
(c) To reflect the termination of our revolving credit facility in full, as disclosed in the Company’s Current Report on Form 8-K filed by with the Securities and Exchange Commission on January 2, 2024. The revolving credit facility was amended to reduce the final repayment amount by approximately $30.0 million, with the Company repaying $273.5 million of the outstanding principal as disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2023. The interest expense and accrued interest payable, reported in other current liabilities, for all periods presented has been adjusted to reflect the pay down of the credit facility as if it occurred on January 1, 2022.
(d) This amount represents the difference between (i) preliminary net cash proceeds received and contingent consideration receivable on January 1, 2024, the closing of the sale of our California Medicare Advantage business, and (ii) the sum of net assets classified in our discontinued operations related to our California Medicare Advantage business as of September 30, 2023 and gain of debt extinguishment of approximately $30.0 million.
The preliminary net cash proceeds included in these unaudited pro forma adjustments were based on an estimate of the balance sheet as of the Transaction’s closing date, while the cost bases of the assets and liabilities classified as discontinued operations are presented as of a different date in these unaudited pro forma balance sheet adjustments. As a result, the net gain or loss ultimately recognized on the sale of our California Medicare Advantage business is expected to differ from the amount presented here.
Additionally, the final sale price remains subject to certain post-closing adjustments, including final reconciliation tangible net equity as of the transaction’s closing date, as discussed in footnote (a) above.
Unaudited Pro Forma Consolidated Statements of Income (Loss)
“As Reported” represents the historical consolidated statements of income (loss) of Bright Health Group for the nine month period ended September 30, 2023 and the year ended December 31, 2022. Adjustments presented in these unaudited pro forma consolidated statements of income (loss) give effect to the transaction as if it had occurred immediately prior to January 1, 2022. We have also included “Other Adjustments” to reclassify our DocSquad and MA Legacy business to discontinued operations consistent with our presentation beginning the second quarter of 2023.
Explanatory footnotes to these proforma adjustments are as follows:
(e) To eliminate the revenues and expenses of the California Medicare Advantage business.
(f) To reclassify the revenues and expenses of DocSquad and the MA Legacy businesses.
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