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spk02: our new health president and CEO, Mike Mikan, and CFO, Jay Matuszak. Before we begin, we want to remind you that this call may contain forward-looking statements under US 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. A reconciliation of the non-GAAP to GAAP measures is available in the company's second 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 8K, dated August 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 New Health Chief Executive Officer, Mike Mikan.
spk00: Good morning, everyone, and thank you for joining New Health's second quarter 2024 earnings call. New Health delivered solid results in the second quarter as we continue to drive value for consumers, providers, and payers across the healthcare industry. On June 24th, we announced that we secured up to $150 million in a new term loan facility with Hercules Capital. This significantly strengthens our capital position and underscores our ability to deliver high quality, affordable health care to all populations. We are excited to have Hercules support and believe we are well positioned to continue to drive long term, sustainable growth in 2024 and beyond. Throughout the second quarter, we continue to advance our value driven, consumer centric care model, which we believe uniquely aligns interests clinically, financially and through data and technology. to create a seamless, more coordinated healthcare experience. We are confident in our model and its ability to drive better health outcomes for all populations. I'll start by mentioning a few reasons why we believe our model is well positioned for the future. First, we believe our value-driven care model is carefully designed to improve upon traditional approaches to care delivery, which have revolved around episodic encounters and led to costly fragmented care. In contrast, our model is grounded in the power of long standing relationships. We believe we are building trusted ongoing relationships with our consumers in the local communities we serve and fostering strong partnerships with payers and providers across the country. By doing so, we believe we have established trust and competence with stakeholders throughout the healthcare industry. and we expect to continue to build upon these relationships in the years to come. Second, our model is built to serve all populations and partner with a diverse set of providers. In the second quarter, we've served over 477,000 consumers across the ACA marketplace, Medicare, and Medicaid. We continue to believe this model demonstrates our ability to effectively manage populations across product categories. delivering personalized care no matter the need or circumstance. In addition to serving a diverse consumer base, we partner with a diverse set of providers. Across our new care and new solutions business segments, we continue to partner with providers through our own clinics in Florida and Texas, as well as affiliated providers across the country as we enable them to succeed in performance-based arrangements. We have deep experience working with a broad variety of provider groups, no matter where they are on their path to taking risks. Overall, we see our diverse and balanced portfolio as key to expanding our value-based footprint in the future, while mitigating risk associated with high concentration in any one area. Finally, we believe our model is well positioned for the future as it places the consumer at the center of everything we do. We are focused on taking a proactive approach to consumer engagement, which is reflected in our commitment to understanding each consumer holistically, developing personalized care plans, and maintaining an ongoing relationship throughout the consumer's entire healthcare journey. We are partners in care, and this is reflected in every interaction we have with our consumers. As our model continues to drive strong results, we are carefully evaluating strategic growth opportunities, many of which continue to surface organically from existing partnerships and the relationships we have formed across the industry. We have a robust pipeline in place for 2025 and beyond as we continue to review capital-efficient opportunities to expand our payer and provider partnerships and grow the consumers we serve in both current and new geographies. In the second quarter, new health delivered enterprise adjusted EBITDA of $4 million. Overall, we believe our differentiated care model positions us to continue to drive strong results for the remainder of 2024 and beyond. I'll now provide a brief update on our new care and new solutions business segments. In our new care segment, positive momentum continued in the second quarter. as we delivered segment-adjusted EBITDA of $13.5 million. We are prioritizing engaging all consumers and delivering consumer-centric care that's tailored to meet specific needs, preferences, and circumstances. In our clinics, we demonstrated resilience and strength in the wake of several severe storms impacting Texas and Florida over the past several months. Aligned with our consumer-centric approach to care, our teams came together to ensure consumers, our patients, continue to receive the care they needed, helping to coordinate appointments and telehealth visits and keeping the patient at the center of all we do. I am proud of our teams and their dedication to delivering high-quality care, no matter the circumstance. New Solutions continues to focus on partnering with providers and enabling them to thrive in performance-based arrangements through our suite of population health tools and capabilities, as well as driving results through our participation in ACO REACH. Our provider enablement business served approximately 113,000 consumers in the second quarter. This exceeded our expectations, and we believe it shows the value we are bringing to providers and their confidence in our ability to help them navigate the industry's shift to value-based care. We believe the strong relationships we are building with providers in this part of our business continue to offer an avenue for future growth opportunities across our new care and new solutions business segments. In our ACO REACH business, we drove strong performance, consistent with our expectations in the second quarter as we maintain our focus on key care management, patient engagement, and health equity initiatives to deliver high quality care to our Medicare beneficiaries. I'll now hand it over to Jay to provide additional details on the second quarter financial results.
spk01: Thank you, Mike, and good morning, everyone. I'll start by reviewing our second quarter financial performance for our consolidated new health business, as well as each of our new care and new solution segments. Then I'll briefly touch 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. GAP financials are included in our earnings release and contain results that include our discontinued operations. New health consolidated revenue for the second quarter was $226 million with gross margin of $48.3 million. New health delivered adjusted EBITDA of $4 million in the second quarter serving approximately 477,000 consumers across our new care and new solutions business segment. This is a moderate increase in consumer serve over the first quarter, and we continue to expect to generate increased growth in the second half of the year. We are reaffirming our expectation for full year adjusted EBITDA of between 15 million and 25 million. Turning now to our new care segment. In the second quarter, new care revenue was 77 million, in line with our expectations. Starting in the third quarter, we have contracts in place with payer partners that are expected to increase our clinic volume and drive further growth in the third and fourth quarters. In the second quarter, new care operating costs were higher than expected due to a long-lived asset impairment expense tied to classifying our associates MD clinics as held for sale. This is immaterial to our business overall, and we will continue to partner with our associates MD clinics through our affiliate business moving forward. Excluding this adjustment, New care operating costs were in line with expectations and new care operating income was $8.5 million for the second quarter. Including the long-lived accident impairment expense, new care operating loss was $5.9 million for the quarter. In our new solution segment, revenue was $152.1 million in the second quarter. Second quarter operating costs were in line with expectations with medical costs moderately lower. New solution segment operating loss was $397,000 for the second quarter. Our ACO REACH business continues to deliver strong performance in line with our expectations, and we are pleased with the progress we are making in this part of our business in the first half of the year with a strong portfolio of aligned provider partners. On the provider enablement side of new solutions, we are generating strong results with our capabilities and expertise in performance-based arrangements, driving value for the provider partners across the country. In the second quarter, we served approximately 113,000 consumers through this business, exceeding our expectations. We look forward to continuing to build relationships with providers, no matter where they are on their path to participating in performance-based arrangements. Next, I'll briefly address the wind down of our ACA insurance business. We are continuing to make progress as planned in the second quarter. At the end of the second quarter, our ACA insurance business had approximately $135 million in excess cash after reserving for expected medical costs and other anticipated wind-down expenses, not including risk adjustment obligations due under our repayment agreements with CMS. We continue to retrieve capital from our discontinued entities and have received approximately $28.2 million so far this year, some of which has been infused into states with repayment agreements. We have made several prepayments to CMS already this year. Overall, we believe our business is in a much stronger and more predictable position this year as we continue to see the remaining liability associated with our ACA insurance business steadily decline. Now turning to our balance sheet. As of June 30th, 2024, we had $277.8 million in total cash and investments, including amounts in our regulated entities. Our non-regulated cash and short-term investments were $142.2 million at the end of the second quarter, including $60.7 million of restricted cash and investments. As Mike mentioned earlier, on June 24th, we were pleased to announce that we had entered into a secured loan facility for up to $150 million with Hercules Capital. This is significant as it meaningfully strengthens our balance sheet and provides a solid foundation for our company to execute against our strategic priorities in 2024 and beyond. 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 are now expecting consolidated revenue of approximately 950 million. Specifically, we expect approximately 320 million from our new care segment and approximately 640 million from our new solution segment. 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 reaching the high end of this range by the end of 2024. We expect to serve 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. Finally, we expect our adjusted operating cost ratio to be between 15 and 16 percent, excluding corporate costs. When you include corporate costs, this is 19 to 20%. Overall, our second quarter results reflect strong performance in both our new care and new solutions business segments, and we look forward to continuing to build on this momentum this second half of the year. I'll now turn it back over to Mike for some closing remarks.
spk00: Thank you, Jay. As we've outlined this morning, we delivered strong performance in the second quarter as we advanced our value-driven, consumer-centric care model. and continue to make high quality healthcare more accessible and affordable for all populations. We believe we are well positioned for 2025 and beyond with a differentiated model that prioritizes strong ongoing relationships and proactive consumer engagement. Our commitment to aligning the interests of consumers, providers, and payers to create a better healthcare experience has never been stronger and we are eager to continue to advance our model in collaboration with our partners. I would like to thank the entire new health team for their continued dedication to transforming healthcare. I look forward to building on our momentum in the second half of 2024 and beyond. That concludes today's call. Thank you for joining and for your interest in new health.
spk01: This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.
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