- Second quarter revenue grew 4.6x year-over-year to $265.4
million
- U.S. value-based care members grew by 220% year-over-year
- Adjusted EBITDA Margin of (25.9)% for the quarter, a 60%
improvement year-over-year
- Reiterating full year 2022 revenue guidance of $1.0 billion or
greater and reiterating improved Adjusted EBITDA guidance of
$(270.0) million
Babylon Holdings Limited (NYSE: BBLN) (“Babylon”), one of
the world’s fastest-growing digital healthcare companies, today
announced its financial and operating results for the second
quarter ended June 30, 2022.
“Babylon has once again delivered very strong results that
demonstrate our continued momentum,” said Ali Parsa, CEO and
Founder of Babylon. “From Q2 revenue growing 4.6x to $265.4 million
and U.S. value-based care members growing by 220% year-over year,
to up to 7x increase in the speed of high risk member sign-up, and
a 31% ER avoidance in our longest serving VBC contract, to a 7.5%
improvement in medical margins in the span of three quarters,
almost all our key metrics are performing well. I am truly thankful
to all Babylonians for their hard work and unwavering commitment to
our mission, and to our members, providers and investors for the
continued trust and support."
Charlie Steel, Chief Financial Officer, added, “Babylon has
continued its track-record of strong operational performance
through the second quarter of 2022, with our Cost of Care Delivery
expense reducing as a percentage of revenue from last quarter and
delivering Adjusted EBITDA results ahead of consensus estimates. We
continue to remain focused on profitable growth and are on track to
achieve our revenue guidance of $1.0 billion or greater for the
full year of 2022, alongside our improved Adjusted EBITDA guidance
of $(270.0) million or less announced in July.”
Second Quarter Financial
Results
Comparison of the following financial results for the three
months ended June 30, 2022, compared to the three months ended June
30, 2021:
- Total revenue was $265.4 million compared to $57.5 million, a
4.6x year-over-year increase of $207.9 million. This was primarily
driven by the growth in value-based care (“VBC”) revenue, which
increased by 524% year-over-year to $244.1 million in Q2 2022.
- Loss for the period totaled $157.1 million, or a 59.2% Loss for
the Period Margin, compared to Loss for the period of $64.9
million, or a 112.9% Loss for the Period Margin, in the second
quarter of 2021. Loss for the Period Margin improved this quarter
by 54 percentage points.
- Claims expense increased year-over-year, from $40.4 million in
Q2 2021 to $238.8 million in Q2 2022. However on a percentage
basis, Medical Margin improved by 5 percentage points over the
period from (3.2)% in Q2 2021 to 2.2% in Q2 2022.
- Clinical care delivery expense increased year-over-year, from
$16.0 million in Q2 2021 to $21.6 million in Q2 2022 but decreased
significantly as a percentage of revenue from 27.9% to 8.2%,
demonstrating operational leverage across our network.
- Adjusted EBITDA totaled $(68.7) million, a (25.9)% Adjusted
EBITDA Margin, compared to $(49.6) million Adjusted EBITDA, or
(86.3)% Adjusted EBITDA Margin, in the second quarter of 2021.
Adjusted EBITDA Margin improved year-over-year by 60 percentage
points.
Adjusted EBITDA, Adjusted EBITDA Margin, Medical Loss Ratio and
Medical Margin are non-IFRS measures. An explanation of non-IFRS
measures, a reconciliation of Adjusted EBITDA to the most
comparable IFRS measure, Loss for the period, and the calculations
of IFRS Loss for the Period Margin, Adjusted EBITDA Margin, Medical
Loss Ratio and Medical Margin, have been provided at the end of
this press release.
Recent Highlights
- VBC membership grew 3.2x year-on-year to a total of
approximately 269,000 U.S. VBC members as of June 30, 2022. The
breakout of U.S. VBC Members by health insurance program type is
shown below:
% of Total U.S. VBC Members:
December 31, 2020
December 31, 2021
June 30, 2022
Medicaid
88
%
84
%
82
%
Medicare
12
%
7
%
12
%
Commercial
—
9
%
6
%
Total U.S. VBC Members1
66,000
167,000
269,000
- In July 2022, we launched a new VBC contract covering 10,000
Medicare Advantage members in New Mexico, increasing the percentage
of our VBC revenue from Medicare contracts to over 40% on a going
forward basis.
- Announced cost reduction actions intended to accelerate our
path to profitability, which are expected to generate annual cash
savings of up to $100 million. These efficiencies are being
implemented during Q3 2022 with the expected financial impact
predominantly from Q4 2022 onwards and subsequent periods.
- Successful completion of the warrant exchange transaction
launched in May 2022, simplifying Babylon’s capital structure, and
reducing the potential dilutive impact of the public and private
placement warrants.
- During the second quarter of 2022, we recorded non-cash
impairment charges of $53.2 million, primarily due the outcome of
an interim impairment assessment.
______________________________
1 Rounded to nearest thousand. “U.S. VBC
Members” means individuals who are covered by one of our U.S.
value-based care agreements with a health plan or healthcare
provider. Under these agreements, we take financial responsibility
for all or some of the surpluses or deficits in total actual costs
under the agreement compared to our negotiated fixed per member per
month, or capitation, allocation. Total U.S. VBC Members for
December 31, 2020 and December 31, 2021 as per Babylon’s Annual
Report on Form 20-F filed with the SEC on March 30, 2022. VBC
membership figures may include some estimates for lagging data
provided by health plans and may be subject to true-ups and
adjustments in the future.
FY 2022 Financial
Guidance
For the twelve months ending December 31, 2022, Babylon is
reiterating its revenue guidance of $1.0 billion or greater, which
represents a more than 3x increase over 2021 revenue driven
predominantly by organic growth, fueled by state expansion in the
U.S. with existing clients, as well as members from new
clients.
Babylon is reiterating improved Adjusted EBITDA guidance for FY
2022 from $(295.0) million or less to $(270) million or less,
implying a significant improvement in Adjusted EBITDA Margin from
(184)% and (54)% in 2020 and 2021, with forecasted monthly Adjusted
EBITDA of $(18) million or less by December 2022. Babylon continues
to evaluate timing to reach profitability on both a cash flow and
Adjusted EBITDA basis, which we are targeting as no later than
2025.
These statements are forward-looking and actual results may
differ materially. Please refer to the Forward-Looking Statements
safe harbor below for information on the factors that could cause
our actual results to differ materially from these forward-looking
statements. We are not able to reconcile projected Adjusted EBITDA
loss for 2022 or December 2022, or 2022 Adjusted EBITDA Margin to
its most directly comparable IFRS measure as we are not able to
forecast Loss for the period on a forward-looking basis without
unreasonable efforts due to the high variability and difficulty in
predicting certain items that affect Loss for the period,
including, but not limited to, changes in fair value of warrant
liabilities, impairment expense, share-based compensation, foreign
exchange gains or losses and gains and losses on sale of
subsidiaries. Adjusted EBITDA should not be used to predict Loss
for the period as the difference between the two measures is
variable and may be significant.
Second Quarter 2022 Earnings Conference
Call
Babylon will host a conference call to discuss second quarter
2022 results on August 9, 2022, at 5:00 p.m. Eastern Time. To
participate in the Company’s live conference call and webcast,
please dial (866) 682-6100 for U.S. participants, 0800 756 3429 for
U.K. participants, or +1 862-298-0702 for international
participants. Alternatively, you can visit the “News & Events”
section of https://ir.babylonhealth.com/ to access the live
webcast. On this page, you can also find a “Call me” link for
instant telephone access to the event, which will be made active 15
minutes prior to the scheduled start time. A replay of the call
will be available via webcast for on-demand listening shortly after
the completion of the call, at the same web link, and will remain
available for approximately 90 days.
Additional Notes
Adjusted EBITDA, Adjusted EBITDA Margin, Medical Loss Ratio and
Medical Margin are non-IFRS measures. An explanation of non-IFRS
measures, a reconciliation of Adjusted EBITDA to the most
comparable IFRS measure, Loss for the period, and the calculations
of IFRS Loss for the Period Margin, Adjusted EBITDA Margin, Medical
Loss Ratio and Medical Margin, have been provided at the end of
this press release.
Accompanying supplemental information will be posted to the
Investor Relations section of Babylon’s website at
https://www.babylonhealth.com.
About Babylon
Babylon is one of the world’s fastest growing digital healthcare
companies whose mission is to make high-quality healthcare
accessible and affordable for every person on Earth.
Babylon is re-engineering how people engage with their care at
every step of the healthcare continuum. By flipping the model from
reactive sick care to proactive healthcare through the devices
people already own, it offers millions of people globally ongoing,
always-on care. Babylon has already shown that in environments as
diverse as the developed UK or developing Rwanda, urban New York,
or rural Missouri, for people of all ages, it is possible to
achieve its mission by leveraging its highly scalable,
digital-first platform combined with high quality, virtual clinical
operations to provide integrated, personalized healthcare.
Founded in 2013, Babylon’s technology and clinical services is
supporting a global patient network across 15 countries and is
capable of operating in 16 languages. In 2021 alone, Babylon helped
a patient every 6 seconds, with approximately 5.2 million
consultations and AI interactions. Importantly, this was achieved
with a 93% user retention rate in our NHS GP at Hand service and 4
or 5 star ratings from more than 90% of our users across all of our
geographies.
Babylon is also working with governments, health providers,
employers and insurers across the globe to provide them with a new
infrastructure that any partner can use to deliver high-quality
healthcare with lower costs and better outcomes. For more
information, please visit www.babylonhealth.com.
Forward-Looking
Statements
This press release contains “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally relate to future events or our
future financial or operating performance. When used in this press
release, the words “estimates,” “projected,” “expects,”
“anticipates,” “forecasts,” “plans,” “intends,” “believes,”
“seeks,” “may,” “will,” “should,” “future,” “propose” and
variations of these words or similar expressions (or the negative
versions of such words or expressions) are intended to identify
forward-looking statements. These forward-looking statements
include, without limitation, information concerning Babylon’s
possible or assumed future results of operations, business
strategies, debt levels, competitive position, industry environment
and potential growth opportunities.
These forward-looking statements are not guarantees of future
performance, conditions, or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside of Babylon’s management’s
control, that could cause actual results to differ materially from
the results discussed in the forward-looking statements. These
risks, uncertainties, assumptions and other important factors
include, but are not limited to our future financial and operating
results and that we may require additional financing; uncertainties
related to our ability to continue as a going concern; the growth
of our business and organization; risks associated with impairment
of goodwill and other intangible assets; our failure to compete
successfully; our ability to renew contracts with existing
customers, and risks of contract renewals at lower fee levels, or
significant reductions in members, pricing or premiums under our
contracts due to factors outside our control; our dependence on our
relationships with physician-owned entities; our ability to
maintain and expand a network of qualified providers; our ability
to increase engagement of individual members or realize the member
healthcare cost savings that we expect; a significant portion of
our revenue comes from a limited number of customers; the
uncertainty and potential inadequacy of our claims liability
estimates for medical costs and expenses; risks associated with
estimating the amount and timing of revenue recognized under our
licensing agreements and value-based care agreements with health
plans; risks associated with our physician partners’ failure to
accurately, timely and sufficiently document their services; risks
associated with inaccurate or unsupportable information regarding
risk adjustment scores of members in records and submissions to
health plans; risks associated with reduction of reimbursement
rates paid by third-party payers or federal or state healthcare
programs; risks associated with regulatory proposals directed at
containing or lowering the cost of healthcare, including the ACO
REACH model; immaturity and volatility of the market for
telemedicine and our unproven digital-first approach; our ability
to develop and release new solutions and services; the impact of
COVID-19 or any other pandemic, epidemic or outbreak of an
infectious disease in the United States or worldwide on our
business; and the other risks and uncertainties identified in
Babylon’s Annual Report on Form 20-F filed with the SEC on March
30, 2022, and in other documents filed or to be filed by Babylon
with the SEC and available at the SEC’s website at www.sec.gov.
Babylon cautions that the foregoing list of factors is not
exclusive and cautions readers not to place undue reliance upon any
forward-looking statements, which speak only as of the date made.
Except as required by law, Babylon does not undertake any
obligation to update or revise its forward-looking statements to
reflect events or circumstances after the date of this press
release.
Table 1
Babylon Holdings
Limited
Consolidated Statement of
Profit and Loss and Other Comprehensive Loss
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021
2022
2021
$’000
$’000
$’000
$’000
Revenue:
Value-based care
244,098
39,133
490,673
66,392
Software licensing
7,375
8,281
15,131
44,245
Clinical services
13,889
10,064
26,004
18,134
Total revenue
265,362
57,478
531,808
128,771
Claims expense
(238,764
)
(40,384
)
(486,316
)
(64,301
)
Clinical care delivery expense
(21,649
)
(16,013
)
(45,576
)
(27,836
)
Platform & application expenses
(13,356
)
(14,943
)
(30,059
)
(21,377
)
Research & development expenses
(18,658
)
(6,811
)
(28,715
)
(17,201
)
Sales, general & administrative
expenses
(67,969
)
(45,127
)
(126,279
)
(76,606
)
Impairment expense
(53,224
)
—
(53,224
)
—
Operating loss
(148,258
)
(65,800
)
(238,361
)
(78,550
)
Finance costs
(9,816
)
(1,251
)
(16,444
)
(2,243
)
Finance income
128
14
383
28
Change in fair value of warrant
liabilities
10,791
—
16,366
—
Loss on settlement of warrants
(2,375
)
—
(2,375
)
—
Exchange (loss) / gain
(7,350
)
482
(7,797
)
(91
)
Net finance expense
(8,622
)
(755
)
(9,867
)
(2,306
)
Gain on sale of subsidiary
—
—
—
3,917
Share of loss of equity-accounted
investees
—
(821
)
—
(1,276
)
Loss before taxation
(156,880
)
(67,376
)
(248,228
)
(78,215
)
Tax (provision) / benefit
(199
)
2,501
(208
)
2,493
Loss for the period
(157,079
)
(64,875
)
(248,436
)
(75,722
)
Other comprehensive loss
Items that may be reclassified
subsequently to profit or loss:
Currency translation differences
1,495
1,687
(2,258
)
(67
)
Other comprehensive loss for the
period, net of income tax
1,495
1,687
(2,258
)
(67
)
Total comprehensive loss for the
period
(155,584
)
(63,188
)
(250,694
)
(75,789
)
Loss attributable to:
Equity holders of the parent
(157,079
)
(64,441
)
(248,436
)
(74,907
)
Non-controlling interest
—
(434
)
—
(815
)
(157,079
)
(64,875
)
(248,436
)
(75,722
)
Total comprehensive loss attributable
to:
Equity holders of the parent
(155,584
)
(62,754
)
(250,694
)
(74,974
)
Non-controlling interest
—
(434
)
—
(815
)
(155,584
)
(63,188
)
(250,694
)
(75,789
)
Net loss per share, Basic and
Diluted
(0.41
)
(0.26
)
(0.64
)
(0.31
)
Table 2
Babylon Holdings
Limited
Consolidated Statement of Cash
Flows
(Unaudited)
For the Six Months Ended June
30,
2022
2021
$’000
$’000
Cash flows from operating
activities
Loss for the period
(248,436
)
(75,722
)
Adjustments to reconcile Loss for the
period to net cash used in operating activities:
Share-based compensation
18,966
12,344
Depreciation and amortization
21,402
13,322
Impairment expense
53,224
—
Finance costs
16,444
2,243
Finance income
(383
)
(28
)
Change in fair value of warrant
liabilities
(16,366
)
—
Loss on settlement of warrants
2,375
—
Exchange loss
7,797
91
Taxation
208
(2,493
)
Gain on sale of subsidiary
—
(3,917
)
Share of loss of equity-accounted
investees
—
1,276
(144,769
)
(52,884
)
Working capital adjustments
Decrease / (increase) in trade and other
receivables
5,489
(12,414
)
Increase / (decrease) in trade and other
payables
12,335
44,372
(Increase) / decrease in
assets/liabilities held for sale
—
1,460
Net cash used in operating
activities
(126,945
)
(19,466
)
Cash flows from investing
activities
Development costs capitalized
(17,449
)
(16,254
)
Capital expenditures
(6,977
)
(2,444
)
Interest received
383
7
Proceeds from sale of investment in
subsidiary
—
2,213
Payment for acquisition of
subsidiaries
—
(13,835
)
Purchase of shares in associates and joint
ventures
—
(5,000
)
Net cash used in investing
activities
(24,043
)
(35,313
)
Cash flows from financing
activities
Proceeds from issuance of notes and
warrants
100,000
—
Payment of equity and debt issuance
costs
(5,499
)
—
Interest paid
(4,644
)
(1,826
)
Principal payments on leases
(2,435
)
(2,293
)
Other financing activities, net
(1,736
)
(366
)
Net cash provided by (used in)
financing activities
85,686
(4,485
)
Net increase in cash and cash
equivalents
(65,302
)
(59,264
)
Cash and cash equivalents at January
1,
262,581
101,757
Effect of movements in exchange rate on
cash held
(10,322
)
(112
)
Cash and cash equivalents at end of
period
186,957
42,381
Table 3
Babylon Holdings
Limited
Consolidated Statement of
Financial Position
(Unaudited)
June 30, 2022
December 31, 2021
$’000
$’000
ASSETS
Non-current assets
Right-of-use assets
17,972
7,844
Property, plant and equipment
26,698
24,990
Goodwill
43,041
93,678
Other intangible assets
105,846
111,421
Total non-current assets
193,557
237,933
Current assets
Right-of-use assets
5,057
3,999
Trade and other receivables
28,333
24,119
Prepayments and contract assets
18,417
26,000
Cash and cash equivalents
186,957
262,581
Total current assets
238,764
316,699
Total assets
432,321
554,632
EQUITY AND LIABILITIES
EQUITY
Ordinary share capital
16
16
Share premium
927,183
922,897
Share-based payment reserve
101,132
80,371
Retained earnings
(1,086,422
)
(837,986
)
Foreign currency translation reserve
(2,285
)
(27
)
Total capital and reserves
(60,376
)
165,271
Total equity
(60,376
)
165,271
LIABILITIES
Non-current liabilities
Loans and borrowings
268,665
168,601
Contract liabilities
54,781
70,396
Lease liabilities
18,028
8,442
Deferred grant income
7,504
7,236
Deferred tax liability
764
1,019
Total non-current liabilities
349,742
255,694
Current liabilities
Trade and other payables
30,818
22,686
Accruals and provisions
43,283
36,856
Claims payable
38,657
24,628
Contract liabilities
20,552
23,786
Warrant liability
2,881
20,128
Lease liabilities
5,245
4,190
Deferred grant income
1,519
1,208
Loans and borrowings
—
185
Total current liabilities
142,955
133,667
Total liabilities
492,697
389,361
Total liabilities and equity
432,321
554,632
Table 4 Babylon Holdings Limited
Non-IFRS Financial Measures (Unaudited)
EBITDA is defined as profit (loss) for the period, adjusted for
finance costs and income, depreciation and amortization, and tax
provision or benefit. Adjusted EBITDA is defined as profit (loss)
for the period, adjusted for finance costs and income, depreciation
and amortization, tax provision or benefit, impairment expenses,
change in fair value of warrant liabilities, loss on settlement of
warrants, share-based compensation, foreign exchange gain or loss,
restructuring and other one-time benefit arrangements and gain or
loss on sale of subsidiaries. Loss for the period is the most
directly comparable IFRS measure to Adjusted EBITDA. Adjusted
EBITDA Margin is defined as Adjusted EBITDA divided by Total
revenue for the corresponding period. Medical Loss Ratio and
Medical Margin are derived from amounts presented in the Statement
of Profit and Loss included in the table below.
We believe that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin,
Medical Loss Ratio and Medical Margin (collectively, the “Non-IFRS
Measures”) are useful metrics for investors to understand and
evaluate our operating results and ongoing profitability because
they permit investors to evaluate our recurring profitability from
our ongoing operating activities.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Medical Loss
Ratio and Medical Margin have certain limitations, and you should
not consider them in isolation or as a substitute for analysis of
our results of operations as reported under IFRS. We caution
investors that amounts presented in accordance with our definitions
of any of the Non-IFRS Measures may not be comparable to similar
measures disclosed by other issuers, because some issuers calculate
certain of the Non-IFRS Measures differently or not at all,
limiting their usefulness as direct comparative measures.
The following table presents a reconciliation of specific IFRS
measures to the Non-IFRS Measures used by management. These include
EBITDA and Adjusted EBITDA from the most directly comparable IFRS
measure, Loss for the period, and the calculations of IFRS Loss for
the Period Margin, Adjusted EBITDA Margin, Medical Loss Ratio and
Medical Margin, for the three and six months ended June 30, 2022
and 2021:
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
$’000
$’000
$’000
$’000
Loss for the period
(157,079
)
(64,875
)
(248,436
)
(75,722
)
Adjustments to calculate EBITDA:
Finance costs and income
9,688
1,237
16,061
2,215
Depreciation and amortization
11,944
7,474
21,402
13,322
Tax provision / (benefit)
199
(2,501
)
208
(2,493
)
EBITDA
(135,248
)
(58,665
)
(210,765
)
(62,678
)
Adjustments to calculate Adjusted
EBITDA:
Impairment expense
53,224
—
53,224
—
Change in fair value of warrant
liabilities
(10,791
)
—
(16,366
)
—
Loss on settlement of warrants
2,375
—
2,375
—
Share-based compensation
10,564
9,542
18,966
12,344
Exchange loss / (gain)
7,350
(482
)
7,797
91
Restructuring and other one-time benefit
arrangements
3,848
—
3,848
—
Gain on sale of subsidiary
—
—
—
(3,917
)
Adjusted EBITDA
(68,678
)
(49,605
)
(140,921
)
(54,160
)
Total revenue
265,362
57,478
531,808
128,771
Value-based care revenue
244,098
39,133
490,673
66,392
Claims expense
(238,764
)
(40,384
)
(486,316
)
(64,301
)
IFRS Loss for the Period Margin
(59.2
) %
(112.9
) %
(46.7
) %
(58.8
) %
Adjusted EBITDA Margin
(25.9
) %
(86.3
) %
(26.5
) %
(42.1
) %
Medical Loss Ratio
97.8
%
103.2
%
99.1
%
96.9
%
Medical Margin
2.2
%
(3.2
) %
0.9
%
3.1
%
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