Babylon Holdings Limited (NYSE: BBLN) (“Babylon” or the
“Company”) today announced its financial and operating results for
the first quarter ended March 31, 2023.
First Quarter Financial
Results
Comparison of the following financial results for the three
months ended March 31, 2023, to the three months ended March 31,
2022:
- Total revenue was $311.1 million compared to $266.4 million, a
1.2x year-over-year increase of $44.7 million. This was primarily
due to the growth in VBC revenue, which increased by 17%
year-over-year to $287.5 million in Q1 2023.
- Net loss totaled $63.2 million, a (20.3)% Net loss margin
compared to Net loss of $29.1 million, a (10.9)% Net loss margin in
Q1 2022. Net income in Q1 2022 included a $78.8 million gain
primarily relating to the Company going public.
- Adjusted EBITDA totaled $(45.8) million, a (14.7)% Adjusted
EBITDA Margin, compared to $(82.6) million Adjusted EBITDA, or
(31.0)% Adjusted EBITDA Margin, in Q1 2022.
Key Highlights
- Improved VBC Revenue mix, exiting two Medicaid contracts and
going live on January 1, 2023 with our digital-first Commercial
Exchange product, Ambetter, resulting in nearly 60% of our VBC
revenue coming from non-Medicaid members
- Continued disciplined execution of previously announced cost
reduction initiatives, including completion of the sale of a
non-core business
- Ambetter digital-first service for Commercial members exceeded
projections with 38% membership growth YTD, members are 12+ times
faster to register and have demonstrated 8x engagement rates,
higher than any of our other cohorts
- Appointments in our U.K. Private business grew 83% YoY, with
over 186K appointments delivered in Q1 2023
Financial Guidance, Balance Sheet Cash
and Other Important Information
In light of the Company’s announcement today concerning an
interim financing and proposed take private transaction to be led
by AlbaCore Capital LLP and affiliates, the Company has withdrawn
its full-year 2023 revenue and Adjusted EBITDA guidance, and its
mid-2024 target for Adjusted EBITDA profitability, issued on March
9, 2023. The Company is not providing updated guidance at this
time.
As of March 31, 2023, the Company had cash and cash equivalents
of $77.7 million, including $52.1 million of cash classified as
held for sale.
First Quarter 2023 Earnings Call and
Additional Notes
Babylon will not host its previously announced conference call
on May 10, 2023 to discuss first quarter 2023 results.
Babylon’s Quarterly Report on Form 10-Q for the first quarter of
2023 is being filed today with the U.S. Securities and Exchange
Commission (the “SEC”) and will be available in the Investor
Relations section of Babylon’s website at
https://ir.babylonhealth.com.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Medical Loss
Ratio, Medical Margin and Cost of Care Delivery Margin are non-GAAP
financial measures (collectively, the “Non-GAAP Measures”) and 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 GAAP. We caution investors that amounts presented in
accordance with our definitions of any of the Non-GAAP Measures may
not be comparable to similar measures disclosed by other issuers,
because some issuers calculate certain of the Non-GAAP Measures
differently or not at all, limiting their usefulness as direct
comparative measures. An explanation of our Non-GAAP measures, a
reconciliation of Adjusted EBITDA to the most comparable GAAP
measure, Net loss, and the calculations of Net loss Margin,
Adjusted EBITDA Margin, Medical Loss Ratio, Medical Margin and Cost
of Care Delivery Margins have been provided at the end of this
press release.
About Babylon
At Babylon, our mission is to make quality healthcare accessible
and affordable for every person on Earth. To this end, we are
building an integrated digital first primary care service that can
manage population health at scale.
Founded in 2013, we are reengineering 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, we offer millions of people
globally, ongoing, always-on care. And, we have 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 our mission by leveraging our highly
scalable, digital-first platform combined with high quality,
virtual clinical operations to provide integrated, personalized
healthcare.
Today, we support a global patient network across 15 countries,
and operate 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. We are working to demonstrate how our model of digital
first integrated primary care can be applied to manage the health
of the population in different settings across Medicare, Medicaid,
and commercial value based care contracts in the US and our primary
care services in the UK.
Babylon is also working with governments, health providers,
employers and insurers across the globe to provide them with a new
digital-first platform 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
ability to receive available funding in full from the amendment and
restatement of its senior secured term loan facility with AlbaCore
Capital LLP and certain of its affiliates (“AlbaCore”) on May 10,
2023 (the “Interim Funding”) and its ability to successfully
implement the framework implementation agreement, dated May 10,
2023, with AlbaCore (the “Framework Agreement”), 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 ability to continue as a going
concern over the next twelve months; risks associated with our debt
financing agreements with AlbaCore, including our ability to
receive available funding from the Interim Funding in full and the
impact of the restrictive covenants on our operations; risks
associated with the implementation of the take private proposal
pursuant to the Framework Agreement; that we may require additional
financing and our ability to obtain additional financing on
favorable terms; our ability to timely identify and execute
strategic alternatives on favorable terms, including restructuring,
refinancing, an asset sale such as the proposed sale of the
Meritage Medical Network/Independent Physician Association
business, a take private transaction, and/or putting Babylon
Holdings Limited into administration under UK law or obtaining
relief under the U.S. Bankruptcy Code; risks and uncertainties
associated with such administration or bankruptcy proceedings; the
diversion of our senior management team’s attention from our
business to pursuing strategic alternatives; the impact on our
share price as a result of announcements related to a potential
take private transaction; turnover in our senior management team
and other key talent; our future financial and operating results,
ability to generate profits in the future, and timeline to
profitability for Babylon as a whole and in our lines of business;
the impact of our recently completed reverse share split on the
price and trading market for our Class A ordinary shares; if we
fail to comply with the NYSE’s continued listing standards and
rules, the NYSE may delist our Class A ordinary shares;
uncertainties related to our ability to continue as a going
concern; our ability to successfully execute our planned cost
reduction actions and realize the expected cost savings; 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; difficulty in
hiring and retaining talent to operate our business; risks
associated with our international operations, economic uncertainty,
or downturns; 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; risks associated with foreign
currency exchange rate fluctuations and restrictions; and the other
risks and uncertainties identified in Babylon’s Form 10-K filed
with the SEC on March 16, 2023 and Form 10-Q to be filed with the
SEC on May 10, 2023, 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.
Babylon Holdings
Limited
Consolidated Balance
Sheets
(Dollars, in thousands, except
share and per share data)
As of March 31,
As of December 31,
2023
2022
(unaudited)
$
$
ASSETS
Current assets
Cash and cash equivalents
25,582
43,475
Trade receivables, net
15,404
15,524
Other receivables
14,897
17,502
Prepayments and contract assets
18,404
18,349
Assets held for sale
108,797
125,275
Total current assets
183,084
220,125
Property, plant and equipment net
12,039
12,658
Operating lease right-of-use assets
12,870
13,327
Total assets
207,993
246,110
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES
Current liabilities
Trade payables
5,893
9,600
Other payables
4,046
4,839
Accruals and other liabilities
40,000
30,029
Due to related parties
4,791
4,791
Claims payable
9,280
8,475
Contract liabilities
19,094
18,710
Lease liabilities
5,023
5,102
Liabilities held for sale
70,351
74,717
Premium deficiency reserve
13,103
6,124
Total current liabilities
171,581
162,387
Loans and borrowings, net of current
position
295,449
278,028
Contract liabilities, net of current
position
42,790
46,160
Lease liabilities, net of current
position
12,983
14,056
Warrant liability
—
711
Earnout liability
252
667
Total liabilities
523,055
502,009
SHAREHOLDERS' EQUITY
Class A ordinary shares, $0.001056433113
par value; 260,000,000 shares authorized at March 31, 2023 and
December 31, 2022; 25,584,711 and 24,858,717 shares issued and
outstanding as of March 31, 2023 and December 31, 2022,
respectively
17
16
Class B ordinary shares, $0.001056433113
par value; 124,000,000 shares authorized at March 31, 2023 and
December 31, 2022; zero shares issued and outstanding as of March
31, 2023 and December 31, 2022
—
—
Additional paid-in-capital
581,215
576,585
Accumulated deficit
(900,001
)
(836,772
)
Accumulated other comprehensive income
3,707
4,272
Total stockholders' equity
(315,062
)
(255,899
)
Total liabilities and shareholders'
equity
207,993
246,110
Babylon Holdings
Limited
Consolidated Statement of
Operations and Other Comprehensive Loss
(Dollars, in thousands, except
share and per share data)
(Unaudited)
For the Three Months Ended
March 31,
2023
2022
$
$
Revenue:
Value-based care
287,465
246,575
Clinical services
17,108
12,115
Software licensing
6,547
7,756
Total revenue
311,120
266,446
Claims expense
(283,906
)
(247,552
)
Clinical care delivery expense
(16,416
)
(23,927
)
Platform & application expenses
(8,594
)
(13,748
)
Research & development expenses
(4,476
)
(17,314
)
Sales, general & administrative
expenses
(48,393
)
(55,649
)
Premium deficiency reserve expense
(2,494
)
(6,868
)
Depreciation and amortization expenses
(1,237
)
(3,078
)
Loss from operations
(54,396
)
(101,690
)
Interest expense
(8,819
)
(5,982
)
Interest income
161
255
Gain on fair value remeasurement
336
78,773
Gain on settlement of warrants
155
—
Exchange loss
(27
)
(447
)
Loss on sale of subsidiary
(646
)
—
Net loss from operations before income
taxes
(63,236
)
(29,091
)
Tax benefit / (provision)
7
(9
)
Net loss
(63,229
)
(29,100
)
Other comprehensive loss
Currency translation differences
(565
)
(3,639
)
Other comprehensive loss, net of income
tax
(565
)
(3,639
)
Total comprehensive loss
(63,794
)
(32,739
)
Net loss per share
Net loss per share, basic and diluted,
from operations
(2.53
)
(1.71
)
Weighted average shares outstanding, basic
and diluted
25,025,645
17,038,663
Babylon Holdings
Limited
Consolidated Statement of Cash
Flows
(Dollars, in
thousands)
(Unaudited)
For the Three Months Ended
March 31,
2023
2022
$
$
Cash flows from operating
activities
Net loss
(63,229
)
(29,100
)
Adjustments to reconcile Net loss to net
cash used in operating activities:
Non-cash interest expense, net
8,658
5,727
Stock-based compensation
2,167
9,174
Depreciation and amortization
1,237
3,078
Exchange loss
27
447
Gain on fair value remeasurement
(336
)
(78,773
)
Premium deficiency reserve expense
2,494
6,868
Gain on settlement of warrants
(155
)
—
Loss on sale of subsidiary
646
—
Taxation
—
9
Working capital adjustments
Decrease / (Increase) in trade and other
receivables
2,886
(3,648
)
(Increase) / Decrease in prepayments and
contract assets
(55
)
4,029
(Decrease) / Increase in trade, other and
claims payables
(3,746
)
17,640
Increase / (Decrease) in accruals and
other liabilities and due to related parties
1,992
(5,264
)
(Decrease) in contract liabilities
(2,011
)
(9,941
)
Decrease in assets and liabilities held
for sale
11,436
—
(Decrease) / Increase in operating lease
liabilities
(417
)
1,272
Net cash used in operating
activities
(38,406
)
(78,482
)
Cash flows from investing
activities
Capital expenditure
(372
)
(2,613
)
Proceeds from sale of investment in
subsidiary
516
—
Net cash provided / (used) in investing
activities
144
(2,613
)
Cash flows from financing
activities
Proceeds from issuance of notes and
warrants
22,000
100,000
Payment of debt issuance costs
(3,153
)
(4,000
)
Payment of equity issuance costs
—
(1,002
)
Other financing activities, net
42
(1,538
)
Net cash provided by financing
activities
18,889
93,460
Net (decrease) / increase in cash and cash
equivalents
(19,373
)
12,365
Cash and cash equivalents at January
1,
43,475
262,581
Effect of movements in exchange rate on
cash held
1,480
32
Cash and cash equivalents at December
31,
25,582
274,978
Babylon Holdings Limited
Non-GAAP Financial Measures
(Unaudited)
EBITDA is defined as Net (loss) income, adjusted for
depreciation, amortization, net interest income (expense), and
income taxes. We define Adjusted EBITDA as Net (loss) income,
adjusted for depreciation, amortization, net interest income
(expense), income taxes, impairment expenses, stock-based
compensation, foreign exchange gains (losses), restructuring and
other termination benefits, gains (losses) on settlement of
warrants, gains (losses) on fair value remeasurement, premium
deficiency reserve (income) expenses and gains (losses) on sale of
subsidiaries and related transaction costs. We define Medical Loss
Ratio as the absolute value of claims expense divided by
Value-based care revenue. We define Medical Margin as one minus the
Medical Loss Ratio. We define Medical Loss Ratio as the absolute
value of claims expense divided by Value-based care revenue. We
define Medical Margin as one minus the Medical loss ratio. We
define Cost of Care Delivery Margin as one minus the absolute value
of claims expense and clinical care delivery expense divided by
total revenue. Medical Loss Ratio, Medical Margins and Cost of Care
Delivery Margins are derived from amounts presented in the
Consolidated Statement of Operations and Comprehensive Loss and the
associated Notes to the Consolidated Financial Statements.
We believe that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin,
Medical Loss Ratio, Medical Margin and Cost of Care Delivery Margin
(collectively, the “Non-GAAP 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, Medical Margin and Cost of Care Delivery 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 GAAP. We caution investors that amounts presented in
accordance with our definitions of any of the Non-GAAP Measures may
not be comparable to similar measures disclosed by other issuers,
because some issuers calculate certain of the Non-GAAP Measures
differently or not at all, limiting their usefulness as direct
comparative measures.
The following table presents a reconciliation of specific GAAP
measures to the Non-GAAP Measures used by management. These include
EBITDA and Adjusted EBITDA from the most directly comparable GAAP
measure, Net (loss) income, and the calculations of Net (loss)
income Margin, Adjusted EBITDA Margin, Medical Loss Ratio, Medical
Margin and Cost of Care Delivery Margin for the three months ended
March 31, 2023 and 2022:
For the Three Months Ended
March 31,
2023
2022
(in thousands)
$
$
Net loss
(63,229
)
(29,100
)
Adjustments to calculate EBITDA:
Depreciation and amortization expenses
1,237
3,078
Interest expense and income, net
8,658
5,727
Tax (benefit) provision
(7
)
9
EBITDA
(53,341
)
(20,286
)
Adjustments to calculate Adjusted
EBITDA:
Stock-based compensation
2,167
9,174
Exchange loss
27
447
Restructuring and other termination
benefits
1,216
—
Gain on settlement of warrants
(155
)
—
Gain on fair value remeasurement
(336
)
(78,773
)
Premium deficiency reserve expense
2,494
6,868
Loss on sale of subsidiary and related
transaction costs
2,148
—
Adjusted EBITDA
(45,780
)
(82,570
)
Total revenue
311,120
266,446
Value-based care revenue
287,465
246,575
Claims expense
(283,906
)
(247,552
)
Clinical care delivery expense
(16,416
)
(23,927
)
Net (loss) income Margin
(20.3
)%
(10.9
)%
Adjusted EBITDA Margin
(14.7
)%
(31.0
)%
Medical Loss Ratio
98.8
%
100.4
%
Medical Margin
1.2
%
(0.4
)%
Cost of Care Delivery Margin
3.5
%
(1.9
)%
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