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Cano Health Announces Financial Results for the Second Quarter 2022

·17 min read

MIAMI, Aug. 9, 2022 /PRNewswire/ -- Cano Health, Inc. ("Cano Health" or the "Company") (NYSE: CANO), a leading value-based primary care provider and population health company, today announced financial results for the second quarter ended June 30, 2022.

(PRNewsfoto/Cano Health, LLC)
(PRNewsfoto/Cano Health, LLC)

Second Quarter Financial Results

  • Total membership of 281,525, including 163,947 Medicare capitated members, an increase of 80% and 47%, respectively year-over-year

  • Total revenue of $689.4 million, an increase of 101% year-over-year

  • Net loss of ($14.6) million, benefiting from a $30.2 million fair value adjustment of warrant liabilities

  • Adjusted EBITDA1 of $29.4 million, compared to ($15.2) million in the second quarter of 2021; results in the quarter were impacted by $6 million of unfavorable prior year development (PYD) related to Medicare Direct Contracting Entity (DCE) program described below

Accelerated membership growth in the second quarter resulted in a larger proportion of new, higher acuity Medicare Advantage and Medicaid members, contributing to a medical cost ratio2, or MCR, of 82.6%.  The acuity of these new members is higher than Cano Health's historical experience, due to more costly hospital admissions and outpatient procedures, and higher cost branded prescription medications.  We expect the MCR of Medicare Advantage and Medicaid members to decrease over the next twelve months, as we diagnose and manage their chronic conditions.

"Cano Health delivered another quarter of strong membership growth, reaching more than 280,000 members," said Dr. Marlow Hernandez, Chairman and Chief Executive Officer at Cano Health.  "We expect new higher acuity members, while pressuring current performance, will provide opportunities for more profitable results going forward as we leverage our population health platform to improve the health of these patients.  Furthermore, we will continue to capitalize on our market leading position and the societal tailwinds that underpin the strong demand for the Cano Health model of care."

________________________________

1 Adjusted EBITDA is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure is provided in the Reconciliation of Non-GAAP Adjusted EBITDA table included in this press release. An explanation of this measure and how it is calculated is also included under the heading "Non-GAAP Financial Measures."

2 Medical Cost Ratio (MCR) is calculated as third-party medical expense divided by capitated revenue

New Organizational Leadership

On August 5th, Cano Health announced two new senior positions on its executive leadership team to build on the Company's success and help drive critical opportunities to strengthen the professional infrastructure across the organization.  Bob Camerlinck has been appointed Chief Operating Officer, overseeing the Company's daily business operations and working closely with executive leadership to implement Cano Health's strategy and drive sustained performance.  Amy Charley joined the Company as Chief Administrative Officer and is responsible for the management of administrative functions and overseeing strategy development, organizational governance, and change management.

Guidance

The Company is updating its guidance for full year 2022 provided on June 7, 2022.  The updated guidance for full year 2022 is as follows:

  • Membership in the range of 300,000 to 305,000, an increase from the prior guidance range of 290,000 to 295,000

  • Total revenue in the range of $2.85 billion to $2.90 billion, an increase from the prior guidance range of $2.80 billion to $2.90 billion

  • Total medical cost ratio (MCR) in the range of 78.0% to 79.0%, up from the prior range of 76.0% to 76.5%

  • Adjusted EBITDA of approximately $200 million, a decrease from the prior range of $230 million to $240 million

  • The Company added six medical centers in the quarter, bringing total medical centers to 143, including 33 centers outside of Florida; the Company expects to operate 184 to 189 by the end of 2022, unchanged from previous guidance

As of August 5, 2022, the Company had approximately 232 million shares of Class A common stock and 254 million shares of Class B common stock issued and outstanding. Total share count for the purposes of calculating market capitalization was approximately 486 million.

Conference Call Information

Cano Health will host a conference call today at 5:00 PM ET to review the Company's business and financial results for the second quarter ended June 30, 2022.

To access the live call and webcast, please dial (888) 660-6359 for U.S. participants, or +1 (929) 203-0867 for international participants, and reference the Cano Health Second Quarter 2022 Earnings Conference Call and Conference ID 8371699. The conference call will also be webcast live in the "Events & Presentations" section of the Investor page of the Cano Health website.

A replay will be available in the "Events & Presentations" section of the Cano Health website for on-demand listening shortly after the completion of the call and will be available for 30 days.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to future events and involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and could materially affect actual results, performance or achievements. Such forward-looking statement include, without limitation, our anticipated results of operations, including our financial guidance for the 2022 fiscal year, our business strategies, our projected costs, prospects and plans, and other aspects of our operations or operating results. These forward-looking statements generally can be identified by phrases such as "will," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on our results of operations and financial condition. Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, changes in market or industry conditions, regulatory environment, competitive conditions, and receptivity to our services; developments and uncertainties related to the DCE program; adverse effects on the Company's business as a result of the restatement of our previously issued financial statements; our ability to realize expected results with respect to patient membership, total revenue and earnings; our ability to enter into new markets and continue our growth; our ability to integrate our acquisitions and achieve desired synergies; our ability to maintain our relationships with health plans and other key payors; the impact of COVID-19 on our business and results of operations; our future capital requirements and sources and uses of cash, including funds to satisfy our liquidity needs; and our ability to recruit and retain qualified team members and independent physicians. For a detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, please refer to our filings with the Securities and Exchange Commission (the "SEC"). All information provided in this press release is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures as defined by the SEC rules. EBITDA and Adjusted EBITDA have not been prepared in accordance with United States generally accepted accounting principles ("GAAP"). EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA, adjusted to add back the effect of certain expenses, such as stock-based compensation expense, de novo losses (consisting of costs associated with the ramp up of new medical centers and losses incurred for the twelve months after the opening of a new facility), acquisition transaction costs (consisting of transaction costs and corporate development payroll costs), restructuring and other charges, fair value adjustments in contingent consideration, loss on extinguishment of debt, and changes in fair value of warrant liabilities. We believe these non-GAAP financial measures provide an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other similar companies. We do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. These non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense, income and other items are excluded or included in determining these non-GAAP financial measures. In addition, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation of those measures to their most directly comparable GAAP measures is available under the heading "Reconciliation of Non-GAAP Measures."

The Company has not reconciled its expectations as to non-GAAP measures in future periods to their most directly comparable GAAP measure because certain costs and expenses are outside of its control or cannot be reasonably predicted.  Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to the Company's results computed in accordance with GAAP.

About Cano Health 

Cano Health (NYSE: CANO) is a high-touch, technology-powered healthcare company delivering personalized, value-based primary care to more than 280,000 members. With its headquarters in Miami, Florida, Cano Health is transforming healthcare by delivering primary care that measurably improves the health, wellness, and quality of life of its patients and the communities it serves. Founded in 2009, Cano Health has more than 4,000 employees, and operates primary care medical centers and supports affiliated providers in nine states and Puerto Rico. For more information, visit canohealth.com or investors.canohealth.com.

Investor Relations Contact:
Jeffrey Geyer
Cano Health, Inc.
(786) 206-1930
investors@canohealth.com

Media Relations Contact:
Georgi Morales Pipkin
Cano Health, Inc.
(786) 206-3322
mediarelations@canohealth.com

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED



Three Months Ended June 30,


Six Months Ended June 30,

(in thousands, except share and per share data)

2022


2021


2022


2021

Revenue:








Capitated revenue

$         655,493


$         329,484


$      1,329,844


$         590,841

Fee-for-service and other revenue

33,880


14,097


63,671


27,342

Total revenue

689,373


343,581


1,393,515


618,183

Operating expenses:








Third-party medical costs

541,317


291,816


1,077,097


486,862

Direct patient expense

52,647


35,607


113,323


69,844

Selling, general and administrative expenses

106,179


47,159


202,849


82,168

Depreciation and amortization expense

19,836


7,945


38,872


13,791

Transaction costs and other

6,207


16,114


14,583


25,068

Change in fair value of contingent consideration

(5,764)


(496)


(10,425)


(211)

Total operating expenses

720,422


398,145


1,436,299


677,522

Income (loss) from operations

(31,049)


(54,564)


(42,784)


(59,339)

Other income and expense:








Interest expense

(13,134)


(9,714)


(26,418)


(20,340)

Interest income

2


1


3


2

Loss on extinguishment of debt


(13,225)


(1,428)


(13,225)

Change in fair value of warrant liabilities

30,175


39,215


57,337


39,215

Other income (expense)

251


(25)


530


(25)

Total other income (expense)

17,294


16,252


30,024


5,627

Net income (loss) before income tax expense

(13,755)


(38,312)


(12,760)


(53,712)

Income tax expense (benefit)

809


(2,023)


1,889


(1,309)

Net income (loss)

$          (14,564)


$          (36,289)


$          (14,649)


$          (52,403)

Net income (loss) attributable to non-controlling interests

(9,231)


(40,844)


(9,976)


(56,958)

Net income (loss) attributable to Class A common stockholders

$            (5,333)


$             4,555


$            (4,673)


$             4,555









Net income (loss) per share attributable to Class A common stockholders, basic

$              (0.03)


$               0.03


$              (0.02)


$               0.03

Net income (loss) per share attributable to Class A common stockholders, diluted

$              (0.03)


$              (0.06)


$              (0.03)


$              (0.06)

Weighted-average shares used in computation of earnings per share:








Basic

210,053,037


167,134,853


200,783,129


166,691,634

Diluted

474,580,471


168,884,315


465,310,563


167,571,198

 

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED




As of,

(in thousands)


June 30,
2022


December 31,
2021

Assets





Current assets:





Cash, cash equivalents and restricted cash


$         47,847


$            163,170

Accounts receivable, net of unpaid service provider costs


200,990


133,433

Prepaid expenses and other current assets


38,466


20,632

Total current assets


287,303


317,235

Property and equipment, net


106,198


85,261

Operating lease right of use assets


168,554


132,173

Goodwill


777,163


769,667

Payor relationships, net


561,733


576,648

Other intangibles, net


234,127


248,973

Other assets


6,327


13,582

Total assets


$   2,141,405


$         2,143,539

Liabilities and stockholders' equity





Current liabilities:





Current portion of notes payable


$           6,444


$                 6,493

Current portion of finance lease liabilities


1,561


1,295

Current portion of contingent consideration


198


3,123

Accounts payable and accrued expenses


69,419


80,829

Current portions due to sellers


4,317


17,357

Current portion operating lease liabilities


20,726


15,275

Other current liabilities


39,390


36,664

Total current liabilities


142,055


161,036

Notes payable, net of current portion and debt issuance costs


914,890


915,266

Long term portion of operating lease liabilities


157,408


122,935

Warrants liabilities


22,807


80,144

Long term portion of finance lease liabilities


2,923


2,181

Contingent consideration


27,800


35,300

Other liabilities


32,525


28,109

Total liabilities


1,300,408


1,344,971

Stockholders' Equity





Shares of Class A common stock


22


18

Shares of Class B common stock


27


30

Additional paid-in capital


495,642


397,443

Accumulated deficit


(83,433)


(78,760)

Total Stockholders' Equity before non-controlling interests


412,258


318,731

Non-controlling interests


428,739


479,837

Total Stockholders' Equity


840,997


798,568

Total Liabilities and Stockholders' Equity


$   2,141,405


$         2,143,539

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED




Six Months Ended June 30,

(in thousands)


2022


2021

Cash Flows from Operating Activities:





Net loss


$         (14,649)


$         (52,403)

Adjustments to reconcile net loss to net cash used in operating activities:





Depreciation and amortization expense


38,872


13,791

Change in fair value of contingent consideration


(10,425)


(211)

Change in fair value of warrant liabilities


(57,337)


(39,215)

Loss on extinguishment of debt


1,428


13,225

Amortization of debt issuance costs


1,570


8,541

Non-cash lease expense


3,642


Stock-based compensation


31,600


3,680

Changes in operating assets and liabilities:





Accounts receivable, net


(67,557)


(6,441)

Other assets


7,158


(5,925)

Prepaid expenses and other current assets


(17,834)


(16,341)

Interest accrued due to seller


100


957

Accounts payable and accrued expenses


(9,362)


14,426

Other liabilities


10,621


7,816

Net cash provided by (used in) operating activities


(82,173)


(58,100)

Cash Flows from Investing Activities:





Purchase of property and equipment


(20,431)


(7,730)

Acquisitions of subsidiaries including non-compete intangibles, net of cash acquired


(4,995)


(614,394)

Payments to sellers


(3,847)


(23,963)

Net cash provided by (used in) investing activities


(29,273)


(646,087)

Cash Flows from Financing Activities:





Business Combination and PIPE financing



935,362

Payments of long-term debt


(3,222)


(402,572)

Debt issuance costs


(88)


(11,274)

Proceeds from long-term debt



295,000

Proceeds from delayed draw term



175,000

Repayments of delayed draw term



(2,350)

Proceeds from insurance financing arrangements


2,529


1,702

Payments of principal on insurance financing arrangements


(1,380)


(993)

Principal payments under finance leases


(679)


(64)

Repayment of equipment loans


(261)


(154)

Employee stock purchase plan withholding tax payments


(776)


Net cash provided by (used in) financing activities


(3,877)


989,657






Net increase (decrease) in cash, cash equivalents and restricted cash


(115,323)


285,470

Cash, cash equivalents and restricted cash at beginning of year


163,170


33,807

Cash, cash equivalents and restricted cash at end of period


$           47,847


$        319,277

 

Reconciliation of Non-GAAP

Adjusted EBITDA

UNAUDITED



Three Months Ended
June 30,


Six Months Ended   
June 30,

(in thousands)

2022


2021


2022


2021

Net loss

$    (14,564)


$    (36,289)


$    (14,649)


$    (52,403)

Interest income

(2)


(1)


(3)


(2)

Interest expense

13,134


9,714


26,418


20,340

Income tax expense (benefit)

809


(2,023)


1,889


(1,309)

Depreciation and amortization expense

19,836


7,945


38,872


13,791

EBITDA

$     19,213


$    (20,654)


$     52,527


$    (19,583)

Stock-based compensation

17,783


3,609


31,600


3,680

De novo (1)

19,469


8,543


35,285


14,383

Transaction costs (2)

7,842


16,976


17,713


26,794

Restructuring and other

1,016


2,811


3,602


3,222

Change in fair value of contingent consideration

(5,764)


(496)


(10,425)


(211)

Loss on extinguishment of debt


13,225


1,428


13,225

Change in fair value of warrant liabilities

(30,175)


(39,215)


(57,337)


(39,215)

Adjusted EBITDA

$     29,384


$    (15,201)


$     74,393


$       2,295

_________________________________

(1) De novo losses include those costs associated with the ramp up of new medical centers and losses incurred after the opening of a new facility. These costs collectively are higher than comparable expenses incurred once such a facility has been opened and is generating revenue, and would not have been incurred unless a new facility was being opened.


(2) Acquisition transaction costs included $1.6 million and $0.9 million for the three months ended June 30, 2022 and 2021, respectively, and $2.6 million and $1.7 million for the six months ended June 30, 2022 and 2021, respectively, of corporate development payroll costs. Corporate development payroll costs include those expenses directly related to the additional staff needed to support our acquisition activity.

 

Key Metrics




Three Months Ended June 30,





2022


2021


% Change

Members:







   Medicare Advantage


123,768


103,812


19.2 %

   Medicare DCE


40,179


8,054


398.9 %

Total Medicare


163,947


111,866


46.6 %

Medicaid


70,254


25,178


179.0 %

ACA


47,324


18,994


149.2 %

Total members


281,525


156,038


80.4 %








Member months:







   Medicare Advantage


364,565


258,327


41.1 %

   Medicare DCE


122,301


23,924


411.2 %

Total Medicare


486,866


282,251


72.5 %

Medicaid


206,630


71,461


189.2 %

ACA


139,355


57,816


141.0 %

Total member months


832,851


411,528


102.4 %








Per Member Per Month ("PMPM"):







   Medicare Advantage


$             1,196


$                990


20.8 %

   Medicare DCE


$             1,362


$             1,221


11.5 %

Total Medicare


$             1,238


$             1,010


22.6 %

Medicaid


$                223


$                612


(63.6) %

ACA


$                  48


$                  14


242.9 %

Total PMPM


$                787


$                801


(1.7) %








Medical centers


143


90



 



Six Months Ended June 30,





2022


2021


% Change

Members:







   Medicare Advantage


123,768


103,812


19.2 %

   Medicare DCE


40,179


8,054


398.9 %

Total Medicare


163,947


111,866


46.6 %

Medicaid


70,254


25,178


179.0 %

ACA


47,324


18,994


149.2 %

Total members


281,525


156,038


80.4 %








Member months:







   Medicare Advantage


718,980


483,157


48.8 %

   Medicare DCE


247,390


23,924


934.1 %

Total Medicare


966,370


507,081


90.6 %

Medicaid


408,827


134,369


204.3 %

ACA


261,266


113,853


129.5 %

Total member months


1,636,463


755,303


116.7 %








Per Member Per Month ("PMPM"):







   Medicare Advantage


$             1,222


$                985


24.1 %

   Medicare DCE


$             1,371


$             1,221


12.3 %

Total Medicare


$             1,260


$                997


26.4 %

Medicaid


$                240


$                613


(60.8) %

ACA


$                  53


$                  29


82.8 %

Total PMPM


$                813


$                782


4.0 %








Medical centers


143


90



 

 

Cision
Cision

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SOURCE Cano Health, Inc.