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Cano Health Announces Financial Results for the First Quarter 2022

CANO

Maintains Full Year Guidance

MIAMI, May 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 first quarter ended March 31, 2022.

(PRNewsfoto/Cano Health, LLC)

First Quarter Financial Results

  • Total membership of 269,333, including 160,306 Medicare capitated members, an increase of 130% and 112%, respectively year-over-year
  • Total revenue of $704.3 million, an increase of 156% year-over-year
  • Net loss of $0.1 million, benefiting from a $27.2 million fair value adjustment of warrant liabilities
  • Adjusted EBITDA1 of $45.0 million, compared to $17.5 million in the first quarter of 2021, an increase of 157% year-over-year

As of May 6, 2022, the Company had approximately 208 million shares of Class A common stock and 277 million shares of Class B common stock issued and outstanding. Total share count for the purposes of calculating market capitalization was approximately 484 million.

"Cano Health's first quarter results reflect the continued growth of our operations and strength of our business model," said Dr. Marlow Hernandez, Chairman and Chief Executive Officer of Cano Health. "Fueled by a significant increase in Medicare members, we have more than doubled our total membership over the past year, firmly establishing us as one of the nation's largest value-based primary care providers. To meet the growing demand for our services, we continue to add capacity in key markets and build scale and density. While rapidly expanding our business, our population health platform, combined with our differentiated growth strategy, is driving sustainable and profitable growth."

Direct Contracting Entity (DCE) Program Update
DCE membership at the end of the quarter was 41,201, an increase from 7,651 at the end of 2021. First quarter membership reflects updated 2022 roster reconciliations provided by the Centers for Medicare and Medicaid Services (CMS).

Total medical cost ratio (MCR)2 in the first quarter was 79.5%, reflecting the impact of DCE membership, which had an MCR of approximately 96.0%. Excluding the impact of DCE, total MCR in the first quarter was approximately 74.0%, which is below the 74.6% reported in the first quarter of 2021, prior to the start of the DCE program. The Company expects total MCR in the second half of 2022 to be significantly lower than Total MCR in the first half of 2022.

Guidance
The Company is maintaining its guidance for full year 2022 provided on March 14, 2022. The outlook for full year 2022 is as follows:

  • Membership in the range of 290,000 to 295,000
  • Total revenue in the range of $2.8 billion to $2.9 billion
  • Total medical cost ratio (MCR) in the range of 76.0% to 76.5%
  • Adjusted EBITDA in the range of $230 million to $240 million
  • The Company added seven medical centers in the quarter, bringing total owned medical centers to 137, including 31 centers outside of Florida; the Company expects to operate 184-189 owned medical centers by the end of 2022

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.

Conference Call Information
Cano Health will host a conference call today at 8:30 AM ET to review the Company's business and financial results for the quarter ended March 31, 2022.

To access the live call and webcast, please dial (844) 684-0650 for U.S. participants, or +1 (343) 761-2594 for international participants, and reference the Cano Health First Quarter 2022 Earnings Conference Call and Conference ID 6284596. 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; 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), fair value adjustments in contingent consideration, restructuring and other charges, 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."

About Cano Health
Cano Health (NYSE: CANO) is a high-touch, technology-powered healthcare company delivering personalized, value-based primary care to nearly 270,000 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:
Derek Fiebig
Cano Health, Inc.
(786) 206-1930
derek.fiebig@canohealth.com

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED



Three Months Ended

March 31,

(in thousands, except share and per share data)

2022


2021

Revenue:




Capitated revenue

$ 674,351


$ 261,357

Fee-for-service and other revenue

29,986


13,245

Total revenue

704,337


274,602

Operating expenses:




Third-party medical costs

535,779


195,046

Direct patient expense

60,677


34,237

Selling, general and administrative expenses

96,587


35,009

Depreciation and amortization expense

19,036


5,846

Transaction costs and other

8,375


8,954

Change in fair value of contingent consideration

(4,661)


285

Total operating expenses

715,793


279,377

Loss from operations

(11,456)


(4,775)

Other income and expense:




Interest expense

(13,284)


(10,626)

Interest income

1


1

Loss on extinguishment of debt

(1,428)


Change in fair value of warrant liabilities

27,162


Total other income (expense)

12,451


(10,625)

Net income (loss) before income tax expense

995


(15,400)

Income tax expense

1,080


714

Net loss

$ (85)


$ (16,114)

Net loss attributable to non-controlling interests

(745)


Net income attributable to Class A common stockholders

$ 660


$ —





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

$ —


N/A

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

$ —


N/A

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




Basic

191,410,221


N/A

Diluted

468,132,925


N/A

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED




As of,

(in thousands)


March 31, 2022


December 31, 2021

Assets





Current assets:





Cash, cash equivalents and restricted cash


$ 113,052


$ 163,170

Accounts receivable, net of unpaid service provider costs


191,724


133,433

Prepaid expenses and other current assets


18,859


20,632

Total current assets


323,635


317,235

Property and equipment, net


95,595


85,261

Operating lease right of use assets


152,180


132,173

Goodwill


772,704


769,667

Payor relationships, net


569,086


576,648

Other intangibles, net


241,963


248,973

Other assets


16,602


13,582

Total assets


2,171,765


2,143,539

Liabilities and stockholders' equity





Current liabilities:





Current portion of notes payable


6,444


6,493

Current portion of finance lease liabilities


1,448


1,295

Current portion of contingent consideration


3,062


3,123

Accounts payable and accrued expenses


93,368


80,829

Current portions due to sellers


1,480


17,357

Current portion operating lease liabilities


18,383


15,275

Other current liabilities


34,472


36,664

Total current liabilities


158,657


161,036

Notes payable, net of current portion and debt issuance costs


915,738


915,266

Long term portion of operating lease liabilities


141,477


122,935

Warrants liabilities


52,982


80,144

Long term portion of finance lease liabilities


2,738


2,181

Contingent consideration


30,700


35,300

Other liabilities


31,696


28,109

Total liabilities


1,333,988


1,344,971

Stockholders' Equity





Shares of Class A common stock


20


18

Shares of Class B common stock


28


30

Additional paid-in capital


464,262


397,443

Accumulated deficit


(78,100)


(78,760)

Total Stockholders' Equity before non-controlling interests


386,210


318,731

Non-controlling interests


451,567


479,837

Total Stockholders' Equity


837,777


798,568

Total Liabilities and Stockholders' Equity


$ 2,171,765


$ 2,143,539

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED




Three Months Ended March 31,

(in thousands)


2022


2021

Cash Flows from Operating Activities:





Net loss


$ (85)


$ (16,114)

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





Depreciation and amortization expense


19,036


5,846

Change in fair value of contingent consideration


(4,661)


285

Change in fair value of warrant liabilities


(27,162)


Loss on extinguishment of debt


1,428


Amortization of debt issuance costs


748


2,170

Non-cash lease expense


1,705


Equity-based compensation


13,816


71

Changes in operating assets and liabilities:





Accounts receivable, net


(58,291)


(6,929)

Other assets


(3,060)


(882)

Prepaid expenses and other current assets


1,773


(6,537)

Interest accrued due to seller


97


536

Accounts payable and accrued expenses


10,010


5,973

Other liabilities


7,443


893

Net cash used in operating activities


(37,203)


(14,688)

Cash Flows from Investing Activities:





Purchase of property and equipment


(7,776)


(2,645)

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


(3,495)


(898)

Payments to sellers


(2,186)


(6,155)

Other



(1)

Net cash used in investing activities


(13,457)


(9,699)

Cash Flows from Financing Activities:





Capitalized transaction costs related to merger



(2,414)

Payments of long-term debt


(1,611)


(1,200)

Debt issuance costs


(87)


Proceeds from insurance financing arrangements


2,529


1,702

Payments of principal on insurance financing arrangements


(690)


(567)

Repayments of equipment loans


(129)


(76)

Repayments of capital lease obligations


(340)


(263)

Employee stock purchase plan contributions


870


Net cash provided by (used in) financing activities


542


(2,818)






Net decrease in cash, cash equivalents and restricted cash


(50,118)


(27,205)

Cash, cash equivalents and restricted cash at beginning of year


163,170


33,807

Cash, cash equivalents and restricted cash at end of period


$ 113,052


$ 6,602

Reconciliation of Non-GAAP

Adjusted EBITDA

UNAUDITED



Three Months Ended March 31,

(in thousands)

2022


2021

Net loss

$ (85)


$ (16,114)

Interest income

(1)


(1)

Interest expense

13,284


10,626

Income tax expense

1,080


714

Depreciation and amortization expense

19,036


5,846

EBITDA

$ 33,314

$

$ 1,071

Stock-based compensation

13,816


71

De novo losses (1)

15,816


5,839

Acquisition transaction costs (2)

9,871


9,818

Restructuring and other

2,585


411

Change in fair value of contingent consideration

(4,661)


285

Loss on extinguishment of debt

1,428


Change in fair value of warrant liabilities

(27,162)


Adjusted EBITDA

$ 45,007

$

$ 17,495







(1)

De novo losses include those costs associated with the ramp up of new facilities and that are not expected to be incurred past the first 12 months after opening. These costs collectively are higher than comparable expenses incurred once such a facility has been open and generating revenue and would not have been incurred unless a new facility was being opened.



(2)

Acquisition transaction costs included $1.0 million and $0.9 million of corporate development payroll costs for the three months ended March 31, 2022 and 2021, respectively. Corporate development payroll costs include those expenses directly related to the additional staff needed to support our increased acquisition activity.

Key Metrics




Three Months Ended March 31,





2022


2021


% Change

Members:







Medicare Advantage


119,105


75,488


57.8%

Medicare DCE


41,201



—%

Total Medicare


160,306


75,488


112.4 %

Medicaid


67,982


21,801


211.8%

ACA


41,045


19,606


109.3%

Total members


269,333


116,895


130.4%








Member months:







Medicare Advantage


354,415


224,830


57.6 %

Medicare DCE


125,089



—%

Total Medicare


479,504


224,830


57.6 %

Medicaid


202,197


62,908


221.4%

ACA


121,911


56,037


117.6%

Total member months


803,612


343,775


133.8%








Per Member Per Month ("PMPM"):







Medicare Advantage


$ 1,249


$ 979


27.6%

Medicare DCE


$ 1,379


$ —


—%

Total Medicare


$ 1,283


$ 979


27.6%

Medicaid


$ 257


$ 615


(58.2)%

ACA


$ 58


$ 44


31.8%

Total PMPM


$ 839


$ 760


10.4%








Owned medical centers


137


72



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.

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/cano-health-announces-financial-results-for-the-first-quarter-2022-301542439.html

SOURCE Cano Health, Inc.

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