Cano Health Announces Financial Results for the Second Quarter 2022
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.
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.
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%
- The total MCR in the second half of 2022 is expected to be significantly lower than total MCR in the first half of 2022, primarily driven by normal seasonality in medical costs and cost recoveries
- Adjusted EBITDA of approximately $200 million, a decrease from the prior range of $230 million to $240 million
- Revised Adjusted EBITDA guidance includes a net impact of approximately $20 million from higher-than-expected costs from new Medicare Advantage and Medicaid members, $9 million from lower projected DCE contribution, and $6 million of unfavorable PYD from Medicare DCE
- The change in guidance is reflective of 2022 calendar year pressures from new higher acuity members and DCE uncertainty; these factors are expected to reverse in 2023 due to higher per member revenue correlated to higher acuity, and lower third-party medical expenses resulting from patient management
- 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.
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
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