Cano Health Announces Financial Results for the Second Quarter 2022 – PR Newswire

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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
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:
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
[email protected]
Media Relations Contact:
Georgi Morales Pipkin
Cano Health, Inc.
(786) 206-3322
[email protected]
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
SOURCE Cano Health, Inc.
Cision Distribution 888-776-0942
from 8 AM – 9 PM ET

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